Texas Capital Bancshares Q4 2024 Earnings Report

Texas Capital Bancshares EPS Results

• Actual EPS: $1.43
• Consensus EPS: $1.07
• Beat/Miss: Beat by +$0.36
• One Year Ago EPS: N/A

Texas Capital Bancshares Revenue Results

• Actual Revenue: $245.90 million
• Expected Revenue: $284.03 million
• Beat/Miss: Missed by -$38.13 million
• YoY Revenue Growth: N/A

Texas Capital Bancshares Announcement Details

• Quarter: Q4 2024
• Date: 1/23/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 9:00AM ET

Texas Capital Bancshares (NASDAQ:TCBI) is the parent company of Texas Capital Bank, a full-service financial institution headquartered in Dallas, Texas. The bank provides banking and financial services primarily to businesses, entrepreneurs, professionals and high-net-worth individuals.

Its offerings include commercial and corporate banking, lending, treasury and cash-management services, investment banking, capital markets solutions, private wealth management and personal banking products. Texas Capital Bank also serves specialized industries and markets through expertise in areas such as real estate, energy, technology and healthcare.

Founded in 1998, Texas Capital Bank has expanded from its Texas roots to serve clients across the United States, with a particular focus on major Texas business centers. Rob C. Holmes serves as the company's president and chief executive officer.

Texas Capital Bancshares Q4 2024 Earnings Call Transcript

Key Takeaways

• Fee revenue grew 30% year‐over‐year, with Investment Banking, Treasury Solutions and Private Wealth fees up 36% to $178 million, reflecting strong non‐interest income momentum.
• Adjusted net income rose 11% to $208 million, earnings per share grew 15% to $4.43, and tangible book value reached a record $66.32 per share.
• The bank maintained industry‐leading capital and liquidity, with a 10% tangible common equity ratio (1st among large banks) and cash plus securities representing 25% of assets.
• Net interest margin declined 23 basis points in Q4 amid seasonal mortgage factors, and the bank expects modest recovery in Q1 with sustained margin challenges as rates normalize.
• 2025 outlook targets high single‐ to low double‐digit revenue growth driven by fee income, non‐interest expense growth of high single digits (~$800 million) and provision expense of 30–35 bps, suggesting continued investment in frontline talent.

Presentation

[Operator]

Thank you all for your patience while you're waiting for the start of today's conference call with Texas Capital Bancshares. I would like to remind you to please press star followed by one when asking a question, and please, just as a reminder, during the Q&A session, if you are speaking, just remember to pick up your handset before asking any questions. We'll be beginning today's call in about three minutes' time. Thank you again. Thank you for your patience while you're waiting to begin today's conference call with Texas Capital Bancshares. Thank you all for standing by. We'll be starting today's call momentarily. Good morning all, and thank you for attending the Texas Capital Bancshares, Inc. Q4 2024 earnings conference call. My name is Brika, and I will be your moderator for today. All lines will be muted during the presentation portion of the call.

[Operator]

We'll have an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Jocelyn Kukulka, Head of Investor Relations at TCBI. Thank you. You may proceed.

[Jocelyn Kukulka, Head of Investor Relations at Texas Capital Bancshares, Inc.]

Good morning, and thank you for joining us for TCBI's fourth 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, our most recent annual report on Form 10-K, and subsequent filings with the SEC.

[Jocelyn Kukulka, Head of Investor Relations at Texas Capital Bancshares, Inc.]

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 the call for Q&A. And now I'll turn the call over to Rob for opening remarks.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

Thank you for joining us today. Our firm materially progressed its transformation in 2024, increasingly translating our proven track record of strategic success into the financial outcomes aligned with our well-communicated plans. Our differentiated Texas-based platform continues to provide an increasing number of clients with the widest possible range of products and services customized to their needs. Multi-year client acquisition trends accelerated again this year, with nearly 40% more new significant clients onboarded in 2024 compared to 2023. Contributions from across the platform enabled full-year adjusted financial results highlighted by fee revenue growth of 30%, pre-provision net revenue growth of 9%, earnings per share growth of 15%, and tangible book value growth of 8%, finishing the year at the highest level in firm history.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

