Texas Capital Bancshares Q1 Earnings Call Highlights

Key Points

• Strong quarter led by fee income: Adjusted EPS rose 72% to $1.58 and total revenue increased 16% to $324 million, driven by an 8% rise in net interest income and a 56% jump in non‑interest revenue, including record fee income of $58.8 million (investment banking fees $42.3 million, up 89% YoY).
• Balance sheet and capital actions: Loans held for investment were $25.2 billion (up 13% YoY) with commercial loans +10% YoY while CRE declined ~9% YoY; deposits grew to $28.5 billion, tangible book value rose 11% to $75.67, the bank repurchased $74.6 million of stock and initiated a quarterly dividend of $0.20 per share.
• Leadership and outlook: Multiple senior appointments were made to scale growth (including a new COO and restructured commercial/private bank heads), management reaffirmed full‑year guidance (mid‑to‑high single‑digit revenue growth) and gave Q2 guidance for NII of $260–$265 million and NIM of roughly 3.35%–3.40%.

Texas Capital Bancshares NASDAQ: TCBI reported first-quarter 2026 results that executives said reflect a shift toward “consistent execution” and further maturation of the company’s diversified revenue strategy, highlighted by record fee income, continued loan growth in commercial categories, and the initiation of a quarterly common dividend.

Leadership changes aimed at scaling growth

Chairman, President and CEO Rob Holmes opened the call by outlining several executive leadership appointments intended to align the organization with its strategic priorities. Jay Clingman will transition to head of Private Bank and Family Office, while Dustin Cosper will become head of Commercial Banking overseeing real estate banking, middle market banking and business banking. John Cummings was named Chief Operating Officer, and CFO Matt Scurlock will also assume the role of President of Texas Capital Bank. Holmes also said Jeff Hood will join as Chief Human Resources Officer in early May.

Revenue growth led by record fee income

Holmes said adjusted earnings per share rose 72% year-over-year to $1.58, while total revenue increased 16% to $324 million, driven by 8% growth in net interest income and 56% growth in non-interest revenue.

Holmes highlighted that fee income from the bank’s “areas of focus” rose 59% year-over-year to a record $58.8 million, and said all three focus areas produced record quarterly fee income. Investment banking fees were $42.3 million, up 89% year-over-year, with contributions across syndications, capital markets, and sales and trading. Treasury product fees increased 14% to $12.1 million, and wealth management fees increased for a third consecutive quarter.

Scurlock added that non-interest income represented 21% of total revenue in the quarter, up from 16% a year earlier. He said wealth management and trust fee income reached a record $4.4 million, up 11% year-over-year, supported by assets under management of $4.4 billion, which rose 16% year-over-year on organic net inflows and favorable market conditions.

In guidance for the second quarter, Scurlock said total non-interest income is expected to be $65 million to $70 million, with investment banking and sales and trading contributing approximately $40 million to $45 million.

Net interest income, margin, and expense trends

Scurlock said first-quarter net interest income increased $18.7 million year-over-year to $254.7 million, landing within the company’s prior guidance range of $250 million to $255 million. Net interest margin expanded 24 basis points year-over-year to 3.43%, the sixth consecutive quarter of year-over-year expansion, and was up five basis points from the prior quarter.

Non-interest expense rose 5% year-over-year to $213.6 million; on an adjusted basis, non-interest expense was $212.2 million. Pre-provision net revenue increased 43% year-over-year to $110.4 million, while adjusted pre-provision net revenue increased 44% to $111.8 million, the fifth consecutive quarter of year-over-year growth, Scurlock said.

Scurlock reaffirmed quarterly expense expectations for the remainder of 2026 at roughly $125 million of salaries and benefits and $75 million of other non-interest expense. He said the first quarter’s salaries and benefits increased due to seasonal compensation, incentive resets, new frontline talent, and merit-based raises.

Looking to the second quarter, Scurlock said the bank expects net interest income of $260 million to $265 million, with net interest margin expected to be roughly 3.35% to 3.40%. He attributed the margin pressure to seasonally higher mortgage finance balances (a lower-yielding asset mix) and slightly higher interest-bearing deposit costs needed to support seasonal funding, though he said higher balances should lift net interest income.

