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    TCBI
    Earnings call· Jun 2026(Q2 FY26)

    TEXAS CAPITAL BANCSHARES INC/TX TCBI

    Jul 22, 2026 Source

    Executive summary

    Texas Capital Bancshares Q2 FY26 — Record Fee Income and Strong Loan Growth

    Texas Capital Bancshares delivered a strong second quarter, driven by record fee income and robust commercial loan growth, reflecting the successful execution of its differentiated strategy. The firm continues to prioritize capital efficiency and client relevance through diversified revenue streams, while maintaining a conservative credit posture and disciplined capital management. Management expressed confidence in sustainable earnings generation and positive operating leverage for the full year.

    Highlights

    5

    • Adjusted earnings per share increased 15% year-over-year to $1.88 per share.

    • Record fee income from areas of focus reached $60.5 million, up 28% year-over-year.

    • Investment banking fees grew 34% year-over-year to $42.8 million.

    • Commercial loans increased $1.2 billion or 10% year-over-year to $13 billion.

    • Tangible book value per share increased 10% year-over-year to $76.98, marking the ninth consecutive quarterly record.

    Concerns

    2

    • Commercial real estate loans decreased 3% linked quarter to $5.1 billion and are expected to decline approximately 12% for the full year.

    • Criticized loans moved slightly higher due to multifamily commercial real estate and macro-driven pressures on C&I, though within anticipated ranges.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year 2026 Total Revenue Growth
    mid- to high single-digit range
    high materiality
    High
    Full-year 2026 Noninterest Revenue
    $270 million to $290 million
    high materiality
    High
    Full-year 2026 Noninterest Expense Growth
    mid-single digits
    medium materiality
    High
    Full-year 2026 Provision for Credit Losses
    35 to 40 basis points of average LHI, excluding mortgage finance
    high materiality
    High
    Q3 2026 Total Noninterest Income
    $70 million and $75 million
    medium materiality
    High
    Q3 2026 Net Interest Income
    $265 million to $270 million
    high materiality
    High
    Q3 2026 Net Interest Margin
    low to 3.25%, 3.20% range
    high materiality
    High
    Full-year 2026 Commercial Real Estate Balance Decline
    approximately 12%
    medium materiality
    High
    Full-year 2026 Salaries and Benefits
    approximately $125 million
    medium materiality
    High
    Full-year 2026 Other Noninterest Expense
    $75 million
    medium materiality
    High
    Mortgage Finance Self-Funding Ratio
    70% to 75%
    low materiality
    Medium

    Operational metrics

    32
    Adjusted Earnings Per Share
    $1.88up 15% year-over-year
    Q2 FY26

    Record fee income and strong C&I loan growth supported the increase.

    Adjusted Total Revenue
    up 8%year-over-year
    Q2 FY26

    Supported by record fee income and strong C&I loan growth.

    Noninterest Income
    $75.1 millionincreased $21 million or 39% year-over-year
    Q2 FY26

    Compared to 18% a year ago, highlighting success in expanding fee-based revenue.

    Fee Income from Areas of Focus
    $60.5 millionincreased 28% year-over-year
    Q2 FY26

    A record for the firm, driven by advisory, sales and trading, wealth, and treasury services.

    Wealth Management Fees
    $5.1 milliongrowing 38% year-over-year
    Q2 FY26

    Fourth straight quarter of increase, reflecting building momentum.

    Adjusted Noninterest Expense
    $202.8 millionincreased $13.9 million or 7% year-over-year
    Q2 FY26

    Reflects disciplined investment in talent and capabilities.

    Pre-Provision Net Revenue
    $130 millionincreased $13 million or 11% year-over-year
    Q2 FY26

    Adjusted PPNR reached $132.7 million, up 10% year-over-year, marking the sixth consecutive quarter of expansion.

    Net Income to Common
    $80.6 millionup $7.6 million or 10% year-over-year
    Q2 FY26

    Adjusted net income to common increased 9% to $82.7 million.

    Earnings Per Share
    $1.83
    Q2 FY26

    Reported GAAP EPS.

    Book Value Per Share
    $77.01increased 10% year-over-year
    Q2 FY26

    Marking the ninth consecutive quarter and record high for the firm.

    Tangible Book Value Per Share
    $76.98increased 10% year-over-year
    Q2 FY26

    Marking the ninth consecutive quarterly record for this important metric.

    Salaries and Benefits
    $122.8 millionincreased $4 million year-over-year
    Q2 FY26

    Investment in frontline talent aligned to fee generation initiatives.

