TEXAS CAPITAL BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On November 1, 2022, Texas Capital Bank (the "Bank"), a wholly owned subsidiary of Texas Capital Bancshares, Inc. (the "Company"), completed the previously announced sale of BankDirect Capital Finance ("BankDirect"), a wholly owned subsidiary of the Bank, to AFCO Credit Corporation, an indirect wholly-owned subsidiary of Truist Financial Corp.
The unaudited pro forma condensed consolidated financial information is based on our historical consolidated financial statements, and gives effect to the sale of BankDirect in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2022 and the year ended December 31, 2021 give effect to the sale of BankDirect as if it had occurred on January 1, 2021, while the unaudited pro forma condensed consolidated balance sheet as of September 30, 2022 gives effect to the sale of BankDirect as if it had occurred on that day.
The unaudited pro forma condensed consolidated financial statements (i) do not necessarily reflect what the company's financial condition or results of operations would have been had the sale of BankDirect occurred on the dates indicated, (ii) are based upon available information and assumptions that management considers to be reasonable to give effect, on a pro forma basis, to the sale of BankDirect and (iii) are intended for informational purposes only. In addition, the unaudited pro forma condensed consolidated financial statements should not be considered to be indicative of our future consolidated financial performance or results of operations and should be read in conjunction with our audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2021 and in our Form 10-Q for the three and nine-months ended September 30, 2022.
TEXAS CAPITAL BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
| | | | | | | | | | | | | | |
| September 30, 2022 |
| (in thousands) | Historical | Transaction Accounting Adjustments | | Pro Forma |
| Assets | | | | |
| Cash and due from banks | $ | 240,609 | | $ | 3,393,538 | | (a) | $ | 3,634,147 | |
| Interest bearing cash and cash equivalents | 3,399,638 | | — | | | 3,399,638 | |
| Available-for-sale debt securities | 2,380,774 | | — | | | 2,380,774 | |
| Held-to-maturity debt securities | 955,875 | | — | | | 955,875 | |
| Equity securities | 32,973 | | — | | | 32,973 | |
| Investment securities | 3,369,622 | | — | | | 3,369,622 | |
| Loans held for sale | 3,142,178 | | (3,137,792) | | (b) | 4,386 | |
| Loans held for investment, mortgage finance | 4,908,822 | | — | | | 4,908,822 | |
| Loans held for investment | 14,878,959 | | — | | | 14,878,959 | |
| Less: Allowance for credit losses on loans | 234,613 | | — | | | 234,613 | |
| Loans held for investment, net | 19,553,168 | | — | | | 19,553,168 | |
| Premises and equipment, net | 27,180 | | — | | | 27,180 | |
| Accrued interest receivable and other assets | 648,172 | | 2,485 | | (b) | 650,657 | |
| Other assets held for sale | 26,450 | | (26,450) | | (b) | — | |
| Goodwill and intangibles, net | 1,496 | | — | | | 1,496 | |
| Total assets | $ | 30,408,513 | | $ | 231,781 | | | $ | 30,640,294 | |
| | | | |
| Liabilities and Stockholders’ Equity | | | | |
| Liabilities: | | | | |
| Non-interest bearing deposits | $ | 11,494,685 | | $ | 55,628 | | (c) | $ | 11,550,313 | |
| Interest bearing deposits | 13,003,878 | | — | | | 13,003,878 | |
| Total deposits | 24,498,563 | | 55,628 | | | 24,554,191 | |
