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

Exhibit 99.1

For immediate release
October 19, 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 THIRD QUARTER OPERATING RESULTS

Dallas, Texas — October 19, 2005 — Texas Capital Bancshares (Nasdaq: TCBI), the parent company of Texas Capital Bank, announced earnings for the third quarter of 2005.

On a comparative basis:

• Net income increased 45%

• EPS increased 40%

• Loans held for investment grew 30%

• Total loans grew 31%

• Demand deposits grew 41%

• Total deposits grew 43%

“This quarter’s results continue to validate the focus and strategy of the bank,” said Jody Grant, chairman and CEO of TCBI. “Our business is strong, and we continue to supplement it with new lines of business, creating additional profitable loan growth. We are optimistic about the Texas economy and our ability to produce exceptional results.”

FINANCIAL SUMMARY
(dollars and shares in thousands)

	Q3 2005			Q3 2004			% Change
OPERATING RESULTS
Net Income	$	7,584		$	5,236			45	%
Diluted EPS	$	.28		$	.20			40	%
ROA		1.04	%		.85	%
ROE		14.41	%		11.25	%
Diluted Shares		26,676			26,264			2	%

	Q3 2005		Q3 2004		% Change
BALANCE SHEET
Total Assets	$	2,932,662	$	2,487,371		18	%
Demand Deposits		457,333		324,292		41	%
Total Deposits		2,312,345		1,612,762		43	%
Loans Held for Investment		1,935,818		1,485,156		30	%
Total Loans		2,054,747		1,564,166		31	%
Stockholders’ Equity		212,318		190,314		12	%

Loans Held for Investment are stated net of unearned income.

1

DETAILED FINANCIALS
Texas Capital Bancshares, Inc. reported net income of $7.6 million for the third quarter of 2005 and $19.4 million for the year to date. For the third quarter and first nine months of 2004, the Company reported net income of $5.2 million and $13.5 million, respectively. On a fully diluted basis, earnings per share were $.28 and $.73, for the three and nine month periods ended September 30, 2005, respectively. For 2004 the EPS comparisons for the three and nine month periods were $.20 and $.52, respectively.

Return on average equity was 14.41 percent and return on average assets was 1.04 percent for the third quarter of 2005 compared to 11.25 percent and .85 percent, respectively, for the third quarter of 2004. The increase in net income and improvement in return on assets and return on equity 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 $27.0 million for the third quarter of 2005, compared to $19.4 million for the third quarter of 2004. The increase was due to an increase in average earning assets of $425.2 million over levels reported in the third quarter of 2004 and an improvement in the net interest margin. The increase in average earning assets included a $451.3 million increase in average loans held for investment, an increase of $50.5 million in loans held for sale offset by a decrease of $109.2 million in average securities. The net interest margin in the third quarter of 2005 was 3.97 percent, a 59 basis point increase from the third quarter of 2004 and a 9 basis point increase from the second quarter of 2005. The improvement in the net interest margin resulted primarily from a 157 basis point increase in the yield on earning assets offset by a 124 basis point increase in the cost of interest-bearing liabilities from the prior year.

Average interest bearing liabilities increased $298.5 million from the third quarter of 2004, which included a $411.2 million increase in interest bearing deposits offset by a $112.7 million decrease in other borrowings. For the same periods, the average balance of demand deposits increased 39% to $420.3 million from $302.3 million.

Key measures of credit quality showed improvement during the third quarter of 2005. Net recoveries were $134,000 compared to net recoveries of $78,000 in the third quarter 2004 and net recoveries of $59,000 in the second quarter of 2005. The Company also reported that the ratio of non-performing loans to core loans decreased to 0.12 percent. Due to continued improvement in key measures of credit quality, the Company did not record a provision for possible loan losses during the third quarter of 2005, consistent with the second quarter of 2005 and down from $375,000 in the third 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 third quarter of 2005 increased $2.3 million, or 67%, to $5.8 million from $3.5 million in the third quarter of 2004. The increase is primarily related to a $1.1 million increase in gains on sale of mortgage loans to $2.2 million from $1.1 million. Additionally, brokered loan fee income, which includes third party fees on mortgage warehouse and premium finance loans, increased $721,000 in the third quarter of 2005 as compared to the third quarter of 2004. Trust fee income increased $296,000 due to continued growth of trust assets.

