TCBI Q4 2012 Earnings Exhibit 99.2 |
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). |
Opening Remarks • Achieved record earnings in 2012 • Reduction in credit costs and improvement in NPAs in 2012 • Strong growth in LHI and deposits in 2012 with exceptional growth in DDAs • LHS levels remained high in 2012; taking advantage of market demand 3 |
Financial Review Net Income and EPS – Outstanding growth in 2012 net income, increased 59% over 2011 net income Operating Leverage, Core Earnings Power & NIM – Growth of Net Revenue • 17% growth from Q4-2011 and 6% from Q3-2012 – Strong growth in LHI and LHS – Growth in net interest income • NIM reduction due to growth and impact of debt offering • Strong LHS levels with favorable spreads, with yields down slightly • Improved funding profile at reduced cost • Growth in DDA and total deposits and matched funding of LHS – Reduced credit costs in 2012 with reduction in NPAs and low level of NCOs Capital – Capital position enhanced with successful addition of $198 million of new regulatory capital raised during Q3-2012 • $87 million in common equity • $111 million 6.5% 30-year subordinated debt 4 |
Financial Review Loan Growth – Broad-based growth in LHI • Averages increased 6% from Q3-2012 and 23% from Q4-2011 • Quarter-end balance 10%, above 2012 average – Average LHS balances up 9% from Q3-2012 and 27% from Q4-2011 Funding – Funding profile still strong with continued DDA and total deposit growth • Average DDA increased 17% from Q3-2012 and 42% from Q4-2011 • Quarter-end balance $178.6 million, or 8%, above Q4-12 average – LHS match funded with borrowings and deposits, producing excellent spreads for highly liquid, short- duration earning assets Credit Costs – Total credit costs of $5.5 million for Q4-2012 • Provision of $4.5 million compared to $3.0 million in Q3-2012, primarily related to growth • OREO valuation cost of $955,000 compared to $64,000 in Q3-2012 • NCOs of $3.5 million (21 bps) compared to $1.2 million (8 bps) in Q3-2012 – Favorable trend in NPA ratio with $4.5 million (6%) decrease from Q3-12, including OREO reduction of $3.1 million (16%) 5 |
Income Statement - Quarterly 6 Q4-12 Q3-12 Q2-12 Q1-12 Q4-11 Net interest income $ 101,155 $ 96,855 $ 90,640 $ 88,229 $ 88,147 Non-interest income 12,836 10,552 10,462 9,190 8,994 Net revenue 113,991 107,407 101,102 97,419 97,141 Provision for credit losses 4,500 3,000 1,000 3,000 6,000 OREO valuation and write-down expense 955 64 3,123 2,741 1,091 Total provision and OREO valuation 5,455 3,064 4,123 5,741 7,091 Non-interest expense 59,119 53,457 50,850 49,535 49,262 Income before income taxes 49,417 50,886 46,129 42,143 40,788 Income tax expense 17,982 18,316 16,506 15,062 15,043 Net income $ 31,435 $ 32,570 $ 29,623 $ 27,081 $ 25,745 Diluted EPS $ .76 $ .80 $ .76 $ .70 $ .67 Net interest margin 4.27% 4.36% 4.49% 4.54% 4.60% ROA 1.27% 1.40% 1.40% 1.33% 1.28% ROE 15.35% 17.27% 18.08% 17.36% 17.05% Efficiency (1) 48.4% 49.8% 50.3% 50.8% 50.7% (1) Excludes OREO valuation charge and $4 million litigation settlement in Q4-12 |
