Texas Capital Bancshares(US:TCBI)2020-07-23 03:41Financial Data and Key Metrics Changes - The second quarter revenue reached a record $280 million, showing an increase both on a linked-quarter and year-over-year basis [16] - The annualized non-interest expense run rate is being reduced by approximately $30 million, focusing on salaries and amortization of capitalized software [17][18] - Provision for loan losses for the quarter was $100 million, which included charges related to large energy and leveraged deals [24][25] Business Line Data and Key Metrics Changes - Average loans held for investment (LHI) excluding mortgage finance increased slightly, primarily driven by Paycheck Protection Program (PPP) loan fundings [19] - Non-interest income saw a significant increase due to improved gain on sale from holding MCA loans for shorter durations [28] - The mortgage finance business is expected to continue driving meaningful revenue, leveraging its lowest risk loan category [16] Market Data and Key Metrics Changes - The company is experiencing meaningful growth in deposits, with expectations for further reductions in interest-bearing costs [20] - The net interest margin (NIM) decreased due to additional liquidity build, but core NIM actually expanded when adjusted for liquidity [21] Company Strategy and Development Direction - The company is focusing on a back-to-basic strategy to capture new clients and increase share of wallet in its primary middle markets [13] - Plans are in place to return to desired earnings levels within 6 to 18 months, with a focus on managing capital and liquidity [13][15] - The company is committed to investing in high-performing bankers and enhancing its product offerings to improve client relationships [59][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to recover and grow, emphasizing the importance of profitability over mere loan growth [50][51] - The management team believes that the remaining energy and leveraged loan portfolios are adequately reserved and manageable [80] - The company is not considering another merger at this time, focusing instead on internal growth and stability [96][98] Other Important Information - The company has been proactive in managing credit risk, particularly in high-risk segments like energy and leveraged lending [38] - The digital platform of Bask Bank remains a viable strategy, although no significant marketing investments will be made in the near term [67] Q&A Session Summary Question: Reserve adequacy and capital adequacy - Management feels confident about the reserve ratio of 82 basis points, citing proactive management of high-risk segments [36][39] - Capital levels are deemed comfortable, with potential consideration for adding subordinated debt [41] Question: Loan growth and NII expectations - A slight decline in net interest income (NII) is expected in Q3, with no significant deposit runoff anticipated [42] Question: Strategic focus narrowing - The company is focusing on providing quality loan and deposit products while enhancing banker tools and capabilities [44] Question: Investments in markets - The company plans to hire 10 to 15 bankers over the next 6 to 12 months to support revenue growth [66] Question: Balance sheet management - There are no plans to reduce the balance sheet; instead, the company is reallocating excess liquidity into securities [92][104]