Texas Capital's Net Interest Margin Rebounds

The Tip Desk · October 27, 2026 · 3 min read

Net interest income hit a record $275.0 million as the net interest margin widened 16 bps to 3.44% after a 15 bps second-quarter compression.

Texas Capital Bancshares (TCBI), the Dallas-based full-service financial services firm, reported record net interest income of $275.0 million in the third quarter of 2026, reversing a second-quarter squeeze in the net interest margin.

The margin widened 16 bps to 3.44% from 3.28% in the second quarter, after it had compressed 15 bps from the first quarter. Loans held for investment excluding mortgage finance yielded 14 bps more, and mortgage-finance yields rose 10 bps. Total cost of deposits ticked up 5 bps to 2.45%. The company said the net interest income increase came primarily from higher average earning-asset yields and lower short-term and long-term borrowings, partly offset by higher funding costs.

Year over year, net interest income rose from $271.8 million on higher average earning assets and lower funding costs, while the margin slipped 3 bps. LHI excluding mortgage finance yields fell 19 bps and mortgage-finance yields fell 16 bps; total cost of deposits declined 17 bps to 2.45%.

Non-interest income rose $6.5 million to $81.6 million, with fee income up 14% year over year. Investment banking and advisory fees increased to $35.3 million from $31.5 million in the second quarter. Trading income was $11.4 million. The company attributed the sequential increase primarily to higher investment banking and advisory fees and other non-interest income.

Non-interest expense fell $1.6 million to $203.9 million, with lower salaries and benefits, legal and professional and other expense, partly offset by higher communications and technology expense from restructuring. The efficiency ratio improved to 57.2% from 61.3%.

Net income available to common stockholders was $99.4 million, or $2.28 a share, compared with $80.6 million, or $1.83 a share, in the second quarter. Return on average assets was 1.25%.

The provision for credit losses was $17.0 million, down from $18.0 million in the second quarter, reflecting an increase in criticized loans and $14.5 million in net charge-offs. Net charge-offs declined from $16.1 million; the net charge-off rate on average LHI was 0.24%. Criticized loans rose to $782.4 million from $696.3 million at June 30, or 3.25% of LHI. Non-accrual LHI was $122.3 million, or 0.51% of LHI. The allowance for credit losses to total LHI rose to 1.39% from 1.34%.

Loans held for investment were $18.64 billion at September 30, versus $18.56 billion at June 30. Mortgage-finance LHI declined to $5.44 billion from $6.38 billion. Total deposits were $27.72 billion versus $28.91 billion.

The CET1 ratio edged up to 12.2% from 12.1% at June 30; total capital was 14.8%. The company repurchased 1,051,660 shares for $103.0 million in the quarter. Effective October 20, the board authorized a new $200.0 million share-repurchase program through October 31, 2027, and terminated the remaining authorization under the December 12, 2025 program. It declared a $0.20 common dividend payable December 15.