GlobeNewswire Inc | Jul 22, 2020 04:03PM EDT

July 22, 2020

DALLAS, July 22, 2020 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank, announced operating results for the second quarter of 2020.

"As we navigate these unprecedented times with a focus on protecting our employees and our clients, we continue to position the Company for long-term, sustainable earnings growth," said Larry Helm, Executive Chairman and CEO. "Our significant investments in infrastructure and technology over the past few years enabled meaningful cost realignment during the second quarter. We remain vigilant in managing credit, while continuing to selectively recruit and acquire frontline talent."

-- In response to pressures of the current economic environment and a refinement of our strategy, we took actions during the second quarter of 2020 which are expected to decrease our non-interest expenses, including a workforce reduction and write-offs of certain software assets. -- We reported a net loss of $34.3 million, or $0.73 per diluted share, for the second quarter of 2020, a $17.6 million decline from the first quarter of 2020, resulting from a $40.3 million increase in revenue, comprised of a $58.7 million increase in non-interest income and an $18.4 million decrease in net interest income, offset by a $56.9 million increase to non-interest expense. Significant transactions affecting our income statement during the second quarter of 2020 included: $100.0 million ($1.55 per share) provision for credit losses; driven by an increase in charge-offs and reserve build related to higher criticized loan levels and continued economic uncertainty from the COVID-19 pandemic,$26.6 million ($0.41 per share) in non-recurring software expenses; including $20.7 million in write-offs of certain software assets and $5.9 million in technology expense related to the roll-out of our Paycheck Protection Program capabilities,$18.0 million ($0.28 per share) in severance accruals related to the workforce reduction referenced above,$10.5 million ($0.16 per share) in final merger-related expenses, and$9.1 million ($0.14 per share) in mortgage servicing rights ("MSR") impairment.

While these expenses had a significant impact on our second quarter operating results, we believe that we are better positioned to improve our core profitability going forward as the non-interest expense items are not expected to recur in future periods.

-- In response to the COVID-19 pandemic over 90% of employees have been working virtually since early March with limited impact on the execution of our business and client experience.Additionally, we funded $717.5 million in loans under the Paycheck Protection Program and implemented a short-term loan modification program that complies with the CARES act to provide temporary relief to certain borrowers who meet the program's qualifications.

FINANCIAL SUMMARY

(Dollars and shares in thousands) Q2 2020 Q2 2019 % ChangeQUARTERLY OPERATING RESULTS Net income/(loss) $ (34,316 ) $ 77,812 (144 ) %Net income/(loss) available to common $ (36,753 ) $ 75,375 (149 )stockholders %Diluted earnings/(loss) per common share $ (0.73 ) $ 1.50 (149 ) %Diluted common shares 50,416 50,384 ? %ROA (0.36 ) 1.05 % %ROE (5.48 ) 12.20 % %BALANCE SHEET Loans held for sale ("LHS") $ 454,581 $ 1,057,586 (57 ) %Loans held for investment ("LHI"), 8,972,626 7,415,363 21 %mortgage financeLHI 16,552,203 16,924,535 (2 ) %Total LHI 25,524,829 24,339,898 5 %Total assets 36,613,127 29,970,384 22 %Demand deposits 10,835,911 7,685,340 41 %Total deposits 30,187,695 22,999,077 31 %Stockholders? equity 2,734,755 2,647,071 3 %

DETAILED FINANCIALS

During the second quarter of 2020, we have continued to face unprecedented challenges as our country grapples with the continuing impact of the COVID-19 pandemic. Actions by U.S. federal, state and foreign governments to address the pandemic, including travel bans, business and entertainment venue closures and rapid changes in business and consumer behavior, have resulted in continuing high levels of uncertainty. economic weakness and market volatility. Due to these events, on May 22, 2020, we and Independent Bank Group, Inc. ("IBTX"), agreed to mutually terminate our merger agreement. The termination was approved by each company's board of directors after careful consideration of the significant impact of the COVID-19 pandemic on global markets and on the companies' ability to fully realize the benefits expected to be achieved through the merger.

We continue to focus on balance sheet strength and while we intend to operate with above-average liquidity in response to this uncertain economic environment, we believe opportunities exist to improve core earnings by reducing or replacing higher-cost funding sources and improving the earning asset mix. In the first few weeks of July 2020, we began to utilize low-yielding liquidity assets to increase the balance of our securities portfolio in an effort to improve yields during the second half of 2020.

