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Texas Capital (TCBI) Q2 Earnings Meet Estimates, Costs Up
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Texas Capital Bancshares Inc. (TCBI - Free Report) reported earnings per share of $1.38 in second-quarter 2018, in line with the Zacks Consensus Estimate. Results compared favorably with 97 cents recorded in the prior-year quarter.
Results were driven by rise in revenues. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses and provisions were major drags.
Net income available to common stockholders came in at $69 million compared with $48.7 million recorded in the prior-year quarter.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
Total revenues (net of interest expense) jumped 23.4% year over year to $249 million in the quarter, driven by higher net interest income, partly offset by lower non-interest income. Furthermore, revenues surpassed the Zacks Consensus Estimate of $242.6 million.
Texas Capital’s net interest income was $231.7 million, up 26.6% year over year, mainly stemming from rise in mortgage finance loans (including MCA) and loans-held-for-investment loans, improved earning asset composition and loan yields. In addition, net interest margin expanded 36 basis points (bps) year over year to 3.93%. This resulted from improvement in loan yields, partially offset by high cost of deposits.
However, non-interest income declined 8% year over year to $17.3 million. The fall was primarily due to decrease in service charges and other non-interest income. These were partially offset by higher brokered loan fees, swap fees, servicing income, wealth management and trust fee income, along with bank-owned life insurance income.
Non-interest expenses flared up 18.2% year over year to $132.1 million. This mainly resulted from rise in almost all components of expenses.
As of Jun 30, 2018, total loans rose 16.7% year over year to $23.7 billion, while deposits climbed 17.3% year over year to $20.3 billion.
Credit Quality: A Mixed Bag
Non-performing assets totaled 0.41% of the loan portfolio, plus other real estate owned assets, reflecting a year-over-year contraction of 32 bps. Total non-performing assets came in at $92.8 million, down 34.8% year over year.
Non-accrual loans were $83.3 million or 0.37% of total loans, against $123.7 million or 0.64% recorded in the year-ago quarter.
Nonetheless, provisions for credit losses summed $27 million, more than doubling on a year-over-year basis. The company’s net charge-offs also increased significantly on a year-over-year basis to $38 million.
Steady Capital and Profitability Ratios
The company’s capital ratios displayed a steady position in the April-June quarter. As of Jun 30, 2018, return on average equity was 12.72%, and return on average assets was 1.16% compared with 10.08% and 0.96%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 7.8% compared with 8.4% reported in the year-earlier quarter.
Common equity Tier 1 ratio was 8.3% as compared with 8.6% in the prior-year quarter. Leverage ratio was 9.9% compared with 10.3% as of Jun 30, 2017.
Stockholders’ equity was up 9.5% year over year to $2.3 billion as of Jun 30, 2018. The uptrend chiefly allied with the retention of net income.
Our Viewpoint
Texas Capital’s improved top line and a better balance sheet during the quarter impress us. Moreover, improving economic situation might drive the company’s performance in the future. Though its inability to control expenses and higher provisions will likely impede near-term profitability, improvement in margin remains a favorable factor.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Driven by top-line strength, Northern Trust Corporation’s (NTRS - Free Report) second-quarter 2018 adjusted earnings per share of $1.72 surpassed the Zacks Consensus Estimate of $1.63. Earnings compared favorably with $1.12 recorded in the year-ago quarter. Results exclude certain one-time items. Higher revenues and strong capital position were positives. In addition, the second quarter witnessed a rise in assets under custody, as well as assets under management. Moreover, mostly credit metrics marked a significant improvement. However, escalating operating expenses remained an undermining factor.
Wells Fargo (WFC - Free Report) recorded negative earnings surprise of 3.6% in the second quarter. Adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.12. Results came in line with the prior-year quarter earnings. Notably, results exclude net discrete income tax expense of 10 cents per share. Including non-recurring items, net income came in at $5.2 billion or 98 cents per share compared with $5.9 billion or $1.08 per share in the prior-year quarter.
Reflecting top-line strength and lower provisions, U.S. Bancorp’s (USB - Free Report) second-quarter earnings per share of $1.02 outpaced the Zacks Consensus Estimate by a penny. Also, results came ahead of the prior-year quarter earnings of 85 cents. Easing margin pressure on rising rates was witnessed in the quarter. Moreover, revenues improved, aided by rise in net interest, as well as fee income. Further, elevated average loans and deposits balances, along with lower provisions, were tailwinds. Nevertheless, escalating expenses and lower mortgage banking revenues were major drags.
