Texas Capital Bancshares' recently retired leader is proud of his company's accomplishments, but he is most proud of its ability to grow without acquisitions.
George Jones stepped down as the $10.8 billion-asset company's president and chief executive on Tuesday. He had led the company since its creation in 1998.
Recent years were pretty good for Jones, largely because of the economic health of Texas, which serves as home to all of the Dallas company's 14 branches. Jones also kept a tight grip on costs; Texas Capital's efficiency ratio stood at 52% at Sept. 30.
Still, there were bumps along the way. Texas Capital (TCBI) was recently ordered to pay a $3 million assessment to the Federal Deposit Insurance Corp. related to 2011 and 2012 call reports. The company has disputed the assessment, in which it was deemed to have dipped below "well-capitalized" status on two occasions.
Texas Capital's mortgage-warehouse unit could also prove problematic. The Office of the Comptroller of the Currency wants national banks it regulates to assign a 100% risk-weighting to warehouse mortgages, and one analyst has forecast that the change could force Texas Capital to raise $185 million.
In a wide-ranging interview Jones, 69, discussed his future and a belief that Texas Capital can grow to $40 billion in assets - with no acquisitions. Here is an edited excerpt.
How do you assess the company's health?
JONES: The bank is in great shape. We've had really good growth the last two quarters. The fourth quarter probably won't be quite that good. We grew by $1.1 billion in two quarters. I'm not sure anybody can duplicate that. Our credit quality is excellent.
There will be nothing that we think is significant or damaging. The company really, in my mind, is extremely well-positioned to compete effectively in 2014.
How did you approach succession planning?
We've been looking at my retirement for two years. It revolved around not just me, but what does the bench look like underneath my positions. We've been working hard to strengthen our bench. We feel like we've done that.
We've had great hiring quarters. In the last two quarters we've hired close to 25 relationship managers. We only have 130 in the company. These are strong leaders that can bring exceptional business with them. We've built in a lot of capacity. You have to have your best marketers with enough capacity to compete.
What are you most proud of during your time as CEO?
Going public in 2003. Raising the initial $80 million of private equity in 2008 was an incredibly difficult, but rewarding, opportunity. The ups and downs of getting this company started.
If you put all that aside, I'm most proud of the culture that we have created for this company. It is a partner-ownership culture that provides a value-added relationship to our customers and it takes great people to do that.
We've worked very hard to build this company with the level of personnel that can be value-added partners to our customers. It sounds easy, but it's really hard to execute. I think we've got a significant level of personnel in this company today that can take it to a $40 billion-asset company.
What are the company's biggest challenges?
I don't really see any significant roadblocks to continuing to operate as we've have been. We can talk about regulation and competition, but we've been in competitive markets since we started. We believe we understand competition and know how to deal with it. Only 5% to 10% of our business is retail. The new CEO has been my partner for 30 years. He's a known quantity to us.
All of those competitive factors are out there. Growing assets is great, but you've got to grow earnings per share along with it. We believe a company like ours should have returns on equity in the 12% to 15% range, and a 1.25% return on assets. I think that's what's going to separate the successful companies.
Name one thing you wish you had done differently at Texas Capital.
I wish Houston had been our second market entry. It was our last market entry. Houston has such an opportunity. We're pouring 75% of our resources into Houston right now. The reason we didn't enter Houston after we opened in Dallas is because we couldn't find the management team. I'm glad we didn't, because you have to find the right management. Houston is a significant growth factor for us in the next five years.
What role will M&A play at Texas Capital?
Zero. We have never acquired a financial institution. We would never say never, but we say it would take a huge opportunity for us to think along those lines. If our company can grow assets and EPS and get enough capital internally, how is the shareholder better served by us buying anything?
We think our model serves the shareholder better than an acquisitive model. [With acquisitions] you get branches and locations and products you don't want and it takes up to two years to figure all that out. We can grow organically, and I think that people who make a lot of acquisitions have found that they cannot grow their existing model. We don't have to do that.
We're where we want to be. People were asking us the other day [about entering] Denver, Oklahoma City and places like that. We have some national business and we follow our customers where they take us. We've got so much room to run within our existing footprint and it's an area that we know. Whether its Denver or Tulsa, I don't know the markets there very well.
What is the company's exposure to collateralized-debt obligations that include trust-preferred securities?
We don't have virtually any of those. It's a lot less than $100 million in our bond portfolio. We haven't bought a security since 2004. It's a nonevent for us.
What are your retirement plans?
I've accepted a board position and I'm looking at two others. I've got a small real estate business. I'm doing a little oil and gas and I'm going to spend a lot of time with my family. I'm going to get in the carpool line. I'm an old guy with little kids, a 10-year-old and a 8 ½-year-old. I just came from a Christmas pageant at my kids' school. I enjoy every bit of that. I'm going to keep a hand in the business. And I've still yet to find my passion. My passion has been my business. George Bush, his passion is painting. I'm going to find my passion.