Balance sheet, credit, and capital actions

On the balance sheet, Scurlock said total loans held for investment (LHI) were $25.2 billion, up 13% year-over-year and 5% linked-quarter. Period-end commercial loans rose 10% year-over-year to $12.5 billion and increased 3% linked-quarter, which Scurlock said marked the ninth consecutive quarter of commercial loan growth. Commercial real estate loans declined 9% year-over-year to $5.3 billion, as payoff rates continued to exceed demand; Scurlock reiterated expectations for full-year average CRE balances to decline approximately 10%.

Mortgage finance balances rose seasonally, with average mortgage finance loans up 32% year-over-year to $5.2 billion and period-end balances increasing to $7.0 billion. Scurlock said “enhanced credit structures” represented 67% of period-end mortgage finance balances, up from 59% at the end of 2025, and he expects an additional 5% could migrate into those structures over the next several quarters.

Total deposits ended the quarter at $28.5 billion, up 9% year-over-year and 8% linked-quarter. Scurlock said broker deposits were used modestly to support the “temporary and predictable” late-quarter growth in mortgage finance. He also said the mortgage finance self-funding ratio was 80% for the quarter and should settle in a 70% to 80% range over the near to medium term.

On credit, Scurlock said the provision for credit losses was $16 million, stable year-over-year, and noted management continues to assume economic scenarios “materially more severe than consensus estimates.” Net charge-offs were $17.4 million, or 30 basis points of LHI, tied to previously identified commercial credits. He also said certain commercial real estate multifamily credits were further downgraded due to lease-up challenges and ongoing rental concessions, though he cited project equity and sponsor support as supportive of overall portfolio quality.

Holmes said the bank’s reserve approach has become “increasingly reliant on a downside scenario weighting,” and discussed monitoring potential macroeconomic impacts, including assessments of rising commodity pricing in certain client segments prior to the recent Middle East conflict.

Capital levels remained above management’s targets, with Scurlock reporting tangible common equity to tangible assets of 9.87% and a CET1 ratio of 11.99%, above the company’s stated CET1 target of 11%. Tangible book value per share rose 11% year-over-year to $75.67, the eighth consecutive quarterly record, according to both Holmes and Scurlock.

The company repurchased approximately 770,000 shares for $74.6 million at a weighted average price of $96.82 during the quarter. Scurlock said the company has $125 million remaining on its repurchase authorization and indicated the bank has historically been constructive on buybacks below roughly 1.3x tangible book value.

Management also announced a new shareholder return lever: a quarterly cash dividend. Scurlock said the board approved an initial quarterly common stock dividend of $0.20 per share, while Holmes called the dividend “a tangible expression of our confidence in earnings momentum.” In response to an analyst question, Holmes said the decision was “important,” but “not labored,” citing board confidence in execution.

For full-year 2026, Scurlock said the company’s overall outlook is unchanged from January guidance, which assumes one additional rate cut in December and a year-end Fed funds rate of 3.5%. He reiterated expectations for mid-to-high single-digit total revenue growth and full-year non-interest revenue of $265 million to $290 million, with mid-single-digit growth in non-interest expense and a provision outlook of 35 to 40 basis points of average LHI excluding mortgage finance.

About Texas Capital Bancshares NASDAQ: TCBI

Texas Capital Bancshares, Inc is a bank holding company headquartered in Dallas, Texas, operating through its wholly owned subsidiary, Texas Capital Bank. The company specializes in providing commercial banking services to middle-market companies, entrepreneurs, professional service firms, real estate developers, and not-for-profit organizations. Its broad range of offerings includes commercial lending, treasury and cash management, real estate finance, equipment finance, and energy lending, all designed to address the unique financial needs of businesses navigating growth and market challenges.

In addition to its core commercial banking capabilities, Texas Capital Bancshares delivers private banking and wealth management services for business owners and high-net-worth individuals.

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