    Subordinated Debt Repaid
    $375 million
    Q2 FY26

    Repaid with proceeds from senior notes offering during Q1.

    Cash Flows from Securities Portfolio
    $200 million
    Q2 FY26

    Reinvested at over 5%.

    Average Broker Deposits
    1.8%
    Q2 FY26

    Expected to increase to 2.6% in Q3 and decrease to $500 million in Q4.

    Commercial Client Interest-Bearing Deposits
    up $850 millionyear-over-year
    Q2 FY26

    Reflects continued growth in commercial client deposits.

    Investment Banking Fees (Full Year Guide)
    $160 million - $175 million
    FY26

    Current year-to-date is approximately $85 million.

    Investment Banking and Sales & Trading (Q3 Outlook)
    $40 million - $45 million
    Q3 FY26

    Outlook for the third quarter.

    Deposit Beta
    80%
    model

    Current margin expectations incorporate this model beta.

    Sold Business Value
    $3.5 billion
    past

    Reference to a past divestiture.

    Commercial Loans Growth
    4%
    linked quarter

    Representing the tenth consecutive quarter of commercial loan growth.

    Commercial Real Estate Loans Decline
    3%
    linked quarter

    Down 9% year-over-year.

    Mortgage Finance Loans Growth
    18%
    year-over-year

    Augmented by late Q1 rate-driven increases in mortgage volumes.

    Commercial Noninterest-Bearing Deposits Growth
    7%
    linked quarter

    Up 18% since Q3 2025.

    Debt Raised Outside Bank Markets
    $10 billion$11 billion last quarter, $29 billion last year
    Q2 FY26

    Reflects the ability to raise capital for clients outside traditional bank channels.

    Equity Raised Outside Bank Markets
    $3 billion
    Q2 FY26

    Reflects the ability to raise capital for clients outside traditional bank channels.

    Enhanced Credit Structures
    69%up from 67% in Q1 2026
    Q2 FY26

    Resulted in 113 basis points of CET1 benefit since Q4 2024.

    Mortgage Finance Self-Funding Ratio
    71%
    Q2 FY26

    Improved balance sheet resilience and earnings generation over 9 quarters of focus reduction.

    Average Cost of Interest-Bearing Deposits
    up 6 basis points
    linked quarter

    Excluding the temporary impact of elevated CD balances, the increase was 1 basis point.

    Received Fixed SOFR Swaps
    $400 million
    Q2 FY26

    Executed to maintain target interest rate sensitivity and realize anticipated rate increases.

    Average Commercial Noninterest-Bearing Deposits
    13%
    Q2 FY26

    As a percentage of total deposits.

    Total Shares Outstanding Repurchased
    6%
    since transformation

    Repurchased over $230 million of stock at $90.62 per share since the beginning of the transformation.

    Industry KPIs

    13
    MetricValueDetails
    Loans$13 billionUSD
    Deposits$28.9 billionUSD
    Rotce ROE—
    Cet1 ratio12.07%%
    Capital returns$23.6 millionUSD
    Fee income lines$75.1 millionUSD
    Allowance reserves$333 millionUSD
    Net interest income$260.4 millionUSD
    Net interest marginlow to 3.25%, 3.20% range%
    Net charge offs npls$16.1 millionUSD
    Total operating expenses$202.8 millionUSD
    Provision for credit losses$18 millionUSD
    Efficiency ratio operating leverage—

    Deals & partnerships

    1
    Phoenix Merchant PartnersStrategic relationship to expand capital solutions for clients, particularly in private credit.

    This partnership enables Texas Capital to offer broader capital solutions, including private credit, to clients, leveraging their existing capabilities in raising debt and equity outside traditional bank markets. It is expected to expand opportunities for treasury and investment banking services.

    Risks & headwinds

    4
    Commercial Real Estate (CRE) Market ConditionsFY26

    Full year average CRE balance decline of approximately 12%.

    Mitigation: Maintaining disciplined client selection, not expanding client base in this segment, and not participating in irrational behavior by other banks.

    Criticized Loan MigrationQ2 FY26

    Slightly higher criticized levels, with largest category being multifamily commercial real estate and some C&I loans experiencing macro-driven pressure.

    Mitigation: Contemplated in the full year provision outlook of 35 to 40 basis points of average LHI (ex-mortgage finance); maintaining conservative reserve posture.