Income Statement - Annual 7 2012 2011 2010 2009 2008 Net interest income $ 376,879 $ 302,937 $ 241,674 $ 196,691 $ 151,737 Non-interest income 43,040 32,232 32,263 29,260 22,470 Net revenue 419,919 335,169 273,937 225,951 174,207 Provision for credit losses 11,500 28,500 53,500 43,500 26,750 OREO valuation and write-down expense 6,883 6,798 8,504 7,809 – Total provision and OREO valuation 18,383 35,298 62,004 51,309 26,750 Non-interest expense 212,961 181,403 154,984 137,733 109,651 Income before income taxes 188,575 118,468 56,949 36,909 37,806 Income tax expense 67,866 42,366 19,626 12,522 12,924 Net income $ 120,709 $ 76,102 $ 37,323 $ 24,387 $ 24,882 Diluted EPS $ 3.01 $ 1.99 $ 1.00 $ .56 $ .89 Net interest margin 4.41% 4.68% 4.28% 3.89% 3.54% ROA 1.35% 1.12% .63% .46% .55% ROE 16.93% 13.39% 7.23% 5.15% 7.46% Efficiency (1) 49.8% 54.1% 56.6% 61.0% 62.9% (1) Excludes OREO valuation charge and $4 million litigation settlement in 2012 |
QTD Average Balances, Yields and Rates 8 (in thousands) Q4 2012 Q3 2012 Q4 2011 Avg. Bal. Yield Rate Avg. Bal. Yield Rate Avg. Bal. Yield Rate Assets Securities $ 103,483 4.55% $ 110,300 4.53% $ 139,826 4.43% Fed funds sold & liquidity investments 91,503 .27% 74,219 .30% 51,149 .36% Loans held for sale 2,658,092 3.96% 2,432,027 4.00% 2,093,883 4.23% Loans held for investment 6,662,817 4.79% 6,313,263 4.81% 5,395,253 5.09% Total loans, net of reserve 9,246,997 4.59% 8,672,917 4.63% 7,421,922 4.89% Total earning assets 9,441,983 4.55% 8,857,436 4.59% 7,612,897 4.85% Total assets $9,869,282 $9,256,864 $7,995,474 Liabilities and Stockholders’ Equity Total interest bearing deposits $4,662,116 .28% $4,649,823 .29% $3,965,614 .35% Other borrowings 1,725,129 .19% 1,639,953 .21% 1,588,198 .17% Subordinated notes 111,000 6.56% 12,065 6.86% – – Long-term debt 113,406 2.33% 113,406 2.43% 113,406 2.34% Total interest bearing liabilities 6,611,651 .40% 6,415,247 .32% 5,667,218 .34% Demand deposits 2,356,758 2,010,694 1,659,132 Stockholders’ equity 814,565 750,113 598,982 Total liabilities and stockholders’ equity $9,869,282 .27% $9,256,864 .22% $7,995,474 .24% Net interest margin 4.27% 4.36% 4.60% |
Financial Summary 9 (in thousands) QTD Averages Q4 2012 Q3 2012 Q4 2011 Q4/Q3 % Change YOY % Change Total assets $9,869,282 $9,256,864 $7,995,474 7% 23% Loans held for investment 6,662,817 6,313,263 6% 23% Loans held for sale 2,658,092 2,432,027 2,093,883 9% 27% Total loans 9,320,909 8,745,290 7,489,136 7% 24% Securities 103,483 110,300 139,826 (6)% (26)% Demand deposits 2,356,758 2,010,694 1,659,132 17% 42% Total deposits 7,018,874 6,660,517 5,624,746 5% 25% Stockholders’ equity 814,565 750,113 598,982 9% 36% |
Financial Summary 10 (in thousands) YTD Averages 2012 2011 YOY % Change Total assets $8,965,961 $6,819,088 31% Loans held for investment 6,148,860 5,059,134 22% Loans held for sale 2,298,651 1,210,954 90% Total loans 8,447,511 6,270,088 35% Securities 117,375 157,120 (25)% Demand deposits 1,984,171 1,515,021 31% Total deposits 6,444,007 5,361,475 20% Stockholders’ equity 713,190 568,147 26% |
Financial Summary 11 (in thousands) Period End Q4 2012 Q3 2012 Q4 2011 Q4/Q3 % Change YOY % Change Total assets $10,540,542 $9,881,362 $8,137,225 7% 30% Loans held for investment 6,785,535 6,549,089 4% 22% Loans held for sale 3,175,272 2,818,622 2,080,081 13% 53% Total loans 9,960,807 9,367,711 7,652,452 6% 30% Securities 100,195 107,288 143,710 (7)% (30)% Demand deposits 2,535,375 2,114,279 1,751,944 20% 45% Total deposits 7,440,804 6,717,579 5,556,257 11% 34% Stockholders’ equity 836,242 802,406 616,331 4% 36% |