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Texas Capital (TCBI) Q2 Earnings Meet Estimates, Costs Up
Texas Capital Bancshares Inc. (TCBI - Free Report) reported earnings per share of $1.38 in second-quarter 2018, in line with the Zacks Consensus Estimate. Results compared favorably with 97 cents recorded in the prior-year quarter.
Results were driven by rise in revenues. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses and provisions were major drags.
Net income available to common stockholders came in at $69 million compared with $48.7 million recorded in the prior-year quarter.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
Total revenues (net of interest expense) jumped 23.4% year over year to $249 million in the quarter, driven by higher net interest income, partly offset by lower non-interest income. Furthermore, revenues surpassed the Zacks Consensus Estimate of $242.6 million.
Texas Capital’s net interest income was $231.7 million, up 26.6% year over year, mainly stemming from rise in mortgage finance loans (including MCA) and loans-held-for-investment loans, improved earning asset composition and loan yields. In addition, net interest margin expanded 36 basis points (bps) year over year to 3.93%. This resulted from improvement in loan yields, partially offset by high cost of deposits.
However, non-interest income declined 8% year over year to $17.3 million. The fall was primarily due to decrease in service charges and other non-interest income. These were partially offset by higher brokered loan fees, swap fees, servicing income, wealth management and trust fee income, along with bank-owned life insurance income.
Non-interest expenses flared up 18.2% year over year to $132.1 million. This mainly resulted from rise in almost all components of expenses.
As of Jun 30, 2018, total loans rose 16.7% year over year to $23.7 billion, while deposits climbed 17.3% year over year to $20.3 billion.
Credit Quality: A Mixed Bag
Non-performing assets totaled 0.41% of the loan portfolio, plus other real estate owned assets, reflecting a year-over-year contraction of 32 bps. Total non-performing assets came in at $92.8 million, down 34.8% year over year.
Non-accrual loans were $83.3 million or 0.37% of total loans, against $123.7 million or 0.64% recorded in the year-ago quarter.
Nonetheless, provisions for credit losses summed $27 million, more than doubling on a year-over-year basis. The company’s net charge-offs also increased significantly on a year-over-year basis to $38 million.
Steady Capital and Profitability Ratios
The company’s capital ratios displayed a steady position in the April-June quarter. As of Jun 30, 2018, return on average equity was 12.72%, and return on average assets was 1.16% compared with 10.08% and 0.96%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 7.8% compared with 8.4% reported in the year-earlier quarter.
Common equity Tier 1 ratio was 8.3% as compared with 8.6% in the prior-year quarter. Leverage ratio was 9.9% compared with 10.3% as of Jun 30, 2017.
Stockholders’ equity was up 9.5% year over year to $2.3 billion as of Jun 30, 2018. The uptrend chiefly allied with the retention of net income.
Our Viewpoint
Texas Capital’s improved top line and a better balance sheet during the quarter impress us. Moreover, improving economic situation might drive the company’s performance in the future. Though its inability to control expenses and higher provisions will likely impede near-term profitability, improvement in margin remains a favorable factor.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise | Texas Capital Bancshares, Inc. Quote
Currently, Texas Capital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Driven by top-line strength, Northern Trust Corporation’s (NTRS - Free Report) second-quarter 2018 adjusted earnings per share of $1.72 surpassed the Zacks Consensus Estimate of $1.63. Earnings compared favorably with $1.12 recorded in the year-ago quarter. Results exclude certain one-time items. Higher revenues and strong capital position were positives. In addition, the second quarter witnessed a rise in assets under custody, as well as assets under management. Moreover, mostly credit metrics marked a significant improvement. However, escalating operating expenses remained an undermining factor.
Wells Fargo (WFC - Free Report) recorded negative earnings surprise of 3.6% in the second quarter. Adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.12. Results came in line with the prior-year quarter earnings. Notably, results exclude net discrete income tax expense of 10 cents per share. Including non-recurring items, net income came in at $5.2 billion or 98 cents per share compared with $5.9 billion or $1.08 per share in the prior-year quarter.
Reflecting top-line strength and lower provisions, U.S. Bancorp’s (USB - Free Report) second-quarter earnings per share of $1.02 outpaced the Zacks Consensus Estimate by a penny. Also, results came ahead of the prior-year quarter earnings of 85 cents. Easing margin pressure on rising rates was witnessed in the quarter. Moreover, revenues improved, aided by rise in net interest, as well as fee income. Further, elevated average loans and deposits balances, along with lower provisions, were tailwinds. Nevertheless, escalating expenses and lower mortgage banking revenues were major drags.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>