Texas Capital Bancshares(TCBI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved a record adjusted total revenue of $1.3 billion, with adjusted net income to common stockholders reaching $314 million, and adjusted earnings per share at $6.80, marking a 53% improvement over 2024 levels [5][12] - Full-year adjusted return on average assets (ROAA) was 1.04%, a 30 basis point improvement compared to 2024, while Q4 ROAA reached 1.2% [4][10] - Adjusted pre-provision net revenue was a record $489 million, reflecting a 32% increase year-over-year [11][12] Business Line Data and Key Metrics Changes - Commercial loan growth was $1.1 billion, or 10%, year-over-year, with total gross loans increasing by $1.6 billion, or 7% [5][14] - Adjusted fee-based revenue grew by 9% to $229 million, marking the third consecutive year of record fee income [11][20] - The company reported a 24% increase in treasury product fees for the full year, reflecting robust client acquisition [21] Market Data and Key Metrics Changes - The company expects total market originations in mortgage finance to increase by 16% to $2.3 trillion in 2026, with internal estimates suggesting a 15% increase in full-year average balances [15][40] - Average mortgage finance loans increased by 8% late in the quarter, driven by strong industry demand [15][48] Company Strategy and Development Direction - The company is focused on executing its strategy with discipline, scaling operations intentionally, and delivering consistent superior returns [8][25] - The strategic focus has shifted towards realizing the full potential of investments made in infrastructure, talent, and technology platforms [7][58] - The company aims to enhance profitability through diversified fee income streams and disciplined capital allocation [8][25] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook for the macroeconomic environment, maintaining a conservative view on provisions for credit losses [12][44] - The company anticipates continued realized scale for multi-year platform investments, with total revenue growth expected in the mid to high single-digit range [25][26] - Management highlighted the importance of maintaining financial resilience amid economic uncertainty [25][32] Other Important Information - The company repurchased 2.2 million shares, or 4.9% of prior year shares outstanding, at approximately 114% of prior month's tangible book value per share [6][24] - The tangible common equity to tangible assets ratio finished at 10.56%, ranking first among the largest banks in the country [5][24] Q&A Session Summary Question: Investment banking and trading outlook - The investment banking pipeline remains healthy, with Q4 transaction volume up about 40%, and the company arranged approximately $49 billion of debt for clients in 2025 [28][29] Question: Capital management and buyback strategy - The company is pleased with its capital management, having increased CET1 to 12.13% while growing loans and buying back shares [32][34] Question: Expense outlook and hiring plans - The company plans to focus on leveraging previous investments by expanding capabilities and adding targeted coverage, with expected mid-single-digit expense growth [36][37] Question: Credit trends and provision guidance - The company experienced a modest increase in special mention loans, primarily related to a few multi-family properties under pressure [44][49] Question: Net interest margin (NIM) expectations - The company expects NIM to remain flattish in Q1, with a focus on managing deposit repricing and maintaining a strong client acquisition strategy [45][54]