Texas Capital Bancshares(TCBI) - 2025 Q2 - Quarterly Results

Executive Summary & Business Overview This section provides an overview of Texas Capital Bancshares' strong Q2 2025 financial performance, CEO insights on strategic success, and a brief introduction to the company's business model Second Quarter 2025 Performance Highlights Texas Capital Bancshares, Inc. reported strong financial results for the second quarter of 2025, with significant year-over-year increases in net income, EPS, total loans, and book value per share, reaching record levels Second Quarter 2025 Performance Metrics | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :-------------------------------- | :---------- | :---------- | :--------- | :----------- | | Net income | $77.3 million | $41.7 million | $35.6 million | 86% | | Net income available to common stockholders | $73.0 million | $37.4 million | $35.6 million | 95% | | Diluted EPS | $1.58 | $0.80 | $0.78 | 98% | | Adjusted Diluted EPS | $1.63 | $0.80 | $0.83 | 104% | | Total loans (QoQ) | $23.9 billion | $21.8 billion | $2.1 billion | 7% (QoQ) | | Total loans (YoY) | $23.9 billion | $21.8 billion | $2.1 billion | 10% (YoY) | | Book Value per share (YoY) | $70.17 | $62.26 | $7.91 | 13% | | Tangible Book Value per share (YoY) | $70.14 | $62.23 | $7.91 | 13% | CEO Commentary Rob C. Holmes, Chairman, President & CEO, highlighted the success of the company's multi-year strategy to build a differentiated, full-service financial services firm, which has strengthened its client franchise and structurally enhanced earnings power, positioning the company for durable results - The company's multi-year focus on building a differentiated, full-service financial services firm has strengthened its client franchise and consistently delivered high-quality outcomes, driving strong financial performance[2] - Strategic actions have structurally enhanced earnings power, positioning the company to deliver durable, through-cycle results for clients and shareholders in the second half of the year[2] About Texas Capital Bancshares, Inc. Texas Capital Bancshares, Inc. (NASDAQ: TCBI) is the parent company of Texas Capital Bank, operating as a full-service financial services firm. Founded in 1998 and headquartered in Dallas, it provides customized solutions across commercial banking, consumer banking, investment banking, and wealth management - Texas Capital Bancshares, Inc. (NASDAQ: TCBI) is the parent company of Texas Capital Bank, a full-service financial services firm[17] - The company delivers customized solutions to businesses, entrepreneurs, and individual customers, with capabilities in commercial banking, consumer banking, investment banking, and wealth management[17] - Founded in 1998, Texas Capital is headquartered in Dallas with offices in Austin, Houston, San Antonio, and Fort Worth, serving clients nationwide[17] Financial Performance Analysis - Quarterly Comparisons This section analyzes Texas Capital Bancshares' financial performance by comparing key metrics for Q2 2025 against prior quarters, highlighting trends in income, expenses, and profitability Q2 2025 vs Q1 2025 Performance The second quarter of 2025 saw significant sequential improvements, with net income available to common stockholders increasing by 70.9% and diluted EPS by 71.7%. This growth was driven by higher net interest income, increased non-interest income, and a decrease in non-interest expense, partially offset by a lower provision for credit losses Net Income and EPS (QoQ) Net Income and EPS (QoQ) | Metric | Q2 2025 | Q1 2025 | QoQ Change | QoQ % Change | | :-------------------------------- | :---------- | :---------- | :--------- | :----------- | | Net income available to common stockholders | $73.0 million | $42.7 million | $30.3 million | 70.9% | | Diluted EPS | $1.58 | $0.92 | $0.66 | 71.7% | Provision for Credit Losses (QoQ) Provision for Credit Losses (QoQ) | Metric | Q2 2025 | Q1 2025 | QoQ Change | | :------------------------ | :---------- | :---------- | :--------- | | Provision for credit losses | $15.0 million | $17.0 million | -$2.0 million | - The provision for credit losses in Q2 2025 was primarily due to an increase in total loans held for investment (LHI) and $13.0 million in net charge-offs, partially offset by a decrease in criticized loans[5] Net Interest Income and Margin (QoQ) Net Interest Income and Margin (QoQ) | Metric | Q2 2025 | Q1 2025 | QoQ Change | QoQ % Change | | :---------------- | :---------- | :---------- | :--------- | :----------- | | Net interest income | $253.4 million | $236.0 million | $17.4 million | 7.4% | | Net interest margin | 3.35% | 3.19% | 