Loan growth and higher interest rates combined to boost third-quarter profits at Texas Capital Bancshares in Dallas.

Net income at the $24 billion-asset company rose 40% to $56 million, compared to the year-ago period. Earnings per share of $1.12 were a penny better than the average estimate of analysts compiled by FactSet Research Systems.

Net interest income after the loan-loss provision rose 27% to $184 million. Total loans increased 17% to $21 billion. The average yield on loans held for investment rose 54 basis points to 4.59%. As a result, the net interest margin widened 45 basis points to 3.59%.

Keith Cargill, CEO of Texas Capital Bancshares.
“While we remain well positioned to take advantage of future business opportunities, we also remain cautious as we are late in a recovery cycle,” Texas Capital CEO Keith Cargill said Wednesday.

Mortgage-finance lending was especially strong, as loans in that category held for investment rose 14% to $5.6 billion.

“We are extremely pleased to report results for another great quarter, with record earnings, continued core loan and deposit growth and seasonally strong mortgage finance balances,” CEO Keith Cargill said in a news release.

“While we remain well positioned to take advantage of future business opportunities, we also remain cautious as we are late in a recovery cycle,” Cargill added.

Texas Capital's markets were impacted by both Hurricanes Harvey and Irma, as its loan-loss provision included an additional $4.5 million to cover costs related to the storms.

Noninterest income increased 14% to $19 million, fueled by a rise in mortgage-servicing income.

Noninterest expense rose 21% to $115 million on higher salaries and employee benefits, marketing costs and expenses associated with an increase in mortgage-servicing rights. The efficiency ratio was little changed at 51.4%.

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.