| Accrued interest payable and other liabilities | 316,365 | | 74,542 | | (d) | 390,907 | |
| Other liabilities | 75,564 | | (75,564) | | (b) | — | |
| Short-term borrowings | 1,701,480 | | — | | | 1,701,480 | |
| Long-term debt | 930,766 | | — | | | 930,766 | |
| Total liabilities | 27,522,738 | | 54,606 | | | 27,577,344 | |
| | | | |
| Stockholders’ equity: | | | | |
| Preferred stock | 300,000 | | — | | | 300,000 | |
| Common stock | 509 | | — | | | 509 | |
| Additional paid-in capital | 1,020,153 | | — | | | 1,020,153 | |
| Retained earnings | 2,050,563 | | 177,175 | | (e) | 2,227,738 | |
| Treasury stock | (50,031) | | — | | | (50,031) | |
| Accumulated other comprehensive loss, net of taxes | (435,419) | | — | | | (435,419) | |
| Total stockholders’ equity | 2,885,775 | | 177,175 | | | 3,062,950 | |
| Total liabilities and stockholders’ equity | $ | 30,408,513 | | $ | 231,781 | | | $ | 30,640,294 | |
TEXAS CAPITAL BANCSHARES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2022 | | Year ended December 31, 2021 |
| (in thousands except per share data) | Historical | Transaction Accounting Adjustments | | Pro Forma | | Historical | Transaction Accounting Adjustments | | Pro Forma |
| Interest income | | | | | | | | | |
| Interest and fees on loans | $ | 688,420 | | $ | (87,336) | | (f) | $ | 601,084 | | | $ | 820,532 | | $ | (95,792) | | (f) | $ | 724,740 | |
| Investment securities | 46,969 | | — | | | 46,969 | | | 42,820 | | — | | | 42,820 | |
| Interest bearing cash and cash equivalents | 37,561 | | — | | | 37,561 | | | 13,233 | | — | | | 13,233 | |
| Total interest income | 772,950 | | (87,336) | | | 685,614 | | | 876,585 | | (95,792) | | | 780,793 | |
| Interest expense | | | | | | | | | |
| Deposits | 94,513 | | — | | | 94,513 | | | 65,507 | | — | | | 65,507 | |
| Short-term borrowings | 15,628 | | — | | | 15,628 | | | 4,613 | | — | | | 4,613 | |
| Long-term debt | 34,651 | | — | | | 34,651 | | | 37,628 | | — | | | 37,628 | |
| Total interest expense | 144,792 | | — | | | 144,792 | | | 107,748 | | — | | | 107,748 | |
| Net interest income | 628,158 | | (87,336) | | | 540,822 | | | 768,837 | | (95,792) | | | 673,045 | |
| Provision for credit losses | 32,000 | | 2,965 | | (f) | 34,965 | | | (30,000) | | (840) | | (f) | (30,840) | |
| Net interest income after provision for credit losses | 596,158 | | (90,301) | | | 505,857 | | | 798,837 | | (94,952) | | | 703,885 | |
| Non-interest income | | | | | | | | | |
| Service charges on deposit accounts | 17,726 | | — | | | 17,726 | | | 18,674 | | — | | | 18,674 | |
| Wealth management and trust fee income | 11,594 | | — | | | 11,594 | | | 13,173 | | — | | | 13,173 | |
| Brokered loan fees | 11,504 | | — | | | 11,504 | | | 27,954 | | — | | | 27,954 | |
| Servicing income | 677 | | — | | | 677 | | | 15,513 | | — | | | 15,513 | |
| Investment banking and trading income | 23,117 | | — | | | 23,117 | | | 24,441 | | — | | | 24,441 | |
| Net gain/(loss) on sale of loans held for sale | — | | — | | | — | | | 1,317 | | — | | | 1,317 | |
| Other | 7,239 | | (3,380) | | (f) | 3,859 | | | 37,158 | | (4,350) | | (f) | 32,808 | |
| Gain on disposal | — | | 236,233 | | (g) | 236,233 | | | — | | 219,568 | | (g) | 219,568 | |
| Total non-interest income | 71,857 | | 232,853 | | | 304,710 | | | 138,230 | | 215,218 | | | 353,448 | |
| Non-interest expense | | | | | | | | | |
| Salaries and benefits | 333,319 | | (35,442) | | (f) | 297,877 | | | 350,930 | | (26,835) | | (f) | 324,095 | |
