• Quarterly Revenue: Increased 15% year-over-year to $283.7 million.
• Full-Year Adjusted Revenue: Increased $36 million, or 3%.
• Fee Revenue Growth: Increased 30% or $49 million for the full year.
• Pre-Provisioned Net Revenue (PPNR): Increased 9% to $369 million for the full year.
• Net Income to Common: $67 million for the quarter or $1.43 per share.
• Full-Year Adjusted Net Income to Common: $208 million, an 11% increase over 2023.
• Full-Year Adjusted Earnings Per Share: Increased 15% to $4.43.
• Return on Average Assets: 0.74% on an adjusted basis for the full year.
• Return on Average Common Equity: 7% on an adjusted basis for the full year.
• Tangible Book Value Growth: Increased 8% year-over-year to $66.32 per share.
• Year-End Tangible Common Equity to Tangible Assets: 10%.
• Total Deposits: Decreased by $627 million or 2% during the quarter.
• Full-Year Deposit Growth: $2.9 billion or 13%.
• Commercial Loan Balances: Expanded $178 million or 6% annualized.
• Real Estate Loan Growth: $300 million for the quarter.
• Criticized Loans: Declined $184 million or 20% quarter-over-quarter.
• Net Charge-Offs: $12.1 million or 22 basis points of average LHI.
• Common Equity Tier 1 (CET1) Ratio: 11.38%, a 19 basis points increase from prior quarter.

• Warning! GuruFocus has detected 7 Warning Signs with NTRS.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Texas Capital Bancshares Inc (NASDAQ:TCBI) achieved a 30% growth in fee revenue and a 15% increase in earnings per share for the full year.
• The company onboarded nearly 40% more new significant clients in 2024 compared to 2023, indicating strong client acquisition trends.
• Investment banking and trading income increased by 47% year-over-year, driven by syndications, capital markets, and sales and trading.
• The treasury solutions platform saw gross payment revenues increase over 10% for the second consecutive year, highlighting successful client adoption.
• TCBI maintained industry-leading capital and liquidity, with a tangible common equity to tangible assets ratio of 10%, ranking first among the largest banks in the country.

Negative Points

• Total deposits decreased by $627 million or 2% during the quarter, primarily due to known seasonality from annual tax payments.
• The company experienced a modest rate-driven decline in net interest income, impacting overall revenue growth.
• Quarterly net interest margin (NIM) and net interest income declined by 23 basis points and $10.5 million, respectively, due to seasonal mortgage warehouse factors.
• Non-interest expense is expected to grow by high single digits in 2025, driven by increased salaries and benefits related to improved fee income outlook.
• The provision expense for the quarter was $18 million, resulting from charge-offs against previously identified problem credits and moderate loan growth.

Q & A Highlights

Q: Can you explain the increase in expense guidance and its correlation with fee income growth? A: Matt Scurlock, CFO, explained that the increase in expenses is primarily due to hiring additional frontline talent in investment banking and treasury solutions. This is expected to drive fee income growth, with the fee income guidance increased to $270 million. The expenses are expected to plateau as the platform matures, leading to improved returns in 2026.

Q: How does the current interest rate environment affect the investment banking fee income? A: Matt Scurlock, CFO, stated that despite the interest rate environment, the investment banking segment is expected to continue growing. The firm has seen significant momentum, with over 30 capital markets transactions this year, and expects continued upward trajectory in non-interest income.

Q: Why didn't the revenue growth guidance change despite a stronger fee income outlook? A: Matt Scurlock, CFO, noted that while there is potential for higher revenue growth, uncertainty in the rate outlook remains. The firm expects high single-digit to low double-digit revenue growth, driven by fee income and loan growth, but remains cautious due to macroeconomic uncertainties.

Q: Is there potential to lower deposit costs if the Fed stops raising rates? A: Matt Scurlock, CFO, indicated that deposit costs could decrease further, with a target interest-bearing deposit beta of 60% by mid-year. The firm has already reduced costs by repricing CDs and expects further reductions as more CDs mature.

Q: Will share buybacks be a significant part of the capital plan moving forward? A: Matt Scurlock, CFO, stated that the firm will continue its disciplined approach to capital management. While maintaining high tangible common equity levels is a priority, potential regulatory capital increases from enhanced credit structures could create excess capital, which may be used for buybacks.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.