For the second quarter of 2020, we reported a net loss of $34.3 million and net loss available to common stockholders of $36.8 million, compared to net income of $77.8 million and net income available to common stockholders of $75.4 million for the same period in 2019. On a fully diluted basis, earnings/(loss) per common share were $(0.73) for the quarter ended June30, 2020 compared to $1.50 for the same period of 2019. The decline in net income for the second quarter of 2020 as compared to the same period in 2019 resulted primarily from a $73.0 million increase in the provision for credit losses, as well as an $80.6 million increase in non-interest expense, driven by the significant second quarter 2020 expenses described below, offset by a $46.1 million increase in non-interest income resulting primarily from a $45.0 million increase in net gain/(loss) on sale of loans held for sale.

We recorded a $100.0 million provision for credit losses for the second quarter of 2020 utilizing the Current Expected Credit Loss ("CECL") methodology adopted in the first quarter of 2020, compared to $96.0 million for the first quarter of 2020 and $27.0 million for the second quarter of 2019. The increase in provision for credit losses resulted primarily from an increase in charge-offs and reserve build related to higher criticized loan levels and continued economic uncertainty from the COVID-19 pandemic. We recorded $74.1 million in net charge-offs during the second quarter of 2020, including $62.4 million in energy net charge-offs and $8.1 million in leveraged lending net charge-offs, all of which were loans that had been previously identified as problem loans, compared to $57.7 million during the first quarter of 2020 and $20.0 million during the second quarter of 2019. Criticized loans totaled $1.0 billion at June 30, 2020, compared to $675.9 million at March 31, 2020 and $629.1 million at June 30, 2019. The increase in criticized loans was predominantly in special mention and was primarily due to the continued downgrade of loans that have been impacted by the COVID-19 pandemic or that are in categories that are expected to be more significantly impacted by COVID-19.

Non-performing assets ("NPAs") totaled $174.0 million at June 30, 2020, a decrease of $45.1 million compared to the first quarter of 2020 and an increase of $59.9 million compared to the second quarter of 2019. The linked quarter decrease is primarily related to charge-offs of energy and leveraged lending loans in the second quarter of 2020. Non-accrual energy loans totaled $103.9 million (60% of total NPAs) at June 30, 2020, $39.8 million of which relates to two loans that have been charged down to final resolution value and are expected to close in the third quarter of 2020, compared to $151.9 million at March 31, 2020. Non-accrual leveraged lending loans totaled $24.8 million (14% of total NPAs) at June 30, 2020, compared to $50.0 million at March 31, 2020. The ratio of NPAs to total LHI plus other real estate owned ("OREO") for the second quarter of 2020 was 0.68 percent, compared to 0.90 percent for the first quarter of 2020 and 0.47 percent for the second quarter of 2019.

In response to the COVID-19 pandemic, we implemented a short-term loan modification program in late March 2020 to provide temporary payment relief to borrowers who meet the program's qualifications. This program allows for a deferral of payments for 90 days, which we may extend for an additional 90 days, for a maximum of 180 days on a cumulative basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan. As of June 30, 2020, we have granted temporary modifications on 482 loans (336 during the second quarter of 2020) with a total outstanding loan balance of $1.2 billion, resulting in the deferral of $10.8 million ($7.1 million in the second quarter of 2020) in interest payments.

Net interest income was $209.9 million for the second quarter of 2020, compared to $228.3 million for the first quarter of 2020 and $243.6 million for the second quarter of 2019. The linked quarter decrease in net interest income was due primarily to a decrease in average LHS, as a result of holding purchased loans for shorter durations, as well as decreases in yields on LHI, excluding mortgage finance, and liquidity assets offset by an increase in yields on LHI, mortgage finance, and a decrease in funding costs. The decline in net interest income on LHS resulting from shorter hold times was offset by an increase in non-interest income as noted below. Net interest margin for the second quarter of 2020 was 2.30 percent, a decrease of 48 basis points from the first quarter of 2020 and a decrease of 111 basis points from the second quarter of 2019. The shift in earning assets, primarily the increase in liquidity assets and decrease in loans held for sale, significantly contributed to the decrease in net interest margin. LHI yields, excluding mortgage finance loans, decreased 85 basis points from the first quarter of 2020, and decreased 169 basis points compared to the second quarter of 2019. LHI, mortgage finance yields for the second quarter of 2020 increased 30 basis points compared to the first quarter of 2020 as a result of decreases in incentive pricing in the second quarter of 2020, and decreased 17 basis points compared to the second quarter of 2019. Additionally, total cost of deposits for the second quarter of 2020 decreased 48 basis points to 0.42 percent compared to 0.90 percent for the first quarter of 2020, and decreased 87 basis points from 1.29 percent for the second quarter of 2019.

