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Texas Capital (TCBI) Stock Declines Despite Q3 Earnings Beat
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Texas Capital Bancshares, Inc. (TCBI - Free Report) reported third-quarter 2023 earnings per share of $1.18, surpassing the Zacks Consensus Estimate of $1.03. Also, the bottom line reflects a rise of 59.5% from the prior-year quarter.
TCBI’s results were aided by a rise in non-interest income and lower expenses. Also, the net interest margin (NIM) improved year over year on higher rates.
However, a fall in net interest income (NII) and higher provisions hurt results to some extent. Further, the quarter witnessed a decline in loan balance. These headwinds seem to have turned investors bearish on the stock, which fell almost 3.5% following the earnings release on Oct 19.
Net income available to common stockholders amounted to $57.4 million, jumping 54.6% year over year.
Revenues Rise & Costs Fall
Total revenues increased 5.5% year over year to $278.9 million due to an improvement in non-interest income. The top line surpassed the Zacks Consensus Estimate of $267.9 million.
NII was $232.1 million, which declined 2.9% year over year. The fall was primarily due to an increase in funding costs and a decline in average earning assets, partially offset by higher yields on average earning assets.
NIM expanded 8 basis points to 3.13%.
Non-interest income increased 85% to $46.9 million. This was primarily due to a rise in investment banking and trading income and other non-interest income.
Non-interest expenses decreased 8.7% to $179.9 million. The fall is mainly due to a decrease in salaries and benefits expenses and marketing costs.
As of Sep 30, 2023, total loans decreased 3.3% on a sequential basis to $20.61 billion. However, total deposits increased 2.4% to $23.88 billion.
Credit Quality Deteriorates
Total non-performing assets jumped 69.7% to $63.1 million from the prior-year quarter’s level. Texas Capital’s net charge-offs were $8.9 million compared with $2.7 million in the year-earlier quarter.
Further, provision for credit losses aggregated to $18 million compared with the year-ago quarter’s $12 million.
Capital Ratios Improve
Tangible common equity to total tangible assets came in at 9.4% compared with the year-ago quarter’s 8.5%.
Common Equity Tier 1 ratio was 12.7%, up from the prior-year quarter’s 11.1%. Also, the leverage ratio was 12.1% compared with 10.7% as of Sep 30, 2022.
Our Viewpoint
A rise in revenues, growth in deposit balances, as well as a decent capital position during the third quarter look impressive for Texas Capital. However, the rise in provision for credit losses is concerning.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Fifth Third Bancorp (FITB - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 92 cents, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company reported an EPS of 93 cents.
The results of FITB were aided by a rise in non-interest income and deposit balance. However, a fall in NII limited its revenue growth. Higher expenses and a decline in average loan and lease balance were undermining factors.
Synovus Financial Corp. (SNV - Free Report) reported third-quarter 2023 adjusted earnings per share of 84 cents, which lagged the Zacks Consensus Estimate of 86 cents. The bottom line also declined 37.3% from the prior-year quarter’s reported number.
Results were adversely impacted by the rise in provisions on challenging operating outlook, a decline in NII and higher expenses. On the other hand, a rise in non-interest revenues and higher rates offered some support to SNV.
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Texas Capital (TCBI) Stock Declines Despite Q3 Earnings Beat
Texas Capital Bancshares, Inc. (TCBI - Free Report) reported third-quarter 2023 earnings per share of $1.18, surpassing the Zacks Consensus Estimate of $1.03. Also, the bottom line reflects a rise of 59.5% from the prior-year quarter.
TCBI’s results were aided by a rise in non-interest income and lower expenses. Also, the net interest margin (NIM) improved year over year on higher rates.
However, a fall in net interest income (NII) and higher provisions hurt results to some extent. Further, the quarter witnessed a decline in loan balance. These headwinds seem to have turned investors bearish on the stock, which fell almost 3.5% following the earnings release on Oct 19.
Net income available to common stockholders amounted to $57.4 million, jumping 54.6% year over year.
Revenues Rise & Costs Fall
Total revenues increased 5.5% year over year to $278.9 million due to an improvement in non-interest income. The top line surpassed the Zacks Consensus Estimate of $267.9 million.
NII was $232.1 million, which declined 2.9% year over year. The fall was primarily due to an increase in funding costs and a decline in average earning assets, partially offset by higher yields on average earning assets.
NIM expanded 8 basis points to 3.13%.
Non-interest income increased 85% to $46.9 million. This was primarily due to a rise in investment banking and trading income and other non-interest income.
Non-interest expenses decreased 8.7% to $179.9 million. The fall is mainly due to a decrease in salaries and benefits expenses and marketing costs.
As of Sep 30, 2023, total loans decreased 3.3% on a sequential basis to $20.61 billion. However, total deposits increased 2.4% to $23.88 billion.
Credit Quality Deteriorates
Total non-performing assets jumped 69.7% to $63.1 million from the prior-year quarter’s level. Texas Capital’s net charge-offs were $8.9 million compared with $2.7 million in the year-earlier quarter.
Further, provision for credit losses aggregated to $18 million compared with the year-ago quarter’s $12 million.
Capital Ratios Improve
Tangible common equity to total tangible assets came in at 9.4% compared with the year-ago quarter’s 8.5%.
Common Equity Tier 1 ratio was 12.7%, up from the prior-year quarter’s 11.1%. Also, the leverage ratio was 12.1% compared with 10.7% as of Sep 30, 2022.
Our Viewpoint
A rise in revenues, growth in deposit balances, as well as a decent capital position during the third quarter look impressive for Texas Capital. However, the rise in provision for credit losses is concerning.
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
Fifth Third Bancorp (FITB - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 92 cents, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company reported an EPS of 93 cents.
The results of FITB were aided by a rise in non-interest income and deposit balance. However, a fall in NII limited its revenue growth. Higher expenses and a decline in average loan and lease balance were undermining factors.
Synovus Financial Corp. (SNV - Free Report) reported third-quarter 2023 adjusted earnings per share of 84 cents, which lagged the Zacks Consensus Estimate of 86 cents. The bottom line also declined 37.3% from the prior-year quarter’s reported number.
Results were adversely impacted by the rise in provisions on challenging operating outlook, a decline in NII and higher expenses. On the other hand, a rise in non-interest revenues and higher rates offered some support to SNV.