Texas Capital Bancshares, Inc.

Welcome to the Texas Capital Bank Shares, Inc. Q1 conference call. My name is Karlyn. I'll be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Jocelyn Kukulka, to begin. Jocelyn, please go ahead.

Good morning, and thank you for joining us for TCBI's first quarter 2024 earnings conference call. I'm Jocelyn Kukulka, head of investor relations. Before we begin, please be aware this call will include forward-looking statements that are based on our current expectations 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 and 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. I'll now turn the call over to Rob for opening remarks.

Thank you for joining us today. Client adoption trends accelerated again this quarter, evidencing our differentiated market position as the preferred Texas-based platform, providing the widest possible range of products and services on parity with the largest money center banks. Our industry-leading liquidity and capital have proven to be a competitive advantage through market and rate cycles. CET1 of 12.4%, ranks third amongst the largest banks of the country. Tangible common equity to tangible assets of 9.8% ranks first amongst the largest banks in the country. And liquid assets of 27% allows for a consistent and proactive market-facing posture as we are uniquely capable of supporting the diverse and broad needs of our clients. in what continues to be a dynamic and challenging operating environment for many industries. Through cycle prioritization of our balance sheet is enabling us to increasingly pivot, observe strategic success into financial outcomes necessary to deliver investor value creation through higher quality earning streams associated with a distinctive set of businesses. Fee income from our areas of focus increased 62% linked quarter and 20% year over year with treasury wealth and investment banking all delivering growth consistent with expectations. Non-interest income comprised over 16% of total revenue as we are now sustainably delivering fee income as a percentage of total revenue within our target range for full year 2025. The evolution of our Treasury Solutions platform is one of the most significant and important improvements that we have delivered for our clients. Our now best-in-class payments offering allows us to successfully compete for, win, and serve as the primary operating relationship for the best clients in our markets. The volumes flowing through our payment systems have increased significantly in the last several years. contributing to a record quarter in Treasury product fees of $8.7 million, a 14% improvement in gross payment revenues year over year. Treasury business awarded in prior quarters continues to ramp at a pace that exceeds industry norms. New business year-to-date is tracking ahead of internal targets, and pipelines across Treasury management products continue to increase. Our firm now provides both payment products and services in parity with the major money center banks and a client onboarding process that is faster and more efficient. The consistent improvement in the client journey is augmented by our high touch, local service, and decisioning. The full rebuild of the private wealth business that I have detailed on prior calls is nearing completion, resulting in a front, middle, and back office structure built on leading technology geared towards superior client experience and significant scale. The pace of client acquisition is ahead of internal expectations as client count has now grown nearly 40% since we began the transformation in early 2021. And AUM has increased nearly 80% over the same time. We remain optimistic about the future earnings potential of this business and in our ability to create further connectivity across all our services as the pace of client acquisition accelerates through the year. Our investment bank continues to deliver improving contributions as we near the two-year anniversary of its launch. Investment banking and trading income more than doubled quarter over quarter to $23.1 million, an increase of 23% year over year. All the largest product offerings, syndications, capital markets, capital solutions, M&A, and sales and trading deliver quarter over quarter revenue growth. Sales and trading revenue doubled in the quarter and the M&A team closed multiple transactions across different industries sourced from different business segments. We continue to hit milestones in the still maturing investment banking offering every quarter and are building a base of consistent and repeatable revenues that will be a meaningful contributor to future earnings. After the unprecedented system-wide rate-driven deposit rotation in 2023, non-interest-bearing deposit accounts outside of mortgage finance are stabilizing around 15% of total deposits and indeed grew slightly quarter over quarter. Enhanced capabilities in both our treasury solutions and private wealth offering enabled the firm to retain and grow client funds during 2023, with those trends continuing into this year. As I mentioned last quarter, the firm has been and remains committed to banking the mortgage finance industry as it weathers the most challenging operating environment in the last 15 years. Over the last two years, we have refocused client selection and improved the service model as we look not to expand share, but to instead deepen relationships through improved relevance with the right clients. To achieve this, we have taken steps to better align the mortgage finance products and support teams throughout the firm to serve the holistic needs to these clients with a broad suite of products and services custom designed to support them. While the rate environment continues to disproportionately impact this client set, our commitment to effectively serving these clients will, over time, deliver risk-adjusted returns consistent with firm-wide objectives. The firm remains fully committed to improving financial performance and believes that our position of unprecedented strength is enabling us to serve the best clients in our markets. Our focus this year is on scaling our value of creative businesses through increased client adoption, improved client journeys, and realized operational efficiencies. Intentional decisions made with the support of analytical rigor to fortify the firm over the last several years have positioned us to deliver attractive through cycle shareholder returns with both higher quality earnings and a lower cost of capital. Lastly, one of the two first calls I made when I agreed to join Texas Capital was to my longtime partner and good friend, Tim Storms. We needed his talent, expertise, experience, and character if we were going to endeavor to create a premier financial institution out of a bank which desperately needed to address many facets after a very proud founding. His many contributions and dedication to our firm these past three years greatly contributed to a new foundation and beginning at Texas Capital. I would like to congratulate him on his career and wish both him and his family a great run in his retirement, something he has now failed at three times. Here is to staying retired, Tim. Thank you. Now I'll turn it over to Matt to discuss the financial results.