Texas Capital Bancshares, Inc.

Hello and welcome to TCBI Q3 2022 earnings call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to Jocelyn Kukoka, head of investor relations. The floor is yours. Please go ahead.

Good morning and thank you for joining us. for TCBI's third quarter 2022 earnings conference call. I'm Jocelyn Kukulka, head of investor relations. Before we begin, please be aware that this call will include forward-looking statements that are based on our current expectation of future results or events. Forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from these statements. Our forward-looking statements are as of the date of this call, and we do not assume any obligation to update or revise them. Statements made on this call should be considered together with the cautionary statements and other information contained in today's earnings release, our most recent annual report on Form 10-K, and subsequent filings with the SEC. We will refer to slides during today's presentation, which can be found along with the press release in the investor relations section of our website at TexasCapitalBank.com. Our speakers for the call today are Rob Holmes, President and CEO, and Matt Scurlock, CFO. At the conclusion of our prepared remarks, our operator will open up a Q&A session. And now I'll turn the call over to Rob for opening remarks. Rob?

Thank you for joining us today to discuss our third quarter activities. We have made significant progress against both our near-term objectives and longer-term goals to build a platform capable of delivering products and services relevant to Texas-based businesses and entrepreneurs at every stage of their life cycles. We have been transparent that this transformation will begin with a period of sustained investment to reorganize the operating model around client delivery. While we realigned our expenses directly against expanded coverage and improved capabilities and refocused the capital base to support businesses where we can be relevant to clients by offering a full suite of products and services. We also committed to give you guideposts to mark our progress along the way and are pleased to have achieved an important one this quarter, delivering operating leverage or quarterly year-over-year growth in PPNR. Early on, I often said the biggest risk to our strategy was the need to build so much of the platform concurrently, which was an acknowledgement of both our opportunity and the limited infrastructure in place upon arrival. Through a year of sustained and focused execution by people across the firm, This risk has slowly dissipated as businesses were built and capabilities landed. While our long-term plan accounts for continued investment, much of the initial lift to deliver the foundational talent, technology, products, and capabilities has been incurred. We are increasingly transitioning the firm's focus from a period of concentrated build into a state of execution. as we start to mature a uniquely broad and client-centric offering currently in its infancy into a robust and scaling platform consistent with our long-term objectives. Our value proposition continues to resonate through sustained market share gains as C&I loans increased again this quarter and are now up 38% year over year. Likewise, year to date, our balance sheet committee has now seen opportunities in excess of $10 billion of total commitments, with the majority of relationships where we would expect to provide more than just the loan product throughout the client lifecycle. Mid-teens growth in new Treasury Solutions clients in the last 12 months is an early indicator that our rapidly expanding product suite is gaining traction with clients. Treasury product fees are up 27% year-over-year, which is largely driven by the improvement in deposit service charges as well as growth in recently launched products like our commercial card. We remain confident that the opportunity for increased client penetration with our full suite of treasury products is significant. This is in part due to continued progress against our digital product roadmap and digital client experience. Using the competitive advantage inherent in our branch-like network, to focus resources on owning the technology enabled client experience across products with a focus on simplified interactions and client enablement. During the third quarter, we rolled out our internally developed digital onboarding platform and are on track to deliver full service capability to our commercial clients by the end of the year. As discussed in previous calls, this new platform reduces total onboarding time through an entirely digital experience. lowering risk, limiting internal handoffs, and enabling our clients to move at their pace of their business. We have also been clear in our desire to rebuild and significantly enhance our successful but subscale private wealth business. We are currently two quarters into systematically revamping our offering, including updating our go-to-market strategy, expanding our products, improving our back office operations, investing in our front-end client experience, and adding quality talent. The foundational build should be largely complete by the middle of next year, resulting in best-in-class offering. We continue to experience strong organic inflows, with about half coming from new clients. Year-to-date net organic inflows were over $225 million, supporting the change in AUM balances of down 6% compared to an S&P market decline of 25%. In a period of tremendous market uncertainty, Texas Capital Securities is yet another way we can now partner with our commercial clients in a unique and differentiated manner. While overall market conditions pressured realized investment banking revenue this quarter, both the quality and frequency of dialogue is improving, resulting in expanding pipelines across multiple product types. I would also note that in just its second quarter of operation, mortgage sales and trading assisted our clients this quarter in navigating a historically complex interest rate environment, generating over $1 million in fee-based revenue and further substantiating our ability to deliver considerable value to this important client segment. As we undertook this transformation, we understood the concentrations of the loan portfolio against the capital base required rationalization. In early September, we announced the strategic divestiture of our insurance premium finance portfolio, which is on track to close in the fourth quarter, subject to customary closing conditions. This transaction will further increase our ability to sustainably deliver value accretive growth in our Texas-focused offering, while the equity return to our balance sheet through this transaction will have the immediate effect of increasing our tangible book value per share by approximately six and a half percent. Upon close, we expect common equity tier one to increase approximately 200 basis points, resulting in regulatory capital ratios in top decile of our peer group and placing us in the most favorable capital position in the history of our firm. The accretive impacts on our balance sheet further include a reduced loan to deposit ratio and an increased highly liquid assets ratio as $3.4 billion of cash proceeds will be held in liquid assets in the near term. Following the closing of the transaction, the loan portfolio composition will also be more representative of our areas of focus, namely core C&I, which will comprise approximately 50% of the total portfolio, a significant differentiator from our peers. We know that delivering shareholder returns is dependent on not only higher quality earnings, but on a lower cost of capital earned through financial resiliency. Compared to our starting point at the end of 2020, we have notably improved our position relative to this objective. Capital ratios are considerably higher, with loss absorption capacity supported by consistently conservative and elevated reserve coverage ratios. Liquid assets are stable with reduced reliance on higher cost, lower quality funding sources. Our loan portfolio is increasingly representative of our stated focus on banking the best clients in our markets, and we continue to reduce the volatility of future earnings through expanded capabilities and our proactive interest rate risk management program. A final comment on the operating environment. sentiment across all sectors is that inflationary pressures and the ensuing rate environment will create headwinds for businesses if they have not already begun. Our strategic planning process acknowledged that we would go through a cycle during our plan horizon. As such, we are prepared and positioned to continue investing against the strategy to make meaningful market share gains. We continue to proactively monitor for recessionary exposures caused by economic and geopolitical uncertainty. Established credit disciplines include quarterly borrowing specific reviews, quarterly portfolio reviews, and client-specific strategy assessments are now mature. Elevated awareness continues, both in monitoring the existing portfolio and ensuring our desired credit risk appetite is being consistently applied throughout new client acquisition. We do not manage the bank in a risk-on, risk-off posture, but instead based on the belief that client selection is always paramount, including as we enter what we expect to be a challenging operating environment in 2023. Thank you for your continued interest in and support of our firm. I'll turn it over to Matt to discuss the quarter's results. Matt.