Texas Capital Bancshares to Acquire $400M Healthcare Portfolio, Announces Strategic Updates » Dallas Innovates

Rob C. Holmes, President and CEO, Texas Capital Bancshares (Composite Photo; Original: Texas Capital)

Texas Capital Bancshares Inc., the parent company of Texas Capital Bank, announced a series of actions that it said advance the company’s strategic plan announced in September 2021. This includes a new commitment of $400 million in its corporate banking and healthcare division, the company said.

“Three years after announcing our strategic plan, we are pleased with the tremendous progress we have made in building a balance sheet and business model worthy of serving the best customers in our markets,” said Rob C. Holmes, chairman and CEO, in a statement. “The actions announced today represent another purposeful step in translating our observed strategic success into focused financial results driven by long-term value creation. We remain focused on delivering exceptional results for customers and shareholders by leveraging our differentiated platform.”

After spending years covering and building capabilities in the corporate banking and healthcare vertical, Texas Capital said it has agreed to acquire a portfolio of approximately $400 million in committed exposure to healthcare companies. Many of the companies in the portfolio are backed by sector-focused sponsors with “significant track records of value creation” and with whom Texas Capital has significant institutional expertise, the firm added. Texas Capital said it expects these clients to benefit from its broad, solutions-focused platform, with revenue cycle management, healthcare asset-based lending and other sector-specific products integrated with diversified cash management, commercial banking and investment banking capabilities.

The transaction is expected to be finalized this month.

Balance sheet reorganization

In addition to targeted investments to expand its portfolio and enhance client services, in August the company continued its multi-year process of effectively streamlining its balance sheet by selling approximately $1.24 billion of available-for-sale securities with an average yield of 1.23% that were purchased prior to 2021. The cash proceeds from the sale were used to purchase $1.06 billion of securities with a yield of 5.26%, which Texas Capital estimates will generate additional net interest income of $35 million to $40 million on an annualized basis based on the federal funds futures curve. The $139 million net loss generated by the repositioning, which had no impact on GAAP equity or Texas Capital’s industry-leading ratio of equity to tangible assets, is expected to result in a net loss in the third quarter of this year and then significantly improve profitability metrics in the fourth quarter of 2024 and subsequent reporting periods.

Texas Capital said it continues to leverage “proven capabilities to deliver technology-enabled process improvements that enhance client service, reduce risk and deliver structural efficiencies.”

Adding products to serve customers

Texas Capital announced it is expanding its product offerings and capabilities to enhance client service in several areas:

Texas Capital Securities Energy Stock Research
To expand Texas Capital Securities’ ability to serve corporate and investment clients in the energy and related sectors, Texas Capital announced the addition of an equity research and sales team led by Derrick Whitfield and Thomas McGarrity. Energy Equity Research is intended to enhance the firm’s trading capabilities, investment insights and dedicated energy sector coverage, as well as provide a platform to further expand its institutional services business. Texas Capital Securities Energy Equity Research is expected to report on its initial coverage universe no later than early 2025, the firm said.

Texas Capital Direct Loans
In August, Texas Capital announced the launch of its Direct Lending platform led by Tim Laczkowski. Texas Capital Direct Lending (TCDL) focuses on providing non-bank term loans to middle-market businesses, enabling Texas Capital clients and prospects to access a broader range of alternative capital sources while benefiting from Texas Capital’s full suite of commercial and investment banking products. The launch further expands Texas Capital’s ability to provide comprehensive solutions and solidifies the firm’s position as the “first choice” for middle-market businesses based in Texas and beyond, according to the company.

Public Finances of the Capital of Texas
In May, Texas Capital announced the formation of the Texas Capital Securities public finance team, which will provide subscription services to governments, nonprofits and institutions in Texas and across the country. The team, led by industry veteran Steven Genyk, now includes dedicated bankers in Dallas, Houston and Austin to serve these sectors.

SBA Loans at Texas Capital
The company said it remains committed to serving businesses throughout their lifecycle, and an expansion of customized services for business banking clients aimed at accelerating customer acquisition will happen next year. Leveraging its improved reach and delivery, Texas Capital said it expects to be among the top five SBA lenders each year to Texas-based businesses by 2025.

Striving for transformation

Texas Capital said it has undergone an enterprise-wide transformation over the past three years to become a leading Texas-based full-service financial services firm able to provide clients with a broad range of differentiated and relevant products and services.

Texas Capital said the company demonstrated a strong balance sheet relative to its peers, which translated into both a 357 basis point increase in total regulatory capital since the end of 2020 and sector-leading capital levels relative to the largest U.S. banks.

Texas Capital also launched Texas Capital Securities. The investment bank complements the firm’s commercial banking business by offering clients a complete set of solutions in Texas Capital’s defined geographic and industry areas. Since opening in December 2021, the firm has completed more than $135 billion in securities transactions, made the nation’s largest institutional term loans in 2023 and 2024, and built a broad business capable of providing advisory services, capital markets, and other financial solutions. Texas Capital said it expects to achieve its published goal of 10% of total revenue in full-year 2024, a year earlier than its original goal set in 2021.

The company said it has also developed a “best-in-class” treasury solutions platform, with a significant multi-year investment in industry-leading cash management capabilities for clients, which continues to drive industry-leading growth in core operating relationships, revenue and client deposits. In the second quarter of 2024, treasury product fees as a percentage of revenue more than doubled compared to full-year 2020, which, combined with top-quartile client deposit growth, demonstrates progress leveraging “best-in-class product and service offerings to effectively meet clients’ deposit and cash management needs,” Texas Capital said.

Texas Capital Bancshares Inc. is a component of the Russell 2000 and S&P MidCap 400 indices.