On an adjusted basis, full-year return on average assets of 0.74%, return on average common equity of 7%, pre-provision net revenue of $369 million, fee income of $211 million, and earnings per share of $4.43, all reached record levels since the beginning of the transformation. Importantly, we achieved these financial milestones while maintaining industry-leading capital and liquidity, a proven competitive advantage through market and rate cycles. Year-end tangible common equity to tangible assets of 10%, ranking first among the largest banks in the country, with cash and securities of 25%, together allow for a consistent and proactive market-facing posture that clients and prospects have come to trust. Our sustained market momentum and unwavering strategic focus position the firm to continue delivering on stated goals throughout 2025.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

As the materially expanded offerings and capabilities of the firm mature, persistent progress in our fee income areas of focus continue to contribute meaningfully to improved financial results. Fees generated by investment banking, treasury solutions, and private wealth grew 36%, or $47 million this year to $178 million, as our ability to support clients across the full breadth of their financial needs is increasingly represented by accelerating revenue contribution from non-interest income. Investment banking and trading income increased 47% year over year, led by elevated contribution from syndications, capital markets, and sales and trading. We believe the proven success of these still maturing offerings continues to warrant additional investment in products, services, and talent, all of which are incorporated in a 25 outlook that Matt will detail later in the call.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

The deliberate evolution of our treasury solutions platform, while both time and resource intensive, is consistently proving to be one of the most critical investments made during the transformation. Client adoption across our now best-in-class cash management suite continued this quarter, with gross payment revenues increasing over 10% for the second consecutive year. Earning the right to become our client's core operating bank is resulting in both improved fee income and increased deposit balances, with treasury product fees growing 18% this year, non-interest-bearing deposits excluding mortgage finance increasing 4%, and total deposits expanding $2.9 billion, or 13%, for the year. The full rebuild of our wealth platform is now substantially complete, with a notably improved client experience and significantly expanded suite of private banking solutions providing the foundation for accelerating growth this year.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

Moving into 2025, we remain steadfast in our commitment to delivering improved risk-adjusted returns consistent with firm-wide objectives, while maintaining a financially resilient posture necessary to support our clients through all stages of their business or personal life, regardless of the market or rate cycle, resulting in achievement of our financial targets in the second half of this year. Finally, I want to express my appreciation to all our employees, whose relentless commitment and daily efforts over the last four years in executing our strategy are the foundation of our firm's current and future success. I'll turn it over to Matt for the financial results.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Thanks, Rob, and good morning. Starting on slide five, year-over-year quarterly revenue increased 15% to $283.7 million. A strong fee generation and realized structural efficiencies supported the second consecutive quarter of pre-provision net revenue at or near all-time highs. For the full year, total adjusted revenue increased $36 million, or 3%, as the modest rate-driven decline in net interest income was more than offset by a record year of adjusted fee revenue, which increased 30%, or $49 million, for the full year. Quarterly total non-interest expense declined 9% compared to Q3 on an adjusted basis, as the full impact of third-quarter actions were realized alongside regular adjustments to compensation accruals. Full-year adjusted non-interest expense increased less than 1%, as we executed on our strategy of realizing operational enhancements associated with prior investments while effectively positioning the firm for future scale.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Taken together, full-year adjusted PPNR increased $31 million, or 9%, to $369 million, which, as Rob mentioned, represents the high-water mark since the transformation began. This quarter's provision expense of $18 million resulted from charge-offs against previously identified problem credits and moderate loan growth, with full-year provision expense in line with guidance as a percentage of average LHI excluding mortgage finance at 40 basis points. Net income to common was $67 million for the quarter, or $1.43 per share, with full-year adjusted net income to common of $208 million, an 11% increase over adjusted 2023 levels. Our continued financial progress, coupled with disciplined capital management, contributed to a 15% increase in full-year adjusted earnings per share. Our balance sheet positioning remains exceptionally strong, with period-end cash balances of 10% of total assets and cash and securities of 25%, in line with year-end targeted ratios.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Ending period gross LHI balances increased by approximately $162 million, or 1%, late quarter, as C&I and real estate loan growth offset expected seasonal declines in mortgage finance loans. Total deposits decreased by $627 million, or 2%, during the quarter, driven predominantly by known seasonality from annual tax payments remitted out of mortgage finance non-interest-bearing accounts. Excluding that anticipated and temporary reduction, deposits grew by nearly $1 billion, or 5%, with now well-established growth trends augmented by expected seasonal inflows from select commercial clients. Total gross LHI, excluding mortgage finance, increased 5% for the full year and 11% annualized late quarter. Commercial loan balances expanded $178 million, or 6%, annualized, with broad contributions across areas of industry and geographic coverage. Real estate loan growth of $300 million was driven by increased client activity and slightly slower payoffs, resulting from the material move higher in the 10-year U.S.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Treasury rates this quarter. We continue to provide value in multiple ways for those clients to whom we choose to extend balance sheet, which manifests in the sustainability of the deposit and fee income trends noted earlier. Average mortgage finance loans increased 5% during the quarter, driven by mortgage rate declines late in the third quarter and modestly increased dwell times. Given ongoing rate volatility, we remain cautious on our outlook going into 2025. Estimates from professional forecasters suggest total market originations to increase by mid-teens % in 2025, compared to our internal estimates of approximately 10% should the rate outlook remain intact. Full-year deposit growth of $2.9 billion, or 13%, was driven predominantly by our continued ability to effectively leverage growth in core operating relationships to serve the entirety of our clients' cash management needs.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Q4 marked the second consecutive quarter of growth in non-interest-bearing deposits, excluding mortgage finance, which increased 4%, or $127 million year-over-year, finishing at the highest levels since the third quarter of 2023. When combined with client interest-bearing deposit growth of $943 million over the same period, our sustained success in attracting high-quality funding associated with our core offerings is enabling maintenance of decade-low broker deposit levels and continued select reduction of higher-cost deposits, where we are unable to earn an adequate return on the aggregate relationship. Period-end and mortgage finance non-interest-bearing deposits decreased $1.6 billion quarter over quarter, as escrow balances related to tax payments are remitted in late November and run through January before beginning to predictably rebuild over the course of the year.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

