Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - TEXAS CAPITAL BANCSHARES INC/TX | d713789d8k.htm |
| EX-99.1 - EX-99.1 - TEXAS CAPITAL BANCSHARES INC/TX | d713789dex991.htm |
 April 23, 2014
TCBI Q1 2014
Earnings
Exhibit 99.2 |
 Certain matters discussed on this call may contain forward-looking
statements, which are subject to risks and uncertainties and are based on
Texas Capital’s current estimates or expectations of future events or future results. Texas Capital is under
no obligation, and expressly disclaims such obligation, to update, alter or
revise its forward-looking statements, whether as a result of new
information, future events or otherwise. A number of factors, many of which are beyond Texas Capital’s
control, could cause actual results to differ materially from future results
expressed or implied by such forward-looking statements.
These risks and uncertainties include the risk of adverse impacts from general
economic conditions, competition, interest rate sensitivity and exposure
to regulatory and legislative changes. These and other factors that could
cause results to differ materially from those described in the
forward-looking statements can be found in the prospectus supplements,
the Annual Report on Form 10-K and other filings made by Texas Capital with the Securities and Exchange
Commission (SEC).
2 |
 Opening Remarks & Financial Highlights
•
Growth in total loans producing foundation for strong growth in net
revenue •
High level of asset sensitivity increased with growth in loans and demand
deposits •
Business
model
focused
on
organic
growth
demonstrates
ability
to
produce
high
returns on invested capital
•
Growth driven by improvement in market share with increased capacity resulting
from success in recruiting and product extension
3
Core
Earnings
Power
Strong
Balanced
Growth
Credit
Quality
•
Exceptional
growth
in
traditional
LHI
balances
–
record
growth
for
seasonally
weak
Q1
•
Mortgage Finance (MF) increased market share with exceptional results
•
Continued growth in deposits, improving low-cost funding composition
•
Successful deployment of new capital with growth in loans exceeding the $281
million raised in anticipation of growth
•
Growth in deposits produced planned growth and improved asset sensitive
position •
Credit metrics remain strong
•
NCOs at 10 bps in Q1-2014
•
NPAs well below pre-crisis levels
•
High allowance coverage ratios
•
Provision primarily related to growth in core LHI |
 Revenue & Expense
4
•
Strong capacity for net revenue
•
Growth in total loans at spreads above 4.20%
•
Decreased from Q4-2013 due to reduced days and
subordinated debt cost
•
Increased 9% from Q1-2013 before adjustments
•
High returns maintained
•
Difference
in
days
and
debt
expense
–
$4.1
million
•
Q1-2014 expenses include seasonal increase in
FICA and related employment expense of $2.5
million from Q4-2013
•
Increase of $900,000 in FDIC assessment with
increased rates for over $10 billion
•
Continued build-out expense related to
recruiting in Q4-2013 and Q1-2014, product
extension and support costs associated with
growth
•
Adjusting for effects of Q1 variables, achieved
improvement in operating leverage with
decrease in efficiency ratio from Q4-2013
•
Provision represents net interest income
contribution of loan growth for 3+ months
Revenue & Expense Trends
Revenue & Expense Highlights
0
100,000
200,000
300,000
400,000
500,000
2009
2010
2011
2012
2013
2014
Q1-
Non-interest Income
Net Interest Income
Non-interest Expense
Operating Revenue CAGR: 19%
Net Interest
Income CAGR:
20%
Non-interest Income CAGR: 9%
Non-interest Expense CAGR: 16%
Net Income CAGR: 43% |
 Net Interest Income & Margin
5
•
Net interest income, before
change in days and sub-debt
expense above Q4-2013 and Q1-
2013
