Texas Capital Bancshares (NASDAQ:TCBI) reported record third-quarter results as growth in net interest income and fee-based businesses lifted revenue and earnings, while management raised portions of its full-year outlook and outlined further investment in frontline talent.
Adjusted earnings per share reached a quarterly record of $2.35, up 8% from a year earlier and 25% from the prior quarter. Adjusted net income available to common shareholders was $102.7 million, while adjusted total revenue rose 5% year over year to a record $356.6 million. Adjusted pre-provision net revenue increased 5% to $157 million, marking the company’s ninth consecutive quarter of expansion, according to CFO Matt Scurlock.
Chairman, President and CEO Rob Holmes called the period “the most complete quarter in the firm’s history,” citing record net interest income, fee income and profitability. He said the results reflected multiyear investments in client coverage, risk management, technology and a more diversified operating model.
Fee Income Reaches New Highs
Non-interest income increased 19% year over year to $81.6 million, representing 23% of total revenue, compared with 20% a year earlier. Combined fees from the company’s strategic focus areas reached a record $64.1 million, up 14% from the third quarter of 2025.
- Investment banking and trading income rose 13% year over year and 9% sequentially to a record $46.7 million.
- Treasury product fees increased 16% year over year to $12.9 million.
- Wealth management trust fees rose 14% to $4.6 million as assets under management grew for a sixth consecutive quarter to $4.8 billion.
Scurlock said all components of investment banking contributed to the quarter, with particular strength in advisory, capital markets, sales and trading. He said the company expects fourth-quarter total non-interest income of $70 million to $75 million, including approximately $45 million to $50 million from investment banking and sales and trading.
The company now expects full-year non-interest income of $295 million to $300 million, modestly above its prior outlook. Scurlock said this would represent about 30% year-over-year growth, including approximately 40% growth in investment banking revenue.
Holmes told analysts that the investment-banking performance was driven by the maturing platform rather than an unusually large recent wave of hiring. He said Texas Capital’s bankers have developed longer-standing client relationships and greater market credibility, helping the firm win both routine and complex transactions.
Net Interest Income, Loans and Deposits
Record net interest income rose $3.2 million from a year earlier to $275 million. Net interest margin improved 16 basis points from the second quarter to 3.44%, though it remained below 3.47% in the prior-year period.
For the fourth quarter, Scurlock projected net interest income of $270 million to $275 million and net interest margin of 3.45% to 3.50%. He said a reduction in lower-yielding mortgage finance balances should support margin, although net interest income is expected to be relatively stable.
Period-end commercial loans increased 13% year over year to $13.4 billion, marking the company’s 11th consecutive quarter of growth in average commercial loan balances. Commercial loans represented 56% of total loans, compared with 28% in 2020 after adjusting for divested businesses.
Commercial real estate balances continued to decline as payoffs exceeded new project financing. Period-end CRE loans fell 7% from the previous quarter to $4.8 billion and were down 16% year over year. Management expects CRE balances to end 2026 at around $4.4 billion, citing limited construction starts and muted new funding activity.
Mortgage finance loans also declined as rates rose during the quarter. Period-end mortgage finance loans fell 15% sequentially to $5.4 billion, while average balances declined 9% from the second quarter to $5.8 billion. Scurlock said the company’s full-year outlook for average mortgage finance balances has moved to about $5.5 billion, from roughly $6 billion previously, based on a lower expected mortgage-origination market.
Enhanced credit structures accounted for 76% of period-end mortgage finance balances, producing a blended 48% risk weight for the portfolio. Management said it expects that percentage to settle closer to 70% over the medium term and did not expect it to rise further.
Total deposits were $27.7 billion at quarter-end, down 4% sequentially as brokered deposits declined alongside mortgage finance loans. Deposits excluding mortgage finance non-interest-bearing deposits and brokered interest-bearing deposits increased 4% sequentially to $22.4 billion. Average commercial non-interest-bearing deposits rose 7% year over year to $3.7 billion.
Expenses, Credit and Capital
Adjusted non-interest expense declined 2% from the second quarter to $199.6 million, though it increased 5% from a year ago due primarily to salaries and benefits. Reported non-interest expense included $4.3 million of restructuring costs tied to a technology-delivery reorganization and write-downs of selected legacy software.
Management expects fourth-quarter non-interest expense of $205 million to $210 million, including $125 million to $130 million in salaries and benefits. Holmes said the company is again investing in frontline personnel across commercial banking, corporate banking, investment banking, wealth management, treasury and other client-facing businesses. He characterized the company as being in the “early days” of the next hiring phase, while Scurlock said returns on these investments should occur more quickly than earlier buildout efforts.
Provision for credit losses was $17 million, and net charge-offs were $14.5 million, or 24 basis points of average loans held for investment. Scurlock said charge-offs primarily related to previously identified commercial and industrial credits tied to consumer-demand exposure. He also cited pressure on select multifamily CRE credits and margin pressure or softer demand affecting some C&I borrowers.
The company maintained its full-year provision outlook of 35 to 40 basis points of average loans held for investment, excluding mortgage finance. Its total allowance for credit losses, including off-balance-sheet reserves, increased to $335.8 million, or 1.39% of loans held for investment.
Texas Capital ended the quarter with a tangible common equity-to-tangible assets ratio of 9.85% and a CET1 ratio of 12.2%. During the quarter, it repurchased approximately 1.05 million shares for $103 million at a weighted-average price of $96.99 per share, exhausting its prior authorization. The board approved a new $200 million share repurchase program.
For 2026, the company now expects adjusted total revenue growth in the high single digits from adjusted revenue of $1.26 billion in 2025. It expects non-interest expense growth in the mid- to high-single digits as it expands performance-related compensation and targeted frontline hiring.
About Texas Capital Bancshares (NASDAQ:TCBI)
Texas Capital Bancshares, Inc is the parent company of Texas Capital Bank, a full-service financial institution headquartered in Dallas, Texas. The bank primarily serves commercial and middle-market businesses, entrepreneurs, professionals, high-net-worth individuals and institutions.
Texas Capital Bank offers commercial and private banking services, including business and personal deposit accounts, commercial and real estate lending, treasury management, wealth management and related financial solutions.