16 bps | - | - Increase in net interest income primarily due to increases in average earning assets and earning asset yields, a decrease in average short-term borrowings, and the impact of one additional day[6] - LHI (excluding mortgage finance) yields decreased 4 basis points, while LHI (mortgage finance) yields increased 49 basis points. Total cost of deposits decreased 11 basis points to 2.65%[6] Non-Interest Income (QoQ) Non-Interest Income (QoQ) | Metric | Q2 2025 | Q1 2025 | QoQ Change | QoQ % Change | | :--------------- | :---------- | :---------- | :--------- | :----------- | | Non-interest income | $54.1 million | $44.4 million | $9.7 million | 21.8% | - Increase primarily due to increases in investment banking and advisory fees and trading income, partially offset by a $1.9 million loss on sale of available-for-sale debt securities[7] Non-Interest Expense (QoQ) Non-Interest Expense (QoQ) | Metric | Q2 2025 | Q1 2025 | QoQ Change | QoQ % Change | | :--------------- | :---------- | :---------- | :--------- | :----------- | | Non-interest expense | $190.3 million | $203.0 million | -$12.7 million | -6.3% | - Decrease primarily due to decreases in salaries and benefits (related to seasonal payroll expenses peaking in Q1) and legal and professional expense, partially offset by an increase in other non-interest expense[8] Q2 2025 vs Q2 2024 Performance Year-over-year performance for Q2 2025 showed substantial growth, with net income available to common stockholders increasing by 95% and diluted EPS by 97.5%. This was driven by a significant increase in net interest income and margin, and a lower provision for credit losses, despite a modest increase in non-interest expense Net Income and EPS (YoY) Net Income and EPS (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :-------------------------------- | :---------- | :---------- | :--------- | :----------- | | Net income available to common stockholders | $73.0 million | $37.4 million | $35.6 million | 95% | | Diluted EPS | $1.58 | $0.80 | $0.78 | 97.5% | Provision for Credit Losses (YoY) Provision for Credit Losses (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------------------------ | :---------- | :---------- | :--------- | | Provision for credit losses | $15.0 million | $20.0 million | -$5.0 million | - The Q2 2025 provision reflected an increase in total LHI and $13.0 million in net charge-offs, partially offset by a decline in criticized loans[10] Net Interest Income and Margin (YoY) Net Interest Income and Margin (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :---------------- | :---------- | :---------- | :--------- | :----------- | | Net interest income | $253.4 million | $216.6 million | $36.8 million | 17.0% | | Net interest margin | 3.35% | 3.01% | 34 bps | - | - Increase in net interest income primarily due to an increase in average earning assets and a decrease in funding costs, partially offset by an increase in average interest-bearing liabilities[11] - LHI (excluding mortgage finance) yields decreased 44 basis points, while LHI (mortgage finance) yields increased 48 basis points. Total cost of deposits decreased 34 basis points[11] Non-Interest Income (YoY) Non-Interest Income (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :--------------- | :---------- | :---------- | :--------- | :----------- | | Non-interest income | $54.1 million | $50.4 million | $3.7 million | 7.3% | - Increase primarily due to increases in service charges on deposit accounts, trading income, and other non-interest income, partially offset by the loss on sale of available-for-sale debt securities[12] Non-Interest Expense (YoY) Non-Interest Expense (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :--------------- | :---------- | :---------- | :--------- | :----------- | | Non-interest expense | $190.3 million | $188.4 million | $1.9 million | 1.0% | - Increase primarily due to increases in salaries and benefits, occupancy expense, and communications and technology expense, partially offset by a decrease in marketing expense[13] Asset Quality and Capital Management This section evaluates the company's asset quality through credit metrics and details its robust regulatory capital position and share repurchase activities Credit Quality Overview Credit quality metrics showed mixed trends in Q2 2025. Net charge-offs increased sequentially and year-over-year, while criticized loans decreased significantly. Non-accrual loans held for investment increased, leading to a higher non-accrual LHI ratio, but the allowance for credit losses to total LHI ratio slightly decreased Credit