Title

Presentation

Texas Capital Bancshares, Inc. beats earnings expectations. Reported EPS is $1.56, expectations were $1.42.

Operator: Hello, everyone. Thank you for joining us today for the Texas Capital Bancshares, Inc. First Quarter 2026 Earnings Conference Call. My name is Sammy, and I will be coordinating your call today. I will now hand over to your host, Jocelyn Kukulka, Head of Investor Relations, to begin. Please go ahead, Jocelyn.

Jocelyn Kukulka: Good morning, and thank you for joining us for Texas Capital Bancshares, Inc.’s First Quarter 2026 Earnings Conference Call. I am 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. Today’s presentation will include certain non-GAAP measures, including, but not limited to, adjusted operating metrics, adjusted earnings per share, and return on capital.

For reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to the earnings press release and our website. 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. 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 texascapital.com. Our speakers for the call today are Rob Holmes, Chairman, President and CEO, and Matt Scurlock, CFO. At the conclusion of our prepared remarks, the operator will open the call for Q&A. I will now turn the call over to Rob for opening remarks.

Rob Holmes: Good morning, and thank you, Jocelyn. We enter this quarter with clear conviction in our strategy and the disciplined execution required to continue unlocking substantial value for our shareholders and clients. First quarter outcomes reflect our shift in strategic focus to consistent execution and realizing the full potential of our investments. This quarter, we took decisive steps to align our organizational structure with that imperative. I am pleased to announce strategic executive leadership appointments that further enhance our positioning for growth. Jay Klingman will transition to Head of Private Bank and Family Office following five successful years building and scaling our middle market and business banking franchises.

Dustin Cosper assumes the role of Head of Commercial Banking overseeing Real Estate Banking, Middle Market Banking, and Business Banking. This shift positions the firm to drive enhanced client outcomes across private banking and commercial banking through more comprehensive and integrated solutions. John Cummings has been named Chief Operating Officer, charged with driving sustained operational excellence and further positioning our platform for scale. Matt Scurlock, Texas Capital Bancshares, Inc.’s Chief Financial Officer, will assume the role of President of Texas Capital Bank, further aligning financial, operational, and business leadership across the organization. We have also appointed Jeff Hood as Chief Human Resources Officer to ensure our talent strategy and culture align with our operational and commercial ambitions.

He will be joining the firm in early May. Turning to the quarterly results, contributions across the firm enabled another quarter of strong financial progress, as adjusted quarterly earnings per share increased 72% versus the prior year period to $1.58 per share as total revenue increased 16% year over year to $324 million, driven by 8% growth in net interest income and 56% growth in noninterest revenue. Fee income from our areas of focus increased 59% year over year, reaching $58.8 million in the quarter, a record for the firm. Notably, all three focus areas delivered record quarterly fee income, demonstrating the platform’s continued maturity and enhanced cross-functional strength. This is not a single-driver story; it reflects embedded momentum across advisory, capital markets, wealth, and treasury services, all facilitated by excellent client banking coverage across the platform.

New client acquisition remains a fundamental driver to platform value. Each quarter, the firm onboards clients that generate revenue across multiple service lines, a structural advantage that compounds over time. Investment banking fees of $42.3 million grew 89% year over year with broad contributions across syndications, capital markets, and sales and trading, reflecting our unique ability to deliver high-quality client outcomes across a range of product solutions. Treasury product fees of $12.1 million increased 14% as existing clients continue to leverage our differentiated payment capabilities and new clients onboard at an accelerated pace. Wealth management fees also increased for the third straight quarter, reflecting building momentum that we expect to continue through the year.

In total, fee income comprised 21% of total revenue versus 16% a year ago, demonstrating the success of our multiyear shift toward a more diversified, capital-efficient, and resilient revenue base. This trajectory directly reflects disciplined client selection and our ability to deepen relationships over time. Our first quarter capital position highlights both the strength of our platform and the efficacy of our capital management approach. Tangible book value per share of $75.67 increased 11% year over year, marking an eighth consecutive quarterly record for this important metric. During the quarter, we repurchased approximately $75 million of common shares at a weighted average price of $96.82 per share, demonstrating our confidence in the franchise and our conviction that earnings momentum will continue.

