TCBIO

Key Points

• 2025 was a defining year with completion of transformation, achieving financial targets. Full-year adjusted ROAA was 1.04%, a 30 basis point improvement vs 2024.
• Disciplined capital allocation focused on franchise accretive client segments: commercial loan growth $1.1 billion (10%) and interest-bearing deposits excluding brokered/ indexed up $1.7 billion (10%) year over year.
• Diversification and growth of fee income streams: fee income areas of focus generated $192 million in 2025 with growth opportunity ahead. Infrastructure, talent, and platforms are designed for scale to handle higher volumes/revenue while managing expenses.

2026 Outlook

• Anticipate total revenue growth in mid to high single-digit range, driven by fee income areas. Full-year noninterest revenue expected $265 to $290 million.
• Noninterest expense growth mid-single digits, reflecting increased compensation, target expansion into client coverage, and platform investments.
• Moderating full-year provision outlook to 35 to 40 basis points of average LHI excluding mortgage finance.

In the fourth quarter, adjusted return on average assets reached 1.2%, with year-over-year improvements. Full-year 2025 saw record adjusted total revenue of $1.3 billion, adjusted net income to common stockholders of $314 million, and adjusted earnings per share of $6.8. Net interest income grew 14% to $1.03 billion, and adjusted fee-based revenue grew 9% to $229 million, marking the third consecutive year of record fee income. Full-year adjusted noninterest expense increased 4% to $768.9 million, while quarterly adjusted noninterest expense decreased 2% to $186.4 million. Full-year adjusted pre-provision net revenue (PPNR) increased $119 million or 32% to $489 million, a record high. The commercial loan balance expanded $254 million or 8% annualized in Q4, and total gross loans held for investment (LHI) increased $1.6 billion or 7% year over year to $24.1 billion.

• Uncertain macroeconomic environment, more conservative than consensus expectations.
• Credit risks in certain Central Texas multifamily properties with net operating income pressure due to rental concessions.
• Potential impact of market rate changes on net interest margin and mortgage finance self-funding ratio.

Q: On investment banking and trading outlook, how does the pipeline look entering 2026?

A: Rob Holmes stated investment banking transaction volume was up ~40%, equities participation higher than forecasted, and pipelines remain healthy with broad growth. Equities sales and trading notional trades up ~45% y/y.

Q: On capital and buybacks, was Q4 buyback reflection of elevated CRE paydowns freeing up capital?

A: Matt Scurlock said they are highly focused on capital utilization, with CET1 up 75 basis points, and buyback strategies tied to financial resilience and shareholder benefit.

Q: On expense outlook, breakdown of mid-single-digit expense guidance?

A: Matt Scurlock explained expense growth features salaries/benefits, select technology, and targeted coverage, with seasonality factors in Q1.

Q: On credit trends and NIM, details on 1Q NIM range and drivers?

A: Matt Scurlock projected 1Q NIM mid-threes range, influenced by mortgage finance self-funding ratio and deposit beta factors.

Q: On mortgage finance, drivers of 4Q average balances and credit trends?

A: Matt Scurlock cited lower rates and longer dwell times as drivers of 4Q average balances, and multifamily credits in Central Texas with rental concession impacts as credit trends.

Q: On CRE balances and future outlook?

A: Matt Scurlock explained CRE balance reductions due to market dynamics with low originations, not due to lack of focus.

Q: On full potential of recent investments and capital instruments?

A: Rob Holmes and Matt Scurlock discussed platform potential not yet at scale and capital instrument optionality in Q1.

Q: On relationship management and client retention?

A: Rob Holmes explained relationship management evolved to institutional relationships with multiple touch points, benefiting client retention and firm value.