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

Part I - Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, income statements, equity, and cash flows, with detailed notes Consolidated Balance Sheets Total assets increased to $31.9 billion by June 30, 2025, driven by loan growth, with total deposits reaching $26.1 billion and stockholders' equity at $3.5 billion Consolidated Balance Sheet Summary (Unaudited) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $31,943,535 | $30,731,883 | | Loans held for investment, net | $23,647,886 | $22,178,357 | | Investment securities | $4,608,628 | $4,396,115 | | Interest bearing cash and cash equivalents | $2,507,691 | $3,012,307 | | Total Liabilities | $28,433,465 | $27,363,947 | | Total deposits | $26,064,309 | $25,238,599 | | Short-term borrowings | $1,250,000 | $885,000 | | Total Stockholders' Equity | $3,510,070 | $3,367,936 | Consolidated Statements of Income Q2 2025 net income rose to $77.3 million, with diluted EPS at $1.58, driven by a 17% increase in net interest income, while six-month net income reached $124.4 million Income Statement Highlights (Unaudited) | (in thousands except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $253,395 | $216,582 | $489,429 | $431,591 | | Provision for credit losses | $15,000 | $20,000 | $32,000 | $39,000 | | Total non-interest income | $54,069 | $50,424 | $98,513 | $91,743 | | Total non-interest expense | $190,276 | $188,409 | $393,296 | $390,802 | | Net income | $77,328 | $41,662 | $124,375 | $67,804 | | Diluted earnings per common share | $1.58 | $0.80 | $2.49 | $1.25 | Consolidated Statements of Stockholders' Equity Stockholders' equity grew to $3.51 billion by June 30, 2025, fueled by $124.4 million net income and $70.2 million other comprehensive income, despite $52.2 million in share repurchases - For the six months ended June 30, 2025, the company repurchased 713,966 shares of common stock for $52.2 million[11] Consolidated Statements of Cash Flows Net cash and cash equivalents decreased by $498.7 million in H1 2025, with $1.64 billion used in investing activities, largely offset by $1.08 billion from financing activities Cash Flow Summary (Unaudited) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $63,365 | $129,091 | | Net cash used in investing activities | $(1,644,610) | $(1,781,461) | | Net cash provided by financing activities | $1,082,579 | $1,322,599 | | Net increase in cash and cash equivalents | $(498,666) | $(329,771) | Notes to Consolidated Financial Statements Detailed notes disclose significant accounting policies, investment securities, loan portfolio credit quality, debt, regulatory capital, and fair value measurements - Total investment securities stood at $4.61 billion as of June 30, 2025. Unrealized losses on available-for-sale debt securities were primarily attributed to changes in market interest rates rather than credit quality issues[20][26] - Gross loans held for investment grew to $24.0 billion. The allowance for credit losses on loans was $277.6 million, or 1.16% of total loans held for investment. Criticized loans declined from $714.0 million at year-end 2024 to $637.5 million at June 30, 2025[29][33] - The Company and the Bank's capital ratios exceeded the regulatory definition of 'well capitalized' as of June 30, 2025. The Company's CET1 capital ratio was 11.45%[48][49] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q2 2025 performance to higher net interest income and an expanded 3.35% net interest margin, covering detailed analysis of financial condition, credit quality, liquidity, and capital resources Key Performance Indicators | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net interest margin | 3.35% | 3.01% | | Return on average assets (ROA) | 0.99% | 0.56% | | Return on average common equity (ROE) | 9.17% | 5.26% | | Efficiency ratio | 61.9% | 70.6% | - Net income for Q2 2025 increased to $77.3 million from $41.7 million in Q2 2024, primarily due to a $36.8 million increase in net interest income[75][86] Net Interest Income Analysis Q2 2025 net interest income rose to $253.4 million, with net interest margin expanding to 3.35% due to lower interest-bearing deposit costs, offsetting earning asset yield declines - The increase in net interest margin was primarily due to a decrease in the cost of interest bearing deposits, which fell to 3.83% in Q2 2025 from 4.64% in Q2 2024[79][88] - Average earning assets for Q2 2025 increased by $1.7 billion compared to Q2 2024, driven by a $2.2 billion increase in average loans held for investment[87] Analysis of Financial Condition Total loans held for investment grew to $23.9 billion by June 30, 2025, with stable asset quality and non-performing assets at 0.36% of total assets, and an allowance for credit losses at 1.16% - Non-performing assets, including non-accrual loans, remained stable at $113.6 million (0.36% of total assets) at June 30, 2025, compared to $111.2 million (0.36% of total assets) at December 31, 2024[104] - The provision for credit losses for the first six months of 2025 was $32.0 million, down from $39.0 million in the prior-year period, reflecting a decline in criticized loans despite overall loan growth[106] Liquidity and Capital Resources Customer deposits grew to $25.9 billion, with 41% uninsured, while capital ratios exceeded 'well capitalized' standards, and $52.2 million in shares were repurchased under a new $200 million program - Estimated uninsured deposits were 41% of total deposits at June 30, 2025, consistent with the level at year-end 2024[111] - On January 22, 2025, the board authorized a new share repurchase program of up to $200.0 million. During the first six months of 2025, the company repurchased 713,966 shares for an aggregate price of $52.2 million[118] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with an asset-sensitive position indicating a 3.8% increase in net interest income for a 100 basis point rate rise over twelve months Interest Rate Sensitivity Simulation | Rate Shock Scenario | Annualized Hypothetical Change in Net Interest Income (June 30, 2025) | | :--- | :--- | | +200 basis points | 7.4% | | +100 basis points | 3.8% | | -100 basis points | (5.9)% | | -200 basis points | (12.0)% | - The company has a positive cumulative interest rate sensitivity gap of $6.4 billion in the 0-3 month repricing period, indicating an asset-sensitive position[128] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The company's management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[138] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[139] Part II - Other Information Item 1. Legal Proceedings The company is involved in ordinary course legal actions, but management anticipates no material adverse effect on financial condition or results of operations - Management does not expect the disposition of any current legal matters to have a material adverse impact on the Company's financial statements[141] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K were reported - No material changes in the Company's risk factors were reported from those previously disclosed in the 2024 Form 10-K[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchase activity, with 713,966 shares repurchased for the six months ended June 30, 2025, leaving $148.2 million available under the current authorization Share Repurchase Activity (2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Total Q1 2025 | 396,106 | $78.25 | | Total Q2 2025 | 317,860 | $65.50 | | Total YTD 2025 | 713,966 | $72.58 | - A new share repurchase program was authorized on January 22, 2025, allowing for the repurchase of up to $200.0 million in common stock, set to expire on January 31, 2026[144] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including the amended Long-Term Incentive Plan, CEO and CFO certifications, and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 1350, as well as the company's amended 2022 Long-Term Incentive Plan[146]