TEXAS CAPITAL BANCSHARES INC/TX (TCBI)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered solid core profitability with EPS of $0.92, ROAA of 0.61%, and NIM expanding 26 bps QoQ to 3.19% on lower funding costs and higher loan yields; tangible book value per share rose to a record $67.97 .
• Management raised 2025 revenue guidance to the high end, now “low double‑digit % growth,” maintained high single‑digit % non‑interest expense growth, provision of 30–35 bps (ex‑mortgage finance), and reiterated a 1.10% quarterly ROAA target in 2H25; tax rate ~25% and CET1 >11% maintained .
• Street scorecard: modest misses on revenue and EPS versus S&P Global consensus as investment banking fees were delayed amid macro/political uncertainty (not canceled), while NII outperformed on deposit beta progress; treasury product fees rose 22% YoY to a record, and core non‑interest‑bearing deposits (ex‑mortgage finance) grew 7% QoQ .
• Credit remained controlled: NCOs 0.18%, ACL/loans 1.48% (1.85% ex‑mortgage finance), NPAs fell QoQ; criticized loans rose modestly QoQ but improved YoY; CET1 11.6% and total capital 15.6% keep strategic optionality (buybacks, growth, hedging) intact .

What Went Well and What Went Wrong

• What Went Well

  • NIM and NII momentum: NIM rose to 3.19% (+26 bps QoQ) as interest‑bearing deposit costs fell to 3.97% and loan yields edged higher; NII increased to $236.0mm (+$6.4mm QoQ) .
  • Core deposits and treasury fees: Non‑interest‑bearing deposits ex‑mortgage finance grew 7% QoQ; treasury product fees rose 22% YoY to a record. “Earning the right to be our clients’ primary operating bank remains the foundation…,” noted the CEO .
  • Guidance upshift and balance sheet strength: Revenue guidance raised to low double‑digit growth; CET1 11.6% and TCE/TA ~10% underpin flexibility (including buybacks of ~396k shares for $31mm at ~$78.25) .

• What Went Wrong

  • Fee headwinds from uncertainty: Non‑interest income fell $9.6mm QoQ on lower investment banking/advisory fees; management cited “mid‑ to late‑quarter capital markets uncertainty” that delayed (not canceled) mandates .
  • Seasonal and talent‑build expense ramp: Non‑interest expense rose 18% QoQ on seasonal payroll resets and new hires in fee areas of focus, lifting the adjusted efficiency ratio to 72.4% .
  • Mixed criticized loans trend: Criticized loans/loans increased to 3.41% (from 3.18% in Q4), though down YoY; management is monitoring tariff‑sensitive sectors (infrastructure, transportation, logistics, manufacturing; low‑end consumer exposure) .

Financial Results

Segment/fee breakdown (non‑interest income):

Key KPIs:

Estimate comparison (S&P Global):

Values retrieved from S&P Global.*

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Contribution from across the firm enabled another quarter of strong financial progress… treasury product fees… increased 22% year‑over‑year to a record high” (CEO) .
• “We are raising our revenue guidance to low double‑digit percent growth… maintaining our noninterest expense guidance… [and] provision… 30 to 35 basis points… Achievement of a quarterly 1.10% ROAA in the second half of 2025” (CFO) .
• “Third consecutive quarter of growth in noninterest‑bearing deposits, excluding mortgage finance… up 7% linked quarter” (CFO) .
• “Clients are just looking for certainty… uncertainty is the great killer of all deals” (CEO on fee delays) .
• “Added $300mm of 2‑year forward‑starting receive‑fixed swaps… sensitivities moved with down‑rate deposit betas to 70%… $500mm prime swaps mature in Q2, $1.5bn SOFR swaps in Q3” (CFO) .

Q&A Highlights

• Revenue guidance drivers: Higher NII via improving deposit betas, sustained LHI growth ex‑mortgage finance, and outlook for seasonal rebound in mortgage finance; fees delayed but not canceled, with expense levers if needed .
• Loan growth durability: New client acquisition and slower capital recycling drove $422mm QoQ growth in LHI ex‑MF; some risk from higher CRE payoffs in Q2 but C&I onboarding remains strong .
• Capital deployment: Buyback optionality intact with TCE/TA ~10% and RWA benefits from mortgage SPE structure (risk weight 100% → 26%; 15% implemented yielded +21 bps capital; target 30% by end‑Q2) .
• Mortgage finance outlook: Q2 average balances guided to ~$5.2bn; self‑funding ratio expected <100%; focus on holistic client solutions to raise returns .
• Hedging/derivatives: Incremental receive‑fixed swaps added; hedge cost trending down (~$8mm in Q1 vs ~$12.5mm Q4) with large maturities in Q2/Q3 to be repositioned .

Estimates Context

• Q1 2025 vs S&P Global consensus: EPS $0.92 vs $0.953 (-$0.03); Total revenue $280.5mm vs $283.3mm (‑$2.8mm). Fee delays created modest headline misses despite core NII strength; Street likely to shift mix assumptions toward NII resilience and back‑half fee recognition given management’s raised revenue guide and commentary . Values retrieved from S&P Global.*

Key Takeaways for Investors

• Core banking engine is inflecting: NIM expanded 26 bps QoQ and deposit betas are normalizing; expect NII to remain the primary driver near‑term .
• Fee volatility is timing‑driven: Investment banking mandates are delayed but not canceled; management raised full‑year revenue guidance and sees back‑half weighted fee realization .
• Balance sheet strength provides offense: CET1 at 11.6% and TCE/TA ~10% support buybacks, selective growth, and hedging flexibility; mortgage SPE structures are accretive to capital density .
• Credit is well‑reserved into macro uncertainty: NCOs remain low, ACL/loans increased, and criticized loans are manageable; tariff‑sensitive sectors are under active surveillance .
• 2025 setup: Raised revenue guidance, maintained cost/provision guardrails, and reiterated 2H ROAA target of 1.10%—a constructive setup if rate cuts and fee pipelines proceed as expected .
• Trading implications: Near‑term catalysts include continued NIM strength, core NIB growth, and any signs of fee pipeline conversion; watch expense discipline if fees slip and monitor criticized loans as macro evolves .

Non‑GAAP and adjustments: Q1 had no material non‑recurring items (adjusted equals reported), enhancing comparability; prior quarters included notable items (e.g., Q3’24 loss on AFS securities) .

Citations:

• Earnings press release & 8‑K exhibits and financials .
• Q1 2025 earnings call transcript (management quotes/guidance) .
• Prior quarter releases for trend (Q4’24, Q3’24) .
• Preferred dividend declaration .

Values retrieved from S&P Global.*