For the quarter, average mortgage finance deposits were 107% of average mortgage finance loans, down modestly from the prior quarter and in line with our previous guidance of 110%. Ending period non-interest-bearing deposits, excluding mortgage finance, were 14% of total deposits, and our expectation is that that percentage remains relatively stable in the near term. Our modeled earnings at risk were relatively flat quarter over quarter, with current and prospective balance sheet positioning continuing to reflect a business model that is intentionally more resilient to changes in interest rates. Given both the volume of maturing swaps and currently more conducive interest rate curve, we do anticipate future interest rate derivative or securities actions in 2025, augmenting potential rate fall earnings generation at materially better terms than available during our deliberate pause through the mid-part of last year.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

The predictable quarterly decline in net interest income of 23 basis points and $10.5 million, respectively, was primarily related to seasonal mortgage warehouse factors, as well as timing differences associated with the impact of lower interest rates on our SOFR-weighted loan portfolio relative to Fed funds-driven realized benefits of rate reductions on overall deposit costs, which will be more fully reflected in January financials. Adjusted quarterly non-interest expense decreased $17.9 million to $172.2 million, as the full quarter expense benefit of the strategic actions taken in the third quarter were realized, along with regular adjustments to compensation accruals. As a reminder, first quarter non-interest expense will be elevated due to certain seasonal expenses related to payroll and compensation expense.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

The total allowance for credit loss, including off-balance sheet reserves, increased $5.9 million on a linked quarter basis to $325 million, up $29 million year-over-year, which, when excluding mortgage finance, is 1.87% of LHI, a high since the adoption of CECL in 2020. Quarter over quarter, criticized loans declined $184 million, or 20%, driven by both more upgrades and fewer downgrades across commercial and real estate credits than in any quarter since 2022. Criticized loans as a percentage of LHI exited the year at 3.18%, down 45 basis points, or $24 million relative to the fourth quarter of last year. Despite these notable improvements, we remain highly focused on proactively managing credit risk across both a range of macroeconomic and portfolio-specific scenarios, including those associated with the recent backup in interest rates.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Net charge-off of $12.1 million, or 22 basis points of average LHI, was driven predominantly by the partial resolution of previously identified problem credits. Consistent with prior quarters, capital levels remain at or near the top of the industry. Total regulatory capital remains exceptionally strong relative to both peer group and our internally assessed risk profile. CT1 finished the quarter at 11.38%, a 19 basis point increase from prior quarter, as capital generation outpaced increased risk-weighted assets associated with quarterly loan growth. We continue to manage capital in a proactive and analytically rigorous manner, with near-term capital availability supported by the implementation of enhanced credit structures for a portion of our mortgage warehouse facilities, which could result in a subset of that loan portfolio being eligible for reduced risk weighting.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Firm ended fourth quarter with tangible common equity to tangible assets of 10%, which continues to be ranked first amongst the largest banks in the country and experienced an increase in tangible book value per share of 8% year-over-year to $66.32, a record level for the firm. Turning to the full-year outlook, which incorporates continued realized momentum associated with multi-year investments across the platform, total revenue growth of high single- to low double-digit % contemplates another year of industry-leading client adoption and associated growth in our fee and commodities of focus, with full-year targeted 2025 total non-interest revenue reaching $270 million. Anticipated non-interest expense growth of high single digits is higher than previously established guidance and accounts for increased salaries and benefits-related spend associated with the improved fee income outlook.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

