Texas Capital Bank (TCBI)

Regional banking firm Texas Capital Bancshares (NASDAQ:TCBI) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 15.4% year on year to $327.5 million. Its non-GAAP profit of $2.08 per share was 17.8% above analysts’ consensus estimates.

Company Overview

Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ:TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Texas Capital Bancshares competes with other regional banks operating in Texas and the Southwest, including Comerica (NYSE:CMA), Prosperity Bancshares (NYSE:PB), and Cullen/Frost Bankers (NYSE:CFR), as well as larger national banks like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) that have significant Texas operations.

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Regrettably, Texas Capital Bank’s revenue grew at a sluggish 3.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Texas Capital Bank’s annualized revenue growth of 8.2% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Texas Capital Bank reported year-on-year revenue growth of 15.4%, and its $327.5 million of revenue exceeded Wall Street’s estimates by 1.3%.

Net interest income made up 84.6% of the company’s total revenue during the last five years, meaning Texas Capital Bank barely relies on non-interest income to drive its overall growth.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last four years, Texas Capital Bank’s efficiency ratio has swelled by 4.9 percentage points, going from 66.5% to 61.6%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q4, Texas Capital Bank’s efficiency ratio was 56.2%, beating analysts’ expectations by 413.2 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Texas Capital Bank to maintain its trailing one-year ratio with a projection of 61.3%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Texas Capital Bank’s EPS grew at a solid 12.1% compounded annual growth rate over the last five years, higher than its 3.6% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Texas Capital Bank, its two-year annual EPS growth of 32.8% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Texas Capital Bank reported adjusted EPS of $2.08, up from $1.43 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Texas Capital Bank’s full-year EPS of $6.81 to grow 5.2%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Texas Capital Bank’s TBVPS grew at an impressive 7% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 10.8% annually over the last two years from $61.34 to $75.25 per share.

Over the next 12 months, Consensus estimates call for Texas Capital Bank’s TBVPS to grow by 9.6% to $82.47, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Texas Capital Bank has averaged a Tier 1 capital ratio of 11.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Texas Capital Bank has averaged an ROE of 7.4%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was good to see Texas Capital Bank beat analysts’ EPS expectations this quarter. We were also glad its net interest income outperformed Wall Street’s estimates. On the other hand, its tangible book value per share slightly missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $102.31 immediately following the results.

Updated: January 22, 2026 at 6:11 AM EST

Before making an investment decision, investors should account for Texas Capital Bank’s business fundamentals and valuation in addition to what happened in the latest quarter.

Texas Capital Bank isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue growth was weak over the last five years. And while its improving efficiency ratio shows the business has become more productive, the downside is its net interest income growth was weak over the last five years. On top of that, its estimated net interest income for the next 12 months are weak.

Texas Capital Bank’s P/B ratio based on the next 12 months is 1.2x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $97.57 on the company (compared to the current share price of $102.31).