Non-interest income increased $58.7 million during the second quarter of 2020 compared to the first quarter of 2020, and increased $46.1 million compared to the second quarter of 2019. The linked quarter increase was primarily related to an increase in net gain/(loss) on sale of LHS, as well as increases in brokered loans fees and other non-interest income. The year-over-year increase was primarily related to an increase in net gain/(loss) on sale of LHS, as well as increases in brokered loan fees and servicing income, partially offset by a decrease in other non-interest income. The linked quarter and year-over-year increase in net gain/(loss) on sale of LHS was due to lower hedge costs in the second quarter of 2020 as a result of holding purchased loans for shorter durations than in prior periods, and is offset by the decline in net interest income on LHS noted above.

Non-interest expense for the second quarter of 2020 increased $56.9 million, or 34 percent, compared to the first quarter of 2020, and increased $80.6 million, or 57 percent, compared to the second quarter of 2019. The linked quarter increase was primarily related to increases in salaries and employee benefits and communications and technology expense. The year-over-year increase was primarily due to increases in salaries and employee benefits, communications and technology expense, servicing-related expenses and merger-related expenses. The year-over-year and linked quarter increases in salaries and employee benefits and communication and technology expense were primarily due to the severance accruals and non-recurring software expenses, respectively, discussed above. The year-over-year increase in servicing-related expenses was primarily due to an increase in MSR amortization, resulting primarily from an increase in the cost basis of our MSR asset as well as from higher mortgage prepayment rates, and an increase in impairment expense.

Texas Capital Bank is well capitalized under regulatory guidelines as of June30, 2020. Our CET 1, tier 1 capital, total capital and leverage ratios were 8.9%, 9.8%, 11.6% and 7.5%, respectively, at June 30, 2020, compared to 9.3%, 10.2%, 12.0% and 8.5%, respectively, at March 31, 2020. At June30, 2020, our ratio of tangible common equity to total tangible assets was 7.0% percent compared to 7.3% at March 31, 2020.

About Texas Capital Bancshares, Inc.

Texas Capital Bancshares, Inc. (NASDAQ: TCBI), a member of the Russell 2000 Index and the S&P MidCap 400, is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and entrepreneurs. Headquartered in Dallas, the bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.

Forward Looking Statements

This communication may be deemed to include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding our financial condition, results of operations, business plans and future performance. These statements are not historical in nature and can generally be identified by such words as believe, expect, estimate, anticipate, plan, may, will, forecast, could, projects, intend and similar expressions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. A number of factors, many of which are beyond our control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.These risks and uncertainties include, but are not limited to, the credit quality of our loan portfolio, general economic conditions in the United States and in our markets, including the continued impact on our customers from volatility in oil and gas prices, the material risks and uncertainties for the U.S. and world economies, and for our business, resulting from the COVID-19 pandemic, expectations regarding rates of default and credit losses, volatility in the mortgage industry, our business strategies, our expectations about future financial performance, future growth and earnings, the appropriateness of our allowance for credit losses and provision for credit losses, our ability to identify, employ and retain a successor chief executive officer, the impact of changing regulatory requirements and legislative changes on our business, increased competition, interest rate risk, new lines of business, new product or service offerings and new technologies. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The information contained in this communication speaks only as of its date. Except to the extent required by applicable law or regulation, we disclaim any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