Quality Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :------------------------------------------ | :---------- | :---------- | :---------- | :--------- | :--------- | | Net charge-offs | $13.0 million | $9.8 million | $12.0 million | +$3.2 million | +$1.0 million | | Criticized loans | $637.5 million | $762.9 million | $859.7 million | -$125.4 million | -$222.2 million | | Non-accrual LHI | $113.6 million | $93.6 million | $85.0 million | +$20.0 million | +$28.6 million | | Non-accrual LHI to total LHI | 0.47% | 0.42% | 0.39% | +0.05% | +0.08% | | Total allowance for credit losses to total LHI | 1.40% | 1.48% | 1.44% | -0.08% | -0.04% | Regulatory Capital and Share Repurchases Texas Capital Bancshares maintained strong regulatory capital ratios, all exceeding 'well capitalized' requirements as of June 30, 2025. The company also repurchased 317,860 shares of common stock during the quarter - All regulatory ratios remain in excess of 'well capitalized' requirements as of June 30, 2025[15] Regulatory Capital Ratios | Regulatory Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :----------------- | :------ | :------ | :------ | | CET1 | 11.4% | 11.6% | 11.6% | | Tier 1 capital | 12.9% | 13.1% | 13.1% | | Total capital | 15.3% | 15.6% | 15.7% | | Leverage ratio | 11.8% | 11.8% | 12.2% | | Tangible common equity to total tangible assets | 10.1% | 10.0% | 9.6% | - During Q2 2025, the Company repurchased 317,860 shares of its common stock for an aggregate purchase price of $21.0 million, at a weighted average price of $65.50 per share[16] Detailed Financial Statements This section presents comprehensive financial statements and detailed analyses of balance sheet, income statement, credit loss experience, and net interest income for various periods Selected Financial Highlights (Summary Tables) This section provides a multi-quarter summary of key consolidated financial data, including income statement figures, balance sheet items, and selected financial ratios, offering a quick overview of performance and financial position trends Consolidated Financial Highlights (in thousands) Consolidated Statements of Income Highlights (Q2 2025 vs Q1 2025 vs Q2 2024): | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :---------- | :---------- | :---------- | | Net interest income | $253,395 | $236,034 | $216,582 | | Provision for credit losses | $15,000 | $17,000 | $20,000 | | Non-interest income | $54,069 | $44,444 | $50,424 | | Non-interest expense | $190,276 | $203,020 | $188,409 | | Net income available to common stockholders | $73,016 | $42,734 | $37,350 | | Diluted earnings per common share | $1.58 | $0.92 | $0.80 | Consolidated Balance Sheet Data Highlights (June 30, 2025 vs March 31, 2025 vs June 30, 2024): | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :--------------- | :-------------- | | Total assets | $31,943,535 | $31,375,749 | $29,854,994 | | Total loans held for investment | $23,925,534 | $22,379,784 | $21,778,730 | | Total deposits | $26,064,309 | $26,053,034 | $23,818,327 | | Stockholders' equity | $3,510,070 | $3,429,774 | $3,175,601 | Selected Financial Ratios Highlights (Q2 2025 vs Q1 2025 vs Q2 2024): | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | | Net interest margin | 3.35% | 3.19% | 3.01% | | Return on average assets | 0.99% | 0.61% | 0.56% | | Return on average common equity | 9.17% | 5.56% | 5.26% | | Efficiency ratio | 61.9% | 72.4% | 70.6% | | Common Equity Tier 1 | 11.4% | 11.6% | 11.6% | Consolidated Balance Sheets This section presents a detailed breakdown of the company's assets, liabilities, and stockholders' equity over five quarters, providing a comprehensive view of its financial position and structural changes Consolidated Balance Sheet Data (in thousands) | Item | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Assets: | | | | | | | Total assets | $31,943,535 | $31,375,749 | $30,731,883 | $31,629,299 | $29,854,994 | | Loans held for investment, net | $23,647,886 | $22,101,405 | $22,178,357 | $22,021,028 | $21,511,433 | | Investment securities | $4,608,628 | $4,531,219 | $4,396,115 | $4,405,520 | $4,388,976 | | Liabilities: | | | | | | | Total deposits | $26,064,309 | $26,053,034 | $25,238,599 | $25,865,255 | $23,818,327 | | Non-interest bearing deposits | $7,718,006 | $7,874,780 | $7,485,428 | $9,070,804 | $7,987,715 | | Short-term borrowings | $1,250,000 | $750,000 | $885,000 | $1,035,000 | $1,675,000 | | Long-term debt | $620,256 | $660,521 | $660,346 | $660,172 | $659,997 | | Stockholders' Equity: | | | | | | | Total stockholders' equity | $3,510,070 | $3,429,774 | $3,367,936 | $3,354,044 | $3,175,601 | Consolidated Statements of Income This section provides