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TEXAS CAPITAL BANCSHARES INC/TX (TCBI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered adjusted EPS of $1.63 and GAAP EPS of $1.58, with adjusted ROAA at 1.02% and NIM expanding 16 bps QoQ to 3.35%, driven by loan growth and lower deposit costs .
  • Total non-interest income rose QoQ on stronger investment banking and trading, despite a $1.9mm AFS securities loss; adjusted PPNR reached $120.5mm, up 52% YoY .
  • Guidance: revenue growth (adjusted) maintained at low double digits; non-interest expense (adjusted) lowered to mid-to-high single-digit growth; provision (ex-MF) unchanged at 30–35 bps; tax rate ~25%; CET1 >11% and target of quarterly 1.10% ROAA in 2H25 reaffirmed .
  • Balance sheet strength and buybacks continue (318k shares repurchased for $21mm at ~$65.50), while asset quality shows mixed trends (critics down, non-accruals up); treasury product fees set a record ($11.6mm) and equities/research coverage expanded to 72 companies .

What Went Well and What Went Wrong

What Went Well

  • NIM expanded 16 bps QoQ to 3.35% as deposit costs fell to 2.65% and average earning asset yields improved; net interest income increased to $253.4mm (+$17.4mm QoQ) .
  • Fee momentum: investment banking and trading income increased QoQ; treasury product fees hit a record ($11.6mm, +37% YoY) with durable trajectory, supporting diversified revenues .
  • Management execution and platform scale: equities buildout (coverage to 72 companies) and capability integration underpin stronger fee pipelines in 2H25; management emphasized structurally higher earnings power .

What Went Wrong

  • Non-accrual loans increased to $113.6mm (0.47% of LHI) from $93.6mm in Q1; net charge-offs rose to $13.0mm; ACL coverage ratio on loans vs non-accruals declined modestly from 3.0x to 2.4x .
  • Mortgage finance funding ratio (deposits vs loans) improved but remains below prior-year levels (91% vs 120%), with yields sensitive to rate path; CFO expects MF yields to drift lower if a September rate cut materializes .
  • AFS securities repositioning generated a $1.9mm loss; while reinvestment at higher yields benefits future NII, it weighed on current non-interest income .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Interest Income ($mm)$229.607 $236.034 $253.395
Non-Interest Income ($mm)$54.074 $44.444 $54.069
Diluted EPS (GAAP)$1.43 $0.92 $1.58
Diluted EPS (Adjusted)$1.43 $0.92 $1.63
Net Interest Margin (%)2.93% 3.19% 3.35%
Provision for Credit Losses ($mm)$18.000 $17.000 $15.000
PPNR ($mm)$111.522 $77.458 $117.188
Non-Interest Income Breakdown ($mm)Q4 2024Q1 2025Q2 2025
Service Charges on Deposits$6.989 $7.840 $8.182
Wealth Mgmt & Trust Fee Income$4.009 $3.964 $3.730
Brokered Loan Fees$2.519 $1.949 $2.398
Investment Banking & Advisory Fees$26.740 $16.478 $24.109
Trading Income$5.487 $5.939 $7.896
AFS Debt Securities Gains/Losses— — ($1.886)
Other$8.330 $8.274 $9.640
KPIsQ4 2024Q1 2025Q2 2025
Total Deposits ($mm)$25,238.599 $26,053.034 $26,064.309
Non-Interest Bearing Deposits ($mm)$7,485.428 $7,874.780 $7,718.006
Total LHI ($mm)$22,450.066 $22,379.784 $23,925.534
Net Charge-offs ($mm)$12.071 $9.797 $12.965
Criticized Loans ($mm)$713.951 $762.887 $637.462
Non-Accrual LHI ($mm)$111.165 $93.565 $113.609
CET1 Ratio (%)11.4% 11.6% 11.4%
Tangible Book Value per Share ($)$66.32 $67.97 $70.14
Total Cost of Deposits (%)2.81% 2.76% 2.65%
Treasury Product Fees ($mm)$9.5 $10.6 $11.6
Q2 2025 Actual vs Wall Street Consensus (S&P Global)ConsensusActualSurprise
EPS (Adjusted) ($)1.28718*1.63 +0.34 (Beat)
Revenue ($mm)299.273*292.464*−6.809 (Miss)

Values with asterisk (*) retrieved from S&P Global.

Note: Company-reported adjusted total revenue was $307.5mm in Q2 (vs $280.5mm in Q1), reflecting NII plus adjusted non-interest income; S&P’s “Revenue” definition may differ from company-reported totals .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue, AdjustedFY 2025Low double-digit % growthLow double-digit % growthMaintained
Non-Interest Expense, AdjustedFY 2025High single-digit % growthMid to high single-digit % growthLowered
Provision / Avg LHI (ex-MF)FY 202530–35 bps30–35 bpsMaintained
CET1 Ratio TargetFY 2025>11%>11%Maintained
Tax RateFY 2025n/a~25%Set/Confirmed
ROAA Target2H 2025n/aAchieve quarterly 1.10%Reaffirmed milestone
DividendsPreferred (Series B)Quarterly declaration$0.359375 per depositary share payable 9/15/2025Announced

