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Texas Capital Bancshares, Inc. TCBI reported first-quarter 2025 adjusted earnings per share of 92 cents, which missed the Zacks Consensus Estimate of 99 cents. However, the figure compared favorably with 62 cents in the year-ago quarter.
TCBI's results were adversely impacted by a rise in expenses and a decline in the loan balance. Nonetheless, an increase in net interest income (NII), non-interest income, and higher deposit balances acted as a tailwind.
Net income available to common shareholders (GAAP basis) was $42.7 million, which increased significantly from $21.8 million in the prior-year quarter.
TCBI’s Quarterly Revenues & Expenses Rise
Total quarterly revenues increased 9.4% year over year to $280.5 million. However, the top line missed the Zacks Consensus Estimate by 2.6%.
NII was $236 million, which rose 9.8% year over year. The rise was driven by an increase in average total loans held for investment (LHI) and a decrease in funding costs, partially offset by an increase in average interest-bearing liabilities and a dip in earning asset yields.
NIM of 3.19% in the first quarter expanded 16 basis points year over year.
Non-interest income rose 7.6% to $44.4 million. The rise was mainly driven by an increase in service charges on deposit accounts, trading income and other non-interest income, partially offset by a decrease in investment banking and advisory fees.
Non-interest expenses increased marginally to $203 million. The rise was primarily due to increases in salaries and benefits, and communications and technology expenses, partially offset by a decrease in Federal Deposit Insurance Corporation (“FDIC”) expenses.
Texas Capital’s Loans Decline, Deposits Increase
As of March 31, 2025, total LHI declined marginally on a sequential basis to $22.1 billion. Total deposits rose 3.2% to $26.1 billion.
TCBI’s Credit Quality Improves
Total non-performing assets fell 8.4% to $93.6 million from the prior-year quarter.
Provision for credit losses aggregated to $17 million, which declined 10.5% from the year-ago quarter. Also, Texas Capital’s net charge-offs declined 8.9% to $9.8 million from the year-ago quarter.
Texas Capital’s Capital Ratios: Mixed Bag
As of March 31, 2025, tangible common equity to total tangible assets increased to 10% from 9.8% in the year-ago quarter.
The leverage ratio was 11.8% in the first quarter of 2025, down from 12.4% as of March 31, 2024. The common equity tier 1 ratio was 11.6%, which declined from the prior-year quarter’s 12.4%.
Our View on TCBI
Texas Capital continues to execute its strategies to enhance top-line growth. Also, the bank’s increasing NII and fee income will further support the top line. However, rising expenses are near-term concerns.