Tangible common equity to tangible assets of 9.87% exceeds peer levels, and CET1 of 11.99% remains well above our stated target of 11% and internally assessed risk profile. As previously discussed, we do not manage the firm to an expected economic scenario. We instead regularly evaluate potential macroeconomic impacts on both credit quality and earnings capacity. Detailed reviews over the past few quarters include topics such as private credit, disruption from artificial intelligence, and exposure to data center supply chains, all of which confirm our adherence to disciplined client selection and diligent concentration management. Leading up to the recent conflict in the Middle East, we assessed the impact of rising commodities pricing on a series of client segments, including commercial clients that rely on commodity inputs such as helium, urea, and aluminum, as well as clients whose customers are potentially impacted by rising prices.

While our assessment across these topical areas suggests impacts on specific clients are, at this point, tangential, we nonetheless continue to assume a credit posture in the reserve calculation that is increasingly reliant on a downside scenario weighting. We maintain a balance sheet that is intentionally positioned, carry capital and reserves that provide meaningful flexibility, and deliver a breadth of products and services that keep the firm relevant to our clients in any environment. That posture is a choice—one we have made consistently—and is the reason we approach periods of uncertainty from a position of strength and are front-footed in the market. Our earnings trajectory is sustainable. Our balance sheet is strong. And our platform is positioned for durable growth.

Today, we are pleased to announce the initiation of a quarterly common stock cash dividend, a tangible expression of our confidence in earnings momentum and our commitment to returning capital to shareholders while funding continued organic growth. This dividend reflects a mature platform, the strength of our capital position, and management’s conviction in the long-term trajectory of the firm. Thank you for your continued interest in and support of Texas Capital Bancshares, Inc. I will now turn the call over to Matt for details on the financial results for the quarter.

Matt Scurlock: Thanks, Rob, and good morning. Starting on Slide 4, first quarter total revenue increased $43.5 million, or 16%, year over year, driven by 8% growth in net interest income and a 56% increase in noninterest revenue. Net interest income increased $18.7 million year over year to $254.7 million, in line with our January guidance of $250 million to $255 million, which anticipated a modest linked-quarter decline of $12.7 million consistent with typical first quarter seasonality. Net interest margin expanded 24 basis points year over year to 3.43%, the sixth consecutive quarter of year-over-year expansion, and improved 5 basis points to the prior quarter. Noninterest expense increased 5% year over year to $213.6 million.

On an adjusted basis, noninterest expense was $212.2 million, an increase of $9.1 million relative to the first quarter of last year, as expense-based productivity continues to deliver anticipated revenue growth and incremental new investments align directly with defined areas of capability build. Taken together, pre-provision net revenue increased $33 million, or 43%, year over year to $110.4 million. Adjusted PPNR reached $111.8 million, up $34.4 million, or 44%, marking the fifth consecutive quarter of year-over-year expansion. Provision for credit losses of $16 million was stable year over year, reflective of anticipated quarterly credit trends and management’s continued assumption of economic scenarios materially more severe than consensus estimates.

Net income to common was $69.5 million, up $26.7 million, or 63% year over year, and adjusted net income increased 65% to $70.5 million. Strong financial performance, coupled with a disciplined multiyear share repurchase program, is consistently driving meaningful EPS growth for our shareholders. First quarter earnings per share reached $1.56, up 70% year over year, with adjusted earnings per share of $1.58, up 72% year over year. Book value per share of $75.71 and tangible book value per share of $75.67 both increased 11% year over year, representing the eighth consecutive quarter and record high for the firm. The allowance for credit losses held relatively steady at $331 million, or 1.32% of total LHI and 1.81% of total LHI excluding mortgage finance.

