Texas Capital projects low double-digit revenue growth for 2025 while advancing scalable platform

Earnings Call Insights: Texas Capital Bancshares (TCBI) Q3 2025

MANAGEMENT VIEW

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Chairman, President & CEO Robert Holmes highlighted the completion of the four-year transformation plan announced in 2021, reporting the firm achieved a 1.3% return on average assets, surpassing its original 1.1% target. Holmes stated, "These results mark an important milestone in our financial acknowledgment of the continued intensity in which we deliver distinctive value to our clients through our wholly differentiated and increasingly scalable platform."

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Holmes emphasized the firm's strengthened position, noting that tangible common equity to tangible assets reached 10.25%, an all-time high, and that "record revenue of $340 million, record pre-provision net revenue of $150 million, record net income to common of $101 million, record earnings per share of $2.18 and record tangible book value per share of $73.02" were achieved in Q3.

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The CEO detailed the evolution of the Treasury Solutions platform, with index deposits now comprising only 6% of average total deposits, down nearly $10 billion from 2020, and a 91% increase in treasury product fees over four years.

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Holmes noted, "We now have industry-specific coverage aligned with businesses that comprise 100% of the addressable Texas economy. And we built the first full-service investment bank in the state, achieving one of the most successful launches in history."

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CFO Matt Scurlock reported, "Third quarter total revenue increased $35.4 million or 12% relative to Q3 adjusted total revenue last year, supported by 13% growth in net interest income and 6% growth in fee-based revenue."

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Scurlock added, "Year-over-year adjusted preprovision net revenue increased 30% or $34.9 million to $149.8 million, an all-time record for the firm."

OUTLOOK

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Scurlock reaffirmed full year 2025 revenue guidance of low double-digit percent growth, noting, "our guidance is unchanged despite now including two 25-basis point rate cuts over the remainder of the year, one in October and one in December, with the forward curve assuming an exit rate of 3.75% at year-end."

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Noninterest expense outlook was revised down to mid-single-digit percent growth from the previous mid- to high-single-digit growth, attributed to "sustained realization of structural efficiencies, partially offset by continued platform build-out."

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The provision outlook remains at 30 to 35 basis points of loans held for investment, excluding mortgage finance.

FINANCIAL RESULTS

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Holmes and Scurlock reported record net income to common of $100.9 million, a 36% increase compared to adjusted net income to common in Q3 last year.

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Average commercial loan balances increased 3% or $317 million during the quarter, with total commitments, excluding mortgage finance, up $577 million or 8.2% annualized.

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Net interest margin expanded 12 basis points to 3.47% for the quarter, supported by increased loan yields, loan growth, and improvements in deposit pricing.

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Allowance for credit loss finished the quarter at $333 million or 1.79% of LHI (excluding mortgage finance), with criticized loans down $368 million or 41% year-over-year, and criticized loans to total LHI at 2.19%.

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CET1 ended at 12.14%, a 69 basis point increase from the prior quarter.

Q&A

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Michael Rose, Raymond James: Questioned lower period-end loan growth despite higher commitments. Scurlock responded that "C&I commitments this quarter increased by $576 million or 11% annualized... we arranged access to more syndicated bank debt than anyone in the country other than JPMorgan."

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Rose also asked about investment banking fee sustainability. Scurlock guided to "fourth quarter noninterest income of $60 million to $65 million on the back of $35 million to $40 million again in the investment banking business." Holmes added the platform was now "much broader in terms of product and clients, it's much more granular and it's much more repeatable."

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Woody Lay, KBW: Asked about NII resilience in light of rate cuts. Scurlock provided NII guidance of "$255 million to $260 million with net interest margin around 3.3%."

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Lay also inquired about credit transformation. Holmes stated, "We're very, very conservative as it relates to risk... client selection is the #1 mitigant."

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Matt Olney, Stephens: Probed capital deployment. Holmes detailed a disciplined capital menu, focusing first on organic growth, then platform investment, share repurchase, and potentially M&A.

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Brett Rabatin, Hovde Group: Asked about expense build. Scurlock guided to Q4 noninterest expense of about $195 million.

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Ben Gerlinger, Citi: Inquired about mortgage finance yields and funding. Scurlock guided to a 3.8% yield for Q4 and an 87% self-funding ratio.

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Sun Young Lee, TD Cowen: Questioned the sustainability of the mortgage finance self-funding ratio. Scurlock indicated continued focus on expanding treasury and deposit wallet with commercial clients could further reduce reliance on mortgage finance deposits.

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Anthony Elian, JPMorgan: Asked about CD maturities and future targets. Scurlock provided CD maturity details, while Holmes clarified, "this is a milestone. We're really excited about the future."

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Jon Arfstrom, RBC: Inquired about market disruption from Texas consolidation. Holmes assured proactive client engagement and competitive positioning.

SENTIMENT ANALYSIS

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Analysts consistently raised detailed, sometimes skeptical questions about loan growth, capital deployment, and sustainability of recent results, reflecting a slightly positive but probing tone, with multiple inquiries on future guidance and business resilience.

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Management maintained a confident tone throughout, emphasizing strength, discipline, and transformation, while expressing caution regarding macroeconomic risks. Holmes remarked, "we're very, very conservative as it relates to risk," and Scurlock highlighted, "metrics depicting portfolio health and coverage today are certainly as strong as they've been."

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Compared to the previous quarter, management appeared more assertive about the firm's transformation and readiness for future M&A, while analysts focused on the sustainability of improvements and capital allocation.

QUARTER-OVER-QUARTER COMPARISON

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Revenue and net income reached record highs, compared to strong but lower results in Q2.

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Expense guidance was revised downward, reflecting increased efficiency.

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Management tone shifted from highlighting transformation progress to emphasizing achievement of transformation goals and readiness for next steps.

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Analysts in both quarters focused on sustainability and capital management but raised more granular questions on business lines and loan growth in Q3.

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Strategic focus evolved from building out the platform to scaling and leveraging new capabilities, especially in investment banking and treasury solutions.

RISKS AND CONCERNS

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Management noted continued conservatism in credit provisioning, with Holmes stating, "we are always looking at downside scenarios, doing tabletop exercises..."

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Scurlock described allowance levels and criticized loans ratios as exceptionally strong, but acknowledged ongoing monitoring of macroeconomic and portfolio risks.

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Analysts questioned sustainability of loan growth, NII resilience amid rate cuts, and expense trends.

FINAL TAKEAWAY

Texas Capital Bancshares delivered a historic quarter, marked by record performance metrics and the achievement of its multi-year transformation goals. Management reaffirmed guidance for low double-digit revenue growth in 2025, driven by a diversified, scalable platform and strong capital position. The firm is positioned to scale high-value businesses further, with a disciplined approach to risk, conservative credit management, and a continued focus on operational efficiency.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/tcbi/earnings/transcripts]

MORE ON TEXAS CAPITAL BANCSHARES

* Texas Capital Bancshares, Inc. (TCBI) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4832124-texas-capital-bancshares-inc-tcbi-q3-2025-earnings-call-transcript]
* Texas Capital Bancshares: Not Quite Good Enough [https://seekingalpha.com/article/4826085-texas-capital-bancshares-not-quite-good-enough]
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* Seeking Alpha’s Quant Rating on Texas Capital Bancshares [https://seekingalpha.com/symbol/TCBI/ratings/quant-ratings]