After the multi-year process of effectively building the reserve to record levels, reflecting our consistently conservative posture, limited remaining legacy problem credits and recent migration trends support our full-year provision outlook of 30-35 basis points of average LHI, excluding mortgage finance, which more closely tracks with trailing charge-off rates while preserving industry-leading coverage levels. Taken together, this outlook suggests another year of meaningful earnings growth and achievement of quarterly 1.1 ROAA in the second half of the year. Operator, we'd now like to open up the call for questions. Thank you.

[Operator]

Thank you, Matt. We will now begin the question and answer session. If you would like to ask a question, I do remind you to please press star followed by one on your telephone keypad. And if for any reason you would like to remove that question, please press star followed by two. And again, to ask a question, press star followed by one. And as a quick reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We'll pause here for a second whilst questions are registered. We have the first question from Ben Gerlinger with Citi. Please go ahead.

[Ben Gerlinger, VP of Equity Research at Citigroup]

Hey, good morning.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

Good morning, Ben.

[Ben Gerlinger, VP of Equity Research at Citigroup]

I was wondering if we could kind of unpack the expense guidance a little bit. I get that you're implying stronger fee income, specifically the investment banking just typically has a higher expense base. And I know you're not going to give 26 guidance, but is there kind of a plateauing effect, or should we kind of assume kind of a similar correlation of stronger fee income, stronger or higher expense base kind of going forward? I'm just trying to understand the relative change on the expense front.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yeah, happy to give you some detail on that, Ben. So the midpoint of that high single-digit guide puts you right around $800 million or so for the year, which is $30 million higher than the $770 that we noted on the third quarter call. That increase is almost entirely driven by additional frontline talent, primarily in investment banking and treasury solutions, which we started adding in late 2024 and would anticipate to grow through the first half of the year. You'll note that the fee income guidance was also increased by a similar amount to $270 from the $240 that we noted in October. As previously discussed, platform maturity is driving significantly tighter earnings credits on incremental investment.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Based on the timing of those new frontline ads, Ben, we'd expect the fees to ramp over the duration of the year, which is consistent with our outlook of delivering 11% in the back half of 2025. To your point, given the ability to translate investments into high-quality revenue growth, we would expect continued pickup in 2026. This should be nicely accreted to the full return profile. Then maybe one other comment on expenses as you work your way from the fourth quarter into the first quarter. I do want to call out that first quarter non-interest expense always includes seasonal adjustments associated with comp and benefits. The number should be between about $15-$17 million this year, up slightly year-over-year. We have a larger portion of the employee base who receives variable comp.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Excluding that amount, the impact of the new adds late in the year through the first quarter should push salaries and benefits back up to about $120 or so exiting Q1, given both annual incentive accrual resets as well as the new talents being onboarded to drive additional fee income.

[Ben Gerlinger, VP of Equity Research at Citigroup]

Gotcha. That's helpful. And then I know previously, when you're talking investment banking or just general fee income upside, and some of it was predicated on lower rates, you're going to get a different mix of investment banking fees. With rates not coming in as much as previously expected, do you think that transition still takes place, or just trying to get a sense of the fee cadence and where that business specifically is?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yeah, Ben, I think at some point we'll be big enough to be more correlated to the macro. At this point, we're pretty confident in our ability to generate fee income. The growth this year was significant across all three areas of focus. Each one of them grew by more than 10%. We did over 30 capital markets transactions this year. We're just outside the top 10 for middle market book runners on syndicated facilities, north of $100 billion of notional trades. There's significant momentum in the investment bank. Rob noted in his comments that we'd anticipate another year of record new client growth. As those clients land on the platform, you're increasingly able to solve a wide range of potential financing issues for them, which is likely to result in continued upward trajectory on non-interest income.