TEXAS CAPITAL BANCSHARES, INC.SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)(Dollars in thousands except per share data) 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 2020 2020 2019 2019 2019CONSOLIDATEDSTATEMENTS OF INCOMEInterest $ 252,010 $ 306,008 $ 337,757 $ 355,101 $ 346,893 incomeInterest 42,082 77,689 89,372 102,933 103,340 expenseNet interest 209,928 228,319 248,385 252,168 243,553 incomeProvision for 100,000 96,000 17,000 11,000 27,000 credit lossesNet interestincome after 109,928 132,319 231,385 241,168 216,553 provision forcredit lossesNon-interest 70,502 11,780 17,761 20,301 24,364 incomeNon-interest 222,352 165,417 168,187 149,429 141,718 expenseIncome/(loss)before income (41,922 ) (21,318 ) 80,959 112,040 99,199 taxesIncome taxexpense/ (7,606 ) (4,631 ) 16,539 23,958 21,387 (benefit)Net income/ (34,316 ) (16,687 ) 64,420 88,082 77,812 (loss)Preferredstock 2,437 2,438 2,437 2,438 2,437 dividendsNet income/(loss)available to $ (36,753 ) $ (19,125 ) $ 61,983 $ 85,644 $ 75,375 commonstockholdersDilutedearnings/ $ (0.73 ) $ (0.38 ) $ 1.23 $ 1.70 $ 1.50 (loss) percommon shareDiluted 50,416,331 50,474,802 50,461,723 50,416,402 50,383,870 common sharesCONSOLIDATEDBALANCE SHEET DATATotal assets $ 36,613,127 $ 35,879,416 $ 32,548,069 $ 33,526,437 $ 29,970,384 LHI 16,552,203 16,857,579 16,476,413 16,772,824 16,924,535 LHI, mortgage 8,972,626 7,588,803 8,169,849 7,951,432 7,415,363 financeLHS 454,581 774,064 2,577,134 2,674,225 1,057,586 Liquidity 9,540,044 9,498,189 4,263,766 4,993,185 3,480,902 assets^(1)Investment 234,969 228,784 239,871 238,022 240,851 securitiesDemand 10,835,911 9,420,303 9,438,459 10,289,572 7,685,340 depositsTotal 30,187,695 27,134,263 26,478,593 27,413,303 22,999,077 depositsOther 2,895,790 5,195,267 2,541,766 2,639,967 3,607,234 borrowingsSubordinated 282,309 282,219 282,129 282,038 281,948 notesLong-term 113,406 113,406 113,406 113,406 113,406 debtStockholders? 2,734,755 2,803,533 2,801,321 2,735,993 2,647,071 equityEnd of periodshares 50,435,672 50,407,778 50,337,741 50,317,654 50,297,552 outstandingBook value $ 51.25 $ 52.64 $ 52.67 $ 51.39 $ 49.65 Tangible book $ 50.89 $ 52.28 $ 52.31 $ 51.03 $ 49.28 value^(2)SELECTEDFINANCIAL RATIOSNet interest 2.30 % 2.78 % 2.95 % 3.16 % 3.41 %marginReturn on ) )average (0.36 % (0.20 % 0.85 % 1.06 % 1.05 %assetsReturn on ) )average (5.48 % (2.85 % 10.68 % 13.22 % 12.20 %common equityNon-interestincome toaverage 0.77 % 0.14 % 0.21 % 0.25 % 0.34 %earningassetsEfficiency 79.3 % 68.9 % 63.2 % 54.8 % 52.9 %ratio^(3)Efficiencyratio, 77.5 % 65.8 % 61.4 % 51.3 % 49.6 %adjusted^(4)Non-interestexpense toaverage 2.43 % 2.00 % 1.98 % 1.86 % 1.98 %earningassetsTangiblecommon equityto total 7.0 % 7.3 % 8.1 % 7.6 % 8.3 %tangibleassets^(5)Common Equity 8.9 % 9.3 % 8.9 % 8.6 % 8.7 %Tier 1Tier 1 9.8 % 10.2 % 9.7 % 9.4 % 9.6 %capitalTotal capital 11.6 % 12.0 % 11.4 % 11.0 % 11.3 %Leverage 7.5 % 8.5 % 8.4 % 8.6 % 9.2 %

(1) Liquidity assets include Federal funds sold and interest-bearing deposits in other banks.(2) Stockholders? equity excluding preferred stock, less goodwill and intangibles, divided by shares outstanding at period end.(3) Non-interest expense divided by the sum of net interest income and non-interest income. Non-interest expense, excluding deposit-related marketing fees and servicing related expenses, divided by the sum of net interest income and non-interest income, net of deposit-related marketing fees and servicing(4) related expenses. Deposit-related marketing fees totaled $1.7 million, $5.2 million, $9.4 million, $11.9 million and $11.6 million for the second and first quarters of 2020, as well as the fourth, third and second quarters of 2019, respectively. Stockholders? equity excluding preferred stock and accumulated other(5) comprehensive income, less goodwill and intangibles, divided by total assets, less accumulated other comprehensive income and goodwill and intangibles.

