Texas Capital Bancshares, Inc. Q4 FY2024 earnings call

• Rob Holmes highlighted the firm's transformation in 2024, with nearly 40% more new significant clients onboarded compared to 2023. Full year adjusted results included fee revenue growth of 30%, pre-provision net revenue growth of 9%, etc. • Matt Scurlock discussed quarterly revenue increased 15% to $283.7 million, full year adjusted revenue up $36 million or 3%, quarterly noninterest expense declined 9%, full year adjusted PPNR increased $31 million or 9% to $369 million. Balance sheet positioning remains strong with cash and securities at 25%, and criticized loans improved. • Emphasis on continued progress in fee income areas, deliberate evolution of Treasury Solutions, and completion of wealth platform rebuild.

Full year 2024 saw adjusted financial results with fee revenue growth of 30%, pre-provision net revenue growth of 9%, earnings per share growth of 15%, and tangible book value growth of 8%. Fees from investment banking, Treasury Solutions, and Private Wealth grew 36% to $178 million. Investment banking and trading income increased 47% year-over-year. Treasury Solutions had gross payment revenues up over 10% for the second consecutive year, treasury product fees grew 18%, noninterest-bearing deposits (excluding mortgage finance) increased 4%, and total deposits expanded $2.9 billion or 13%. The wealth platform rebuild is substantially complete.

• Full year 2025 total revenue growth expected in high single to low double-digit percent, targeted noninterest revenue $270 million. • Noninterest expense growth anticipated in high single digits. • Provision outlook 30 to 35 basis points of average LHI, excluding mortgage finance. • Aim for 1/1 ROAA in the second half of 2025.

• Interest rate volatility which could impact NIM and net interest income. • Macroeconomic scenarios affecting credit risk, including potential impact of recent backup in interest rates. • Seasonal adjustments in expenses, such as first quarter noninterest expense being elevated due to certain seasonal expenses related to payroll and compensation.

Q: Could you unpack the expense guidance, especially regarding investment banking fee cadence?

A: The midpoint of high single-digit expense guide is around $800 million, driven by additional frontline talent in investment banking and treasury solutions. Fees are expected to ramp over the year with 1:1 ROAA in the back half of 2025. First quarter noninterest expense has seasonal adjustments.

Q: With rates not coming in as much as expected, does the investment banking fee transition still take place?

A: The firm has significant momentum in investment banking with over 30 capital markets transactions, and expects continued upward trajectory on noninterest income as new clients land on the platform.

Q: About the revenue guidance, why the increase and what about deposit beta with rates?

A: Total revenue growth expected in high single to low double-digit percent. Deposit beta could get to 60%, with actions taken to reduce interest-bearing deposit costs. $550 million of CDs matured in the quarter with lower repricing rates.

Q: Thoughts on margin and ROA goal?

A: Q1 may see pullback in NII due to seasonality, but outlook supports sustainably above 3% margin. Aim for 1.10% ROA in the second half of 2025.

Q: Buybacks and capital plan?

A: Will use same approach as before, focusing on building business model and balance sheet, potential for reduced risk weighting on mortgage warehouse facilities creating excess regulatory capital.

Q: Sensitivity of fee income guide to rate cuts?

A: Confident in $270 million fee income regardless of rate outlook, with core operating deposits and treasury product fees expected to continue growing.

Q: Change in NII guide and frontline talent?

A: NII guide not changed drastically, mid-to-high single-digit loan growth can drive higher end of revenue guide. Frontline talent is to further skill set across industry verticals and segments in investment bank and treasury services, no new products/services introduced.