TEXAS CAP BANCSH(TCBIO) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights Texas Capital Bancshares, Inc. reported strong Q1 2025 results, featuring significant net income growth, record book values, and robust balance sheet expansion. First Quarter 2025 Overview Texas Capital Bancshares, Inc. announced strong first quarter 2025 results with significant year-over-year improvements in key financial metrics, including a substantial increase in net income and record levels for book value and tangible book value per share. The company also reported robust balance sheet growth and maintained strong capital ratios. - Texas Capital Bancshares, Inc. reported first quarter 2025 net income of $47.0 million and net income available to common stockholders of $42.7 million, or $0.92 per diluted share[1] - Total deposits increased 9% year-over-year, and total loans grew 7% year-over-year, indicating strong balance sheet growth[1] - Book Value and Tangible Book Value per share both increased 11% year-over-year, reaching record levels[1] - Capital ratios remained strong, with CET1 at 11.6% and Total Capital at 15.6%[1] Key Financial and Operating Metrics The table below provides a snapshot of key financial and operating metrics for Q1 2025, Q4 2024, and Q1 2024, highlighting trends in profitability, earnings per share, and balance sheet components. Operating Results (Q1 2025 vs. Q4 2024 vs. Q1 2024) | (dollars in thousands except per share data) | 1st Quarter 2025 | 4th Quarter 2024 | 1st Quarter 2024 | | :------------------------------------------ | :--------------- | :--------------- | :--------------- | | OPERATING RESULTS | | | |\ | Net income | $47,047 | $71,023 | $26,142 |\ | Net income available to common stockholders | $42,734 | $66,711 | $21,829 |\ | Diluted earnings per common share | $0.92 | $1.43 | $0.46 |\ | Return on average assets | 0.61 % | 0.88 % | 0.36 % |\ | Return on average common equity | 5.56 % | 8.50 % | 3.03 % |\ | BALANCE SHEET | | | |\ | Total loans held for investment | $22,379,784 | $22,450,066 | $20,831,004 |\ | Total assets | $31,375,749 | $30,731,883 | $29,180,585 |\ | Total deposits | $26,053,034 | $25,238,599 | $23,954,037 |\ | Stockholders' equity | $3,429,774 | $3,367,936 | $3,170,662 | Financial Performance Analysis This section analyzes the company's financial performance, comparing Q1 2025 results against both the previous quarter and the prior year, highlighting key drivers of change in income, expenses, and margins. First Quarter 2025 vs. Fourth Quarter 2024 Compared to the fourth quarter of 2024, Q1 2025 saw a decrease in net income available to common stockholders and diluted EPS, primarily driven by increased non-interest expense due to seasonal payrolls and lower non-interest income. However, net interest income and net interest margin improved due to decreased funding costs. Q1 2025 vs. Q4 2024 Key Financials | Metric | Q1 2025 | Q4 2024 | Change (QoQ) | | :-------------------------------------- | :------------- | :------------- | :------------- | | Net income available to common stockholders | $42.7 million | $66.7 million | -$24.0 million |\ | Diluted earnings per common share | $0.92 | $1.43 | -$0.51 |\ | Provision for credit losses | $17.0 million | $18.0 million | -$1.0 million |\ | Net interest income | $236.0 million | $229.6 million | +$6.4 million |\ | Net interest margin | 3.19 % | 2.93 % | +26 bps |\ | Non-interest income | | | -$9.6 million |\ | Non-interest expense | | | +$30.9 million | - The decrease in non-interest income was primarily due to a decrease in investment banking and advisory fees[7] - The increase in non-interest expense was primarily due to seasonal payroll expenses that peak in the first quarter[7] - The provision for credit losses in Q1 2025 was primarily due to an increase in criticized loans and $9.8 million in net charge-offs, as well as uncertainty in the economic outlook[5] First Quarter 2025 vs. First Quarter 2024 On a year-over-year basis, Q1 2025 demonstrated significant growth in net income and diluted EPS. Net interest income and margin also improved, driven by increased average total loans held for investment and decreased funding costs, despite a slight increase in non-interest expense. Q1 2025 vs. Q1 2024 Key Financials | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :-------------------------------------- | :------------- | :------------- | :------------- | | Net income available to common stockholders | $42.7 million | $21.8 million | +$20.9 million |\ | Diluted earnings per common share | $0.92 | $0.46 | +$0.46 |\ | Provision for credit losses | $17.0 million | $19.0 million | -$2.0 million |\ | Net interest income | $236.0 million | $215.0 million | +$21.0 million |\ | Net interest margin | 3.19 % | 3.03 % | +16 bps |\ | Non-interest income | | | +$3.1 million |\ | Non-interest expense | | | +$627 thousand | - The increase in net interest income was primarily due to an increase in average total loans held for investment and a decrease in funding costs[10] - Non-interest income increased due to higher service charges on deposit accounts, trading income, and other non-interest income, partially offset by lower investment banking and advisory fees[11] - Non-interest expense increased slightly, primarily due to increases in salaries and benefits and communications and technology expense, partially offset by a decrease in Federal Deposit Insurance Corporation (FDIC) expense (Q1 2024 included $3.0 million in additional FDIC special assessment expense)[12] Credit Quality This section provides an overview of the company's credit quality, detailing key metrics such as net charge-offs, criticized loans, and non-performing assets, along with their trends over recent quarters. Overview of Credit Quality Metrics Credit quality metrics in Q1 2025 showed mixed trends. Net charge-offs decreased both quarter-over-quarter and year-over-year, while criticized loans increased quarter-over-quarter but decreased year-over-year. Non-accrual loans held for investment decreased QoQ but slightly increased YoY. Key Credit Quality Metrics | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------------------------------------------ | :------------- | :---------------- | :------------- | | Net charge-offs (Q1) | $9.8 million | $12.1 million | $10.8 million |\ | Criticized loans | $762.9 million | $714.0 million | $859.5 million |\ | Non-accrual LHI | $93.6 million | $111.2 million | $92.8 million |\ | Non-accrual LHI to total LHI | 0.42 % | 0.50 % | 0.45 % |\ | Total allowance for credit losses to total LHI | 1.48 % | 1.45 % | 1.46 % | Detailed Credit Loss Experience The summary of credit loss experience details the allowance for credit losses, charge-offs, recoveries, and related ratios over the past five quarters. Net charge-offs decreased in Q1 2025 compared to both the prior quarter and the prior year, while the total allowance for credit losses increased. Summary of Credit Loss Experience (dollars in thousands) | | 1st Quarter 2025 | 4th Quarter 2024 | 3rd Quarter 2024 | 2nd Quarter 2024 | 1st Quarter 2024 | | :--------------------------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Allowance for credit losses on loans: | | | | | |\ | Beginning balance | $271,709 | $273,143 | $26