Texas Capital Bancshares (TCBI) 8-K Texas Capital Bancshares Announces Strong Second Quarter Operating Results

Exhibit 99.1

For immediate release
July 20, 2005

MEDIA CONTACT
Tricia Linderman, 214.932.6798
tricia.linderman@texascapitalbank.com

INVESTOR CONTACT
Myrna Vance, 214.932.6646
myrna.vance@texascapitalbank.com

TEXAS CAPITAL BANCSHARES ANNOUNCES STRONG SECOND QUARTER OPERATING RESULTS

Dallas, Texas – July 20, 2005 — Texas Capital Bancshares (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced earnings for the second quarter of 2005.

On a comparative basis:

• Net income increased 51%

• EPS increased 47%

• Loans held for investment grew 32%

• Total loans grew 35%

• Demand deposits grew 32%

• Total deposits grew 21%

“Our outstanding second quarter is due to the continued success of our strategy of focusing on the middle market in the five major cities in Texas,” said Jody Grant, Chairman and CEO. “We are benefiting from our local Texas identity and the exceptionally strong Texas economy.”

FINANCIAL SUMMARY

(dollars and shares in thousands)

	Q2 2005			Q2 2004			% Change
OPERATING RESULTS
Net Income	$	6,587		$	4,360			51	%
Diluted EPS	$	.25		$	.17			47	%
ROA		.97	%		.77	%
ROE		13.14	%		10.04	%
Diluted Shares		26,543			26,140			2	%
BALANCE SHEET
Total Assets	$	2,818,039		$	2,399,603			17	%
Demand Deposits		475,516			359,628			32	%
Total Deposits		1,971,005			1,628,397			21	%
Loans Held for Investment		1,805,630			1,364,106			32	%
Total Loans		1,926,338			1,422,164			35	%
Stockholders’ Equity		205,880			174,327			18	%

Loans Held for Investment are stated net of unearned income.

1

DETAILED FINANCIALS

Texas Capital Bancshares, Inc. reported net income of $6.6 million for the second quarter of 2005 and $11.9 million for the year to date. For the second quarter and first half of 2004, the Company reported net income of $4.4 million and $8.3 million, respectively. On a fully diluted basis, earnings per share were $.25 and $.45, for the three and six month periods ended June 30, 2005, respectively. For 2004 the EPS comparisons for the three and six month periods were $.17 and $.32.

Return on average equity was 13.14 percent and return on average assets was .97 percent for the second quarter of 2005 compared to 10.04 percent and .77 percent, respectively, for the second quarter of 2004. The increase in net income and improvement in return on assets in 2005 as compared to 2004 results are attributed to growth in net interest income which came from continued earning asset growth, as well as an improvement in net interest margin.

Net interest income was $24.5 million for the second quarter of 2005, compared to $17.3 million for the second quarter of 2004. The increase was due to an increase in average earning assets of $407.1 million over levels reported in the second quarter of 2004 and an improvement in the net interest margin. The increase in average earning assets included a $429.2 million increase in average loans held for investment (core loans) offset by a decrease of $32.2 million in average securities. The average balance of loans held for sale increased to $84.5 million in the second quarter of 2005 from $68.9 million in 2004. The net interest margin in the second quarter of 2005 was 3.88 percent, a 64 basis point increase from the second quarter of 2004 and a 27 basis point increase from the first quarter of 2005. The improvement in the net interest margin resulted primarily from 148 basis point increase in the yield on earning assets offset by a 105 basis point increase in the cost of interest bearing liabilities from the prior year.

Average interest bearing liabilities increased $297.6 million from the second quarter of 2004, which included a $326.6 million increase in interest bearing deposits offset by a $29.0 million decrease in other borrowings. For the same periods, the average balance of demand deposits increased to $397.3 million from $290.0 million.

Key measures of credit quality showed improvement during the second quarter of 2005. Net recoveries were $59,000 compared to net charge-offs of $96,000, or 0.03 percent of loans, in second quarter 2004 and net recoveries of $17,000 in the first quarter of 2005. The Company also reported that the ratio of non-performing loans to core loans decreased to 0.32 percent. Subsequent to quarter-end, $3.8 million of the Company’s non-performing loans were paid, bringing total non-performing loans to $1.9 million, or 0.10% of core loans. Due to continued improvement in key measures of credit quality, the Company did not record a provision for possible loan losses during the second quarter of 2005, consistent with the first quarter of 2005 and down from $363,000 in the second quarter of 2004. Reserve coverage of losses, non-performing assets and classified loans remained strong. In management’s opinion, the reserve is sufficient to cover all reasonably expected losses in the portfolio and is derived from consistent application of the methodology for establishing the adequacy of reserves for Texas Capital Bank’s loan portfolio.