Total LHI of $25.2 billion increased 13% year over year and 5% linked quarter, with contributions across both the commercial and mortgage finance portfolios. Period-end commercial loans of $12.5 billion increased $1.2 billion, or 10%, year over year, driven by now consistent contributions across industries and geographies and sustained quarterly increases in target client acquisition. Linked-quarter commercial loans increased $336 million, or 3%, representing the ninth consecutive quarter of commercial loan growth and continuing the trajectory of risk-appropriate and return-accretive portfolio expansion facilitated by our bankers across Business Banking, Middle Market, and Corporate Banking. Commercial real estate loans of $5.3 billion decreased 9% year over year and 2% linked quarter, as payoff rates continue to outpace client appetite for capital deployment, with expectations previously provided for full year average CRE balances to decline approximately 10% remaining intact.

Despite the expected seasonal linked-quarter pullback, average mortgage finance loans increased 32% year over year to $5.2 billion, with period-end balances increasing to $7 billion, 33% above average for the quarter and consistent with the annual pattern of origination volumes building at the end of Q1 heading into the spring and summer home-buying season. Enhanced credit structures now represent 67% of period-end mortgage finance balances, up from 59% at Q4 2025, further improving the blended risk weighting of the portfolio to 53%. We anticipate that an incremental 5% could migrate to the enhanced structures over the next several quarters, at which point we should reach the maximum near-term potential for the portfolio. Total deposits of $28.5 billion at quarter end increased 9% year over year and 8% linked quarter, with reductions in interest-bearing deposits associated with seasonal tax payments supplemented by modest levels of brokered deposits to support the temporary and predictable late Q1 growth in mortgage finance volumes.

Ending-period commercial managed Experian deposits increased $76 million, or 2%, and are now up $309 million since Q3 2025, with average commercial noninterest-bearing deposits remaining at 13% of total deposits for the quarter. Average noninterest-bearing mortgage finance deposits of $4.2 billion decreased $288 million year over year, bringing the self-funding ratio down to 80% for the quarter, as eight quarters of focused reduction clearly improved both the balance sheet resilience and earnings generation. We have now established a more balanced deposit base with a complete treasury offer increasingly embedded across our clients’ platforms and would expect the mortgage finance self-funding ratio to settle between 70% to 80% in the near to medium term.

The majority of mortgage finance noninterest-bearing deposits are compensated through relationship pricing, resulting in application of an interest credit to either the client’s mortgage finance or commercial loan yield. The compensation attribution is evaluated on a periodic basis, and we determined that the 60% mortgage finance and 40% commercial split be updated to reflect the evolution of the mortgage finance business, resulting in a 70% mortgage finance and 30% commercial distribution beginning on the first of this year. Average cost of interest-bearing deposits declined 15 basis points linked quarter and 65 basis points year over year to 3.32%, as we continue to add value to banking relationships beyond simply price. This is in part evidenced by the 75% cumulative interest-bearing deposit beta realized since the beginning of the cycle.

During the quarter, we completed a $400 million fixed-to-floating senior notes offering due in 2032 priced at a coupon of 5.301%. Proceeds from the issuance will be used in part to redeem the holding company’s $375 million fixed-to-floating rate subordinated notes in May, leveraging improved risk-weighted asset positioning associated with the enhanced credit structures to fulfill holding company cash objectives with a lower-cost instrument. Current and prospective balance sheet positioning continues to reflect the balance sheet and business model that is intentionally more resilient to changes in market rates. Our modeled earnings-at-risk improved as expected this quarter as market rates moved consistent with our previously communicated preferences for adding duration to the swap book.

During Q1, $350 million in swaps matured with a 3.31% receive rate. These were replaced with $500 million in receive-fixed OIS swaps executed at 3.45%, with $100 million becoming effective March 1 and the remainder becoming effective on April 1. Looking ahead, we will continue to exercise discipline in appropriately augmenting rate-fall earnings generation embedded in our business model. At this point, we are comfortable with our near-term positioning across a range of forward interest rate paths. Net interest income of $254.7 million declined $12.7 million in the quarter, primarily related to seasonal mortgage finance dynamics and fewer days in the quarter, which were partially offset by quarter-over-quarter improvements in deposit costs. LHI excluding mortgage finance yields compressed modestly, consistent with expected SOFR-linked loan repricing.

