Exhibit 99.1
Morgan Stanley
Financials Conference
June 10, 2014 Keith Cargill, President and CEO
Peter Bartholow, Chief Operating Officer and CFO
Texas Capital Bancshares, Inc.
Certain matters discussed in connection with this presentation 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 Annual Report on Form 10-K and other filings made by Texas Capital with the Securities and Exchange Commission.
Texas Capital Bancshares, Inc.
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Overview and Strategy
Texas Capital Bancshares, Inc. is a business bank operating principally in the 5 largest MSAs in Texas.
– All 5 markets ranked in the top 10% among all MSAs in terms of creating and sustaining both job and economic growth
– Borrowers with borrowing needs of $2 to $15mm – Middle market businesses, high net worth entrepreneurs
Growth strategy
– Organic growth (never made a bank acquisition)
– Grow loan/deposit base by hiring and retaining highly experienced bankers with established relationships and industry expertise
– Growth opportunities reside in the 5 Texas markets with some specialty lines of business extending beyond these markets
Strong Credit Culture – low net charge-offs since inception with better asset quality than peers in all cycles
Fort Worth Dallas San Antonio Austin Houston
Texas Capital Bancshares, Inc.
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Opening Remarks & Financial Highlights
Strong Balanced Growth
Core Earnings Power
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
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
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
Texas Capital Bancshares, Inc.
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Revenue & Expense
Revenue & Expense Trends
500,000
400,000
300,000
200,000
100,000
0
Operating Revenue CAGR: 19% Net Interest Income CAGR: 20% Non-interest Income CAGR: 9% Non-interest Expense CAGR: 16% Net Income CAGR: 43%
2009 2010 2011 2012 2013 Q1-2014
Non-interest Income Net Interest Income Non-interest Expense
Revenue & Expense Highlights
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 $10 billion
Continued build-out expense related to recruiting in Q4-2013 and Q1-2014, product extension and support costs associated with growth
Adjusting for effects of Q1 variables, achieved improvement in operating leverage with decrease in efficiency ratio from Q4-2013
Provision represents net interest income contribution of loan growth for 3+ months
Texas Capital Bancshares, Inc.
Net Interest Income & Margin
NIM Highlights
Net Interest Income, before change in days and sub-debt expense above Q4-2013 and Q1-2013
Yields on traditional LHI down modestly with strong growth
Lower MF yields due to relationship pricing offset benefit to NIM from change in composition
Core funding costs - deposits and borrowed funds - stable at 17 bps after increase in liquidity balances
Cost of subordinated debt had impact of 6 bps in Q1-2014
Cost of additional liquidity approximately 5 bps in Q1-2014
Fee collection on NPLs created swing of 4 bps from Q4-2013
Net Interest Income & Margin Trends
Net Interest income ($MM) Net Interest Margin (%) Earning Asset Yield (%) Total Loan Spread (%)
120.0
100.0
80.0
60.0
40.0
20.0
0.0
6.00%
5.50%
5.00%
4.50%
4.00%
3.50%
3.00%
Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q1-2014
Texas Capital Bancshares, Inc.
Analysis of Net Interest Income & Profitability
NII ($MM) NIM (%)
Pre-tax Efficiency
$(1.6) 111.6 Subordinated Q4-2013 note interest 4.21% (0.06) Q1-2014 Reported $ Income 44,350 $ EPS 0.60 1.01% ROA 10.2% ROE Ratio 58.4%
(1.1) Decline in loan fee (0.04) Effect of significant items
0.0 Increase in liquidity (0.05) - Common stock offering - 0.02 - 0.75% -
(1.1) Decrease in MF loan yields (0.04) - Reduced day count in Q1 2,518 0.04 0.06% 0.64% (1.2%)
(0.6) Decrease in LHI net loan yields (0.02) - Subordinated note interest(1) 1,600 0.02 0.04% 0.40% (0.8%)
0.6 Mix shift from MF to LHI 0.02 - FICA & Other 2,471 0.04 0.06% 0.62% (1.9%)
(2.5) Reduced day count in Q1 - - FDIC insurance assessment 934 0.01 0.02% 0.24% (0.8%)