TEXAS CAPITAL BANCSHARES, INC.CONSOLIDATED BALANCE SHEETS (UNAUDITED)(Dollars in thousands) June 30, 2020 June 30, 2019 % ChangeAssets Cash and due from banks $ 176,540 $ 163,675 8 %Interest-bearing deposits 9,490,044 3,446,902 175 %Federal funds sold and securities 50,000 34,000 47 %purchased under resale agreementsSecurities, available-for-sale 234,969 240,851 (2 )%LHS, at fair value ($454.6 million at June30, 2020 and $1,056.5 million at June 30, 454,581 1,057,586 (57 )%2019)LHI, mortgage finance 8,972,626 7,415,363 21 %LHI (net of unearned income) 16,552,203 16,924,535 (2 )%Less: Allowance for credit losses on 264,722 214,572 23 %loansLHI, net 25,260,107 24,125,326 5 %Mortgage servicing rights, net 75,451 47,785 58 %Premises and equipment, net 28,603 28,197 1 %Accrued interest receivable and other 824,963 807,728 2 %assetsGoodwill and intangibles, net 17,869 18,334 (3 )%Total assets $ 36,613,127 $ 29,970,384 22 % Liabilities and Stockholders? Equity Liabilities: Deposits: Non-interest bearing $ 10,835,911 $ 7,685,340 41 %Interest bearing 19,351,784 15,313,737 26 %Total deposits 30,187,695 22,999,077 31 % Accrued interest payable 20,314 23,115 (12 )%Other liabilities 372,145 276,432 35 %Federal funds purchased and repurchase 195,790 507,234 (61 )%agreementsOther borrowings 2,700,000 3,100,000 (13 )%Subordinated notes, net 282,309 281,948 ? %Trust preferred subordinated debentures 113,406 113,406 ? %Total liabilities 33,871,659 27,301,212 24 % Redeemable non-controlling interest 6,713 22,101 (70 )% Stockholders? equity: Preferred stock, $.01 par value, $1,000 liquidation value:Authorized shares - 10,000,000 Issued shares - 6,000,000 shares issued at 150,000 150,000 ? %June 30, 2020 and 2019Common stock, $.01 par value: Authorized shares - 100,000,000 Issued shares - 50,436,089 and 50,297,969 504 503 ? %at June 30, 2020 and 2019, respectivelyAdditional paid-in capital 983,144 972,219 1 %Retained earnings 1,600,639 1,516,044 6 %Treasury stock (shares at cost: 417 at (8 ) (8 ) ? %June 30, 2020 and 2019)Accumulated other comprehensive income, 476 8,313 N/Mnet of taxesTotal stockholders? equity 2,734,755 2,647,071 3 %Total liabilities and stockholders? equity $ 36,613,127 $ 29,970,384 22 %

TEXAS CAPITAL BANCSHARES, INC.CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(Dollars in thousands except per share data) Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019Interest income Interest and fees on loans $ 247,595 $ 329,842 $ 531,220 $ 642,545 Investment securities 2,024 2,260 4,207 3,720 Federal funds sold andsecurities purchased under 77 157 691 536 resale agreementsInterest-bearing deposits in 2,314 14,634 21,900 25,653 other banksTotal interest income 252,010 346,893 558,018 672,454 Interest expense Deposits 32,294 72,529 94,468 141,583 Federal funds purchased 176 5,202 845 8,718 Other borrowings 4,569 20,124 14,151 31,978 Subordinated notes 4,191 4,191 8,382 8,382 Trust preferred subordinated 852 1,294 1,925 2,626 debenturesTotal interest expense 42,082 103,340 119,771 193,287 Net interest income 209,928 243,553 438,247 479,167 Provision for credit losses 100,000 27,000 196,000 47,000 Net interest income after 109,928 216,553 242,247 432,167 provision for credit lossesNon-interest income Service charges on deposit 2,459 2,849 5,752 5,828 accountsWealth management and trust fee 2,348 2,129 4,815 4,138 incomeBrokered loan fees 10,764 7,336 18,779 12,402 Servicing income 6,120 3,126 10,866 5,860 Swap fees 1,468 601 4,225 1,632 Net gain/(loss) on sale of LHS 39,023 (5,986 ) 26,023 (6,491 )Other 8,320 14,309 11,822 31,009 Total non-interest income 70,502 24,364 82,282 54,378 Non-interest expense Salaries and employee benefits 100,255 76,889 176,922 154,712 Net occupancy expense 9,134 7,910 17,846 15,789 Marketing 7,988 14,087 16,510 25,795 Legal and professional 11,330 10,004 28,796 20,034 Communications and technology 42,760 11,022 56,551 20,220 FDIC insurance assessment 7,140 4,138 12,989 9,260 Servicing-related expenses 20,117 6,066 36,471 11,448 Merger-related expenses 10,486 ? 17,756 ? Other 13,142 11,602 23,928 25,976 Total non-interest expense 222,352 141,718 387,769 283,234 Income/(loss) before income (41,922 ) 99,199 (63,240 ) 203,311 taxesIncome tax expense/(benefit) (7,606 ) 21,387 (12,237 ) 43,798 Net income/(loss) (34,316 ) 77,812 (51,003 ) 159,513 Preferred stock dividends 2,437 2,437 4,875 4,875 Net income/(loss) available to $ (36,753 ) $ 75,375 $ (55,878 ) $ 154,638 common stockholdersBasic earnings/(loss) per $ (0.73 ) $ 1.50 $ (1.11 ) $ 3.07 common shareDiluted earnings/(loss) per $ (0.73 ) $ 1.50 $ (1.11 ) $ 3.07 common share