Non-interest expense for the third quarter of 2005 increased $6.6 million or 46 percent,

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to $21.2 million from $14.6 million in the third quarter of 2004. The increase is primarily related to a $4.6 million increase in salaries and employee benefits to $13.5 million from $8.9 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 Houston office, addition of the premium finance business, the continued expansion of the residential mortgage lending division, and increased incentive compensation reflective of the Company’s performance.

On October 6, 2005, Texas Capital Bancshares issued $25 million of trust preferred, which matures in 2035. The proceeds will be used to augment capital for support of future growth.

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.

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TEXAS CAPITAL BANCSHARES, INC.

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

	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2005			2005			2005			2004			2004
CONSOLIDATED STATEMENT OF OPERATIONS
Interest income	$	45,146		$	39,167		$	34,187		$	32,529		$	29,019
Interest expense		18,188			14,683			12,519			11,069			9,633
Net interest income		26,958			24,484			21,668			21,460			19,386
Provision for loan losses		—			—			—			200			375
Net interest income after provision for loan losses		26,958			24,484			21,668			21,260			19,011
Non-interest income		5,790			4,694			4,179			3,738			3,463
Non-interest expense		21,249			19,190			17,854			15,917			14,595
Income before income taxes		11,499			9,988			7,993			9,081			7,879
Income tax expense		3,915			3,401			2,717			3,054			2,643
Net income	$	7,584		$	6,587		$	5,276		$	6,027		$	5,236
Diluted EPS	$	.28		$	.25		$	.20		$	.23		$	.20
Diluted shares		26,676,335			26,543,191			26,622,813			26,457,466			26,263,714
CONSOLIDATED BALANCE SHEET DATA
Total assets	$	2,932,662		$	2,818,039		$	2,636,920		$	2,611,163		$	2,487,371
Loans held for investment		1,935,818			1,805,630			1,676,799			1,564,578			1,485,156
Loans held for sale		118,929			120,708			70,672			119,537			79,010
Securities		674,792			725,554			754,154			804,544			820,661
Demand deposits		457,333			475,516			405,162			397,629			324,292
Total deposits		2,312,345			1,971,005			1,981,701			1,789,887			1,612,762
Other borrowings		366,501			610,254			431,682			594,991			653,168
Long-term debt		20,620			20,620			20,620			20,620			20,620
Stockholders’ equity		212,318			205,880			194,511			195,275			190,314
End of period shares		25,672,369			25,616,829			25,557,896			25,461,602			25,292,206
Book value (excluding securities gains/losses)		8.36			8.06			7.79			7.57			7.31
SELECTED FINANCIAL RATIOS
Net interest margin		3.97	%		3.88	%		3.61	%		3.58	%		3.38	%
Return on average assets		1.04	%		.97	%		.82	%		.94	%		.85	%
Return on average equity		14.41	%		13.14	%		10.89	%		12.50	%		11.25	%
Non-interest expense to earning assets		3.10	%		3.01	%		2.94	%		2.63	%		2.53	%
Efficiency ratio		64.9	%		65.8	%		69.1	%		63.2	%		63.9	%
Tier 1 capital ratio		9.5	%		9.9	%		10.4	%		10.7	%		11.0	%
Total capital ratio		10.3	%		10.7	%		11.3	%		11.7	%		12.0	%
Tier 1 leverage ratio		7.8	%		8.1	%		8.3	%		8.3	%		8.3	%
ASSET QUALITY SUMMARY
Non-performing loans	$	2,294		$	5,718		$	6,065		$	6,059		$	7,016
Net charge-offs (recoveries)		(134	)		(59	)		(17	)		233			(78	)
Net charge-offs (recoveries) to average loans(1)		(.03	)%		(.01	)%		(.00	)%		.06	%		(.02	)%
Allowance to loans(1)		.98	%		1.04	%		1.12	%		1.20	%		1.26	%
Non-performing loans to loans(1)		.12	%		.32	%		.36	%		.39	%		.47	%
Allowance to non-performing loans(1)		8.2x			3.3x			3.1x			3.1x			2.7x

(1) Excludes loans held for sale.

