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Texas Capital (TCBI) Q4 Earnings Top Estimates, Costs Fall

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Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of $1.19 for fourth-quarter 2021, surpassing the Zacks Consensus Estimate of 91 cents. Moreover, results compare favorably with the prior-year quarter’s $1.14.

Robust capital position and lower expenses were driving factors. Moreover, provision for credit losses recorded benefits. Yet, a fall in net interest income (NII) and fee income plus pressed margins were deterrents. Further, results reflect a decline in both loans and deposit balances.

Net income available to common stockholders came in at $60.82 million, up 5.3% year over year.

For the full year, earnings per share came in at $4.6, comparing favorably with the year-ago earnings of $1.12 per share. Net income available to common shareholders was $235.2 million, up substantially year over year.

Revenues Decline, Costs Fall

Total revenues (net of interest expense) fell 15.2% year over year to $225.49 million due to a decline in both non-interest income and net interest income. Revenues surpassed the Zacks Consensus Estimate of $214.09 million.

In 2021, total revenues were down 14% from the prior-year level to $907.1 million. Nonetheless, the top line beat the Zacks Consensus Estimate of $895.4 billion.

NII came in at $194.1 million, down 6.5% year over year, induced by a fall in total average loans and LHI yields, partially offset by decreases in average interest-bearing deposits and cost of deposits.

NIM contracted 10 basis points (bps) year over year to 2.12%.

Non-interest income plummeted 40% to $31.5 million. This decline primarily resulted as net gain/(loss) on sale ofloans held for sale, brokered loan fees and servicing income all decreased as a result of the mortgage servicing rights (MSR) sale and mortgage correspondent aggregation (MCA)  program transition earlier in 2021.

Non-interest expenses decreased 3% to $146.7 million from the prior-year quarter’s level. This is mainly led by declines in the servicing-related expenses, resulting from the MSR sale and MCA program transition earlier in 2021, partially offset by an increase in salaries and employee benefits.

As of Dec 31, 2021, total loans decreased 4.2% on a sequential basis to $22.8billion, while deposits decreased 5.7% to $28.1 billion.

Credit Quality Strengthens

Non-performing assets totaled 0.32% of the loan portfolio plus other real estate-owned assets compared with the prior-year quarter’s figure of 0.5%. Total non-performing assets plunged 17% to $72.5 million from the prior-year quarter’s level.

Benefit for credit losses aggregated $10 million compared with the year-ago quarter’s provision of $32 million. Texas Capital’s net charge-offs (NCOs) were $1million compared with $65.4 million as of Dec 31, 2020.

Capital Ratios Improve

Tangible common equity to total tangible assets came in at 8.3% compared with the year-earlier quarter’s 7.2%.

Common Equity Tier 1 (CET1) ratio was 11.1%, up from the prior-year quarter’s 9.4%. Leverage ratio was 9% compared with 7.5% as of Dec 31, 2020.

Stockholders’ equity was up 11.8% year over year to $3.2 billion as of Dec 31, 2021.

Our Viewpoint

Texas Capital’s controlled expenses and a solid capital position during the December quarter look impressive. This apart, an improving economic situation is anticipated to help TCBI continue to record benefits for credit losses and drive its performance in the days to come. However, lower revenues and margin pressure might erode its near-term profitability.

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

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by a higher net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance and a strong capital position were encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.