Texas Capital BancShares Inc. (NASDAQ:TCBI.W) Q2 2016 Earnings Conference Call - Preliminary Transcript

Jul 20, 2016 • 05:00 pm ET


Texas Capital BancShares Inc. (NASDAQ:TCBI.W) Q2 2016 Earnings Conference Call - Preliminary Transcript


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Good afternoon and welcome to the Texas Capital Bancshares Inc. Second Quarter 2016 Earnings Conference Call. Our participants will be in listen only mode. [Operator Instructions] Please note this event is being recorded.

At this time, I will turn the call over to Heather Worley, Director of Investor Relations. Please go ahead.

Heather Worley

Thank you for joining us for the Texas Capital Bancshares Inc. second quarter 2016 earnings conference call. I'm Heather Worley, Director of Investor Relations. Before we get started, please remember that this call will include forward-looking statements that are based on current expectations of future results. Forward-looking statements are subject to both known and unknown risks and uncertainty, that could cause actual results to differ materially from the statements.

Our forward looking statements are as the date of this call, and we do not assume any obligation to update or revise. Statements made on this call should be considered together with the cautionary statements and other information contained in today's earning release or in most recent annual report on form 10-K and subsequent filings with the SEC.

With me on the call today are Keith Cargill, President and CEO and Peter Bartholow, CFO and COO. After a few prepared remarks, our operator Laura will facilitate a Q&A session. At this time, I will turn the call over to Keith and we'll begin on Slide 3 of the webcast. Keith?

Keith Cargill

Thank you, Heather. We welcome you to our second quarter earnings call. I'm Keith Cargill, President and CEO of Texas Capital BancShares. We will lead with my opening remarks followed by comments from Peter Bartholow, CFO and Chief Operating Officer. Then I will close and Laura, our operator will open the call for Q&A.

Second quarter of 2016 show continued strong growth in loans and deposits. Average core LHI growth equal 3% link quarter. Year-over-year, core LHI grew 12%. Average growth in mortgage finance amounted to 18% linked quarter, with the seasonally strong second quarter volumes. Year-over-year mortgage financing increased 2%. Netting out the increase in participation sold. Our newest mortgage business, mortgage correspondent aggregation or MCA, the 25% on average from Q1 to Q2. We look forward to a first time profit contribution from the MCA Business in the third quarter preceding its one year anniversary, since we launched MCA at the end of September 2015. Demand deposits increased on average 15% link quarter, and 14% year-over-year. Let's move to credit.

First, we were able to record a significantly reduced provision for loan losses of $16 million versus the $30 million in Q1. Despite higher charges off, the reserve for our energy portfolio remained at 5%. We ended the second quarter with an overall loan loss reserve of 1.41%, against LHI net of mortgage finance. Non accrual loans, LHI decreased point 0.93% [Phonetic], 2.93% from 1.02% link quarter. Non accruals 0.77% at Q2, 2015. Net charge offs were $12 million or 39 basis points versus 25 basis points in Q1. In Q2, 2015 net charges for 14 basis points.