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TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)

	September 30,			September 30,			%
	2005			2004			Change
Assets
Cash and due from banks	$	105,584		$	62,506			69	%
Federal funds sold		38,110			—			100	%
Securities, available-for-sale		674,792			820,661			(18	)%
Loans held for sale		118,929			79,010			51	%
Loans held for investment (net of unearned income)		1,935,818			1,485,156			30	%
Less: Allowance for loan losses		18,908			18,731			1	%
Loans held for investment, net		1,916,910			1,466,425			31	%
Premises and equipment, net		6,916			4,697			47	%
Accrued interest receivable and other assets		63,203			52,576			20	%
Goodwill and intangible, net		8,218			1,496			449	%
Total assets	$	2,932,662		$	2,487,371			18	%
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	457,333		$	324,292			41	%
Interest bearing		1,318,108			1,160,118			14	%
Interest bearing in foreign branches		536,904			128,352			318	%
Total deposits		2,312,345			1,612,762			43	%
Accrued interest payable		4,051			2,660			52	%
Other liabilities		16,827			7,847			114	%
Federal funds purchased		93,897			146,342			(36	)%
Repurchase agreements		271,044			478,581			(43	)%
Other borrowings		1,560			28,245			(94	)%
Long-term debt		20,620			20,620			—
Total liabilities		2,720,344			2,297,057			18	%
Stockholders’ equity:
Common stock, $.01 par value:
Authorized shares — 100,000,000
Issued shares —25,672,369 and 25,292,206 at September 30, 2005 and 2004, respectively		257			253
Additional paid-in capital		174,904			170,650
Retained earnings		39,494			14,020
Treasury stock (shares at cost: 84,274 at September 30, 2005 and 2004)		(573	)		(573	)
Deferred compensation		573			573
Accumulated other comprehensive income (loss), net		(2,337	)		5,391
Total stockholders’ equity		212,318			190,314			12	%
Total liabilities and stockholders’ equity	$	2,932,662		$	2,487,371			18	%

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

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2005		2004		2005		2004
Interest income
Interest and fees on loans	$	37,363	$	20,455	$	94,310	$	54,659
Securities		7,442		8,546		23,625		23,633
Federal funds sold		334		15		428		48
Deposits in other banks		7		3		137		9
Total interest income		45,146		29,019		118,500		78,349
Interest expense
Deposits		13,658		6,231		33,037		15,922
Federal funds purchased		989		437		3,224		1,051
Repurchase agreements		2,706		2,572		7,251		6,907
Other borrowings		451		112		809		394
Long-term debt		384		281		1,069		793
Total interest expense		18,188		9,633		45,390		25,067
Net interest income		26,958		19,386		73,110		53,282
Provision for loan losses		—		375		—		1,488
Net interest income after provision for loan losses		26,958		19,011		73,110		51,794
Non-interest income
Service charges on deposit accounts		816		825		2,390		2,573
Trust fee income		778		482		1,979		1,373
Cash processing fees		—		—		—		587
Bank owned life insurance (BOLI) income		267		346		846		996
Brokered loan fees		962		241		1,581		753
Gain on sale of mortgage loans		2,198		1,083		5,874		2,275
Other		769		486		1,993		1,337
Total non-interest income		5,790		3,463		14,663		9,894
Non-interest expense
Salaries and employee benefits		13,465		8,914		36,852		25,008
Net occupancy expense		1,937		1,443		5,495		4,118
Marketing		821		669		2,442		1,772
Legal and professional		1,183		755		3,383		2,327
Communications and data processing		658		764		2,227		2,618
Franchise taxes		49		52		139		205
Other		3,136		1,998		7,755		5,375
Total non-interest expense		21,249		14,595		58,293		41,423
Income before income taxes		11,499		7,879		29,480		20,265
Income tax expense		3,915		2,643		10,033		6,732
Net income	$	7,584	$	5,236	$	19,447	$	13,533
Earnings per share:
Basic	$	.30	$	.21	$	.76	$	.54
Diluted	$	.28	$	.20	$	.73	$	.52

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TEXAS CAPITAL BANCSHARES, INC.

SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)

	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	2005			2005			2005			2004			2004
Beginning balance	$	18,774		$	18,715		$	18,698		$	18,731		$	18,278
Loans charged-off:
Commercial		14			70			266			258			—
Real estate		—			28			—			—			—
Consumer		32			52			1			16			135
Leases		—			2			58			115			65
Total		46			152			325			389			200
Recoveries:
Commercial		115			171			282			6			142
Leases		65			40			60			150			136
Total recoveries		180			211			342			156			278
Net charge-offs (recoveries)		(134	)		(59	)		(17	)		233			(78	)
Provision for loan losses		—			—			—			200			375
Ending balance	$	18,908		$	18,774		$	18,715		$	18,698		$	18,731
Reserve to loans held for investment(2)		.98	%		1.04	%		1.12	%		1.20	%		1.26	%
Reserve to average loans held for investment(2)		1.00	%		1.07	%		1.18	%		1.23	%		1.31	%
Net charge-offs (recoveries) to average loans(1)(2)		(.03	)%		(.01	)%		(.00	)%		.06	%		(.02	)%
Provision for loan losses to average loans(1) (2)		—			—			—			.05	%		.10	%
Recoveries to gross charge-offs		391.3	%		138.8	%		105.2	%		40.1	%		139.0	%
Reserve as a multiple of net charge-offs		N/M			N/M			N/M			80.2x			N/A
Non-performing loans:
Loans past due (90 days)
(3)	$	941		$	—		$	18		$	209		$	117
Non-accrual		1,353			5,718			6,047			5,850			6,899
Total	$	2,294		$	5,718		$	6,065		$	6,059		$	7,016
Reserve as a percent of non-performing loans(2)		8.2x			3.3x			3.1x			3.1x			2.7x

(1)	Interim period ratios are annualized.
(2)	Excludes loans held for sale.
(3)	Over 90% of the loans past due 90 days and still accruing are premium finance loans. These loans are secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take up to 180 days from the cancellation date.

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TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands)

	3rd Quarter		2nd Quarter		1st Quarter		4th Quarter		3rd Quarter
	2005		2005		2005		2004		2004
Interest income
Interest and fees on loans	$	37,363	$	31,255	$	25,692	$	23,941	$	20,455
Securities		7,442		7,887		8,296		8,567		8,546
Federal funds sold		334		14		80		17		15
Deposits in other banks		7		11		119		4		3
Total interest income		45,146		39,167		34,187		32,529		29,019
Interest expense
Deposits		13,658		10,446		8,933		7,315		6,231
Federal funds purchased		989		1,374		861		740		437
Repurchase agreements		2,706		2,151		2,394		2,631		2,572
Other borrowings		451		354		4		80		112
Long-term debt		384		358		327		303		281
Total interest expense		18,188		14,683		12,519		11,069		9,633
Net interest income		26,958		24,484		21,668		21,460		19,386
Provision for loan losses		—		—		—		200		375
Net interest income after provision for loan losses		26,958		24,484		21,668		21,260		19,011
Non-interest income
Service charges on deposit accounts		816		793		781		797		825
Trust fee income		778		615		586		559		482
Bank owned life insurance (BOLI) income		267		291		288		292		346
Brokered loan fees		962		400		219		243		241
Gain on sale of mortgage loans		2,198		1,911		1,765		1,145		1,083
Other		769		684		540		702		486
Total non-interest income		5,790		4,694		4,179		3,738		3,463
Non-interest expense
Salaries and employee benefits		13,465		11,858		11,529		9,786		8,914
Net occupancy expense		1,937		1,875		1,683		1,577		1,443
Marketing		821		922		699		837		669
Legal and professional		1,183		1,103		1,097		814		755
Communications and data processing		658		914		655		540		764
Franchise taxes		49		45		45		41		52
Other		3,136		2,473		2,146		2,322		1,998
Total non-interest expense		21,249		19,190		17,854		15,917		14,595
Income before income taxes		11,499		9,988		7,993		9,081		7,879
Income tax expense		3,915		3,401		2,717		3,054		2,643
Net income	$	7,584	$	6,587	$	5,276	$	6,027	$	5,236