| Occupancy expense | 27,192 | | (1,837) | | (f) | 25,355 | | | 33,232 | | (2,491) | | (f) | 30,741 | |
| Marketing | 21,765 | | (543) | | (f) | 21,222 | | | 10,006 | | (319) | | (f) | 9,687 | |
| Legal and professional | 38,365 | | (352) | | (f) | 38,013 | | | 41,152 | | (821) | | (f) | 40,331 | |
| Communications and technology | 48,819 | | (724) | | (f) | 48,095 | | | 75,185 | | (1,084) | | (f) | 74,101 | |
| FDIC insurance assessment | 11,252 | | — | | | 11,252 | | | 21,027 | | — | | | 21,027 | |
| Servicing-related expenses | — | | — | | | — | | | 27,765 | | — | | | 27,765 | |
| Other | 33,730 | | (2,316) | | (f) | 31,414 | | | 39,715 | | (3,891) | | (f) | 35,824 | |
| Total non-interest expense | 514,442 | | (41,214) | | | 473,228 | | | 599,012 | | (35,441) | | | 563,571 | |
| Income before income taxes | 153,573 | | 183,766 | | | 337,339 | | | 338,055 | | 155,707 | | | 493,762 | |
| Income tax expense | 38,346 | | 45,794 | | (h) | 84,140 | | | 84,116 | | 37,401 | | (h) | 121,517 | |
| Net income | 115,227 | | 137,972 | | | 253,199 | | | 253,939 | | 118,306 | | | 372,245 | |
| Preferred stock dividends | 12,938 | | — | | | 12,938 | | | 18,721 | | — | | | 18,721 | |
| Net income available to common stockholders | $ | 102,289 | | $ | 137,972 | | | $ | 240,261 | | | $ | 235,218 | | $ | 118,306 | | | $ | 353,524 | |
| | | | | | | | | |
| Basic earnings per common share | $ | 2.03 | | $ | 2.73 | | | $ | 4.76 | | | $ | 4.65 | | $ | 2.34 | | | $ | 6.99 | |
| Diluted earnings per common share | $ | 2.00 | | $ | 2.70 | | | $ | 4.70 | | | $ | 4.60 | | $ | 2.31 | | | $ | 6.91 | |
| | | | | | | | | |
| Weighted average basic common shares | 50,506,364 | | 50,506,364 | | | 50,506,364 | | | 50,580,660 | | 50,580,660 | | | 50,580,660 | |
| Weighted average diluted common shares | 51,090,515 | | 51,090,515 | | | 51,090,515 | | | 51,140,974 | | 51,140,974 | | | 51,140,974 | |
TEXAS CAPITAL BANCSHARES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2022 and the year ended December 31, 2021 give effect to the sale of BankDirect as if it had occurred on January 1, 2021, while the unaudited pro forma condensed consolidated balance sheet as of September 30, 2022 gives effect to the sale of BankDirect as if it had occurred on that day.
(2) Adjustments to the Unaudited Pro Forma Condensed Consolidated Financial Statements
The following is a summary of the transaction accounting adjustments reflected in the unaudited pro forma condensed consolidated financial statements:
(a) This adjustment reflects the receipt of cash consideration at the closing of the transaction.
(b) This adjustment reflects the elimination of assets and liabilities associated with BankDirect as of September 30, 2022.
(c) This adjustment reflects BankDirect deposit balances held at the Bank as of September 30, 2022 that were previously eliminated in consolidation.
(d) This adjustment reflects accruals for transaction costs and income tax expense recorded at the closing of the transaction.
(e) This adjustment reflects the gain recorded at the closing of the transaction, net of transaction costs and income tax expense.
(f) This adjustment reflects the elimination of revenues and expenses associated with BankDirect for the nine months ended September 30, 2022 and the year ended December 31, 2021.
(g) This adjustment reflects the pre-tax gain recorded at the closing of the transaction, net of transaction costs.
(h) This adjustment reflects the tax impact of the transaction accounting adjustments.