Adjusted noninterest expense of $212 million increased 5% from Q1 2025, reflecting continued investment in frontline talent across fee income areas of focus and increasing tech-enabled capabilities meant to both improve the client experience while positioning the firm for continued scale. Q1 adjusted salaries and benefits increased $29 million to $130.9 million due to $17 million of seasonal compensation, annual incentive reset, new frontline talent, and annual merit-based salary increases. For the remainder of 2026, we continue to anticipate approximately $125 million of salaries and benefits and $75 million of all other noninterest expense, both on a quarterly basis. As Rob described, noninterest income increased 56% year over year and 15% linked quarter, setting several records for the firm.

Noninterest income as a percentage of total revenue reached 21% in the quarter, up from 16% in Q1 2025, consistent with our strategic priority to increase noninterest income through expanded products and services delivered across our platform. Investment banking and trading income of $42.3 million increased 89% year over year, supported by broad-based contributions across the platform. Wealth management and trust fee income of $4.4 million also represented a record high, increasing 11% year over year, supported by assets under management of $4.4 billion, which increased 16% year over year from organic net inflows and favorable market conditions. Treasury product fees at $12.1 million—a record high as well—increased 14% year over year, driven by continued client adoption and the expansion of payment and cash management capabilities that have driven north of 10% growth in gross payment volume in four of the last five years.

Total noninterest income is expected to be $65 million to $70 million for Q2, with revenue attributed to investment banking and sales and trading contributing approximately $40 million to $45 million. The total allowance for credit loss, including off-balance sheet reserves, of $331 million remains near our all-time high. When excluding the impact of mortgage finance allowance or related loan balance, the allowance was relatively flat linked quarter at 1.81% of total LHI, which is in the top decile among the peer group. Net charge-offs for the quarter were $17.4 million, or 30 basis points of LHI, tied to previously identified credits in the commercial portfolio. During the quarter, previously discussed commercial real estate multifamily credits were further downgraded as projects in lease-up continue to require ongoing rental concessions to gain or maintain occupancy.

Despite these net operating income-influenced grade adjustments, material project-specific equity and sponsor support give us confidence in the fundamental portfolio quality moving through the year. Capital ratios remain strong and well in excess of our internally assessed profile. Tangible common equity to tangible assets of 9.87% and a CET1 ratio of 11.99%. During the quarter, the firm repurchased approximately 770,000 shares for $74.6 million at a weighted average price of $96.82 per share, representing 127% of prior month’s tangible book value per share. We remain committed to prudent capital deployment that balances organic growth and tangible book value accretion through share repurchases at levels that we view as attractive relative to the firm’s intrinsic value.

Additionally, against the backdrop of more durable and structurally higher levels of earnings generation across the platform, the Board of Directors has approved the initiation of a quarterly common stock dividend of $0.20 per share, providing another tool to effectively manage capital on behalf of our shareholders. For full year 2026, our overall outlook remains unchanged from guidance given in January as we continue to realize scale from multiyear platform investments. Guidance accounts for one additional rate cut in December with a Fed funds rate of 3.5% at year end. We anticipate total revenue growth in the mid- to high-single-digit range driven by industry-leading client adoption and continued growth in our fee income areas of focus, with full year noninterest revenue expected to reach $265 million to $290 million.

Anticipated noninterest expense growth in mid-single digits reflects increased year-over-year compensation expenses tied to improved performance, targeted expansion in defined client coverage areas, and sustained platform investments. Given continued economic uncertainty and our commitment to operating from a position of financial resilience, we reiterate the full year provision outlook of 35 to 40 basis points of average LHI excluding mortgage finance. This outlook reflects another year of positive operating leverage and sustainable earnings generation. Operator, we would now like to open the call for questions. Thank you.

Operator: We will now open the call for questions. Our first question comes from Woody Lay from Keefe, Bruyette & Woods. Your line is open, Woody. Please go ahead.