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Deposit costs & NIMNIM 2.93%; deposit cost fell to 2.81% NIM 3.19%; deposit cost 2.76% NIM 3.35%; deposit cost 2.65%; deposit betas reached 81% since easing cycle Improving NIM, lower funding costs
Investment banking & tradingIB fees $26.74mm IB fees down QoQ to $16.48mm IB & trading income up QoQ; Q3 NI guide: non-interest income $60–$65mm, IB fees $35–$40mm Reaccelerating into 2H
Mortgage financeMF loans avg $5.41bn in Q4 MF loans $3.97bn avg; seasonality ahead MF avg loans +34% QoQ to $5.3bn; MF deposit-to-loan ratio ~91%; yields could dip with Sep cut Seasonal strength; cautious outlook
Capital & buybacksCET1 11.4%; strong capital; new buyback authorized Jan 2025 CET1 11.6% CET1 11.4%; repurchased ~318k shares for $21mm; regulatory tone has no bearing on capital deployment High capital; active buybacks
Asset qualityNPLs rose; criticized loans declined into Q4 year-end Criticized loans up QoQ; NPLs down from Q4 Criticized loans −26% YoY; NPLs up QoQ; ACL 2.9x non-accruals Mixed but improving criticized trends
Technology/platform buildoutn/aInvestments driving efficiency amid higher tech spend Tech-enabled onboarding, research coverage expansion, scalable platform; efficiencies noted Scaling capabilities

Management Commentary

  • CEO: “The strategic actions we’ve taken have structurally enhanced our earnings power… position us to deliver durable, through-cycle results for both clients and shareholders.”
  • CEO on platform impact: treasury fees up 37% YoY to a record; client service models enable tech-enabled connectivity and same-day account opening; equities research coverage expanded to 72 companies .
  • CFO: “Adjusted total revenue increased 16% YoY… adjusted PPNR increased 52% to $120.5mm… allowance for credit losses increased to $334mm… reserves are 1.79% of LHI excluding MF” .
  • CEO on ROAA goal: “1.1% is just a mere stop along the way” (longer-term aspiration beyond that milestone) .

Q&A Highlights

  • Investment banking pipeline and fee trajectory: Management guided Q3 non-interest income to $60–$65mm with IB fees at $35–$40mm; capability buildout (ECM, corporate access, research) supports back-half growth .
  • Expense outlook: Non-interest expense expected mid-to-high $190mm range in coming quarters amid capability rollout, with salaries low-to-mid $120mm and other non-interest >$70mm .
  • Deposit repricing and NII: CDs repricing lower (4.75% to ~4.25%); linked-quarter NII expected to increase by ~$10mm given momentum even before Fed cuts .
  • Mortgage finance: MF deposit-to-loan ratio near 90% in Q3; yields likely down into mid-4.30s if September cut occurs; otherwise flat QoQ .
  • Capital/regulatory: CET1 target (>11%) unaffected by shifts in regulatory tone; excess capital viewed as strategic advantage enabling client onboarding and buybacks .

Estimates Context

  • Q2 2025 vs consensus (S&P Global): EPS $1.63 vs $1.28718 consensus (Beat); Revenue $292.464mm vs $299.273mm consensus (Miss). Values retrieved from S&P Global.*
  • Forward consensus (S&P Global):
    • Q3 2025: EPS 1.77339*, Revenue $326.563mm*;
    • Q4 2025: EPS 1.76677*, Revenue $325.211mm*;
    • Q1 2026: EPS 1.42593*, Revenue $317.062mm*.
      Given NIM expansion, deposit cost reductions, and fee momentum, Street may need to lift EPS and non-interest income assumptions for 2H; however, MF yield headwinds and higher NPLs warrant caution in credit costs assumptions .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Positive operating leverage: NII growth (+$17.4mm QoQ), 16 bps NIM expansion, and lowered adjusted expense growth guidance should sustain earnings momentum into 2H25 .
  • Diversification gains: Investment banking/trading improved QoQ with Q3 fee guide of $60–$65mm; treasury product fees at record levels ($11.6mm), indicating durable non-interest revenue streams .
  • Credit: Criticized loans trending lower (−26% YoY), though non-accruals increased; ACL remains robust (2.9x non-accruals). Monitor normalization of NCOs (~$13.0mm) and provision at 30–35 bps (ex-MF) .
  • Capital deployment: CET1 at 11.4%, TBVPS at $70.14 (record), and active buybacks ($21mm); management views excess capital as a strategic edge .
  • Near-term catalysts: Delivery on Q3 non-interest income and IB fees guide, continued NIM tailwinds from deposit repricing and securities reinvestment, and achieving quarterly 1.10% ROAA in 2H25 .
  • Watchpoints: MF yields sensitive to rate path; NPL uptick; AFS losses/repositioning trade-offs; deposit betas already high (81%) could limit additional cost declines absent Fed cuts .
  • Strategic trajectory: CEO frames 1.10% ROAA as a milestone, not destination; platform investments (tech, equities research) should expand fee TAM and support multi-year earnings durability .