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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2021
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from              to             
Commission file number 001-34657
TEXAS CAPITAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2679109
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2000 McKinney Avenue
Suite 700
DallasTXUSA75201
(Address of principal executive offices)(Zip Code)
(214) 932-6600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareTCBINasdaq Stock Market
6.5% Non-Cumulative Perpetual Preferred Stock Series A, par value $0.01 per shareTCBIPNasdaq Stock Market
5.75% Non-Cumulative Perpetual Preferred Stock Series B, par value $0.01 per shareTCBIONasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ý        No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý        ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerxAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes          No  ý
APPLICABLE ONLY TO CORPORATE ISSUERS:
On April 21, 2021, the number of shares set forth below was outstanding with respect to each of the issuer's classes of common stock:
Common Stock, par value $0.01 per share 50,581,310


Table of Contents
Texas Capital Bancshares, Inc.
Form 10-Q
Quarter Ended March 31, 2021

Index
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.





Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)March 31, 2021December 31, 2020
(Unaudited)
Assets
Cash and due from banks$215,835 $173,573 
Interest-bearing deposits in other banks11,212,276 9,032,807 
Investment securities3,443,058 3,196,970 
Loans held for sale ($176.3 million and $239.1 million at March 31, 2021 and December 31, 2020, respectively, at fair value)
176,286 283,165 
Loans held for investment, mortgage finance9,009,081 9,079,409 
Loans held for investment (net of unearned income)15,399,174 15,351,451 
Less: Allowance for credit losses on loans242,484 254,615 
Loans held for investment, net24,165,771 24,176,245 
Mortgage servicing rights, net121,096 105,424 
Premises and equipment, net23,346 24,546 
Accrued interest receivable and other assets679,199 715,699 
Goodwill and intangible assets, net17,566 17,667 
Total assets$40,054,433 $37,726,096 
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing$15,174,642 $12,740,947 
Interest-bearing18,217,328 18,255,642 
Total deposits33,391,970 30,996,589 
Accrued interest payable5,629 11,150 
Other liabilities316,797 339,486 
Federal funds purchased and repurchase agreements115,587 111,751 
Other borrowings2,400,000 3,000,000 
Long-term debt664,968 395,896 
Total liabilities36,894,951 34,854,872 
Stockholders’ equity:
Preferred stock, $0.01 par value, $1,000 liquidation value:
Authorized shares—10,000,000
Issued shares—6,300,000 shares issued at March 31, 2021 and 6,000,000 at December 31, 2020
450,000 150,000 
Common stock, $0.01 par value:
Authorized shares—100,000,000
Issued shares— 50,558,184 and 50,470,867 at March 31, 2021 and December 31, 2020, respectively
505 504 
Additional paid-in capital984,207 991,898 
Retained earnings1,781,215 1,713,056 
Treasury stock (shares at cost: 417 at March 31, 2021 and December 31, 2020)
(8)(8)
Accumulated other comprehensive income/(loss), net of taxes(56,437)15,774 
Total stockholders’ equity3,159,482 2,871,224 
Total liabilities and stockholders’ equity$40,054,433 $37,726,096 
See accompanying notes to consolidated financial statements.
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME/(LOSS) - UNAUDITED
 Three months ended March 31,
(in thousands except per share data)20212020
Interest income
Interest and fees on loans$215,592 $283,625 
Investment securities9,887 2,183 
Federal funds sold and securities purchased under resale agreements1 614 
Interest-bearing deposits in other banks2,932 19,586 
Total interest income228,412 306,008 
Interest expense
Deposits20,004 62,174 
Federal funds purchased75 669 
Other borrowings2,517 9,582 
Long-term debt5,743 5,264 
Total interest expense28,339 77,689 
Net interest income200,073 228,319 
Provision for credit losses(6,000)96,000 
Net interest income after provision for credit losses206,073 132,319 
Non-interest income
Service charges on deposit accounts4,716 3,293 
Wealth management and trust fee income2,855 2,467 
Brokered loan fees9,311 8,015 
Servicing income9,009 4,746 
Swap fees526 2,757 
Net gain/(loss) on sale of loans held for sale5,572 (13,000)
Other7,103 3,502 
Total non-interest income39,092 11,780 
Non-interest expense
Salaries and employee benefits87,522 77,193 
Net occupancy expense8,274 8,712 
Marketing1,697 8,522 
Legal and professional8,277 17,466 
Communications and technology15,969 13,791 
FDIC insurance assessment6,613 5,849 
Servicing-related expenses12,989 16,354 
Merger-related expenses 7,270 
Other8,975 10,260 
Total non-interest expense150,316 165,417 
Income/(loss) before income taxes94,849 (21,318)
Income tax expense/(benefit)22,911 (4,631)
Net income/(loss)71,938 (16,687)
Preferred stock dividends3,779 2,438 
Net income/(loss) available to common stockholders$68,159 $(19,125)
Other comprehensive loss
Change in unrealized gain/(loss) on available-for-sale debt securities arising during period, before tax$(91,407)$(5,292)
Income tax expense/(benefit)(19,196)(1,111)
Other comprehensive loss, net of tax(72,211)(4,181)
Comprehensive loss$(273)$(20,868)
Basic earnings/(loss) per common share$1.35 $(0.38)
Diluted earnings/(loss) per common share$1.33 $(0.38)
See accompanying notes to consolidated financial statements.
