Texas Capital Bancshares(TCBI) - 2024 Q2 - Quarterly Results

Q2 2024 Earnings Release Financial Highlights TCBI reported Q2 2024 net income of $37.4 million, achieving record book and tangible book value per share while repurchasing $50.0 million in common stock Q2 2024 Key Operating Results | Financial Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Income Available to Common Stockholders | $37.4 million | $21.8 million | $64.3 million | | Diluted Earnings Per Common Share | $0.80 | $0.46 | $1.33 | | Return on Average Assets | 0.56% | 0.36% | 0.95% | | Return on Average Common Equity | 5.26% | 3.03% | 9.17% | - The company repurchased $50.0 million of its common stock during the quarter, while Book Value and Tangible Book Value per share both increased by 1.9% to record levels[13][18] - CEO Rob C. Holmes stated, "Building a platform resilient to market and rate cycles is a foundational tenant of our strategic plan," emphasizing the focus on realizing the platform's strategic value through enhanced financial performance[2] Financial Performance Analysis This section analyzes quarterly and annual financial performance, highlighting sequential net income growth from lower expenses and higher non-interest income, alongside a year-over-year decline due to reduced net interest income and increased provisions Q2 2024 vs. Q1 2024 Comparison Net income significantly increased quarter-over-quarter, driven by a $14.0 million decrease in non-interest expenses and a $9.1 million increase in non-interest income - Net income available to common stockholders increased to $37.4 million from $21.8 million in Q1 2024[4] - Non-interest expense decreased by $14.0 million, primarily due to a $9.9 million drop in salaries and benefits (related to seasonal payroll expenses) and lower legal and FDIC assessment costs[4] - Non-interest income increased by $9.1 million, mainly from higher investment banking and advisory fees[4] - Net interest income was stable at $216.6 million, with a net interest margin of 3.01%, a slight decrease of 2 basis points[4] Q2 2024 vs. Q2 2023 Comparison Net income declined year-over-year to $37.4 million, primarily due to a $15.4 million decrease in net interest income and a $13.0 million increase in credit loss provisions - Net interest income decreased to $216.6 million from $232.0 million in Q2 2023, as the net interest margin contracted by 28 basis points to 3.01%[16] - The provision for credit losses increased significantly to $20.0 million, compared to $7.0 million in Q2 2023[5] - Non-interest expense increased by $6.8 million (4%) year-over-year, driven by higher salaries, occupancy, and technology costs[16] Credit Quality Credit quality metrics showed mixed results, with net charge-offs increasing to $12.0 million and criticized loans remaining stable sequentially but rising year-over-year Credit Quality Indicators | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Charge-offs | $12.0 million | $10.8 million | $8.2 million | | Criticized Loans | $859.7 million | $859.5 million | $619.4 million | | Non-accrual LHI | $85.0 million | $92.8 million | $81.0 million | | Non-accrual LHI / Total LHI | 0.39% | 0.45% | 0.38% | | Allowance for Credit Losses / Total LHI | 1.44% | 1.46% | 1.32% | Regulatory Ratios and Capital The company maintained capital ratios above 'well capitalized' requirements, despite a sequential decline in CET1 to 11.6% due to $275.0 million note redemption and $50.0 million share repurchase Regulatory Capital Ratios | Ratio | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | CET1 | 11.6% | 12.4% | 12.2% | | Tier 1 Capital | 13.1% | 13.9% | 13.7% | | Total Capital | 15.7% | 16.6% | 16.4% | | Leverage | 12.2% | 12.4% | 12.4% | - The decline in regulatory ratios from Q1 2024 was primarily due to the redemption of $275.0 million in bank-issued senior unsecured credit-linked notes[18] - During Q2 2024, the company repurchased 852,098 shares of its common stock for an aggregate price of $50.0 million[18] About Texas Capital Bancshares, Inc. & Forward-Looking Statements This section provides a corporate overview of Texas Capital Bancshares, Inc. as a full-service financial firm and includes standard legal disclaimers regarding forward-looking statements - TCBI is a full-service financial services firm founded in 1998, headquartered in Dallas, offering commercial banking, consumer banking, investment banking, and wealth management capabilities[19] - The report contains forward-looking statements that are subject to various risks and uncertainties, and the company disclaims any obligation to update these statements[20] Financial Statements and Data Consolidated Statements of Income This section details Q2 2024 income statement figures, including net interest income of $216.6 million, non-interest income of $50.4 million, and net income of $41.7 million Consolidated Statements of Income (Unaudited, in thousands) | | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net interest income | $216,582 | $215,009 | $231,990 | | Provision for credit losses | $20,000 | $19,000 | $7,000 | | Non-interest income | $50,424 | $41,319 | $46,011 | | Non-interest expense | $188,409 | $202,393 | $181,644 | | Net income | $41,662 | $26,142 | $68,651 | | Net income available to common stockholders | $37,350 | $21,829 | $64,339 | Consolidated Balance Sheets This section presents the balance sheet as of June 30, 2024, showing total assets grew 3% year-over-year to $29.9 billion, with loans and deposits also increasing Consolidated Balance Sheet Highlights (Unaudited, in thousands) | | June 30, 2024 | June 30, 2023 | % Change | | :--- | :--- | :--- | :--- | | Total assets | $29,854,994 | $28,976,544 | 3% | | Loans held for investment, net | $21,511,433 | $21,088,672 | 2% | | Total deposits | $23,818,327 | $23,318,240 | 2% | | Total liabilities | $26,679,393 | $25,894,617 | 3% | | Total stockholders' equity | $3,175,601 | $3,081,927 | 3% | Analysis of Net Interest Income This section details net interest income analysis, showing a Q2 2024 net interest margin of 3.01%, a decrease from both the prior quarter and prior year due to funding cost pressures Net Interest Margin Analysis | | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Average Earning Assets | $28,573,791 | $28,192,019 | $27,953,908 | | Net Interest Income (tax-equivalent) | $216,646 | $215,075 | $232,103 | | Net Interest Margin | 3.01% | 3.03% | 3.29% | | Yield on Earning Assets | 5.86% | 5.88% | 5.69% | | Rate on Interest Bearing Liabilities | 4.75% | 4.81% | 4.33% | Summary of Credit Loss Experience This section details credit loss experience, with a Q2 2024 provision for credit losses of $20.0 million and net charge-offs of $12.0 million, increasing the total allowance to $312.6 million Credit Loss Experience (Unaudited, in thousands) | | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Beginning Allowance for Credit Losses | $304,571 | $296,335 | $282,113 | | Total Charge-offs | $12,108 | $10,869 | $8,852 | | Total Recoveries | $153 | $105 | $613 | | Net Charge-offs | $11,955 | $10,764 | $8,239 | | Total Provision for Credit Losses | $20,000 | $19,000 | $7,000 | | Ending Allowance for Credit Losses | $312,616 | $304,571 | $282,113 | Summary of Non-Performing Assets This section summarizes non-performing assets, with total NPAs at $85.0 million in Q2 2024, a decrease from the prior quarter, and non-accrual loans at 0.39% of total LHI Non-Performing Assets (Unaudited, in thousands) | | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Non-accrual loans held for investment | $85,021 | $92,849 | $81,039 | | Total non-performing assets | $85,021 | $102,099 | $81,039 | | NPA / Total Assets | 0.28% | 0.35% | 0.28% | | Non-accrual LHI / Total LHI | 0.39% | 0.45% | 0.38% |