TEXAS CAPITAL BANCSHARES INC/TX Q2 FY2024 earnings call

Key Points - Rob Holmes: Continued progress on strategy, industry-leading liquidity and capital, fee income up 21% linked Q and 11% Y/Y, investment banking pipeline diverse, treasury solutions platform improved, private wealth rebuild ongoing, tangible book value up over 7% Y/Y, $50M share repurchased. - Matt Scurlock: Total revenue up 4% to $267M, non-interest revenue up 22% linked Q, adjusted PPNR up 24% linked Q, provision expense $20M, net income to common $37.4M, balance sheet metrics strong, deposit changes, net interest margin down 2 basis points, non-interest expenses down 2% linked Q, credit metrics stable with criticized loans flat QoQ.

Total revenue increased to $267 million for the quarter, with net interest income up $1.6 million and non-interest revenue up $9 million (22% linked quarter). Fee income was $50.4 million, the highest since Q1 2021. Investment banking and trading income increased 33% QoQ to $30.7 million. Treasury product fees grew 14% Y/Y. Private wealth AUM was flat QoQ, but managed investment assets were up 5%. Non-interest bearing deposits outside mortgage finance remained flat at $3.3 billion, while non-brokered interest bearing deposits grew 23% Y/Y to $2.9 billion.

Modestly reducing 2024 revenue guidance to low to mid-single-digit growth. Expect resumption of PPNR growth in Q4 2024, accelerating in 2025. Annual provision expense guidance at 50 basis points of LHI excluding mortgage finance. Intent to move towards 11% CET1 at year end remains intact.

Economic uncertainty impacting credit quality, interest rate fluctuations affecting loan volumes and fee income, dependence on client appetite for bank credit, potential impact of market dislocation on capital deployment.

Q: Ben Gerlinger asked about balance sheet sensitivity and share repurchases given above-tangible stock price.

A: Matt Scurlock said current stock price makes buybacks less appealing, prioritizing improved earnings and tangible capital generation.

Q: Stephen Scouten inquired about investment banking contribution rate.

A: Matt Scurlock said investment banking fees were granular and broad, with capital markets a main contributor, but to model next quarters using trailing four quarters.

Q: Matt Olney asked about updated expense outlook and deposit changes.

A: Matt Scurlock said expense guidance shifted to mid-single-digits due to potential higher salary benefits and fee-based revenue, and deposit changes driven by client interest bearing deposits and reduction in broker deposits.

Q: Woody Lay asked about 2024 revenue guide and credit.

A: Matt Scurlock said back half revenue growth hinges on loan growth, and criticized loans were stable with stability in downgrades and upgrades.

Q: Jon Arfstrom asked about client onboarding and capital markets.

A: Rob Holmes discussed strong client onboarding momentum across segments, and Matt Scurlock said capital markets revenues should be modeled using trailing four quarters as the business is new.