Q3 2023 Texas Capital Bancshares Inc Earnings Call

Participants attending TCBI’s Third Quarter 2023 Earnings Call include J. Matthew Scurlock, MD & CFO of Texas Capital Bancshares, Inc., Jocelyn Kukulka, Head of IR and Corporate Development of Texas Capital Bancshares, Inc., Robert C. Holmes, President, CEO & Director of Texas Capital Bancshares, Inc., Brady Matthew Gailey, MD of Keefe, Bruyette, & Woods, Inc., Research Division, Matthew Covington Olney, MD & Analyst of Stephens Inc., Research Division, Michael Edward Rose, MD of Equity Research of Raymond James & Associates, Inc., Research Division, and Zachary C. Westerlind, Associate Analyst of UBS Investment Bank, Research Division.

Operator:
Hello, everyone, and welcome to TCBI’s Third Quarter 2023 Earnings Call. I’m Lydia, your operator. (Operator Instructions) It’s my pleasure to introduce your host, Jocelyn Kukulka, Head of Investor Relations. Please proceed when you’re ready.

Jocelyn Kukulka:
Good morning, and thank you for joining us for TCBI’s Third Quarter 2023 Earnings Conference Call. I’m Jocelyn Kukulka, Head of Investor Relations. Before we begin, I want to highlight that this call will contain forward-looking statements based on our current expectations. Please be aware that these statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. The forward-looking statements were made as of the date of this call, and we will not be obligated to update or revise them. Please read the cautionary statements and review the information provided in our earnings release, annual report, and SEC filings. You can find the slides for today’s presentation on our website at texascapitalbank.com. Today, we have Rob Holmes, President and CEO, and Matt Scurlock, CFO, as our speakers. After their remarks, we will have a Q&A session. Now, I’ll turn it over to Rob for opening remarks.

Robert C. Holmes:
This quarter marks a significant milestone as it has been two years since we announced our transformation to become Texas Capital’s first full-service financial services firm. Our focus over the past two years has been on providing clients with a wide range of differentiated products and services, delivered by an experienced team of bankers dedicated to the success of our clients and the Texas economy. We are committed to serving the best clients in all our markets and becoming a trusted partner throughout their corporate and individual journeys. Our clients’ success will define our firm. With the completion of our strategy and the addition of talented individuals, we now have a solid foundation to execute our plans. Our strong liquidity and capital position give us a competitive advantage in the current operating environment. Our CET1 of 12.7% ranks fourth among the largest banks, while our TCE of 9.4% ranks first. With liquid assets of 28%, we are well-prepared to support our clients’ diverse needs in these challenging times. Our platform’s strength was evident this quarter as we delivered financial results by addressing our clients’ critical needs with new products and services. We have moved beyond being just a loan-only bank and can now provide comprehensive financial solutions. This shift has made our capital less of a commodity. Our success in supporting clients across our platform has established our position as a full-service financial services firm. More than 75% of clients we have made credit commitments to have expanded their engagement with our treasury business and other services. We continue to add clients and operating accounts at a pace consistent with our long-term plan. September saw the highest number of new treasury business accounts in the last two years, demonstrating that we are becoming a trusted financial partner to our clients. The treasury business is expected to generate significant balances, payments, and revenues in the coming months. Gross segment revenues increased by 14% year-over-year, the highest growth since Q1 2022, driven by our treasury business. Our onboarding tool, Initio, has exceeded expectations and improved client journeys. We have been able to open hundreds of accounts per client per day, even during challenging periods. Our broad platform also offers alternative cash management solutions to clients seeking options in the current rate environment. We provide interest-bearing deposits, insured suite programs, money market options, and liquid investments. Our resilient balance sheet allows us to approach clients confidently, focusing on their needs rather than our near-term financial outcomes. Our investment banking capabilities are also helping clients, with investment banking and trading income reaching a record high for the fourth consecutive quarter. We successfully arranged a comprehensive financing solution for a marquee client, which was one of the largest sole managed term loans ever. This transaction generated significant market momentum and opened up new opportunities for us. It’s important to note that we did not hold any part of this financing transaction on our balance sheet. While we expect revenue trends to be inconsistent in the near term, we remain focused on meeting our clients’ needs and creating long-term value. Now, I’ll hand it back to Jocelyn for the Q&A session.

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