Texas Capital Non-Interest Income Hits Record as NIM Compresses
Non-interest income rose 29% year-over-year to $75.1 million in the second quarter.
Net interest income for Texas Capital Bancshares (TCBI) rose to $260.4 million in the second quarter of 2026, up from $254.7 million in the first quarter and $253.4 million a year earlier. The growth occurred despite a 15 bps sequential compression in net interest margin, which fell to 3.28%.
The margin decline followed a 2 bps decrease in yields on loans held for investment, excluding mortgage finance, and a 2 bps increase in the total cost of deposits, which reached 2.40%. On a yearly basis, the margin expanded 8 bps compared to the second quarter of 2025.
Fee-based revenue provided a significant offset to margin pressure. Non-interest income reached a record $75.1 million, a 29% increase over the second quarter of 2025. The gain was driven by higher fees across wealth management, trust, investment banking, and trading.
Balance sheet growth remained steady as loans held for investment rose to $18.56 billion, compared to $18.22 billion in the first quarter and $18.04 billion a year ago. Total deposits increased to $28.91 billion, up from $28.52 billion in the prior quarter and $26.06 billion in the second quarter of 2025.
Credit quality metrics weakened as criticized loans rose to $696.3 million at June 30, 2026, up from $650.6 million at March 31. This trend drove the provision for credit losses to $18.0 million, compared to $16.0 million in the first quarter and $15.0 million in the second quarter of 2025. Net charge-offs were $16.1 million for the quarter, down from $17.4 million in the first quarter but up from $13.0 million a year ago.
The bank's efficiency ratio improved to 61.3% from 65.9% in the first quarter. This shift followed an $8.1 million sequential decrease in non-interest expense due to seasonal payroll expenses.
Capital levels strengthened as the CET1 ratio rose to 12.1% at quarter-end, compared to 12.0% in the first quarter and 11.4% a year earlier. During the period, the bank repurchased 239,348 shares of common stock for $23.6 million.