Texas Capital's Rob C. Holmes goes one-on-one with Jim Cramer

Cramer: Lately, the bank stocks have finally come into their own. That includes the regionals. Take Texas Capital Bancshares, that's the parent of Texas Capital Bank, where the stock is up 23% in just the past two months. In January of 2021, Rob Holmes took over as CEO after a three-decade stint at JPMorgan Chase. He pushed through an ambitious turnaround plan to transform Texas Capital into a full-service financial firm that does more than just commercial banking. Since then, get this, the stock is up nearly 43%, trouncing the 16% gain you would have gotten from the State Street Spider Regional Bank ETF. Plus, when the company reported in October, the results were phenomenal. So can the stock keep running? Let's check in with Rob Holmes, the Chairman, President & CEO of Texas Capital Bancshares, to find out. Mr. Holmes, welcome to Mad Money.

Holmes: Thank you. Thank you for having me.

Cramer: Okay, so Rob, people always say to me, listen, Texas is the most robust place in the country. How do I invest in Texas? And I think with your bank, I found the answer. You.

Holmes: Maybe so. Maybe so. Thank you so much. Thanks for having me. Look, Texas is an incredible place to be and invest. It's the eighth-largest economy in the world. It's a diversified economy. No subsector in Texas takes more than 10% of the GDP now. That's very different than years past when energy dominated it. We have 10% of manufactured goods in the U.S., 10% of the GDP of the U.S., 10% of public companies. We've had more corporations come to Texas in 2015 than any other state. And we're not concentrated by metro areas either, like a lot of other states. And so it's a hugely diversified, growing economy. And the workforce there, there's more people working in Texas than live in 46 states. It's the second-largest workforce. It's the youngest workforce, and it's educated, 16 tier one universities in the state of Texas. That's more than any other state.

Cramer: Now, at the same time, I imagine there are people who are Texas pride. They understand the bank that you used to work at, JPMorgan, and they've got other banks, Bank of America. But there's a lot of people who just want to be local. Right? And it's working to your advantage.

Holmes: Well, well it is. So thanks for saying that. We set off on an ambitious plan three years ago, as you said, four years ago, and over the last four years of any bank in the country, $20 billion or above in assets, we've improved profitability as measured by ROA, by more. We've improved tangible common equity to assets than any other bank in the country that size by more: 247 basis points. So we're on our way. We started a whole new Treasury platform. We ripped out the payments platform. We have a new payments platform, new lockbox, new merchant, new card. That business grows at 2% if you're really good at it. It's been growing over 20% every quarter, quarter over quarter year, for about 10 quarters.

Cramer: OK, so tell me about what your previous experience has done to really inform what you do now.

Holmes: Well, in my previous experience I was taught to be hyper conservative and risk-off as it relates to financials. So we've done just that. We sold the business in November of '22 for $3.5 billion, which fortified us. And so if you look at our tangible common equity assets, it's peer-leading, if you look at our CET1 capital, it's peer-leading, our total capital is peer-leading. So we're safe and sound. And you have to be that. We used to be criticized before our turnaround for not having enough capital. Today the analysts call us Texas Excess Capital, and I'm OK with that.

Cramer:  OK, so how about investment bank?

Holmes: Investment banking is what they said that couldn't be done, right?

Cramer:  Right. No, I mean, honestly, I have to tell you, I didn't think you had it.

Holmes: Yeah, well, you're not alone. You were in the front of a big crowd. But what we did is we took a really bad business, which is a mortgage warehouse, which was 42% of our earnings. So what do you do with a bad business when you have great clients? We took the back book of our mortgage warehouse, which is $110 billion a year, and got open with every primary dealer on Wall Street. That gave us distribution. So we have a top 10 mortgage desk on the street now, our debt desk. We led the largest sole-managed debt deal in the country each of the last two years. We placed about $25 billion worth of debt. That's private credit, bank debt and institutional debt. We're a top eight arranger of middle market bank debt in the country. We then did public finance. We opened that desk January 1. We're way ahead of schedule. And then lastly, I think you'll like this, last day of second quarter we started trading equities. The third quarter started making markets in equities. We've been on the cover of some IPOs. We have our first lead left IPO mandate in the first quarter.

Cramer:  Possible research coverage?

Holmes: We have research coverage, 100 companies under coverage now.

Cramer: You do. And how many are in Texas?

Holmes: The vast, a lot.

Cramer:  So we should be using you as the source when we're looking at Houston, Texas.

Holmes: I would love you to use us now. And by the end of the first quarter, we'll have another 50.

Cramer:  Wow.

Holmes: And we have a corporate access team. Since that corporate access team got here, which was in February, we've arranged about 1,000 meetings with investors for our corporate clients.

Cramer:  Now, people may not realize, but in the '80s and '90s, Texas had a huge number of banks, but they didn't succeed. 

Holmes: And that's why we're the only full-service financial services firm. 

Cramer: This is a green field.

Holmes: And you're right. So what we try to do is we try to global the local banks. We could do anything a money center bank can do except hedge commodities, which I don't want to. 

Cramer: OK. 

Holmes: But we actually out-local the global banks. So if you want local decision-making, local decision-making, not just local people, where policy is decided and global products and services, you bank with us.

Cramer:  Now when a bank, a new company decides to commit to Texas, I would imagine they want to commit to you.

Holmes: I get a lot of calls.

Cramer: You do?

Holmes: We do get a lot of calls.

Cramer:  And your plan, ultimately, what to do? How big can you be? What's beyond Texas or no need? Well, you have to with some of these companies, right? 

Holmes: So what we do is we have a tie to Texas. So we have companies all over the country we bank, but they're owned by a Texas private equity sponsor, or a private equity sponsor in L.A. has 10 companies in Texas. We don't have enough scale, we're not big enough to be something to everybody. We have to pick and choose. But we're structured like a money center bank. So we have a healthcare vertical, TMT, FIG, diversified, energy, mortgage, government not-for-profit. We want all the best healthcare companies in the country to be in Texas, but they're not. So we do have to bank companies outside the state of Texas.

Cramer: And you've gotten people from all over the country to work for you. Well, you've known people because of your previous experience, and they're coming in.

Holmes: We have and we've had some of the people that worked at the largest and most successful desks in businesses on Wall Street.

Cramer: Well, I got to tell you, I'm very impressed. I know the bank from 2020. It's a different bank.

Holmes: It's a very different bank. 

Cramer: And is it ever successful. That's Rob Holmes. He is the Chairman, President & CEO of Texas Capital. And Mad Money is back after.