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Texas Capital's (TCBI) Q3 Earnings Miss, Costs Flare Up
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Texas Capital Bancshares Inc. (TCBI - Free Report) reported negative earnings surprise of 4.1% in third-quarter 2018. Earnings per share of $1.65 lagged the Zacks Consensus Estimate of $1.72. However, results compare favorably with $1.12 recorded in the prior-year quarter.
Results were driven by rise in revenues and lower provisions. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses were an undermining factor.
Net income available to common stockholders came in at $83.1 million compared with $56.2 million recorded in the prior-year quarter.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
Total revenues (net of interest expense) jumped 15.4% year over year to $257.7 million in the quarter, driven by higher net interest and non-interest income. Furthermore, revenues marginally surpassed the Zacks Consensus Estimate of $257.1 million.
Texas Capital’s net interest income was $232.2 million, up 13.6% year over year. In addition, net interest margin expanded 11 basis points (bps) year over year to 3.70%. This resulted from improvement in loan yields, partially offset by high cost of deposits.
Non-interest income surged 34.2% year over year to $25.5 million. The rise was primarily due to increase in almost all components of income.
Non-interest expenses flared up 18.6% year over year to $136.1 million. This mainly resulted from rise in almost all components of expenses.
As of Sep 30, 2018, total loans rose 11.2% year over year to $23.8 billion, while deposits climbed 6.8% year over year to $20.4 billion.
Credit Quality: A Marked Improvement
Non-performing assets totaled 0.49% of the loan portfolio, plus other real estate owned assets, reflecting a year-over-year contraction of 18 bps. Total non-performing assets came in at $107.6 million, down 21.1% year over year.
Non-accrual loans were $107.5 million or 0.49% of total loans, against $118.2 million or 0.58% recorded in the year-ago quarter.
Moreover, provisions for credit losses summed $13.2 million, down 32% on a year-over-year basis. The company’s net charge-offs also tanked 81.3% on a year-over-year basis to $2 million.
Steady Capital and Profitability Ratios
The company’s capital ratios displayed a steady position in the Jul-Sep quarter. As of Sep 30, 2018, return on average equity was 14.68%, and return on average assets was 1.31% compared with 11.2% and 0.99%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 8.3% compared with 8.2% reported in the year-earlier quarter.
Common equity Tier 1 ratio was 8.6% as compared with 8.4% in the prior-year quarter. Leverage ratio was 9.7% compared with 9.6% as of Sep 30, 2017.
Stockholders’ equity was up 9.1% year over year to $2.4 billion as of Sep 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 will likely drive the company’s performance, moving ahead. Though improvement in margin remains a favorable factor, its inability to control expenses and higher provisions will likely impede near-term profitability.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Riding on higher revenues and lower provisions, U.S. Bancorp’s (USB - Free Report) third-quarter 2018 earnings per share of $1.06 outpaced the Zacks Consensus Estimate of $1.04. Also, results came ahead of the prior-year quarter earnings of 88 cents. Higher revenues along with loan growth and lower provisions were recorded. Though lower mortgage banking revenues and escalating expenses disappointed, easing margin pressure on rising rates and overall higher fee income acted as tailwinds.
Driven by expense management, Citigroup (C - Free Report) delivered a positive earnings surprise of 4.8% in the Sep-end quarter. Earnings from continuing operations per share of $1.74 for the quarter handily outpaced the Zacks Consensus Estimate of $1.66. Also, earnings climbed 22.5% year over year. Higher consumer banking, equity markets and fixed income market revenues along with loan growth were witnessed. Though investment banking revenues disappointed as strong advisory business was more than offset by lower underwriting fees on low client activity, reduced expenses and credit costs acted as tailwinds.
Reflecting high costs, Northern Trust Corporation’s (NTRS - Free Report) third-quarter earnings per share of $1.58 missed the Zacks Consensus Estimate of $1.60. Earnings compared favorably with $1.20 recorded in the year-ago quarter. Escalating operating expenses acted as a headwind in the reported quarter. However, higher revenues and strong capital position were positives. Additionally, the third quarter witnessed a rise in assets under custody, as well as assets under management. Moreover, mostly credit metrics marked a significant improvement.