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Woody Lay: Hey, good morning, guys. The momentum is really great to see. You mentioned some of the uncertainty in the Middle East and feel good about your clients. As it pertains to the investment banking pipeline, I know last year with some of the tariff noise, we saw some timing pushed out to the back half of the year. Do you expect a similar dynamic to happen here if the uncertainty lasts longer in the quarter?

Matt Scurlock: I would start by saying that we are really pleased with our track record of finding the right solutions for our clients, which continued this quarter, whether that is bank debt or non-bank debt. We were the number one arranger of middle market syndicated credit in the country this quarter, along with arranging over $11 billion of debt outside the bank markets for our clients, and we raised over $1 billion on our still-new equities platform. When you think about how we use the investment bank as a differentiator in the market, the coverage bankers are doing a great job of leveraging the product partners to win new relationships, particularly with our target prospects, evidenced in part by over half of the investment banking fees outside of sales and trading we generated in the last six months coming alongside new client acquisition in banking.

These record fee quarters continue to be underpinned by much more granular deal volumes. These are not a couple of large transactions; they are a durable, consistent approach to delivering service in the market. We still feel really good about the $40 million to $45 million for the quarter and $160 million to $175 million for the full year.

Rob Holmes: I would just add one thing, Woody. Matt clearly articulated what I think are very good statistics. Remember, we are not doing investment banking with a different set of clients. We are delivering the best products to our middle market and corporate clients through the great relationships our middle market and corporate bankers have with those clients, which gives credibility to the investment bank and bankers when they come into the room. I think that is a differentiated part of this platform.

Woody Lay: Got it. That is helpful color. Maybe shifting over to the mortgage finance business, the period-end loan balances were well above where they have been historically. I know that can be volatile with timing, but any expectation for average balances as we head into the second quarter?

Matt Scurlock: There was quite a bit of volatility in Q1 on 30-year fixed-rate mortgages. We got as low as about 5.98% in February and then hit the high point in March at about 6.64%. If you will recall, the full-year guide of about 15% is predicated on a $2.3 trillion origination market and an average 30-year fixed-rate mortgage near that context, which—while there could be some volatility along the way—we still think is the right number for the full year. That gets you to about a $6 billion full-year average warehouse balance. We think that is actually the number for Q2 as well, Woody—about $6 billion of average mortgage finance volumes. You should end around $7.2 billion, and that comes with about $4.5 billion of average mortgage finance deposits.

So that self-funding ratio should push down to around 75%, which should help the yield move from around 3.99% this quarter to somewhere around 4.05% in Q2. We have clearly completely restructured that business, with now 67% of those balances residing in the enhanced credit structure, which is generating significant capital. For the loans that are in the structure, it is a weighted average risk weighting at 30%, 53% for the entire portfolio, and 78% of those clients do things with us beyond the dealer, and 100% of them are on our treasury platform. Incremental volume in the mortgage finance business is significantly more profitable for us now than it has ever been.

Rob Holmes: I would just suggest that the new credit-enhanced structure fundamentally changed the firm. It took a business that by definition was a subpar loan-only business and moved it—in concert with a new product and service platform—into one where we are doing many things with those clients, and we are lending to them through a dramatically less risky structure that allows for higher returns and releases capital. It fundamentally changed the way we look at that business, and it is more of an industry vertical than a mortgage warehouse.

Matt Scurlock: And just to put a couple more numbers around that, Woody, over the last twelve months, we have grown loans by $2.8 billion, or 13%, and we have also bought back 6% of the company—$228 million—for inside of $87 a share, while actually growing CET1 by 36 basis points. This has been a critical factor not just in structurally enhancing profitability, but in allowing us to deploy capital in a variety of different ways.

Woody Lay: Alright. That is all for me. Thanks for taking my questions.

Rob Holmes: Thanks, Woody.

Operator: Next question comes from Casey Haire from Autonomous Research. Your line is open, Casey. Please go ahead.

Jackson Singleton: Hi, good morning. This is Jackson Singleton on for Casey Haire. Matt, just wanted to start on NIM. Any color you can give us on the drivers heading into Q2?

