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Texas Capital (TCBI) Q4 Earnings Miss Estimates, NII Rises
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Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of 87 cents for fourth-quarter 2022, missing the Zacks Consensus Estimate of 98 cents. Moreover, the bottom line compares unfavorably with the prior-year quarter’s $1.19.
Rising revenues were the driving factor. Yet, a rise in provisions and increasing expenses were deterrents. Further, the quarter witnessed a decline in both loan and deposit balances.
Net income available to common stockholders came in at $212.9 million, up significantly from $60.8 million in the prior-year quarter.
For 2022, earnings per share came in at $6.18, up from $4.60 per share in 2021. Net income available to common shareholders was $315.2 million, up 34% year over year.
Revenues and Costs Rise
Total revenues (net of interest expense) increased substantially year over year to $525.3 million. This included a gain of $248.5 million on the disposal of a subsidiary. Revenues surpassed the Zacks Consensus Estimate of $272.3 million.
In 2022, total revenues were up 35.1% from the prior-year level to $1.23 billion. The top line beat the Zacks Consensus Estimate of $972.71 million.
Net interest income (NII) was $247.6 million, up 27.6% year over year. The rise was aided by an increase in yields on earning assets, partially offset by a decline in total average loans and an increase in funding.
The net interest margin (NIM) expanded 114 basis points (bps) to 3.26%.
Non-interest income increased considerably to $277.7 million. This was primarily due to the gain of $248.5 million recognized on the sale of the company’s insurance premium finance subsidiary and an increase in investment banking and trading income.
Non-interest expenses increased 45.3% to $213.1 million. The rise is mainly due to an increase in legal and professional expenses and charitable contributions.
As of Dec 31, 2022, total loans decreased 2.5% on a sequential basis to $19.3 billion. Likewise, total deposits decreased 6.7% to $22.9 billion.
Credit Quality – Mixed Bag
Non-performing assets totaled 0.25% of the loan portfolio plus other real estate-owned assets compared with the prior-year quarter’s figure of 0.32%. Total non-performing assets plunged 33.3% to $48.3 million from the prior-year quarter’s level.
Provision for credit losses aggregated to $34 million compared with the year-ago quarter’s benefit of $10 million. Texas Capital’s net charge-offs (NCOs) were $15 million compared with $1 million in the prior-year quarter.
Capital Ratios Improve
Tangible common equity to total tangible assets came in at 9.7% compared with the year-earlier quarter’s 8.3%.
Common Equity Tier 1 (CET1) ratio was 13%, up from the prior-year quarter’s 11.1%. Leverage ratio was 11.5% compared with 9% as of Dec 31, 2021.
Share Repurchase Update
During the quarter, Texas Capital repurchased 1.14 million shares at an average price of $57.2 per share.
TCBI’s board of directors authorized a new share repurchase program. Under this, the company is authorized to buyback shares worth up to $150 million.
Our Viewpoint
Texas Capital’s rise in revenue and its solid capital position during the December-end quarter look impressive. However, declining deposits, increasing provisions and expenses are a concern.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
First Republic Bank’s fourth-quarter 2022 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.82. Additionally, the bottom line declined 6.9% from the year-ago quarter's levels.
Results have been supported by a rise in NII and non-interest income. FRC’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
Citigroup Inc. (C - Free Report) delivered an earnings surprise of 7.3% in fourth-quarter 2022. Income from continuing operations per share of $1.10 missed the Zacks Consensus Estimate of $1.18. However, the reported figure declined 40.7% from the prior-year quarter’s level.
Citigroup witnessed growth in revenues in the quarter, backed by higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. However, the higher cost of credit was a spoilsport.
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Texas Capital (TCBI) Q4 Earnings Miss Estimates, NII Rises
Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of 87 cents for fourth-quarter 2022, missing the Zacks Consensus Estimate of 98 cents. Moreover, the bottom line compares unfavorably with the prior-year quarter’s $1.19.
Rising revenues were the driving factor. Yet, a rise in provisions and increasing expenses were deterrents. Further, the quarter witnessed a decline in both loan and deposit balances.
Net income available to common stockholders came in at $212.9 million, up significantly from $60.8 million in the prior-year quarter.
For 2022, earnings per share came in at $6.18, up from $4.60 per share in 2021. Net income available to common shareholders was $315.2 million, up 34% year over year.
Revenues and Costs Rise
Total revenues (net of interest expense) increased substantially year over year to $525.3 million. This included a gain of $248.5 million on the disposal of a subsidiary. Revenues surpassed the Zacks Consensus Estimate of $272.3 million.
In 2022, total revenues were up 35.1% from the prior-year level to $1.23 billion. The top line beat the Zacks Consensus Estimate of $972.71 million.
Net interest income (NII) was $247.6 million, up 27.6% year over year. The rise was aided by an increase in yields on earning assets, partially offset by a decline in total average loans and an increase in funding.
The net interest margin (NIM) expanded 114 basis points (bps) to 3.26%.
Non-interest income increased considerably to $277.7 million. This was primarily due to the gain of $248.5 million recognized on the sale of the company’s insurance premium finance subsidiary and an increase in investment banking and trading income.
Non-interest expenses increased 45.3% to $213.1 million. The rise is mainly due to an increase in legal and professional expenses and charitable contributions.
As of Dec 31, 2022, total loans decreased 2.5% on a sequential basis to $19.3 billion. Likewise, total deposits decreased 6.7% to $22.9 billion.
Credit Quality – Mixed Bag
Non-performing assets totaled 0.25% of the loan portfolio plus other real estate-owned assets compared with the prior-year quarter’s figure of 0.32%. Total non-performing assets plunged 33.3% to $48.3 million from the prior-year quarter’s level.
Provision for credit losses aggregated to $34 million compared with the year-ago quarter’s benefit of $10 million. Texas Capital’s net charge-offs (NCOs) were $15 million compared with $1 million in the prior-year quarter.
Capital Ratios Improve
Tangible common equity to total tangible assets came in at 9.7% compared with the year-earlier quarter’s 8.3%.
Common Equity Tier 1 (CET1) ratio was 13%, up from the prior-year quarter’s 11.1%. Leverage ratio was 11.5% compared with 9% as of Dec 31, 2021.
Share Repurchase Update
During the quarter, Texas Capital repurchased 1.14 million shares at an average price of $57.2 per share.
TCBI’s board of directors authorized a new share repurchase program. Under this, the company is authorized to buyback shares worth up to $150 million.
Our Viewpoint
Texas Capital’s rise in revenue and its solid capital position during the December-end quarter look impressive. However, declining deposits, increasing provisions and expenses are a concern.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Texas Capital Bancshares, Inc. price-consensus-eps-surprise-chart | 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
First Republic Bank’s fourth-quarter 2022 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.82. Additionally, the bottom line declined 6.9% from the year-ago quarter's levels.
Results have been supported by a rise in NII and non-interest income. FRC’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
Citigroup Inc. (C - Free Report) delivered an earnings surprise of 7.3% in fourth-quarter 2022. Income from continuing operations per share of $1.10 missed the Zacks Consensus Estimate of $1.18. However, the reported figure declined 40.7% from the prior-year quarter’s level.
Citigroup witnessed growth in revenues in the quarter, backed by higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. However, the higher cost of credit was a spoilsport.