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Texas Capital's (TCBI) Q3 Earnings Miss, Costs Flare Up
Texas Capital Bancshares Inc. (TCBI - Free Report) reported negative earnings surprise of 4.1% in third-quarter 2018. Earnings per share of $1.65 lagged the Zacks Consensus Estimate of $1.72. However, results compare favorably with $1.12 recorded in the prior-year quarter.
Results were driven by rise in revenues and lower provisions. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses were an undermining factor.
Net income available to common stockholders came in at $83.1 million compared with $56.2 million recorded in the prior-year quarter.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
Total revenues (net of interest expense) jumped 15.4% year over year to $257.7 million in the quarter, driven by higher net interest and non-interest income. Furthermore, revenues marginally surpassed the Zacks Consensus Estimate of $257.1 million.
Texas Capital’s net interest income was $232.2 million, up 13.6% year over year. In addition, net interest margin expanded 11 basis points (bps) year over year to 3.70%. This resulted from improvement in loan yields, partially offset by high cost of deposits.
Non-interest income surged 34.2% year over year to $25.5 million. The rise was primarily due to increase in almost all components of income.
Non-interest expenses flared up 18.6% year over year to $136.1 million. This mainly resulted from rise in almost all components of expenses.
As of Sep 30, 2018, total loans rose 11.2% year over year to $23.8 billion, while deposits climbed 6.8% year over year to $20.4 billion.
Credit Quality: A Marked Improvement
Non-performing assets totaled 0.49% of the loan portfolio, plus other real estate owned assets, reflecting a year-over-year contraction of 18 bps. Total non-performing assets came in at $107.6 million, down 21.1% year over year.
Non-accrual loans were $107.5 million or 0.49% of total loans, against $118.2 million or 0.58% recorded in the year-ago quarter.
Moreover, provisions for credit losses summed $13.2 million, down 32% on a year-over-year basis. The company’s net charge-offs also tanked 81.3% on a year-over-year basis to $2 million.
Steady Capital and Profitability Ratios
The company’s capital ratios displayed a steady position in the Jul-Sep quarter. As of Sep 30, 2018, return on average equity was 14.68%, and return on average assets was 1.31% compared with 11.2% and 0.99%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 8.3% compared with 8.2% reported in the year-earlier quarter.
Common equity Tier 1 ratio was 8.6% as compared with 8.4% in the prior-year quarter. Leverage ratio was 9.7% compared with 9.6% as of Sep 30, 2017.
Stockholders’ equity was up 9.1% year over year to $2.4 billion as of Sep 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 will likely drive the company’s performance, moving ahead. Though improvement in margin remains a favorable factor, its inability to control expenses and higher provisions will likely impede near-term profitability.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Riding on higher revenues and lower provisions, U.S. Bancorp’s (USB - Free Report) third-quarter 2018 earnings per share of $1.06 outpaced the Zacks Consensus Estimate of $1.04. Also, results came ahead of the prior-year quarter earnings of 88 cents. Higher revenues along with loan growth and lower provisions were recorded. Though lower mortgage banking revenues and escalating expenses disappointed, easing margin pressure on rising rates and overall higher fee income acted as tailwinds.
Driven by expense management, Citigroup (C - Free Report) delivered a positive earnings surprise of 4.8% in the Sep-end quarter. Earnings from continuing operations per share of $1.74 for the quarter handily outpaced the Zacks Consensus Estimate of $1.66. Also, earnings climbed 22.5% year over year. Higher consumer banking, equity markets and fixed income market revenues along with loan growth were witnessed. Though investment banking revenues disappointed as strong advisory business was more than offset by lower underwriting fees on low client activity, reduced expenses and credit costs acted as tailwinds.
Reflecting high costs, Northern Trust Corporation’s (NTRS - Free Report) third-quarter earnings per share of $1.58 missed the Zacks Consensus Estimate of $1.60. Earnings compared favorably with $1.20 recorded in the year-ago quarter. Escalating operating expenses acted as a headwind in the reported quarter. However, higher revenues and strong capital position were positives. Additionally, the third quarter witnessed a rise in assets under custody, as well as assets under management. Moreover, mostly credit metrics marked a significant improvement.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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