[Ben Gerlinger, VP of Equity Research at Citigroup]

Okay. That's helpful, Colin. Thank you.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

You bet.

[Operator]

Thank you. Your next question comes from Peter Winter with D.A. Davidson. Please go ahead.

[Peter Winter, Managing Director Senior Research Analyst at D.A. Davidson & Co.]

Good morning. I wanted to also ask about the guidance. I saw the increase to total revenue growth to high single digit, below double digit versus prior guidance of high single digit, so the question is, although it's strong, I'm just surprised you didn't change the lower end of the guidance given a stronger outlook for fee income, and you talked about last quarter that with less rate cuts in the forward curve, that would lead to upside as well to the forecast.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Thanks for the question, Peter. Obviously, a lot of uncertainty in the rate outlook. So the path to the higher end of the revenue guide, we gave you a 60% interest-bearing deposit beta by the mid-part of the year. Expect with a 7% 30-year fixed-rate mortgage, you're going to have a $1.9 trillion market, which should drive about a 10% increase in average warehouse balances for us, to about $5 billion full-year average, $270 million of fees. If you're able to deliver between, call it, mid to high single-digit LHI growth, that could push it to the higher end of the revenue guide. Rob said, since he's been here and at this point is fully indoctrinated through the culture, the intent is not to grow loans. The intent is to add high-quality clients and help them solve problems.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

So to the extent that that results in additional loan growth, that obviously would be accreted to the revenue guide.

[Peter Winter, Managing Director Senior Research Analyst at D.A. Davidson & Co.]

Got it. And then this quarter, you realized a 32% deposit beta. I'm just wondering if the Fed is done raising rates, is there still room to lower deposit costs, and where do you think the beta can go to?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yeah, we think it could get to 60%. So 32% is what showed up in the quarterly financials, but through year-end, Peter, we pushed pricing down to closer to a 50% rate. So we had about $550 million of CDs mature in the quarter. They rolled off at a rate of about 515 basis points. Of those, 460 or so came back on at a rate closer to 440 basis points. So those actions reduced interest-bearing deposit costs to 415 in December relative to 463 in September. That's not a spot number. That's a full month number. We got about $820 million of CDs that are going to mature in Q1 at an average rate of 5% relative to posted rates of about 4.4%. And we'll look to replace or reprice those based on various factors related to balance sheet positioning.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

So it's with those components that we think we get to the 60 interest-bearing beta by mid-year.

[Peter Winter, Managing Director Senior Research Analyst at D.A. Davidson & Co.]

That's even without any rate cuts?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yes.

[Peter Winter, Managing Director Senior Research Analyst at D.A. Davidson & Co.]

That's great. Thanks, Matt.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

You bet.

[Operator]

Thank you. We now have a question from Jared Shaw with Barclays Capital. You may begin.

[Jared Shaw, Managing Director at Barclays Capital]

Hi, good morning. Maybe could you spend a little bit of time on margin and how we should be thinking about that in light of your 110 ROA goal at the second half of the year?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yeah. So starting with Q1, it's again important to just note that there's still some remaining seasonality in the balance sheet. So with mortgage finance declines, you are likely to see a bit of a pullback in NII in Q1. The rate reduction in November and December has not yet flowed through to mortgage finance yield. There's a bit of a delay on that. So that should support actual expansion of margin in Q1, north of 3% back to levels that we saw in Q1 of last year. And then I think, Jared, maybe better than trying to articulate a forward margin, we just need to think through the guides that we just provided on how to move to the higher end of that revenue growth.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

I think you're just going to be sustainably above 3% based on that outlook, but have a variety of different paths to deliver the revenue targets.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. All right. Thanks, and then looking at capital and the buyback announcement, should we be thinking that buybacks are a bigger part of the plan going forward, or is this more of just an administrative renewal of the prior buyback?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