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

Preferred StockCommon StockAdditional Treasury StockAccumulated
Other
 
 Paid-inRetainedComprehensive 
(in thousands except share data)SharesAmountSharesAmountCapitalEarningsSharesAmountIncome/(Loss)Total
Balance at December 31, 2019 (audited)6,000,000 $150,000 50,338,158 $503 $978,205 $1,663,671 (417)$(8)$8,950 $2,801,321 
Impact of adoption of new accounting standards, net of taxes (1)(7,154)— (7,154)
Comprehensive loss:
Net loss— — — — — (16,687)— — — (16,687)
Change in unrealized gain/(loss) on available-for-sale securities, net of taxes— — — — — — — — (4,181)(4,181)
Total comprehensive loss(20,868)
Stock-based compensation expense recognized in earnings
— — — — 3,227 — — — — 3,227 
Preferred stock dividend — — — — — (2,438)— — — (2,438)
Issuance of stock related to stock-based awards
— — 70,037 1 (1,493)— — — — (1,492)
Balance at March 31, 20206,000,000 $150,000 50,408,195 $504 $979,939 $1,637,392 (417)$(8)$4,769 $2,772,596 
Balance at December 31, 2020 (audited)6,000,000 $150,000 50,470,867 $504 $991,898 $1,713,056 (417)$(8)$15,774 $2,871,224 
Comprehensive loss:
Net income— — — — — 71,938 — — — 71,938 
Change in unrealized gain/(loss) on available-for-sale securities, net of taxes— — — — — — — — (72,211)(72,211)
Total comprehensive loss(273)
Stock-based compensation expense recognized in earnings
— — — — 5,461 — — — — 5,461 
Issuance of preferred stock300,000 300,000 — — (10,277)— — — — 289,723 
Preferred stock dividend— — — — — (3,779)— — — (3,779)
Issuance of stock related to stock-based awards
— — 87,317 1 (2,875)— — — — (2,874)
Balance at March 31, 20216,300,000 $450,000 50,558,184 $505 $984,207 $1,781,215 (417)$(8)$(56,437)$3,159,482 
(1)    Represents the impact of adopting Accounting Standard Update ("ASU") 2016-13. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for more information.

See accompanying notes to consolidated financial statements.
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TEXAS CAPITAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
 Three months ended March 31,
(in thousands)20212020
Operating activities
Net income$71,938 $(16,687)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses(6,000)96,000 
Depreciation and amortization26,067 13,122 
Net (gain)/loss on sale of loans held for sale(5,572)13,000 
Increase/(decrease) in valuation allowance on mortgage servicing rights(16,448)10,015 
Stock-based compensation expense6,368 3,369 
Purchases and originations of loans held for sale(1,133,239)(2,356,710)
Proceeds from sales and repayments of loans held for sale1,233,725 4,126,102 
Changes in operating assets and liabilities:
Accrued interest receivable and other assets48,927 (141,940)
Accrued interest payable and other liabilities(27,335)39,473 
Net cash provided by operating activities198,431 1,785,744 
Investing activities
Purchases of investment securities(461,381)(1,951)
Principal payments received on investment securities118,316 4,788 
Originations of mortgage finance loans(48,097,222)(37,932,501)
Proceeds from pay-offs of mortgage finance loans48,167,550 38,513,547 
Net increase in loans held for investment, excluding mortgage finance loans(54,141)(438,869)
Purchase of premises and equipment, net(924)(1,007)
Net cash provided by/(used in) investing activities(327,802)144,007 
Financing activities
Net increase in deposits2,395,381 655,670 
Costs from issuance of stock related to stock-based awards and warrants(2,874)(1,492)
Net proceeds from issuance of preferred stock289,723  
Preferred dividends paid(3,779)(2,438)
Net increase/(decrease) in other borrowings(600,000)2,500,000 
Net increase in federal funds purchased and repurchase agreements3,836 153,501 
Net proceeds from issuance of long-term debt268,815  
Net cash provided by financing activities2,351,102 3,305,241 
Net increase in cash and cash equivalents2,221,731 5,234,992 
Cash and cash equivalents at beginning of period9,206,380 4,425,583 
Cash and cash equivalents at end of period$11,428,111 $9,660,575 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$33,860 $73,480 
Cash paid during the period for income taxes440 519 
See accompanying notes to consolidated financial statements.