Non-interest income for the second quarter of 2005 increased $1.6 million, or 52%, to $4.7 million from $3.1 million in the second quarter of 2004. The increase is primarily related to a $1.2 million increase in gains on sale of mortgage loans to $1.9 million from $729,000. Trust fee income increased $161,000 due to continued growth of trust assets.

Non-interest expense for the second quarter of 2005 increased $5.7 million, or 42%,

2

percent, to $19.2 million from $13.5 million in the second quarter of 2004. The increase is primarily related to a $3.9 million increase in salaries and employee benefits to $11.9 million from $8.0 million. The increase in salaries and employee benefits resulted from an increase in the total number of employees related to general business growth, additional staffing for the new Houston office, the significant expansion of the residential mortgage lending division, and increased incentive compensation reflective of the Company’s performance.

TCB also announced the formation of BankDirect Capital Finance (BDCF), a new line of business focused on premium finance and other services for insurance agencies and their customers. The Company paid $6.6 million to create BDCF. BDCF had outstanding loans of $10 million on June 30; current outstandings are $85 million. The Company expects BDCF to be modestly profitable and accretive in 2005.

ABOUT TEXAS CAPITAL BANK

Texas Capital Bancshares (Nasdaq: TCBI) is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and private clients. Headquartered in Dallas, the Bank has full-service locations in Austin, Dallas, Fort Worth, Houston, Plano, and San Antonio.

This release contains forward-looking statements, which are subject to risks and uncertainties. A number of factors, many of which are beyond Texas Capital Bancshares’ 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 Form 10-K and other filings made by Texas Capital Bancshares with the Securities and Exchange Commission.

3

TEXAS CAPITAL BANCSHARES, INC.

SELECTED FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share data)

	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter
	2005			2005			2004			2004			2004
CONSOLIDATED STATEMENT OF OPERATIONS
Interest income	$	39,167		$	34,187		$	32,529		$	29,019		$	25,056
Interest expense		14,683			12,519			11,069			9,633			7,804
Net interest income		24,484			21,668			21,460			19,386			17,252
Provision for loan losses		—			—			200			375			363
Net interest income after provision for loan losses		24,484			21,668			21,260			19,011			16,889
Non-interest income		4,694			4,179			3,738			3,463			3,116
Non-interest expense		19,190			17,854			15,917			14,595			13,496
Income before income taxes		9,988			7,993			9,081			7,879			6,509
Income tax expense		3,401			2,717			3,054			2,643			2,149
Net income	$	6,587		$	5,276		$	6,027		$	5,236		$	4,360
Diluted EPS	$	.25		$	.20		$	.23		$	.20		$	.17
Diluted shares		26,543,191			26,622,813			26,457,466			26,263,714			26,140,080
CONSOLIDATED BALANCE SHEET DATA
Total assets	$	2,818,039		$	2,636,920		$	2,611,163		$	2,487,371		$	2,399,603
Loans held for investment		1,805,630			1,676,799			1,564,578			1,485,156			1,364,106
Loans held for sale		120,708			70,672			119,537			79,010			58,058
Securities		725,554			754,154			804,544			820,661			783,234
Demand deposits		475,516			405,162			397,629			324,292			359,628
Deposits		1,971,005			1,981,701			1,789,887			1,612,762			1,628,397
Other borrowings		610,254			431,682			594,991			653,168			569,404
Long-term debt		20,620			20,620			20,620			20,620			20,620
Stockholders’ equity		205,880			194,511			195,275			190,314			174,327
End of period shares		25,616,829			25,557,896			25,461,602			25,292,206			25,259,574
Book Value (excluding securities gains/losses)		8.06			7.79			7.57			7.31			7.09
SELECTED FINANCIAL RATIOS
Net interest margin		3.88	%		3.61	%		3.58	%		3.38	%		3.24	%
Return on average assets		.97	%		.82	%		.94	%		.85	%		.77	%
Return on average equity		13.14	%		10.89	%		12.50	%		11.25	%		10.04	%
Non-interest expense to earning assets		3.01	%		2.94	%		2.63	%		2.53	%		2.52	%
Efficiency ratio		65.8	%		69.1	%		63.2	%		63.9	%		66.3	%
Tier 1 capital ratio		9.9	%		10.4	%		10.7	%		11.0	%		11.4	%
Total capital ratio		10.7	%		11.3	%		11.7	%		12.0	%		12.5	%
Tier 1 leverage ratio		8.1	%		8.3	%		8.3	%		8.3	%		8.6	%
ASSET QUALITY SUMMARY
Non-performing loans	$	5,718		$	6,065		$	6,059		$	7,016		$	10,816
Net charge-offs (recoveries)		(59	)		(17	)		233			(78	)		96
Net charge-offs (recoveries) to average loans(1)		(.01	)%		(.00	)%		.06	%		(.02	)%		.03	%
Allowance to loans(1)		1.04	%		1.12	%		1.20	%		1.26	%		1.34	%
Non-performing loans to total loans(1)		.32	%		.36	%		.39	%		.47	%		.79	%
Allowance to non-performing loans(1)		3.3	x		3.1	x		3.1	x		2.7	x		1.7	x