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QUARTERLY FINANCIAL SUMMARY — UNAUDITED
Consolidated Daily Average Balances, Average Yields and Rates
(Dollars in thousands)

	3rd Quarter 2005							2nd Quarter 2005							1st Quarter 2005							4th Quarter 2004							3rd 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	$	643,319	$	7,007		4.32	%	$	685,058	$	7,451		4.36	%	$	729,907	$	7,861		4.37	%	$	765,943	$	8,168		4.24	%	$	776,302	$	8,337		4.27	%
Securities — Non-taxable		48,675		669		5.45	%		48,694		671		5.53	%		48,715		669		5.57	%		44,907		614		5.44	%		24,925		322		5.14	%
Federal funds sold		37,532		334		3.53	%		1,980		14		2.84	%		12,377		80		2.62	%		3,159		17		2.14	%		4,192		15		1.42	%
Deposits in other banks		895		7		3.10	%		1,736		11		2.54	%		17,858		119		2.70	%		773		4		2.06	%		1,128		3		1.06	%
Loans held for sale(3)		121,181		3,650		11.95	%		84,497		2,897		13.75	%		81,956		2,281		11.29	%		94,510		2,191		9.22	%		70,730		1,765		9.93	%
Loans held for investment		1,884,161		33,713		7.10	%		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	%
Less reserve for loan losses		18,882		—		—			18,753		—		—			18,930		—		—			18,870		—		—			18,440		—		—
Loans, net of reserve		1,986,460		37,363		7.46	%		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	%
Total earning assets		2,716,881		45,380		6.63	%		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	%
Cash and other assets		175,986							162,835							148,557							137,702							157,255
Total assets	$	2,892,867						$	2,721,358						$	2,610,647						$	2,544,796						$	2,448,952
Liabilities and Stockholders’ Equity
Transaction deposits	$	107,398	$	271		1.00	%	$	111,029	$	272		0.98	%	$	107,162	$	255		0.97	%	$	104,621	$	230		0.87	%	$	99,245	$	150		0.60	%
Savings deposits		628,019		4,442		2.81	%		654,519		3,906		2.39	%		613,391		3,147		2.08	%		587,020		2,548		1.73	%		581,616		2,005		1.37	%
Time deposits		987,731		8,945		3.59	%		782,643		6,268		3.21	%		765,497		5,531		2.93	%		658,447		4,537		2.74	%		631,115		4,076		2.57	%
Total interest bearing deposits		1,723,148		13,658		3.14	%		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	%
Other borrowings		504,700		4,146		3.26	%		545,896		3,879		2.85	%		534,773		3,259		2.47	%		635,552		3,451		2.16	%		617,394		3,121		2.01	%
Long-term debt		20,620		384		7.39	%		20,620		358		6.96	%		20,620		327		6.43	%		20,620		303		5.85	%		20,620		281		5.42	%
Total interest bearing liabilities		2,248,468		18,188		3.21	%		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	%
Demand deposits		420,288							397,266							363,398							335,914							302,338
Other liabilities		15,265							8,370							9,241							10,732							11,395
Stockholders’ equity		208,846							201,015							196,565							191,890							185,229
Total liabilities and stockholders’ equity	$	2,892,867						$	2,721,358						$	2,610,647						$	2,544,796						$	2,448,952
Net interest income			$	27,192						$	24,719						$	21,902						$	21,675						$	19,499
Net interest income to earning assets						3.97	%						3.88	%						3.61	%						3.58	%						3.38	%

(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.
(3)	Revenue includes origination fees and other loan fees for our residential mortgage loans that are earned when the loan is sold. This increases our overall yield on these loans since most of the mortgage loans are on our books for less than 30 days.

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