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(1) Operations and Summary of Significant Accounting Policies
Organization and Nature of Business
Texas Capital Bancshares, Inc. (the "Company” or "TCBI"), a Delaware corporation, was incorporated in November 1996 and commenced banking operations in December 1998. The consolidated financial statements of the Company include the accounts of Texas Capital Bancshares, Inc. and its wholly owned subsidiary, Texas Capital Bank, National Association (the "Bank”). We serve the needs of commercial businesses and successful professionals and entrepreneurs located in Texas as well as operate several lines of business serving a regional or national clientele of commercial borrowers. We are primarily a secured lender, with the majority of our loans held for investment, excluding mortgage finance loans and other national lines of business, being made to businesses headquartered or with operations in Texas. Our national lines of business provide specialized lending products to businesses throughout the United States.
Basis of Presentation
Our accounting and reporting policies conform to accounting principles generally accepted in the United States ("GAAP") and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation.
The consolidated interim financial statements are unaudited and certain information and footnote disclosures presented in accordance with GAAP have been condensed or omitted. In the opinion of management, the interim financial statements include all normal and recurring adjustments and the disclosures made are adequate to make the interim financial information not misleading. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2020, included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K"). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Subsequent Event
On April 20, 2021, we entered into an agreement to sell our portfolio of mortgage servicing rights to a third party. The third party has also, in a separate letter of intent, agreed to extend employment opportunities to many of the Company’s Mortgage Correspondent Aggregation (“MCA”) employees and the Company has agreed to make best efforts to cooperate in transitioning its MCA client base to the third party, resulting in the wind-down of the Company’s MCA program. The sale and transition of employees and clients is expected to be completed in the second quarter of 2021, subject to customary closing conditions, and will result in the Company recording an expected gain on sale of mortgage servicing rights ("MSRs") and severance costs in the second quarter of 2021, both of which are not expected to be material.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, the fair value of financial instruments and the status of contingencies are particularly susceptible to significant change.
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(2) Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
 Three months ended March 31,
(in thousands except share and per share data)20212020
Numerator:
Net income/(loss)$71,938 $(16,687)
Preferred stock dividends3,779 2,438 
Net income/(loss) available to common stockholders$68,159 $(19,125)
Denominator:
Denominator for basic earnings per share—weighted average shares50,513,277 50,373,580 
Effect of employee stock-based awards(1)556,234 101,222 
Denominator for dilutive earnings per share—adjusted weighted average shares and assumed conversions
51,069,511 50,474,802 
Basic earnings/(loss) per common share$1.35 $(0.38)
Diluted earnings/(loss) per common share$1.33 $(0.38)
(1)SARs and RSUs outstanding of 80,263 at March 31, 2021 and 428,007 at March 31, 2020 have not been included in diluted earnings/(loss) per share because to do so would have been antidilutive for the periods presented.
(3) Investment Securities
Available-for-Sale Debt Securities
The following is a summary of available-for-sale debt securities: 
(in thousands)Amortized
Cost(1)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
March 31, 2021
Available-for-sale debt securities:
U.S. government agency securities$125,000 $ $(5,160)$119,840 
Residential mortgage-backed securities3,166,816 367 (71,396)3,095,787 
Tax-exempt asset-backed securities173,569 7,997  181,566 
Credit risk transfer securities14,713  (3,248)11,465 
Total$3,480,098 $8,364 $(79,804)$3,408,658 
December 31, 2020
Available-for-sale debt securities:
U.S. government agency securities$125,000 $1 $(1,412)$123,589 
Residential mortgage-backed securities2,818,518 11,566 (1,128)2,828,956 
Tax-exempt asset-backed securities184,940 14,236  199,176 
Credit risk transfer securities14,713  (3,296)11,417 
Total
$3,143,171 $25,803 $(5,836)$3,163,138 
(1)Excludes accrued interest receivable of $6.3 million and $6.0 million at March 31, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
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The amortized cost and estimated fair value, excluding accrued interest receivable, and weighted average yield of available-for-sale debt securities are presented below by contractual maturity:  
(in thousands, except percentage data)Less Than
One Year
After One
Through
Five Years
After Five
Through
Ten Years
After Ten
Years
Total
March 31, 2021
Available-for-sale:
U.S. government agency securities:(1)
Amortized cost$ $ $125,000 $ $125,000 
