Texas Capital Bancshares(US:TCBI)2024-01-18 17:58Financial Data and Key Metrics Changes - The firm reported a full-year adjusted PPNR growth of 14% to $338 million, with fee revenue growth of 60% and EPS growth of 23% [7][37][68] - Total adjusted revenue increased by $99 million or 10% for the full year, benefiting from a 60% increase in noninterest income [67] - The year-end CET1 ratio was 12.6%, ranking fourth among the largest banks in the country, while tangible common equity to tangible assets reached an all-time high of 10.2% [24][82] Business Line Data and Key Metrics Changes - Treasury product fees were $7.8 million in the quarter, up 10% year-over-year, reflecting the addition of primary banking relationships [14] - Investment banking and trading income decreased to $10.7 million, down from record levels in the previous four quarters [15] - Wealth management income decreased by 7% during the year due to client preference for managed liquidity options [65] Market Data and Key Metrics Changes - The firm experienced a 23% increase in volumes flowing through its payment system over the last two years, contributing to an 11% improvement in gross payment revenues in 2023 [26] - Average mortgage finance loans decreased by $751 million or 16% in the quarter, reflecting seasonal trends in home buying [71] - Ending period mortgage finance noninterest-bearing deposit balances decreased by $1.7 billion quarter-over-quarter due to seasonal tax payments [43] Company Strategy and Development Direction - The company is focused on enhancing the resiliency of its balance sheet and business model over near-term growth, with significant investments made to support scalable businesses [25] - The strategy includes deepening client relationships rather than expanding market share, with a focus on improving service models [10] - The firm aims to leverage its cash management platform to drive deeper client relationships and outperformance relative to the industry [42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the mortgage finance industry is facing its most challenging operating environment in the last 15 years, but expects a recovery in origination volumes as market conditions improve [28][40] - The firm anticipates mid-single-digit growth in revenue for 2024, supported by continued execution across income areas and a slowing of capital recycling efforts [83] - Management remains conservative in its outlook, elevating annual provision expense guidance to 50 basis points of LHI, excluding mortgage finance [85] Other Important Information - The firm repurchased approximately 3.7% of total shares outstanding during the year, at a weighted average price equal to the prior month tangible book value [31][51] - The total allowance for credit loss increased to $296 million or 1.46% of total LHI at quarter end, reflecting anticipated economic challenges [48] Q&A Session Summary Question: Can you provide more details on the revenue guidance and deposit betas? - Management indicated that deposit betas are expected to be limited initially but will build over time as the Fed cuts rates, with a focus on improving productivity in the expense base [62][88] Question: What is the target state composition of the funding base? - Management stated that while they will never hit a target state composition, significant progress has been made in improving the quality of deposits [100] Question: How do you expect mortgage finance loans and deposits to track in 2024? - Management expects average mortgage finance loans to pick up in Q2 and Q3, with a self-funding ratio normalizing back to around 120% [132]