Yahoo Finance Texas Capital Bancshares Inc (TCBI) Q1 2024 Earnings Call Transcript Highlights: Key Financial ...
Total Adjusted Revenue: Increased $10 million, or 4%, to $256 million for the quarter.
Net Interest Income: Remained flat for the quarter.
Non-Interest Revenue: Resumed quarterly growth, contributing significantly to total revenue.
Adjusted Non-Interest Expense: Increased 6% linked quarter, decreased 1% year-over-year.
Provision Expense: $19 million for the quarter, driven by an increase in criticized loans and partial charge-offs.
Net Income to Common: $21.8 million, up 38% linked quarter.
Adjusted Net Income to Common: $29.6 million, down 5% linked quarter.
Total Deposits: Grew 7% during the quarter, nearly $1.6 billion increase.
Loan-to-Hold Investment (LHI) Balances: Increased by approximately $488 million, or 2% linked quarter.
Commercial Loan Balances: Average increased $225 million; end of period balances were relatively flat.
Net Interest Margin: Increased by 10 basis points this quarter.
Net Interest Income: Increased modestly to $215 million.
Non-Interest-Bearing Deposits: Grew slightly to $3.3 billion for the quarter.
CET1 Ratio: Ended the quarter at 12.38%, a decrease of 27 basis points from the previous quarter.
Tangible Common Equity to Tangible Assets: Ended at 9.83%.
Allowance for Credit Loss: Increased $8 million linked quarter to $305 million.
Criticized Loans: Increased $121 million, or 16%, to $860 million.
Net Charge-Offs: $10.8 million for the quarter.
Release Date: April 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Hey, good morning, guys. Wanted to start with asset quality, and Matt, you noted the anticipated increase in criticized assets given interest rates and other topics. Can you maybe talk about the lumpiness of that $121 million increase? And then, does the recent term structure change with the higher end being higher, does that impact how you think about future criticized levels? Thanks. A: Thanks, Brett Rabatin, for the question. So simply, the risk outlook for us on credit hasn't changed at all. So portfolio migration was up a bit in the substandard this quarter, but it's entirely consistent with the expectations that we began communicating really in the middle of 2022 when the Fed began to tighten in earnest. That's in part where we had a provision guide last year of 45 basis points of loans excluding mortgage finance and why we pushed it up to 50 basis points for this year.
Q: Okay, that's helpful. And then just thinking about the funding costs, from here, it would seem like you've topped out here depending on the core funding mix and the mortgage banking or the mortgage warehouse deposit balances. Can you guys maybe talk about -- and you talked about some of the repricing that you have. Would it be fair to assume that the cost of interest-bearing funds has topped out here and you guys see levers absent rates to maybe improve the cost structure of deposits? A: So on interest-bearing, we noted on the last call that the September cost of interest-bearing was $455 and that December cost went to $462 and that we thought costs would generally drift higher at a similar rate up until the Fed ultimately acted on any sort of reduction in interest rates and Q1 behaved exactly as anticipated. So the March interest-bearing deposit costs were $469, so up 7 basis points from December to March.
Q: Hi, good morning. I was kind of curious if you could stress test the guidance a little bit. I get that mortgage is called a wild card or a question mark at this point. Let's say mortgage doesn't get any better than what we're at right now. There's kind of a no-cut scenario; mortgage rates are still 7%. A: So the mortgage balances will influx up for seasonality. But we're not counting on a reduction in the 10-year driving volumes associated with warehouse. So the guidance unchanged with now two rate cuts, essentially 1.5 today, relative to the five, almost seven, rate cuts that were contemplated in the original guidance, would suggest we can generate returns that are pretty resilient in a wide range of rate environments.
Q: Hey, thanks. Good morning. I wanted to ask about loan yields, ex-mortgage finance. I think they increased about 12 bps during the quarter. A little surprised that we saw that, given the changes of SOFR during the quarter. Any color on that change, sequential? Thanks. A: Matt, so we called out in the comments and then mentioned a bit, I think, last quarter that over the last five quarters, we've recycled about $1 billion of capital into higher returning relationships. And we continue to see pretty advantageous spreads over index on newly originated credit.
Q: Hey, good morning, guys. Wanted to start on the investment banking trading fees. Last year, we saw a pretty nice ramp-up in the second and third quarter. Should we expect something similar in 2024? And can you just talk about how your pipelines are responding in the current macro environment? A: I would just say, Woody, that all five major components of the investment bank, I think Matt said in his comments, revenue increased quarter over quarter. So syndications, capital markets, capital solutions, M&A, and sales and trading all delivered revenue growth.
Q: Thanks. Good morning. Matt, you alluded to the non-interest-bearing balances, excluding mortgage. Seems like the remixing is burning out and you alluded to the treasury wins. What's possible there over time in terms of non-mortgage, non-interest-bearing deposit growth? A: I think -- so it's going to be dependent on the rate environment, Jon. But the momentum, to Rob's point, in the treasury business is the strongest it's ever been. I mean, year to date, new treasury clients are up 105% of internal expectations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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