(1) Excludes loans held for sale.

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TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)

	June 30,			June 30,			%
	2005			2004			Change
Assets
Cash and due from banks	$	107,982		$	90,754			19	%
Federal funds sold		5,000			59,970			(92	)%
Securities, available-for-sale		725,554			783,234			(7	)%
Loans held for sale		120,708			58,058			108	%
Loans held for investment (net of unearned income)		1,805,630			1,364,106			32	%
Less: Allowance for loan losses		18,774			18,278			3	%
Loans held for investment, net		1,786,856			1,345,828			33	%
Premises and equipment, net		5,398			4,719			14	%
Accrued interest receivable and other assets		60,124			55,544			8	%
Goodwill, net		6,417			1,496			329	%
Total assets	$	2,818,039		$	2,399,603			17	%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	475,516		$	359,628			32	%
Interest bearing		1,208,972			1,174,284			3	%
Interest bearing in foreign branches		286,517			94,485			203	%
Total deposits		1,971,005			1,628,397			21	%
Accrued interest payable		3,410			2,832			20	%
Other liabilities		6,870			4,023			71	%
Federal funds purchased		129,262			97,972			32	%
Repurchase agreements		354,159			467,686			(24	)%
Other borrowings		126,833			3,746			3,286	%
Long-term debt		20,620			20,620			—
Total liabilities		2,612,159			2,225,276			17	%
Stockholders’ equity:
Common stock, $.01 par value:
Authorized shares – 100,000,000
Issued shares – 25,616,829 and 24,978,518 at June 30, 2005 and 2004, respectively		256			250
Series A-1 non-voting common stock, $.01 par value:
Issued shares –281,056 at June 30, 2004		—			3
Additional paid-in capital		174,183			170,147
Retained earnings		31,910			8,784
Treasury stock (shares at cost: 84,274 at June 30, 2005 and 2004, respectively)		(573	)		(573	)
Deferred compensation		573			573
Accumulated other comprehensive income (loss), net		(469	)		(4,857	)
Total stockholders’ equity		205,880			174,327			18	%
Total liabilities and stockholders’ equity	$	2,818,039		$	2,399,603			17	%

5

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except per share data)

	Three Months Ended June 30				Six Months Ended June 30
	2005		2004		2005		2004
Interest income
Interest and fees on loans	$	31,255	$	17,498	$	56,947	$	34,204
Securities		7,887		7,536		16,183		15,087
Federal funds sold		14		18		94		33
Deposits in other banks		11		4		130		6
Total interest income		39,167		25,056		73,354		49,330
Interest expense
Deposits		10,446		4,948		19,379		9,691
Federal funds purchased		1,374		294		2,235		614
Repurchase agreements		2,151		2,250		4,545		4,335
Other borrowings		354		56		358		282
Long-term debt		358		256		685		512
Total interest expense		14,683		7,804		27,202		15,434
Net interest income		24,484		17,252		46,152		33,896
Provision for loan losses		—		363		—		1,113
Net interest income after provision for loan losses		24,484		16,889		46,152		32,783
Non-interest income
Service charges on deposit accounts		793		891		1,574		1,748
Trust fee income		615		454		1,201		891
Cash processing fees		—		—		—		587
Bank owned life insurance (BOLI) income		291		329		579		650
Mortgage warehouse fees		195		274		414		512
Gain on sale of mortgage loans		1,911		729		3,676		1,192
Other		889		439		1,429		851
Total non-interest income		4,694		3,116		8,873		6,431
Non-interest expense
Salaries and employee benefits		11,858		7,964		23,387		16,094
Net occupancy expense		1,875		1,341		3,558		2,675
Marketing		922		569		1,621		1,103
Legal and professional		1,097		779		2,194		1,572
Communications and data processing		914		995		1,569		1,854
Franchise taxes		45		56		90		153
Other		2,479		1,792		4,625		3,377
Total non-interest expense		19,190		13,496		37,044		26,828
Income before income taxes		9,988		6,509		17,981		12,386
Income tax expense		3,401		2,149		6,118		4,089
Net income	$	6,587	$	4,360	$	11,863	$	8,297
Earnings per share:
Basic	$	.26	$	.17	$	.46	$	.33
Diluted	$	.25	$	.17	$	.45	$	.32

6

TEXAS CAPITAL BANCSHARES, INC.

SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)

	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter
	2005			2005			2004			2004			2004
Beginning balance	$	18,715		$	18,698		$	18,731		$	18,278		$	18,011
Loans charged-off:
Commercial		70			266			258			—			—
Real estate		28			—			—			—			—
Consumer		52			1			16			135			6
Leases		2			58			115			65			266
Total		152			325			389			200			272
Recoveries:
Commercial		171			282			6			142			—
Leases		40			60			150			136			176
Total recoveries		211			342			156			278			176
Net charge-offs (recoveries)		(59	)		(17	)		233			(78	)		96
Provision for loan losses		—			—			200			375			363
Ending balance	$	18,774		$	18,715		$	18,698		$	18,731		$	18,278
Reserve to loans held for investment(2)		1.04	%		1.12	%		1.20	%		1.26	%		1.34	%
Reserve to average loans held for investment(2)		1.07	%		1.18	%		1.23	%		1.31	%		1.38	%
Net charge-offs (recoveries) to average loans(1)(2)		(.01	)%		(.00	)%		.06	%		(.02	)%		.03	%
Provision for loan losses to average loans(1) (2)		—			—			.05	%		.10	%		.11	%
Recoveries to gross charge-offs		138.8	%		105.2	%		40.1	%		139.0	%		64.7	%
Reserve as a multiple of net charge-offs		N/M			N/M			80.2x			N/M			190.4x
Non-performing loans:
Loans past due (90 days)	$	—		$	18		$	209		$	117		$	4,423
Non-accrual		5,718			6,047			5,850			6,899			6,393
Total	$	5,718		$	6,065		$	6,059		$	7,016		$	10,816
Reserve as a percent of non-performing loans(2)		3.3	x		3.1	x		3.1	x		2.7	x		1.7	x

(1)	Interim period ratios are annualized.
(2)	Excludes loans held for sale.

7

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands)

	2nd Quarter		1st Quarter		4th Quarter		3rd Quarter		2nd Quarter
	2005		2005		2004		2004		2004
Interest income
Interest and fees on loans	$	31,255	$	25,692	$	23,941	$	20,455	$	17,498
Securities		7,887		8,296		8,567		8,546		7,536
Federal funds sold		14		80		17		15		18
Deposits in other banks		11		119		4		3		4
Total interest income		39,167		34,187		32,529		29,019		25,056
Interest expense
Deposits		10,446		8,933		7,315		6,231		4,948
Federal funds purchased		1,374		861		740		437		294
Repurchase agreements		2,151		2,394		2,631		2,572		2,250
Other borrowings		354		4		80		112		56
Long-term debt		358		327		303		281		256
Total interest expense		14,683		12,519		11,069		9,633		7,804
Net interest income		24,484		21,668		21,460		19,386		17,252
Provision for loan losses		—		—		200		375		363
Net interest income after provision for loan losses		24,484		21,668		21,260		19,011		16,889
Non-interest income
Service charges on deposit accounts		793		781		797		825		891
Trust fee income		615		586		559		482		454
Bank owned life insurance (BOLI) income		291		288		292		346		329
Mortgage warehouse fees		195		219		243		241		274
Gain on sale of mortgage loans		1,911		1,765		1,145		1,083		729
Other		889		540		702		486		439
Total non-interest income		4,694		4,179		3,738		3,463		3,116
Non-interest expense
Salaries and employee benefits		11,858		11,529		9,786		8,914		7,964
Net occupancy expense		1,875		1,683		1,577		1,443		1,341
Marketing		922		699		837		669		569
Legal and professional		1,097		1,097		814		755		779
Communications and data processing		914		655		540		764		995
Franchise taxes		45		45		41		52		56
Other		2,479		2,146		2,322		1,998		1,792
Total non-interest expense		19,190		17,854		15,917		14,595		13,496
Income before income taxes		9,988		7,993		9,081		7,879		6,509
Income tax expense		3,401		2,717		3,054		2,643		2,149
Net income	$	6,587	$	5,276	$	6,027	$	5,236	$	4,360

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QUARTERLY FINANCIAL SUMMARY – UNAUDITED

Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)

	2nd Quarter 2005							1st Quarter 2005							4th Quarter 2004							3rd Quarter 2004							2nd Quarter 2004
	Average		Revenue/		Yield/			Average		Revenue/		Yield/			Average		Revenue/		Yield/			Average		Revenue/		Yield/			Average		Revenue/		Yield/
	Balance		Expense(1)(2)		Rate			Balance		Expense(1)(2)		Rate			Balance		Expense(1)(2)		Rate			Balance		Expense(1)(2)		Rate			Balance		Expense(1)(2)		Rate
Assets
Securities – Taxable	$	685,058	$	7,451		4.36	%	$	729,907	$	7,861		4.37	%	$	765,943	$	8,168		4.24	%	$	776,302	$	8,337		4.27	%	$	748,343	$	7,396		3.97	%
Securities – Non-taxable		48,694		671		5.53	%		48,715		669		5.57	%		44,907		614		5.44	%		24,925		322		5.14	%		17,664		215		4.90	%
Federal funds sold		1,980		14		2.84	%		12,377		80		2.62	%		3,159		17		2.14	%		4,192		15		1.42	%		7,686		18		0.94	%
Deposits in other banks		1,736		11		2.54	%		17,858		119		2.70	%		773		4		2.06	%		1,128		3		1.06	%		995		4		1.62	%
Loans held for sale		84,497		2,897		13.75	%		81,956		2,281		11.29	%		94,510		2,191		9.22	%		70,730		1,765		9.93	%		68,922		1,456		8.50	%
Loans held for investment		1,755,311		28,358		6.48	%		1,590,207		23,411		5.97	%		1,516,672		21,750		5.71	%		1,432,860		18,690		5.19	%		1,326,066		16,042		4.87	%
Less reserve for loan losses		18,753		—		—			18,930		—		—			18,870		—		—			18,440		—		—			18,205		—		—
Loans, net of reserve		1,821,055		31,255		6.88	%		1,653,233		25,692		6.30	%		1,592,312		23,941		5.98	%		1,485,150		20,455		5.48	%		1,376,783		17,498		5.11	%
Total earning assets		2,558,523		39,402		6.18	%		2,462,090		34,421		5.67	%		2,407,094		32,744		5.41	%		2,291,697		29,132		5.06	%		2,151,471		25,131		4.70	%
Cash and other assets		162,835							148,557							137,702							157,255							138,399
Total assets	$	2,721,358						$	2,610,647						$	2,544,796						$	2,448,952						$	2,289,870
Liabilities and Stockholders’ Equity
Transaction deposits	$	111,029	$	292		1.05	%	$	107,162	$	255		0.97	%	$	104,621	$	230		0.87	%	$	99,245	$	150		0.60	%	$	95,031	$	140		0.59	%
Savings deposits		654,519		3,886		2.38	%		613,391		3,147		2.08	%		587,020		2,548		1.73	%		581,616		2,005		1.37	%		560,182		1,639		1.18	%
Time deposits		782,643		6,268		3.21	%		765,497		5,531		2.93	%		658,447		4,537		2.74	%		631,115		4,076		2.57	%		566,369		3,169		2.25	%
Total interest bearing deposits		1,548,191		10,446		2.71	%		1,486,050		8,933		2.44	%		1,350,088		7,315		2.16	%		1,311,976		6,231		1.89	%		1,221,582		4,948		1.63	%
Other borrowings		545,896		3,879		2.85	%		534,773		3,259		2.47	%		635,552		3,451		2.16	%		617,394		3,121		2.01	%		574,942		2,600		1.82	%
Long-term debt		20,620		358		6.96	%		20,620		327		6.43	%		20,620		303		5.85	%		20,620		281		5.42	%		20,620		256		4.99	%
Total interest bearing liabilities		2,114,707		14,683		2.78	%		2,041,443		12,519		2.49	%		2,006,260		11,069		2.19	%		1,949,990		9,633		1.97	%		1,817,144		7,804		1.73	%
Demand deposits		397,266							363,398							335,914							302,338							289,973
Other liabilities		8,370							9,241							10,732							11,395							8,047
Stockholders’ equity		201,015							196,565							191,890							185,229							174,706
Total liabilities and stockholders’ equity	$	2,721,358						$	2,610,647						$	2,544,796						$	2,448,952						$	2,289,870
Net interest income			$	24,719						$	21,902						$	21,675						$	19,499						$	17,327
Net interest income to earning assets						3.88	%						3.61	%						3.58	%						3.38	%						3.24	%

(1) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income.

(2) Taxable equivalent rates used where applicable.

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