Texas Capital Bancshares, Inc. Q1 FY2026 earnings call

Strategic executive leadership appointments: Jay Klingman to head of private bank and family office, Dustin Cosper to head of commercial banking, John Cummings as COO, Matt Scurlock to President of Texas Capital Bank, Jeff Hood as Chief Human Resources Officer. Quarterly financial progress: adjusted earnings per share up 72%, total revenue up 16%, driven by net interest income and non-interest revenue growth. Fee income from areas of focus up 59%, record for the firm. Capital position strong with tangible book value per share up 11%, CET1 of 11.99% well above target. Initiation of quarterly common stock cash dividend.

Total revenue increased 16% year-over-year to $324 million. Adjusted quarterly earnings per share increased 72% versus prior year to $1.58 per share. Net interest income grew 8%, non-interest revenue 56%. Fee income from focus areas reached $58.8 million, a record, with all three focus areas delivering record quarterly fee income. Net interest margin expanded 24 basis points year-over-year to 3.43%. Tangible book value per share of $75.67 increased 11% year-over-year. Total LHI of $25.2 billion increased 13% year-over-year.

Full-year overall outlook unchanged from January guidance. Anticipate total revenue growth in mid to high single-digit range. Full-year non-interest revenue expected to reach $265 to $290 million. Anticipated non-interest expense growth in mid-single digits. Full-year provision outlook of 35 to 40 basis points of average LHI, excluding mortgage finance.

Potential impacts on specific clients from Middle East conflict are tangential but credit posture in reserve calculation relies on downside scenario weighting. Balance sheet and business model intentionally resilient to market rate changes, but market rate movements can affect modeled earnings at risk.

Q: Hey, good morning, guys. So the earnings momentum is really great to see. You mentioned some of the uncertainty in the Middle East and feel good about your clients. As it pertains to the investment banking pipeline, I know last year with some of the tariff noise, we saw some timing pushed out to the back half of the year. Do you expect a similar dynamic to happen here if this uncertainty lasts longer in the quarter?

A: We're really pleased with our track record of finding the right solutions for our clients, which continue this quarter, whether that's bank debt or non-bank debt. So we were the number one arranger of middle market syndicated credit in the country this quarter, along with arranging over $11 billion of debt outside the bank markets for our clients. And then we raised over a billion dollars on still new equities platform. And we still feel really good about the 40 to 45 million for the quarter and 160 to 175 for the full year.

Q: Maybe just shifting over to the mortgage finance business, the period end loan balances were well above where they have been historically. I know that can be kind of volatile with timing, but just any expectation for average balances as we head into the second quarter?

A: There was quite a bit of volatility in Q1 on 30-year fixed rate mortgages. We got as low as about 598 in the last week of February and then hit the high point in the last week of March at about 664. If you'll recall the full year guide, about 15% predicated on $2.3 trillion origination market and an average 6.3% 30-year fixed rate mortgage, which, well, there could be some volatility along the way. We still think that's the right number for the full year. That gets you to about a $6 billion full year average warehouse balance. So we think that's actually the number for Q2 as well, Woody, that you'll have about $6 billion of average mortgage finance volumes. You should end around $7.2 billion. And that comes with about 4.5 billion of average mortgage finance deposits. So that self-funding ratio should push down to around 75%, which should help the yield move from around 399, I think is where we were this quarter, to somewhere around 405 in Q2. And then the last thing I'd note on that, we've clearly completely restructured that business with now 67% of those balances residing in the enhanced credit structure, which is generating significant amount of capital. in that for the loans that are in the structure, it's a weighted average risk weighting at 30%, 53% for the entire portfolio. And then 78% of those clients do things with us in the dealer and 100% of them are on our treasury platform. So incremental volume in the mortgage finance business is significantly more profitable for us now than it's really ever been.