    Cost of LiquidityOngoing

    Interest-bearing deposit costs increased 6 basis points linked quarter (1 basis point ex-temporary CD impact); structural trend of increasing cost of deposits.

    Mitigation: Building a business model less reliant on deposit spreads and more on fee generation; focusing on client relevance to build a moat around this obstacle.

    Competitive Pressure in LendingOngoing

    Irrational behavior by banks on price and structure in both CRE and C&I markets.

    Mitigation: Refusing to participate in irrational behavior; focusing on clients who want responsible credit structures; allocating capital to the best places with clients.

    What to watch in Q3 FY26

    5

    Net Interest Margin (NIM) Trajectory

    Q4 FY26
    Currentlow to 3.25%, 3.20% range (Q3 outlook)
    Targetmove higher off of that in the fourth quarter

    Why it matters

    NIM is a key driver of profitability for banks, and its recovery from the Q3 low point will indicate balance sheet optimization and interest rate sensitivity.

    Tony, yes, we do think that's the low point in 2026. It's difficult to lay down a margin guide for anything beyond about 90 to 180 days, but we would expect the margin to move higher off of that in the fourth quarter.

    Q&A highlights

    8

    Asked for clarification on Q3 NIM outlook, given it was lower than previous guidance, and how to think about seasonal factors.

    Management explained that Q2 NIM was largely consistent with expectations, with slight variations due to earning asset mix. Q3 NIM is expected to be in the low 3.20s range due to higher weighting of lower-yielding mortgage finance assets and temporary broker funding, which is anticipated to be the low point for the year.

    “So as you think about Q3, the guide contemplates netinterest income growing to $265 million to $270 million, you'll see likely another slight seasonal step-down in margin into the low to 3.25%, 3.20% range, excuse me, as that loan portfolio is even more heavily weighted toward high risk-adjusted return, but lower yielding mortgage finance assets, and then we'll leverage the broker channels to just effectively match fund that.”

    asked by Michael Rose · answered by Matt Scurlock

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Evolution and Fee Income Growth

    Texas Capital Bancshares is intentionally shifting towards more durable, complete, and less rate-sensitive revenue sources, with fee income now representing 22% of total revenue, up from 18% a year ago. This quarter saw record fee income of $60.5 million, driven by strong performance in investment banking, treasury product fees, and wealth management, which grew 34%, 8%, and 38% year-over-year respectively. This strategic evolution aims to strengthen returns and compound franchise value over time⏳.

    02

    Capital Management and Shareholder Returns

    The firm demonstrated confidence in its earnings momentum by repurchasing $23.6 million of common shares at a weighted average price of $97.63 per share during the quarter, and declaring its inaugural common stock cash dividend. Tangible book value per share reached a record $76.98, marking the ninth consecutive quarterly record. Management emphasizes disciplined stewardship of shareholder capital, balancing organic growth investments with strategic share repurchases.

    03

    Credit Quality and Reserve Posture

    Texas Capital maintains a strong credit quality foundation, prioritizing preparedness for uncertainty. The allowance for credit loss, including off-balance sheet reserves, remains near an all-time high at $333 million. The allowance, excluding mortgage finance, is 1.78% of total LHI, placing it in the top decile among peers. While criticized loans increased slightly due to multifamily CRE and C&I pressures, these trends are generally evolving as anticipated and are contemplated in the full-year provision outlook.

    04

    Loan and Deposit Dynamics

    Commercial loans grew 10% year-over-year to $13 billion, marking the tenth consecutive quarter of commercial loan growth. Total deposits increased 11% year-over-year to $28.9 billion, with commercial noninterest-bearing deposits up 7% linked quarter. The firm continues to optimize its balance sheet, with enhanced credit structures now representing 69% of mortgage finance balances, contributing 113 basis points of CET1 benefit since Q4 2024.

    05

    Technology and Digital Strategy

    The company appointed Mo Jamous as Chief Digital and Information Officer in early July, bringing over two decades of experience in financial services technology. This appointment is expected to strengthen the firm's platform, drive innovation, and advance its technology strategy, further supporting its differentiated offerings and client experience.

    06

    Texas Market Disruption and Growth

    Management noted that ongoing M&A disruption in the Texas market is benefiting Texas Capital Bancshares across loans, deposits, and talent acquisition. The firm's tiered client and prospect targeting, combined with disciplined client coverage, has led to a record number of client onboardings. This disruption, alongside the firm's strategic approach, allows for significant progress in client migration and talent acquisition.

    AI-generated summary of the company’s earnings call. Not investment advice.