TEXAS CAPITAL BANCSHARES, INC.SUMMARY OF CREDIT LOSS EXPERIENCE(Dollars in thousands) 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 2020 2020 2019 2019 2019Allowance forcredit losses on loans:Beginning balance $ 240,958 $ 195,047 $ 190,138 $ 214,572 $ 208,573 Impact of CECL ? 8,585 ? ? ? adoptionLoans charged-off: Commercial 12,287 20,653 13,968 21,124 4,880 Energy 62,368 37,730 797 16,655 15,173 Real estate ? ? ? ? 177 Total charge-offs 74,655 58,383 14,765 37,779 20,230 Recoveries: Commercial 513 257 1,754 799 224 Energy ? 423 209 107 ? Total recoveries 513 680 1,963 906 224 Net charge-offs 74,142 57,703 12,802 36,873 20,006 Provision forcredit losses on 97,906 95,029 17,711 12,439 26,005 loansEnding balance $ 264,722 $ 240,958 $ 195,047 $ 190,138 $ 214,572 Allowance foroff-balance sheet credit losses:Beginning balance $ 10,174 $ 8,640 $ 9,351 $ 10,790 $ 9,795 Impact of CECL ? 563 ? ? ? adoptionProvision foroff-balance sheet 2,094 971 (711 ) (1,439 ) 995 credit lossesEnding balance $ 12,268 $ 10,174 $ 8,640 $ 9,351 $ 10,790 Total allowance for $ 276,990 $ 251,132 $ 203,687 $ 199,489 $ 225,362 credit lossesTotal provision for $ 100,000 $ 96,000 $ 17,000 $ 11,000 $ 27,000 credit lossesAllowance forcredit losses on 1.04 % 0.99 % 0.79 % 0.77 % 0.88 %loans to LHIAllowance forcredit losses on 1.03 % 1.02 % 0.79 % 0.76 % 0.90 %loans to averageLHINet charge-offs to 1.16 % 0.98 % 0.21 % 0.58 % 0.34 %average LHI^(1)Net charge-offs toaverage LHI for 0.73 % 0.53 % 0.31 % 0.41 % 0.27 %last twelve months^(1)Total provision forcredit losses to 1.57 % 1.63 % 0.27 % 0.17 % 0.45 %average LHI^(1)Total allowance forcredit losses to 1.09 % 1.03 % 0.83 % 0.81 % 0.93 %LHI

(1) Interim period ratios are annualized.

TEXAS CAPITAL BANCSHARES, INC.SUMMARY OF NON-PERFORMING ASSETS AND PAST DUE LOANS(Dollars in thousands) 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 2020 2020 2019 2019 2019 Non-performing assets (NPAs):Non-accrual loans $ 174,031 $ 219,165 $ 225,384 $ 120,686 $ 114,084 Other real estate ? ? ? ? ? owned (OREO)Total LHI NPAs $ 174,031 $ 219,165 $ 225,384 $ 120,686 $ 114,084 Non-accrual loans 0.68 % 0.90 % 0.91 % 0.49 % 0.47 %to LHITotal LHI NPAs to 0.68 % 0.90 % 0.91 % 0.49 % 0.47 %LHI plus OREOTotal LHI NPAs to 0.49 % 0.63 % 0.71 % 0.37 % 0.39 %earning assetsAllowance forcredit losses on 1.5x 1.1x .9x 1.6x 1.9xloans tonon-accrual loansLHI past due 90days and still $ 21,079 $ 21,274 $ 17,584 $ 29,648 $ 15,212 accruing^(1)LHI past due 90 0.08 % 0.09 % 0.07 % 0.12 % 0.06 %days to LHILHS past due 90days and still $ 10,152 $ 9,014 $ 8,207 $ 9,187 $ 11,665 accruing^(2)

At June30, 2020, loans past due 90 days and still accruing includes premium finance loans of $14.8 million. These loans are primarily secured(1) by obligations of insurance carriers to refund premiums on canceled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date. Includes loans guaranteed by U.S. government agencies that were repurchased out of Ginnie Mae securities. Loans are recorded as LHS and carried at fair value on the balance sheet. Interest on these past due loans accrues at the(2) debenture rate guaranteed by the U.S. government. Also includes loans that, pursuant to Ginnie Mae servicing guidelines, we have the unilateral right, but not obligation, to repurchase and thus must record as LHS on our balance sheet regardless of whether the repurchase option has been exercised.