Matt Scurlock: Happy to walk through that. We are pleased with the ability to generate NII improvement across a range of interest rate environments, and as we have talked about in previous calls, that is predicated on improved deposit repricing—which for us is a result of being more relevant for clients—and a deliberate move away from historically higher-cost funding sources. That said, we have been pretty vocal on previous calls: we think the cost of funding for the industry is going to go higher over time, and our strategy and resource allocation contemplate the mix of businesses and services we will need to earn an acceptable return against that reality. We have no additional reduction in deposit cost incorporated in the full-year guide.

For Q2, we do anticipate slightly higher interest-bearing deposit costs to support volumes necessary to fund the seasonal, predictable, and temporary increase in mortgage finance, which we just walked through. As you see mortgage finance grow in the second quarter, that is a lower-yielding asset. The yield is moving from 3.99% to 4.05%, whereas the yield on all other loans outside the mortgage finance business stays around 6.65%. That blends the overall loan yields down from 6.04% to the mid-to-high 5.90%s, which should push the margin down to 3.35%–3.40%, while seeing NII actually increase on the larger balance sheet to $260 million–$265 million.

Jackson Singleton: Got it. Super helpful. And then just one follow-up. How should we think about buybacks going forward, given CET1 well above 11%, but TCE is now around 10% which is around the soft target, and you just announced the dividend? Any color on how management is thinking about buybacks for the rest of the year?

Matt Scurlock: We have $125 million of remaining authorization. We have shown a propensity to buy back inside of 1.3 times tangible (which is essentially two- to three-year out tangible book value per share). I would look for us to be constructive around those prices. The decisions around the buyback or the recently announced dividend—which Rob can talk to—were not influenced by potential changes in the regulatory capital treatment. But for you, that is roughly a 100-basis-point potential pickup in rent cap should you see these changes go through. We are confident in our current levels of earnings generation, our capital position, our reserve levels, and liquidity, and we are pleased to have another tool at our disposal to effectively allocate capital.

Rob Holmes: I would just say that we have proved to be good stewards of capital allocation. Distribution policy is important to shareholders and to us, and the dividend shows great confidence in the platform, our bankers, our earnings, and prospects going forward, as well as our capital and our risk posture. We are excited about having another quiver and the ability to add to the distribution policy as we go forward.

Jackson Singleton: Great. Thanks for all the help. I will step back.

Operator: Our next question comes from JPMorgan. Please go ahead.

Analyst: Good morning. This is Mike Petrini on for Tony. I am curious if you could provide any color on what drove the quarter-over-quarter increase in NPAs. Any industry in particular that stood out?

Matt Scurlock: Those are a few previously identified credits that we have been reserving for now for multiple quarters. They are continuing to go through workout in a way that we think is going to be maximally beneficial for the firm. No industry concentration—there is one multifamily and a couple of corporate credits—consistent with our guide of 35–40 basis points provision for the year.

Analyst: Great. And then just one on expense. How are you thinking about the split between comp expense and non-comp expense?

Matt Scurlock: When you strip out all the seasonal comp and benefit expense for Q1—about $17 million—and add back in annual incentive comp accruals, the impact of new hires primarily in fee income areas of focus, and then just a few weeks of merit increases that were processed late in the quarter, that moves salaries and benefits to about $125 million in Q2. All other noninterest expense remains around $75 million. As a reminder, that is heavily focused on expenses associated with putting new capabilities in the market—growth in occupancy, marketing, and technology expense—which is expense in support of revenue. Think roughly $200 million of total noninterest expense in Q2, and that is probably a good number for Q3 and Q4 as well. As a reminder, that is enough to cover the high end of the revenue guide; if you see revenue, particularly fees, come in at the high end, you would have some offsets in noninterest expense.

Analyst: Great. Thank you.

Matt Scurlock: You bet.

Operator: Our next question comes from Jared Shaw from Barclays. Your line is open, Jared. Please go ahead.

Jared Shaw: Hi, sorry about that. Good morning. With the self-funding ratio guiding lower now, what does that mean for total end-of-period and average DDA balances as we look at next quarter?

