Four commercial loans flagged as problems at Texas Capital
Growth in both commercial lending and mortgage finance fueled an improvement in profits at Texas Capital Bancshares in Dallas, although credit quality issues were evident.
Second-quarter net income rose 42% year over year to $69 million, the $28 billion-asset company said Wednesday. Earnings per share of $1.38 were 2 cents lower than the mean estimate of analysts polled by FactSet Research Systems.
Net interest income after the loan-loss provision increased 20% to $205 million. The provision more than doubled to $27 million, as Texas Capital placed four loans on nonaccrual status; one of the loans is to a borrower in the energy industry, two are to health care-sector borrowers and the fourth is a general commercial-and-industrial loan.
Loans held for investment rose 16% to $16.5 billion. Mortgage finance loans increased 19% to $5.9 billion.
Total deposits rose 18% to $20.3 billion. However, demand deposits, banks’ cheapest category of deposits, dropped 6% to $7.6 billion. Interest-bearing deposits increased 39% to $12.7 billion.
Noninterest income dropped 8% to $17 million, largely as a result of a $3.9 million reduction of income from gains on the sale of mortgage correspondent aggregation loans. However, Texas Capital booked a $1.3 million increase to income from mortgage servicing rights.
Noninterest expense climbed 18% to $132 million. Salaries and employee benefits, marketing, legal expenses and federal deposit insurance assessments all increased as a result of general business growth.