TEXAS CAPITAL BANCSHARES, INC.CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(Dollars in thousands) 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 2020 2020 2019 2019 2019Interest income Interest and fees $ 247,595 $ 283,625 $ 312,147 $ 329,344 $ 329,842 on loansInvestment 2,024 2,183 2,618 2,316 2,260 securitiesFederal funds soldand securities 77 614 439 554 157 purchased underresale agreementsInterest-bearingdeposits in other 2,314 19,586 22,553 22,887 14,634 banksTotal interest 252,010 306,008 337,757 355,101 346,893 incomeInterest expense Deposits 32,294 62,174 70,987 80,967 72,529 Federal funds 176 669 1,319 1,835 5,202 purchasedOther borrowings 4,569 9,582 11,712 14,703 20,124 Subordinated notes 4,191 4,191 4,191 4,191 4,191 Trust preferredsubordinated 852 1,073 1,163 1,237 1,294 debenturesTotal interest 42,082 77,689 89,372 102,933 103,340 expenseNet interest income 209,928 228,319 248,385 252,168 243,553 Provision for 100,000 96,000 17,000 11,000 27,000 credit lossesNet interest incomeafter provision for 109,928 132,319 231,385 241,168 216,553 credit lossesNon-interest income Service charges on 2,459 3,293 2,785 2,707 2,849 deposit accountsWealth managementand trust fee 2,348 2,467 2,342 2,330 2,129 incomeBrokered loan fees 10,764 8,015 8,645 8,691 7,336 Servicing income 6,120 4,746 4,030 3,549 3,126 Swap fees 1,468 2,757 1,559 1,196 601 Net gain/(loss) on 39,023 (13,000 ) (7,757 ) (6,011 ) (5,986 )sale of LHSOther 8,320 3,502 6,157 7,839 14,309 Total non-interest 70,502 11,780 17,761 20,301 24,364 incomeNon-interest expenseSalaries and 100,255 76,667 80,262 80,106 76,889 employee benefitsNet occupancy 9,134 8,712 9,075 8,125 7,910 expenseMarketing 7,988 8,522 12,807 14,753 14,087 Legal and 11,330 17,466 21,032 11,394 10,004 professionalCommunications and 42,760 13,791 13,801 10,805 11,022 technologyFDIC insurance 7,140 5,849 5,613 5,220 4,138 assessmentServicing-related 20,117 16,354 2,960 8,165 6,066 expensesMerger-related 10,486 7,270 1,370 ? ? expensesOther 13,142 10,786 21,267 10,861 11,602 Total non-interest 222,352 165,417 168,187 149,429 141,718 expenseIncome/(loss) (41,922 ) (21,318 ) 80,959 112,040 99,199 before income taxesIncome tax expense/ (7,606 ) (4,631 ) 16,539 23,958 21,387 (benefit)Net income/(loss) (34,316 ) (16,687 ) 64,420 88,082 77,812 Preferred stock 2,437 2,438 2,437 2,438 2,437 dividendsNet income/(loss)available to common $ (36,753 ) $ (19,125 ) $ 61,983 $ 85,644 $ 75,375 shareholders