•
Yields on traditional LHI down
modestly with strong growth
•
Lower MF yields due to
relationship pricing offset benefit
to NIM from change in
composition
•
Core
funding
costs
-
deposits
and
borrowed
funds
-
stable
at
17
bps
after increase in liquidity balances
•
Cost of subordinated debt had
impact of 6 bps in Q1-2014
•
Cost of additional liquidity
approximately 5 bps in Q1-2014
•
Fee collection on NPLs created
swing of 4 bps from Q4-2013
Net Interest Income & Margin Trends
NIM Highlights
0.0
20.0
40.0
60.0
80.0
100.0
120.0
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
Net Interest income ($MM)
Net Interest Margin (%)
Earning Asset Yield (%)
Total Loan Spread (%) |
 Analysis of Net Interest Income & Profitability
6
NII ($MM)
NIM (%)
$111.6
Q4-2013
4.21%
(1.6)
Subordinated note interest
(0.06)
(1.1)
Decline in loan fee
(0.04)
0.0
Increase in liquidity
(0.05)
(1.1)
Decrease in MF loan yields
(0.04)
(0.6)
Decrease in LHI net loan yields
(0.02)
0.6
Mix shift from MF to LHI
0.02
(2.5)
Reduced day count in Q1
-
3.7
Growth (at Q4 margin)
-
(0.6)
Other
(0.03)
108.4
Q1-2014
3.99%
Pre-tax
Income
EPS
ROA
ROE
Efficiency
Ratio
Q1-2014 Reported
$44,350
$0.60
1.01%
10.2%
58.4%
Effect of significant items
-
Common stock offering
-
0.02
-
0.75%
-
-
Reduced day count in Q1
2,518
0.04
0.06%
0.64%
(1.2%)
-
Subordinated note interest
(1)
1,600
0.02
0.04%
0.40%
(0.8%)
-
FICA & Other
2,471
0.04
0.06%
0.62%
(1.9%)
-
FDIC insurance assessment
934
0.01
0.02%
0.24%
(0.8%)
(1) Sub debt only outstanding for two months of Q1-2014
|
 Performance Summary
7
(in thousands)
Q1 2014
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Net interest income
$ 108,315
$ 111,475
$ 108,776
$ 101,220
$ 98,042
Non-interest income
10,356
11,184
10,431
11,128
11,281
Net revenue
118,671
122,659
119,207
112,348
109,323
Provision for credit losses
5,000
5,000
5,000
7,000
2,000
OREO valuation and write-down expense
-
466
-
382
71
Total provision and OREO valuation
5,000
5,466
5,000
7,382
2,071
Non-interest expense
69,321
69,825
62,009
68,352
55,629
Income before income taxes
44,350
47,368
52,198
36,614
51,623
Income tax expense
16,089
17,012
18,724
12,542
18,479
Net income
28,261
30,356
33,474
24,072
33,144
Preferred stock dividends
2,438
2,438
2,437
2,438
81
Net income available to common shareholders
$ 25,823
$ 27,918
$ 31,037
$ 21,634
$ 33,063
Diluted EPS
$ .60
$ .67
$ .74
$ .52
$ .80
Net interest margin
3.99%
4.21%
4.21%
4.19%
4.27%
ROA
1.01%
1.10%
1.25%
0.95%
1.38%
ROE
10.20%
11.94%
13.74%
9.94%
15.82%
Efficiency
(1)
58.4%
56.9%
52.0%
60.8%
50.9%
(1) Excludes OREO valuation charge |
 Loan & Deposit Growth
8
•
Broad-based
growth
in
average
traditional
LHI
(excluding
MF)
–
Growth
of
$575
million
(7%)
from
Q4-2013
and
$1.9
billion
(27%)
from
Q1-2013.
Period-end
balance
$210.1million
higher
than
Q1-2014
average
balance
and
29%
above
Q1-
2013.
Quarter-end
balance
is
20%
above
average
for
all
of
2013.
•
MF
performance
exceeded
industry
trends
with
decrease
of
9%
from
Q4-2013.
Maintained
average
MF
balances
over
$2.0
billion for Q1-2014.
•
Average
DDA
increased
3%
from
Q4-2013
and
34%
from
Q1-2013;
total
average
deposits
increased
3%
from
Q4-2013
and
26% from Q1-2013
•
Total
deposit
growth
from
Q1-2013
of
$2
billion
compared
to
total
loan
growth
of
$1.5
billion
as
planned
for
liquidity
build
and reduction in borrowed funds.
Growth Highlights
Balance Trends
Total Loan Composition
($11.6 Billion at 3/31/14)
0
2,000
4,000
6,000
8,000
10,000
12,000
2009
2010
2011
2012
2013
2014
Demand Deposits
Interest Bearing Deposits
Loans HFI
Demand Deposit CAGR: 37%
Total Deposit CAGR: 22%
Loans Held for Investment CAGR: 18%
Business
Assets
31%
Energy
8%
Highly
Liquid
Assets
2%
Mortgage
Finance
23%
Other Assets
3%
Comml. R/E
Mkt. Risk
18%
Residential
R/E Mkt.