Revenue and Income Growth ($ in thousands) Non-Interest Income 12 (1) Excludes OREO valuation charge for 2012, 2011 and 2010. 98,606 109,651 137,733 154,985 181,403 212,961 160,379 174,207 225,951 273,937 335,169 419,919 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2007 2008 2009 2010 2011 2012 Non -Interest Expense Net Interest Income Operating Revenue CAGR: 21% Net Interest Income CAGR: 22% Non-interest Income CAGR: 16% Non-interest Expense CAGR: 17% Net Income CAGR: 31% |
EPS Growth 2007 2008 2009^ 2010 2011 5 Year EPS CAGR: 21% 2012 ^Excludes $.15 effect of preferred TARP dividend during 2009. Reported EPS was $0.56. 13 $1.18 $0.89 $0.71 $1.00 $1.99 $3.01 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 |
3462 4028 4457 4711 5572 6786 3066 3333 4121 5455 5557 7441 0 1000 2000 3000 4000 5000 6000 7000 8000 2007 2008 2009 2010 2011 2012 Loans HFI Interest Bearing Deposits Deposit and Loan Growth ($ in millions) Demand Deposits 14 Demand Deposit CAGR: 37% Total Deposit CAGR: 19% Loans Held for Investment CAGR: 14% |
Loan Portfolio Statistics 15 Non-accrual loans Commercial $ 15,373 Construction 17,217 Real estate 23,066 Consumer 57 Equipment leases 120 Total non-accrual loans $ 55,833 Non-accrual loans as % of loans held for investment .82% Non-accrual loans as % of total loans .56% OREO 15,991 Total Non-accruals + OREO $ 71,824 Non-accrual loans + OREO as % of loans held for investment + OREO 1.06% Total Loans $9,960,807 All numbers in thousands. Loan Collateral by Type 12/31/12 |
Credit Quality Improved Credit Trends – Total credit cost of $5.5 million for Q4-2012, compared to $3.1 million in Q3-2012 and $7.1 million in Q4-2011 • Provision of $4.5 million for Q4-2012 compared to $3.0 million for Q3-2012 and $6.0 million in Q4-2011, reflecting better credit trends in 2012, but increases for growth • NCOs for YTD of 10 bps, with $3.5 million (21 bps) in Q4-2012 compared to 25 bps in Q4-2011 • OREO valuation charge of $955,000 compared to $64,000 in Q4-2012 and $1.1 million in Q4-2011 – NPA ratio continues to decline • Reduction of $16.8 million (19%) from Q4-2011 and $4.5 million (6%) from Q3-2012 • NPA ratio of 1.06% compared to 1.16 % in Q3-2012 and 1.58% in Q4-2011 • NPLs at $55.8 million, down $1.4 million from Q3-2012 and down $1.3 million from Q4- 2011 • NPL ratio at 0.56% of total loans and 0.82% of LHI • OREO reduction of $3.1 million (16%) from Q3-2012 and $18.1 million (53%) from Q4- 2011 – Achieved reduction in 2012 credit costs consistent with improvement in credit metrics 16 |
Credit Quality 17 Net Charge-offs / Average Loans * Excludes loans held for sale. Combined reserve / Loans * 1.15% 1.31% 1.56% 1.59% 1.16% Non-accrual loans + OREO to loans * + OREO 1.06% 1.58% 3.25% 2.74% 1.81% Combined reserve to non-accruals 1.3x 1.3x .6x .7x 1.0x 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 2012 2011 2010 2009 2008 0.10% 0.58% 1.14% 0.46% 0.35% |
Closing Comments • Strong core earnings and growth to continue in 2013 • Credit costs in 2013 expected to be slightly lower than 2012 • Strong LHI pipeline and new commitments present opportunity for growth potential • LHS balances to stay high and could grow modestly with increased market share and participation program 18 |
Q&A 19 |