TEXAS CAPITAL BANCSHARES, INC.QUARTERLY FINANCIAL SUMMARY - UNAUDITEDConsolidated Daily Average Balances, Average Yields and Rates(Dollars in thousands) 2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019 Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense RateAssets Investmentsecurities - $ 38,829 $ 185 1.92 % $ 42,799 $ 274 2.57 % $ 40,904 $ 693 6.72 % $ 39,744 $ 357 3.56 % $ 38,887 $ 287 2.96 %TaxableInvestmentsecurities - 195,806 2,327 4.78 % 195,578 2,417 4.97 % 197,591 2,437 4.89 % 200,090 2,480 4.92 % 192,115 2,498 5.21 %Non-taxable^(2)Federal fundssold andsecurities 245,434 77 0.13 % 199,727 614 1.24 % 102,320 439 1.70 % 100,657 554 2.18 % 28,436 157 2.22 %purchased underresaleagreementsInterest-bearingdeposits in 10,521,240 2,314 0.09 % 6,225,948 19,586 1.27 % 5,387,000 22,553 1.66 % 4,184,217 22,887 2.17 % 2,491,827 14,634 2.36 %other banksLHS, at fair 380,624 2,547 2.69 % 3,136,381 27,480 3.52 % 3,567,836 33,411 3.72 % 2,555,269 26,206 4.07 % 2,494,883 27,607 4.44 %valueLHI, mortgage 8,676,521 74,518 3.45 % 7,054,682 55,324 3.15 % 7,870,888 63,114 3.18 % 8,118,025 68,660 3.36 % 7,032,963 63,523 3.62 %finance loansLHI^(1)(2) 17,015,041 170,970 4.04 % 16,598,775 201,781 4.89 % 16,667,259 216,686 5.16 % 16,901,391 235,557 5.53 % 16,781,733 239,829 5.73 %Less allowancefor credit 236,823 ? ? 201,837 ? ? 189,353 ? ? 212,898 ? ? 206,654 ? ? losses on loansLHI, net of 25,454,739 245,488 3.88 % 23,451,620 257,105 4.41 % 24,348,794 279,800 4.56 % 24,806,518 304,217 4.87 % 23,608,042 303,352 5.15 %allowanceTotal earning 36,836,672 252,938 2.76 % 33,252,053 307,476 3.72 % 33,644,445 339,333 4.00 % 31,886,495 356,701 4.44 % 28,854,190 348,535 4.84 %assetsCash and other 1,075,864 976,520 974,866 1,000,117 940,793 assetsTotal assets $ 37,912,536 $ 34,228,573 $ 34,619,311 $ 32,886,612 $ 29,794,983 Liabilities andStockholders? EquityTransaction $ 3,923,966 $ 5,998 0.61 % $ 3,773,067 $ 13,582 1.45 % $ 3,817,294 $ 16,428 1.71 % $ 3,577,905 $ 18,442 2.04 % $ 3,475,404 $ 18,037 2.08 %depositsSavings deposits 12,537,467 13,510 0.43 % 11,069,429 35,961 1.31 % 11,111,326 40,603 1.45 % 10,331,078 45,586 1.75 % 8,896,537 40,994 1.85 %Time deposits 3,434,388 12,786 1.50 % 2,842,535 12,631 1.79 % 2,453,655 13,956 2.26 % 2,706,434 16,939 2.48 % 2,227,460 13,498 2.43 %Total interest 19,895,821 32,294 0.65 % 17,685,031 62,174 1.41 % 17,382,275 70,987 1.62 % 16,615,417 80,967 1.93 % 14,599,401 72,529 1.99 %bearing depositsOther borrowings 3,612,263 4,745 0.53 % 3,020,255 10,251 1.37 % 2,822,465 13,031 1.83 % 2,896,477 16,538 2.27 % 4,018,231 25,326 2.53 %Subordinated 282,252 4,191 5.97 % 282,165 4,191 5.97 % 282,074 4,191 5.89 % 281,979 4,191 5.90 % 281,889 4,191 5.96 %notesTrust preferredsubordinated 113,406 852 3.02 % 113,406 1,073 3.80 % 113,406 1,163 4.07 % 113,406 1,237 4.33 % 113,406 1,294 4.58 %debenturesTotal interestbearing 23,903,742 42,082 0.71 % 21,100,857 77,689 1.48 % 20,600,220 89,372 1.72 % 19,907,279 102,933 2.05 % 19,012,927 103,340 2.18 %liabilitiesDemand deposits 10,865,896 10,003,495 10,933,887 9,992,406 7,929,266 Other 293,698 270,868 278,964 264,506 220,305 liabilitiesStockholders? 2,849,200 2,853,353 2,806,240 2,722,421 2,632,485 equityTotalliabilities and $ 37,912,536 $ 34,228,573 $ 34,619,311 $ 32,886,612 $ 29,794,983 stockholders?equityNet interest $ 210,856 $ 229,787 $ 249,961 $ 253,768 $ 245,195 income^(2)Net interest 2.30 % 2.78 % 2.95 % 3.16 % 3.41 %margin

(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.

INVESTOR CONTACTJulie Anderson, 214.932.6673julie.anderson@texascapitalbank.com

MEDIA CONTACTShannon Wherry, 469.399.8527shannon.wherry@texascapitalbank.com