We'll use the same approach that we've used since Rob's arrival, to be honest, Jared. So we said before we're trying to build a business model and balance sheet for all cycles, which includes inevitable increase at some point in client appetite for bank debt. We've been quite adamant that having especially high tangible common equity levels is what we believe to be a competitive advantage. We also noted in the remarks the potential for increased regulatory capital from enhanced credit structures for a portion of the mortgage warehouse facilities. That's not enabled through use of an expensive derivative, but instead adjustments to facility structure, which better reflects what clients are used to with large bank counterparties. We did migrate a few clients into that structure prior to year-end and have potential for up to 10% of warehouse balances to qualify for a reduced risk weighting by end of Q1.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Too early to get into full-year impacts on that, but we'll certainly keep you up to date as it moves along. Obviously, it would potentially create some excess regulatory capital.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. Thanks. And then just finally for me, I guess, what would be the sensitivity of the fee income guide if we got one or zero rate cuts from the ECR impact of that?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

We feel pretty confident in the 270, regardless of the rate outlook. I mean, our ability to onboard gross B times B is, I think, peer-leading. So we grew at 11% this year, 18% growth in treasury product fees. That's not an initiative that was spun up post-Silicon Valley Bank. That's a core component of how we want to build the franchise. So I'd anticipate continued growth in core operating deposits this year alongside continued growth in treasury product fees. And again, feel pretty good about the 270, regardless of economic outlook. Rob, do you have anything you want to add on that?

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

No, I think you've articulated it well.

[Jared Shaw, Managing Director at Barclays Capital]

Great. Thanks a lot.

[Operator]

Thank you, Jared. Your next question comes from Anthony Elian with J.P. Morgan.

[Anthony Elian, Equity Research Analyst at JPMorgan Securities LLC]

Hi everyone. Just to follow up on the outlook. Last quarter, you guided 2025 NII to increase high single digits. But if I do the math right, your revenue guide implies NII increasing about mid-single digits now. Matt, just what changed in the implied lowered NII guide? Is it just a higher-for-longer rate outlook?

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yeah. I'm not sure that the NII guides changed a whole lot. So if you get mid to high single-digit loan growth, which is just going to be an outcome of the products and services that clients choose to use on the platform, you could settle into the higher end of that revenue guide.

[Anthony Elian, Equity Research Analyst at JPMorgan Securities LLC]

Okay, so even using the four.

[Anthony Elian, Equity Research Analyst at JPMorgan Securities LLC]

Go ahead.

[Matthew Scurlock, CFO at Texas Capital Bancshares, Inc.]

Yeah. Alongside $5 billion of average warehouse, 60% interest-bearing deposit beta in the mid-year, $270 million of fees.

[Anthony Elian, Equity Research Analyst at JPMorgan Securities LLC]

Okay. And then my follow-up, the additional frontline talent you plan to make this year, is this in segments and products you are already in, or are there still areas you may be considering to enter as well? Thank you.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

It's furthering the skill set and talent base across all of our different industry verticals and segments in the investment bank as well as treasury services. So no real new introduction of new products and services other than what we've recently introduced, such as public finance, but none for the quarter going forward.

[Anthony Elian, Equity Research Analyst at JPMorgan Securities LLC]

Thank you.

[Operator]

Thank you. As a quick reminder, please press star followed by one if you would like to register a question. And we now have Jon Arfstrom with RBC on the line. Jon, can you please ensure your line is unmuted locally before speaking? Jon Arfstrom, could you please ensure your line is unmuted locally? We will close this question, and I can confirm that does conclude the question and answer session here. I would like to hand it back to Rob Holmes for some closing remarks.

[Rob Holmes, Chairman President and CEO at Texas Capital Bancshares, Inc.]

Just want to thank everybody for your interest in joining the call today, and look forward to next quarter. Thank you.

Participants

Executives

• Matthew Scurlock, CFO
• Rob Holmes, Chairman President and CEO
• Jocelyn Kukulka, Head of Investor Relations

Analysts

• Ben Gerlinger, VP of Equity Research at Citigroup
• Jared Shaw, Managing Director at Barclays Capital
• Anthony Elian, Equity Research Analyst at JPMorgan Securities LLC
• Peter Winter, Managing Director Senior Research Analyst at D.A. Davidson & Co.