3.7 Growth (at Q4 margin) -
(0.6) Other (0.03) (1) Sub debt only outstanding for two months of Q1-2014
108.4 Q1-2014 3.99%
7 Texas Capital Bancshares, Inc.
Performance Summary
(in thousands) Q1 2014 Q4 2013 $ Q3 2013 Q2 2013 Q1 2013
Net Interest Income $ 108,315 $ 111,475 11,184 108,776 $ 101,220 $ 11,281 98,042
Non-Interest Income 10,356 10,431 112,348 11,128 109,323
Net Revenue 118,671 122,659 119,207
Provision for credit losses 5,000 5,000 5,000 7,000 2,000
OREO valuation and write-down expense – 466 – 382 2,071 71
Total provision and OREO valuation 5,000 5,466 5,000 7,382 55,629
Non-Interest expense 69,321 69,825 62,009 68,352
Income before income taxes 44,350 47,368 52,198 36,614 51,623
Income tax expense 16,089 17,012 30,356 18,724 12,542 18,479 33,144
Net Income 28,261 33,474 24,072
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%
8 (1) Excludes OREO valuation charge
Texas Capital Bancshares, Inc.
Loan & Deposit Growth
Balance Trends
Demand Deposit CAGR: 37%
Total Deposit CAGR: 22%
Loans Held for Investment CAGR: 18%
12,000
10,000
8,000
6,000
4,000
2,000
0 2009 2010 2011 2012 2013 2014
Demand Deposits Interest Bearing Deposits Loans HFI
Total Loan Composition
($11.6 Billion at 3/31/14)
Business Assets 31%
Energy 8%
Highly Liquid Assets 2%
Unsecured 2%
Owner Occupied R/E 5%
Mortgage Finance 23%
Residential R/E Mkt. Risk 8%
Other Assets 3%
Comml. R/E Mkt. Risk 18%
Growth Highlights
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 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.
9 Texas Capital Bancshares, Inc.
Asset Quality
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
1.40%
1.20%
1.00% 1.14%
0.80%
0.60%
0.40% 0.58%
0.20%
0.00% 0.10% 0.07% 0.10%
2010 2011 2012 2013 2014
Asset Quality Highlights
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
10 Texas Capital Bancshares, Inc.
EPS Growth
EPS Growth
(5-yr CAGR of 27%)
$3.50
$3.00 $3.01
$2.72
$2.50
$2.00 $1.99
$1.50
$1.00 $0.71 $1.00
$0.60
$0.50
$0.00 YTD
2009^ 2010 2011 2012 2013
3/31/2014
^Excludes $.15 effect of preferred TARP dividend during 2009. Reported EPS was $0.56.
11 Texas Capital Bancshares, Inc.
2014 Outlook
Business Driver 2014 Outlook v. 2013 Results
Average LHI Mid to high teens percent growth
Average LHI- Mortgage Finance Flat to down, outperforming industry
Average Deposits High teens to low 20’s percent growth
Liquidity Assets Growth with 5 bps or less impact on NIM
Net Interest Income Low double digit percent growth
Net Interest Margin 3.80% to 3.90%, driven by growth and above peer
Net Charge-Offs Less than 0.15%, and continued strong credit quality
NIE High single digit - to low double digit percent growth
Efficiency Ratio Less than 55%, slight reduction from 2013
As of June 10, 2014
12 Texas Capital Bancshares, Inc.
2014 Performance Drivers
Strengths
Proven organic growth business model continues to produce in challenging environment
Continue to be highly asset sensitive based on how we run our business
Well capitalized for expected growth
Successful track record of talent acquisition that we expect to continue
Excellent credit quality history that’s expected to continue
Mortgage Finance continues to exceed industry trends
Challenges
Low interest rates
Regulatory environment
Competition and pressure on pricing
Texas Capital Bancshares, Inc.
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Q&A
Texas Capital Bancshares, Inc.
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Appendix
Texas Capital Bancshares, Inc.
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Average Balances, Yields & Rates - Quarterly
(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%
Texas Capital Bancshares, Inc.
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Average Balance Sheet - Quarterly
(in thousands) QTD Average
Q1/Q4 % YOY %
Q1 2014 Q4 2013 Q1 2013 Change Change
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%
Texas Capital Bancshares, Inc.
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Ending Balance Sheet - Quarterly
(in thousands) Period End
Q1/Q4 % YOY %
Q1 2014 Q4 2013 Q1 2013 Change Change
Total Assets $12,143,296 $11,714,397 $10,020,565 4% 21%
29%
Loans Held for Investment 8,928,033 8,486,309 6,920,011 5%
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%
(39)%
Securities 52,960 63,214 87,527 (16)%
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%
Texas Capital Bancshares, Inc.
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