Banks
Texas Capital posts record net interest income as criticized loans climb to $782m
The Texas lender's third-quarter EPS rose to $2.28 and it authorised a new $200m buyback, but loans flagged as criticized rose 12% from June and past-due balances jumped.
HedgeWeekly News Desk ·
Texas Capital Bancshares reported third-quarter net income available to common shareholders of $99.4m, or $2.28 per diluted share, on Wednesday, up from $80.6m, or $1.83, in the second quarter and compared with $100.9m, or $2.18, a year earlier. Adjusted earnings were $2.35 a share. Net interest income reached a record $275.0m as the net interest margin widened 16 basis points from the prior quarter to 3.44%.
Fee revenue also grew. Non-interest income was $81.6m, against $68.6m in the third quarter of 2025, including $35.3m of investment banking and advisory fees, up from $31.5m in the second quarter. The efficiency ratio improved to 57.2% from 61.3% in the prior quarter. The bank bought back 1,051,660 shares for $103.0m at an average of $96.99, ended the quarter with a common equity tier 1 ratio of 12.2%, and its board approved a new repurchase authorisation of up to $200m running to October 31, 2027.
Credit indicators moved the other way. Criticized loans rose to $782.4m, or 3.25% of loans held for investment, from $696.3m at the end of June and $529.7m a year earlier. Loans 90 or more days past due and still accruing jumped to $53.2m from $0.5m. The bank booked a $17.0m credit-loss provision, which it linked to the rise in criticized loans and $14.5m of net charge-offs, and lifted its allowance to 1.39% of loans from 1.34%. Non-accrual loans held for investment were roughly flat at $122.3m, or 0.51% of the book.
Why it matters: criticized loans are now about 48% higher than a year ago, and the release does not explain what drove either that increase or the jump in past-due balances. For bank equity and credit investors, the quarter splits into strong earnings and capital on one side and a growing watch list on the other, with management itself referring to a challenging economic backdrop. The next signals are whether past-due loans migrate into non-accrual status or charge-offs in the fourth quarter, and whether deposits, which fell to $27.7bn from $28.9bn at the end of June, stabilise.