detailed consolidated statements of income, presenting revenue and expense components for the three and six months ended June 30, 2025 and 2024, as well as a quarterly trend over five periods, highlighting the drivers of net income Consolidated Statements of Income (in thousands) Consolidated Statements of Income (Three Months Ended June 30, in thousands): | Item | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Total interest income | $439,567 | $422,068 | | Total interest expense | $186,172 | $205,486 | | Net interest income | $253,395 | $216,582 | | Provision for credit losses | $15,000 | $20,000 | | Total non-interest income | $54,069 | $50,424 | | Total non-interest expense | $190,276 | $188,409 | | Net income available to common stockholders | $73,016 | $37,350 | | Diluted earnings per common share | $1.58 | $0.80 | Consolidated Statements of Income (Six Months Ended June 30, in thousands): | Item | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Total interest income | $866,856 | $839,446 | | Total interest expense | $377,427 | $407,855 | | Net interest income | $489,429 | $431,591 | | Provision for credit losses | $32,000 | $39,000 | | Total non-interest income | $98,513 | $91,743 | | Total non-interest expense | $393,296 | $390,802 | | Net income available to common stockholders | $115,750 | $59,179 | | Diluted earnings per common share | $2.49 | $1.25 | Key Interest Income/Expense Components (Q2 2025 vs Q1 2025 vs Q2 2024, in thousands): | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :----- | :----- | :----- | | Interest and fees on loans | $364,358 | $334,150 | $345,251 | | Interest expense on deposits | $174,798 | $174,936 | $181,280 | | Investment banking and advisory fees | $24,109 | $16,478 | $25,048 | | Salaries and benefits expense | $120,154 | $131,641 | $118,840 | Summary of Credit Loss Experience This section details the allowance for credit losses, including beginning and ending balances, charge-offs, recoveries, and provision for credit losses, categorized by loan type. It also provides key ratios related to credit loss experience Allowance for Credit Losses and Key Ratios (in thousands) Allowance for Credit Losses on Loans (in thousands): | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :----- | :----- | :----- | | Beginning balance | $278,379 | $271,709 | $263,962 | | Total charge-offs | $13,451 | $10,697 | $12,108 | | Total recoveries | $486 | $900 | $153 | | Net charge-offs | $12,965 | $9,797 | $11,955 | | Provision for credit losses on loans | $12,234 | $16,467 | $15,290 | | Ending balance | $277,648 | $278,379 | $267,297 | Key Ratios: | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------------------------- | :------ | :------ | :------ | | Allowance for credit losses on loans to total LHI | 1.16% | 1.24% | 1.23% | | Net charge-offs to average total LHI (annualized) | 0.22% | 0.18% | 0.23% | | Total provision for credit losses to average total LHI (annualized) | 0.26% | 0.32% | 0.38% | Non-Performing Assets and Criticized Loans This section provides a detailed breakdown of non-performing assets, past due loans, and criticized loans, along with their respective ratios, offering insights into the overall asset quality and potential credit risks Non-Performing Assets and Criticized Loans (in thousands) Non-Performing Assets (in thousands): | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :----- | :----- | :----- | | Non-accrual loans held for investment | $113,609 | $93,565 | $85,021 | | Total non-performing assets | $113,609 | $93,565 | $85,021 | Non-Performing Asset Ratios: | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------------------------- | :------ | :------ | :------ | | Non-accrual LHI to total LHI | 0.47% | 0.42% | 0.39% | | Total non-performing assets to total assets | 0.36% | 0.30% | 0.28% | | Allowance for credit losses on loans to non-accrual LHI | 2.4x | 3.0x | 3.1x | Criticized Loans (in thousands): | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :----- | :----- | :----- | | Criticized loans | $637,462 | $762,887 | $859,671 | | Criticized loans to total LHI | 2.66% | 3.41% | 3.95% | | Special mention loans | $339,923 | $484,165 | $593,305 | | Special mention loans to total LHI | 1.42% | 2.16% | 2.72% | Taxable Equivalent Net Interest Income Analysis This analysis provides a detailed breakdown of average balances, interest income/expense, and corresponding yields/rates for earning assets and interest-bearing liabilities, presented on a taxable equivalent basis, for various quarterly and year-to-date periods Taxable Equivalent Net Interest Income Analysis (in thousands) | Item | Q2 2025 Avg