Matt Scurlock: We like, in aggregate, $4.5 billion of average balances for mortgage finance for next quarter, and then you will see that drift a little bit higher toward the end of the quarter. But we think we have essentially right-sized our deposits in that particular segment, with almost all of those clients having appropriate treasury relationships. I would not anticipate the self-funding ratio really moving much lower. I think somewhere between 70%–80% is the right way to think about it over the rest of this year.

Jared Shaw: Alright, thanks. And I think you went through the NII outlook for second quarter. Was that $260 million to $265 million? Did I catch that right?

Matt Scurlock: You got it right—$260 million to $265 million. Margin is 3.35%–3.40%.

Jared Shaw: Thank you.

Matt Scurlock: You bet.

Operator: Our next question comes from Jefferies. Your line is open. Please go ahead.

Analyst: Hey, guys. Max on for David. Just a quick question around C&I and the pipelines. I know you attributed a lot of the growth to actual new client growth rather than just high utilization. Could you talk about new client growth versus higher utilization for fiscal year 2026?

Matt Scurlock: Utilization is up 1% linked quarter and down 2% year over year. We continue to sit around that 45% level. The majority of the growth continues to come from new client acquisition. Commitments are up $2.8 billion—almost 15%—year over year. An important thing to remember is that when we are acquiring these clients through the banking verticals, we are doing other things with them. They are generating investment banking fees quite often at the outset of the relationship. Over 90% of them are doing treasury business with us, which is why you are seeing the pickup in year-over-year treasury product fees. The incremental profitability associated with new client acquisition in C&I is significant.

Rob Holmes: And to Matt’s point earlier, when you arrange $11 billion of debt for clients that is not bank debt—Term Loan B, high yield, and private credit—and close to $1 billion of equity, the new clients are not only showing up through loan growth. They are showing up in other ways across the firm.

Analyst: Got it. Thank you very much for that color. I appreciate it. Just a quick follow-up. Going to CRE loans, paydowns decreased again this quarter. Any color you can add to that? Any specifics you expect for CRE declines for the rest of the year?

Matt Scurlock: I would still think average balances are down at least 10%. Average was $5.7 billion last year; we think it is down at least 10%. You could see about $100 million come off in each of the next three quarters. Credit availability in that space dramatically outstrips demand. We are fairly focused on multifamily and industrial, have a great set of clients, and the starts in those spaces are at the lowest levels in ten years. The reduction of those balances is simply a reflection of our clients transacting less, and we have plenty of opportunities to deploy capital elsewhere, so we will not chase lower yields on the marginal client.

Analyst: Great. Thank you very much.

Operator: Our next question comes from Matt Olney from Stephens. Your line is open, Matt. Please go ahead.

Matt Olney: Yes, thanks. Good morning. Most of my questions have been addressed. I want to go back to capital. I appreciate the commentary around the common dividend and the buyback. Where does M&A rank as far as the capital priority list this year?

Rob Holmes: Nothing has changed there. It is part of the menu on the strategy continuum. We continue to look at opportunistic alternatives in M&A, whether it is whole bank or otherwise, and we will continue to do that. The great news—and you are going to get tired of hearing me say it—is we do not have to do anything. Our M&A transaction was a transformation, and we still have a ton of synergies, both cost and revenue, that we can exploit and that will benefit shareholders for a long period to come. We are excited about being in the position we are in and not having to do something strategically to achieve our goals.

Matt Olney: Okay. Thanks. That is all for me.

Operator: Our next question comes from Jon Arfstrom from RBC. Your line is open, Jon. Please go ahead.

Jon Arfstrom: Thanks. Good morning, everyone. A few follow-ups. Matt, you mentioned technology spending as one of the drivers you are focused on. Can you talk a little bit about where you are spending in terms of tech and what some of the projects are?

Matt Scurlock: We hope at this point we have a track record of effectively investing in a technology platform that yields either new products that generate revenue with target clients or drives real structural efficiencies. The mandate here is no different. We continue to look aggressively at ways to automate, digitize, and eliminate processes that can improve the client experience, improve the employee experience, and decrease operating risk. Some of the year-over-year increase in tech spend is capitalized project portfolio that should reduce expense or show increased revenue elsewhere on the platform. We are also quite focused on figuring out ways internally to leverage AI, so you see some of that come through in tech expenses as well.

