Texas Capital Bancshares To Acquire $400M Healthcare Portfolio, Announces Strategic Updates
Rob C. Holmes, president and CEO of Texas Capital Bancshares [Composite photo; original: Texas Capital]
Texas Capital Bancshares Inc., the parent company of Texas Capital Bank, has announced a series of actions it said advanced the firms strategic plan as announced back in September 2021. That includes a new $400 million commitment in its corporate banking healthcare vertical, the firm said.
“Three years after announcing our strategic plan, we’re pleased with the tremendous progress made building a balance sheet and a business model worthy of serving the best clients in our markets,” President and CEO Rob C. Holmes said in a statement. “Actions announced today represent another deliberate step in translating observed strategic success into targeted financial performance associated with long-term value creation. We remain focused on delivering exceptional results for clients and shareholders by leveraging our differentiated platform.”
Following the multiyear coverage and capability build in its corporate banking healthcare vertical, Texas Capital said it has agreed to acquire a portfolio of roughly $400 million in committed exposure to companies in the healthcare sector. Many of the companies in the portfolio are supported by sector-focused sponsors with “notable track records of value creation” and with whom Texas Capital has significant institutional knowledge, the firm added. Texas Capital said it expects those clients to benefit from an extensive solutions-focused platform, with revenue cycle management, healthcare asset-based lending, and other sector-specific products integrated with differentiated cash management, commercial banking and investment banking capabilities.
The transaction is slated to close this month.
Realigning the balance sheet
In addition to deliberate investments to expand the portfolio and enhance client-facing services, in August the firm continued its multiyear process of effectively rationalizing its legacy balance sheet, selling about $1.24 billion of available-for-sale securities with an average yield of 1.23%, bought before 2021. Cash proceeds from the sale were used to buy $1.06 billion of securities at a yield of 5.26%, which Texas Capital said is expected to contribute an incremental $35 to $40 million in net interest income on an annualized basis based on the federal funds futures curve. The $139 million after-tax loss generated by the repositioning, which had no impact on GAAP equity or on Texas Capital’s industry leading tangible common equity to tangible assets ratio, is expected to result in a net loss for the third quarter of this year before notably improving forward profitability metrics in the fourth quarter of 2024 and subsequent reporting periods.
Texas Capital said it continues to leverage “proven capabilities to deliver tech-enabled process improvements that enhance client journeys, reduce risk, and deliver structural efficiencies.”
Adding products to serve clients
Texas Capital said it’s expanding its products and capabilities to enhance its service to clients in several areas:
Texas Capital Securities Energy Equity Research
To expand Texas Capital Securities’ ability to serve its corporate & investment banking clients in the energy industry and adjacent sectors, Texas Capital announced the hiring of a research and equity specialty sales team led by Derrick Whitfield and Thomas McGarrity. Energy Equity Research is intended to enhance the firm’s transaction capabilities, investment insights, and dedicated coverage of the energy sector, while also providing a platform to further expand its institutional services businesses. Texas Capital Securities Energy Equity Research is expected to report on an initial coverage universe no later than early 2025, the firm said.
Texas Capital Direct Lending
In August, Texas Capital announced the launch of its Direct Lending platform led by Tim Laczkowski. Texas Capital Direct Lending (TCDL) is focused on providing nonbank term loans to middle-market companies, enabling Texas Capital clients and prospects to access a wider array of capital alternatives while enjoying the benefits of Texas Capital’s full suite of commercial and investment banking products. According to the company, the launch further extends Texas Capital’s ability to provide comprehensive solutions and solidifies the firm’s position as the “first call” for middle market companies headquartered in Texas and beyond.
Texas Capital Public Finance
In May, Texas Capital announced the formation of Texas Capital Securities’ Public Finance team to provide municipal underwriting services to governments, nonprofits, and institutions in the state of Texas and across the country. Led by industry veteran Steven Genyk, the team now includes dedicated bankers in Dallas, Houston, and Austin to serve these sectors.
Texas Capital SBA Lending
The firm said it remains committed to serving businesses through the entirety of their lifecycles, with expansion of tailored services for business banking clients designed to accelerate client acquisition moving into next year. Leveraging improved coverage and delivery, Texas Capital said it expects to be a top five SBA lender each year to Texas-based businesses by 2025.
The push for transformation
Over the past three years, Texas Capital said it has undergone an enterprise-wide transformation to become the premier full-service financial services firm headquartered in Texas that is equipped to provide clients with a wide range of differentiated and relevant products and services.
Texas Capital said the company delivered a strong balance sheet compared to its peers, resulting in both a 357 bps increase in total regulatory capital since year-end 2020, and sector-leading capital levels when measured against the largest U.S. banks.
Texas Capital also launched Texas Capital Securities. The investment bank complements the firm’s commercial banking business by offering a complete set of solutions to clients within Texas Capital’s defined areas of geographic and industry coverage. From its opening in December 2021, the firm has completed over $135 billion in securities trading volume, delivered the largest sole arranged institutional term loans in the country in both 2023 and 2024 and built a broad business capable of delivering advisory, capital markets, and other financial solutions. Texas Capital said it expects to achieve its published target of 10% of total revenue in full-year 2024, a year earlier than the target initially set in 2021.
The firm said it also developed a “best-in-class” treasury solutions platform, with a significant multi-year investment in industry-leading cash management capabilities for clients that continues to result in peer-leading growth in primary operating relationships, revenue, and client deposits. Through the second quarter of 2024, treasury product fees as a percentage of revenue have more than doubled from full-year 2020, which, when coupled with top quartile growth in client deposits, shows progress leveraging a “best-in-class product and service offerings to effectively satisfy clients’ deposit and cash management needs,” Texas Capital said.
Texas Capital Bancshares Inc. is a member of the Russell 2000 Index and the S&P MidCap 400.
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