Texas Capital Bancshares beat fourth-quarter earnings estimates, revised its 2025 fee income expectations upward and reaffirmed its guidance for hitting a profitability metric later this year.
On Thursday, the Dallas-based bank reported quarterly net income of $71 million and earnings per share of $1.43. Analysts polled by S&P Capital IQ had predicted earnings of $1.08 per share.
Texas Capital now expects fee income on an adjusted basis to be $270 million for the full year, up from the $240 million it predicted in October. And it's still on track to deliver a return on average assets of 1.1% in the back half of the year, Chief Financial Officer Matt Scurlock said during the earnings call.
It may not have been enough to satisfy investors. Texas Capital's stock price fell more than 3.8% immediately following the call with analysts. By early midafternoon, the decline had slightly lessened before shifting downward again, with shares ending the day down 4.7%.
The stock slide may reflect skepticism about the company's ability to reach its profitability goals.
"On the call, they said they still feel like 1.1% [return on average assets] is achievable in the second half of the year," Jared Shaw, an analyst at Barclays, told American Banker on Thursday. "I don't think the Street thinks they'll get there."
Texas Capital has spent the past several years
In the years since, the $30.7 billion-asset company has focused on reducing expenses; building out fee-generating businesses, such as an investment bank; and enhancing technology — all geared toward serving the financial needs of Texas-based firms and driving higher, more sustainable earnings.
In September, Texas Capital said it had
The turnaround plan included certain profitability targets to be achieved by 2025, including the 1.1% return on average assets goal and a 12.5% return on average tangible common equity.
In the fall of 2023, Holmes told American Banker that the company fully intended to meet its guidance.
For full-year 2024, the return on average assets was 0.74% while the return on average tangible common equity was 7.1%, both on an adjusted basis, Texas Capital said Thursday.
The company expects to achieve a common equity Tier 1 capital ratio of at least 11% for 2025. For full-year 2024, that ratio was 11.4%, down from 12.6% the prior year, the company said.
Analyst Peter Winter of D.A. Davidson told American Banker that executives seem to be "very confident" in their ability to deliver on the 11% common equity Tier 1 capital ratio goal.
The Dallas bank has spent the last three years building itself into a new company. Now, it has to prove the investments will pay off.
Meanwhile, the bank is aiming for adjusted expense growth in the high single digits, part of which will be driven by new hires in the investment banking and treasury management business, Scurlock said. Expenses on an adjusted basis for 2024 were $172.2 million, down 14.5% from 2023.
Hiring in investment banking and treasury began late last year and will probably "grow through the first half of the year," Scurlock said.
Also on Thursday, Texas Capital said Holmes will gain another title by taking over as board chairman following the company's 2025 annual meeting. Holmes will succeed Bob Stallings, who has been chair since April 2023 and will shift into the lead independent director role, the company said.
Stallings will receive a one-year waiver from the board of its retirement policy to allow him to stand for reelection to the board at the annual meeting.
In addition, the company announced a new share repurchase program for up to $200 million through Jan. 31, 2026.