Rob Holmes: Jon, I grew a little frustrated a short period back about our progress with AI, and we realized to do AI really well, you need a great data platform. We have been building that for the past five years. It is called Big Sky. We are in the cloud with a modern tech infrastructure. We have over 250 internal APIs that you need for AI. We have all the things that we need, and in the past short period of time, we have made up a lot of ground. We have our own secure multi-LLM AI platform called Ranger. It is available to most of our employees and was built by our tech team. About 80% of employees have accessed it in the last four weeks, so it is widely used and widely adopted. We have a three-pronged strategy on AI. Number one, we have firm-wide agents—right now in production for loan ops and fraud.

We will have credit agents to do portfolio reviews, etc., in the next quarter, with great adoption by the credit team. We have over 170 processes that we are mapping for firm-wide agents as well. Every company has process mapping, but they are often done vertically—not horizontally. We are mapping processes as a continuum—loan origination, approval, onboarding, monitoring, etc.—and will digitize, improve, or apply AI on top of that process mapping. We also have an agent builder with about 64 employees who have created 280 agents they want to use. We are tracking those agents; if multiple employees created the same agent, we will create a better one, retire the others, and drive firm-wide adoption. Lastly, we are selectively deploying third-party AI solutions for certain use cases.

We think that is the right way to move forward, and we are excited about it. We have embedded governance and risk management into every stage of development and deployment, which is important.

Jon Arfstrom: That is very helpful. One question on the promotions—and congrats, Matt, on that. The Private Banking and Family Office title reads wealth capabilities as well. Is that the first time we have seen Private Banking and Family Office named in your documents? What is the plan there, and does that include wealth management? Where are you in terms of the timeline for growing that business?

Rob Holmes: That business was a legacy business here; however, like most things we found, the infrastructure was poor. We had to move to a new custodian, improve the digital client journey, restructure service, and make a lot of changes. Now that is in really good shape. We have one of the highest-rated high-yield savings digital accounts in America, so we know how to digitally improve client journeys. Now our client journey on our private bank platform is as good as a money center bank. I suggest you try it—we can onboard you, Jon, if you want. Our custody works right now. Our portfolios have always performed competitively, often better than peers for like-risk portfolios. With the right infrastructure and client journey, we can put real weight behind that business and grow it.

Our bankers are already calling on these clients—the managers of these companies—and the brand has won their trust and confidence. Just like a middle market banker is the point of the spear for investment banking, they can do the same for wealth, but with much more confidence. Jay has run a wealth business before here in Texas. He knows our clients and can partner really well with Dustin—who used to report to Jay—running Commercial Real Estate. They can partner on growing that business across the platform. The Family Office is new as of about six months ago. We hired someone from a money center bank who ran that business on the West Coast to come here. There are more family offices in Texas than any other state, and more in Dallas than any other city in Texas.

We think that is a key component in differentiating both for the private bank as well as investment banking and treasury.

Jon Arfstrom: And then just one last one for me—on the dividend. I like that decision, but I am curious: how heavily debated was that at the board level, or was it a relatively easy decision and rational in terms of the life cycle of the company?

Rob Holmes: The good news is the Board has complete confidence in this management team and the people who work here. We have created a lot of credibility at the Board level, just like I hope we have at the investor level, and certainly with the regulators, by doing exactly what we said we would do over a long period of time—both in the short and long run. Our employees—bankers, middle and back office—have delivered exactly what we said. When you have these conversations, it is on the backdrop of a lot of confidence and proven performance that gives them the confidence to fully support the dividend. It was an important decision, but it was not labored.

Operator: We currently have no further questions. I would like to hand back to Chairman and CEO, Rob Holmes, for some closing remarks.

Rob Holmes: Just want to say thank you to everybody for dialing in, and we look forward to next quarter.

Operator: This concludes today’s call. We thank everyone for joining. You may now disconnect your lines.

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