Risk
8%
Owner
Occupied
R/E
5%
Unsecured
2% |
 Asset Quality
9
•
Total credit cost of $5.0 million for Q1-2014, compared
to $5.4 million in Q4-2013 and $2.1 million in Q1-2013
•
Provision of $5.0 million for Q1-2014 compared to $5.0
million for Q4-2013 and $2.0 million in Q1-2013
•
NCOs $2.1 million, or 10 bps in Q1-2014 compared to 6
bps in Q4-2013 and 7 bps in Q1-2013
•
No OREO valuation charge in Q1-2014 compared to
$466,000 in Q4-2013 and $71,000 in Q1-2013
Asset Quality Highlights
Non-accrual loans
Q1-2014
Commercial
$ 26,834
Construction
–
Real estate
16,329
Consumer
8
Equipment leases
42
Total non-accrual loans
43,213
Non-accrual loans as % of loans
excluding MF
.48%
Non-accrual loans as % of total
loans
.37%
OREO
2,420
Total Non-accruals + OREO
$ 45,633
Non-accrual loans + OREO as %
of loans excluding MF + OREO
.51%
Reserve to non-accrual loans
2.1x
NCO / Average Traditional LHI
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
2010
2011
2012
2013
2014
1.14%
0.58%
0.10%
0.07%
0.10% |
 EPS Growth
10
2009^
2010
2011
2012
2013
YTD
3/31/2014
^Excludes $.15 effect of preferred TARP dividend during
2009. Reported EPS was
$0.56. EPS
Growth (5-yr CAGR of 27%)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$0.71
$1.00
$1.99
$3.01
$2.72
$0.60 |
 Closing Comments
•
Success of organic growth model demonstrated with strong growth in loans
and deposits
•
Solid core earnings power and strong asset growth expected to continue in
2014 and beyond
•
New capital deployed and generating favorable returns with strong growth in
loans and deposits
•
Talent acquisition continued in Q1-2014; outlook for 2014 remains
favorable •
Asset sensitivity increased; now better positioned to take advantage of
increases in short-term rates
•
Excellent credit quality position maintained with Q1-2014 provision related
to growth
•
Mortgage Finance clearly exceeding industry trends with improved
market
position
11 |
 Q&A
12 |
 Appendix
13 |
 Average Balances, Yields & Rates -
Quarterly
14
(in thousands)
Q1 2014
Q4 2013
Q1 2013
Avg. Bal.
Yield Rate
Avg. Bal.
Yield Rate
Avg. Bal.
Yield Rate
Assets
Securities
$ 57,581
4.18%
$ 65,067
4.25%
$ 93,394
4.57%
Fed funds sold & liquidity investments
304,042
.27%
158,594
.21%
103,503
.23%
Loans held for investment, mortgage finance
2,027,264
3.36%
2,238,730
3.59%
2,362,646
3.89%
Loans held for investment
8,717,969
4.61%
8,142,569
4.73%
6,842,766
4.77%
Total loans, net of reserve
10,657,547
4.41%
10,297,290
4.52%
9,130,970
4.58%
Total earning assets
11,019,170
4.29%
10,520,951
4.45%
9,327,867
4.53%
Total assets
$11,401,368
$10,899,266
$ 9,729,559
Liabilities
and
Stockholders’
Equity
Total interest bearing deposits
$ 6,105,214
.27%
$ 5,887,252
.26%
$ 4,988,788
.26%
Other borrowings
293,012
.24%
314,018
.20%
1,041,573
.17%
Subordinated notes
227,667
6.20%
111,000
6.58%
111,000
6.68%
Long-term debt
113,406
2.20%
113,406
2.21%
113,406
2.27%
Total interest bearing liabilities
6,739,299
.50%
6,425,676
.40%
6,254,767
.40%
Demand deposits
3,381,501
3,289,307
2,529,927
Stockholders’
equity
1,177,054
1,077,822
854,327
Total
liabilities
and
stockholders’
equity
$11,401,368
.30%
$10,899,266
.24%
$ 9,729,559
.26%
Net interest margin
3.99%
4.21%
4.27%
Total deposits and borrowed funds
$ 9,779,727
.17%
$ 9,490,577
.17%
$ 8,560,288
.17%
Loan spread
4.24%
4.35%
4.41% |
 Average Balance Sheet -
Quarterly
15
(in thousands)
QTD Average
Q1/Q4 %
Change
YOY %
Change
Q1 2014
Q4 2013
Q1 2013
Total assets
$11,401,368
$10,899,266
$9,729,559
5%
17%
Loans held for investment
8,717,969
8,142,569
6,842,766
7%
27%
Loans held for investment, mortgage
finance
2,027,264
2,238,730
2,362,646
(9)%
(14)%
Total loans
10,745,233
10,381,299
9,205,412
4%
17%
Securities
57,581
65,067
93,394
(12)%
(38)%
Demand deposits
3,381,501
3,289,307
2,529,927
3%
34%
Total deposits
9,486,715
9,176,559
7,518,715
3%
26%
Stockholders’
equity
1,177,054
1,077,822
854,327
9%
38% |
 Ending Balance Sheet -
Quarterly
16
(in thousands)
Period End
Q1/Q4 %
Change
YOY %
Change
Q1 2014
Q4 2013
Q1 2013
Total assets
$12,143,296
$11,714,397
$10,020,565
4%
21%
Loans held for investment
8,928,033
8,486,309
6,920,011
5%
29%
Loans held for investment, mortgage
finance
2,688,044
2,784,265
2,577,830
(3)%
4%
Total loans
11,616,077
11,270,574
9,497,841
3%
22%
Securities
52,960
63,214
87,527
(16)%
(39)%
Demand deposits
3,451,294
3,347,567
2,628,446
3%
31%
Total deposits
9,729,128
9,257,379
7,745,831
5%
26%
Stockholders’
equity
1,230,131
1,096,350
1,013,195
12%
21% |