Regional banking firm Texas Capital Bancshares (NASDAQ: TCBI) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 16% year on year to $309.8 million. Its GAAP profit of $1.58 per share was 23.5% above analysts’ consensus estimates.

Is now the time to buy TCBI? Find out in our full research report (it’s free).

StockStory’s Take

Texas Capital Bank’s first quarter results showed steady year-on-year progress, but missed Wall Street’s revenue and adjusted profit expectations. Management pointed to strong growth in treasury product fees and a notable increase in noninterest-bearing deposits as key drivers of the quarter. CEO Rob Holmes highlighted that “peer-leading growth in treasury product fees” and a 7% rise in noninterest-bearing deposits, excluding mortgage finance, underpinned performance. However, capital markets uncertainty weighed on fee revenue, as some investment banking transactions were delayed rather than canceled, affecting the overall fee pipeline.

Looking forward, management is raising its revenue outlook to the high end of its range, citing confidence in loan growth and noninterest income momentum. CFO Matt Scurlock noted that higher net interest income, ongoing deposit expansion, and the ability to reprice down liabilities are expected to support earnings. However, leadership remains cautious given persistent macroeconomic and policy uncertainty, with Holmes emphasizing that “recent tariff actions and resulting volatility in the financial markets could manifest in changes to client confidence, affecting hiring, capital investment, and M&A.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to robust deposit growth, expanding treasury services, and resilient net interest income, while acknowledging ongoing economic and political uncertainty impacting fee generation.

• Treasury product fee strength: Treasury product fees rose 22% year-over-year, marking a record for the firm, fueled by growth in cash management, payments, and receivables solutions. Management credits this to a solutions-focused approach that deepens client relationships and increases primary operating accounts.

• Deposit base expansion: Noninterest-bearing deposits (excluding mortgage finance) grew 7% quarter-over-quarter and 11% year-over-year, the largest quarterly increase since 2021. This reflects successful onboarding of new commercial clients and a shift toward less rate-sensitive funding sources.

• Net interest margin improvement: The company achieved a 26 basis point increase in net interest margin late in the quarter. Management attributed this to effective repricing of liabilities and continued discipline around deposit costs, which supported a 10% increase in net interest income year-over-year.

• Investment banking pipeline delays: Fee revenue in investment banking was pressured by macro uncertainty, with most deals delayed rather than cancelled. Management expects the majority of these transactions to shift into the second half of the year, rather than disappearing altogether.

• Disciplined capital and credit management: Texas Capital continues to maintain peer-leading capital levels and a conservative approach to credit risk. The company has proactively increased its allowance for credit losses and implemented enhanced credit structures in its mortgage finance portfolio, improving regulatory capital efficiency.

Drivers of Future Performance

Management’s outlook for the remainder of the year hinges on sustained deposit growth, fee income recovery, and proactive risk management amid lingering macroeconomic uncertainty.

• Revenue resilience from core banking: Management expects double-digit revenue growth, underpinned by ongoing expansion in commercial and treasury services, as well as stable net interest income. The firm’s strategy of deepening client relationships is projected to drive continued deposit and loan growth, even as economic outlook remains mixed.

• Fee income rebound dependent on market clarity: Delayed investment banking transactions are forecasted to close in the second half of the year, provided economic and policy conditions stabilize. Management cautions that persistent uncertainty could further defer or reduce these fees, which are a key source of noninterest income.

• Macroeconomic and regulatory headwinds: Recent tariff announcements and general policy volatility are seen as potential risks to client confidence, affecting loan demand, M&A activity, and asset quality. Management is maintaining elevated reserves and monitoring sectors such as logistics, manufacturing, and infrastructure for signs of stress.

Catalysts in Upcoming Quarters

Looking ahead, our analysts will watch for (1) evidence that delayed investment banking transactions are closing as expected in the second half of the year, (2) continued growth in core deposits and treasury product fees as a sign of franchise strength, and (3) the effectiveness of credit risk management in sectors sensitive to tariffs and policy changes. Progress on digital wealth management onboarding and successful execution of interest rate risk hedging strategies will also be key areas of focus.

Texas Capital Bank currently trades at $85, in line with $85.62 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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