Balance (in thousands) | Q2 2025 Income/Expense (in thousands) | Q2 2025 Yield/Rate | Q1 2025 Avg Balance (in thousands) | Q1 2025 Income/Expense (in thousands) | Q1 2025 Yield/Rate | Q2 2024 Avg Balance (in thousands) | Q2 2024 Income/Expense (in thousands) | Q2 2024 Yield/Rate | | :------------------------------------ | :------------------ | :------------------- | :----------------- | :------------------ | :------------------- | :----------------- | :------------------ | :------------------- | :----------------- | | Earning Assets: | | | | | | | | | | | Investment securities | $4,573,164 | $45,999 | 3.93% | $4,463,876 | $46,565 | 4.10% | $4,427,023 | $33,584 | 2.80% | | Interest bearing cash and cash equivalents | $2,661,037 | $29,218 | 4.40% | $4,255,796 | $46,574 | 4.44% | $3,273,069 | $43,233 | 5.31% | | Loans held for investment, net | $23,068,150 | $364,849 | 6.34% | $21,226,418 | $334,618 | 6.39% | $20,844,931 | $344,632 | 6.65% | | Total earning assets | $30,302,351 | $440,066 | 5.80% | $29,946,425 | $427,759 | 5.76% | $28,573,791 | $422,132 | 5.86% | | Interest Bearing Liabilities: | | | | | | | | | | | Total interest bearing deposits | $18,301,657 | $174,798 | 3.83% | $17,849,877 | $174,936 | 3.97% | $15,702,189 | $181,280 | 4.64% | | Short-term borrowings | $306,176 | $3,444 | 4.51% | $751,500 | $8,246 | 4.45% | $927,253 | $12,749 | 5.53% | | Long-term debt | $649,469 | $7,930 | 4.90% | $660,445 | $8,073 | 4.96% | $778,401 | $11,457 | 5.92% | | Total interest bearing liabilities | $19,257,302 | $186,172 | 3.88% | $19,261,822 | $191,255 | 4.03% | $17,407,843 | $205,486 | 4.75% | | Net interest income (taxable equivalent) | | $253,894 | | | $236,504 | | | $216,646 | | | Net interest margin | | 3.35% | | | 3.19% | | | 3.01% | | Non-GAAP Reconciliations & Disclosures This section provides reconciliations of non-GAAP financial measures to GAAP and includes important disclosures regarding forward-looking statements and associated risks GAAP to Non-GAAP Reconciliations This section provides reconciliations of various non-GAAP financial measures, such as adjusted net income, adjusted EPS, and adjusted efficiency ratio, to their most directly comparable GAAP measures. Management uses these adjusted measures to evaluate operating results and financial strength, believing they offer meaningful additional information to investors - Non-GAAP financial measures are adjusted for certain items that management believes are non-operating in nature and not representative of actual operating performance[35] - Management believes these non-GAAP measures provide meaningful additional information for evaluating operating results, financial strength, business performance, and capital position[35] Reconciliation of Non-GAAP Financial Measures (in thousands except per share data) | Metric | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | Q1 2025 (GAAP) | Q1 2025 (Adjusted) | Q2 2024 (GAAP) | Q2 2024 (Adjusted) | | :------------------------------------ | :------------- | :----------------- | :------------- | :----------------- | :------------- | :----------------- | | Net income | $77,328 | $79,841 | $47,047 | $47,047 | $41,662 | $42,020 | | Net income to common stockholders | $73,016 | $75,529 | $42,734 | $42,734 | $37,350 | $37,708 | | Diluted earnings per common share | $1.58 | $1.63 | $0.92 | $0.92 | $0.80 | $0.80 | | Pre-provision net revenue (PPNR) | $117,188 | $120,475 | $77,458 | $77,458 | $78,597 | $79,059 | | Return on average assets | 0.99% | 1.02% | 0.61% | 0.61% | 0.56% | 0.57% | | Return on average common equity | 9.17% | 9.48% | 5.56% | 5.56% | 5.26% | 5.31% | | Efficiency ratio | 61.9% | 61.1% | 72.4% | 72.4% | 70.6% | 70.4% | Forward-Looking Statements This section serves as a disclaimer, indicating that the communication contains forward-looking statements subject to inherent uncertainties, risks, and changes in circumstances. It advises that actual results could differ materially from those projected due to various factors, including economic conditions, regulatory changes, and operational risks - The communication contains forward-looking statements regarding TCBI's financial condition, results of operations, business plans, and future performance, which are not historical in nature[18] - These statements are subject to inherent and various uncertainties, risks, and changes in circumstances that are difficult to predict and are not guarantees of future results[19] - Important risks include economic conditions, credit quality developments, liquidity management, regulatory compliance, IT systems, interest rate changes, and external events, as detailed in SEC filings[19]