Estimated fair value  119,840  119,840 
Weighted average yield(3) % %1.13 % %1.13 %
Residential mortgage-backed securities:(1)
Amortized cost$ $449 $17,368 $3,148,999 $3,166,816 
Estimated fair value 499 16,442 3,078,846 3,095,787 
Weighted average yield(3) %4.59 %1.08 %1.16 %1.16 %
Tax-exempt asset-backed securities:(1)
Amortized Cost$ $ $ $173,569 $173,569 
Estimated fair value   181,566 181,566 
Weighted average yield(2)(3) % % %4.95 %4.95 %
CRT securities:(1)
Amortized Cost$ $ $ $14,713 $14,713 
Estimated fair value   11,465 11,465 
Weighted average yield(3) % % %0.11 %0.11 %
Total available-for-sale debt securities:
Amortized cost$3,480,098 
Estimated fair value$3,408,658 
December 31, 2020
Available-for-sale:
U.S. government agency securities:(1)
Amortized cost$ $ $125,000 $ $125,000 
Estimated fair value  123,589  123,589 
Weighted average yield(3) % %1.13 % %1.13 %
Residential mortgage-backed securities:(1)
Amortized cost$ $545 $17,500 $2,800,473 $2,818,518 
Estimated fair value 605 17,490 2,810,861 2,828,956 
Weighted average yield(3) %4.58 %1.08 %1.25 %1.25 %
Tax-exempt asset-backed securities:(1)
Amortized Cost$ $ $ $184,940 $184,940 
Estimated fair value   199,176 199,176 
Weighted average yield(2)(3) % % %4.92 %4.92 %
CRT securities:(1)
Amortized Cost$ $ $ $14,713 $14,713 
Estimated fair value   11,417 11,417 
Weighted average yield(3) % % %0.15 %0.15 %
Total available-for-sale debt securities:
Amortized cost$3,143,171 
Estimated fair value$3,163,138 
(1)Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
(2)Yields have been adjusted to a tax equivalent basis assuming a 21% federal tax rate.
(3)Yields are calculated based on amortized cost.
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The following table discloses our available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:
Less Than 12 Months12 Months or LongerTotal
(in thousands)Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
March 31, 2021
U.S. government agency securities$119,840 $(5,160)$ $ $119,840 $(5,160)
Residential mortgage-backed securities3,067,739 (71,396)  3,067,739 (71,396)
CRT securities  11,465 (3,248)11,465 (3,248)
Total$3,187,579 $(76,556)$11,465 $(3,248)$3,199,044 $(79,804)
December 31, 2020
U.S. government agency securities$98,588 $(1,412)$ $ $98,588 $(1,412)
Residential mortgage-backed securities354,387 (1,128)  354,387 (1,128)
CRT securities  11,417 (3,296)11,417 (3,296)
Total$452,975 $(2,540)$11,417 $(3,296)$464,392 $(5,836)
At March 31, 2021, we had 108 securities in an unrealized loss position, comprised of 5 U.S. government agency securities, 2 CRT securities and 101 residential mortgage-backed securities. Based upon our March 31, 2021 review of securities with unrealized losses we have determined that all losses resulted from factors not deemed credit-related. We have evaluated the near-term prospects of each securities portfolio in relation to the severity of the unrealized losses and adverse conditions related to the securities among other factors. Based on that evaluation management has determined that we have the ability and intent to hold the securities until recovery of fair value and have recorded the unrealized losses in accumulated other comprehensive income ("AOCI").
Available-for-sale debt securities with carrying values of approximately $28.1 million and $1.6 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at March 31, 2021. The comparative amounts at December 31, 2020 were $31.7 million and $1.9 million, respectively.
Equity Securities
Equity securities consist of Community Reinvestment Act funds and investments related to our non-qualified deferred compensation plan. At March 31, 2021 and December 31, 2020, we had $34.4 million and $33.8 million, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities included in other non-interest income in the consolidated statements of income and other comprehensive income:
Three months ended March 31,
(in thousands)20212020
Net gains/(losses) recognized during the period$378 $(2,977)
Less: Realized net gains/(losses) recognized during the period on equity securities sold
398 (19)
Unrealized net gains/(losses) recognized during the period on equity securities still held
$(20)$(2,958)
(4) Loans Held for Investment and Allowance for Credit Losses on Loans
Loans held for investment are summarized by portfolio segment as follows:
(in thousands)March 31, 2021December 31, 2020
Commercial$8,969,224 $8,861,580 
Energy691,806 766,217 
Mortgage finance(1)9,009,081 9,079,409 
Real estate5,810,590 5,794,624 
Gross loans held for investment(2)24,480,701 24,501,830 
Unearned income (net of direct origination costs)(72,446)(70,970)
Allowance for credit losses on loans(242,484)(254,615)
Total loans held for investment, net(2)$24,165,771 $24,176,245 
(1)    Balances at March 31, 2021 and December 31, 2020 are stated net of $1.0 billion and $1.2 billion of participations sold, respectively.
(2)    Excludes accrued interest receivable of $55.9 million and $56.5 million at March 31, 2021 and December 31, 2020, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets.
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The following table summarizes our gross loans held for investment by year of origination and internally assigned credit grades:
(in thousands)20212020201920182017