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Texas Capital (TCBI) Q1 Earnings Lag Estimates, Costs Rise
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Texas Capital Bancshares Inc. (TCBI - Free Report) reported adjusted loss per share of 11 cents in first-quarter 2020, against the Zacks Consensus Estimate for earnings of 94 cents. The reported figure excluded certain noteworthy items such as the impacts of the MSR impairment charges and merger-related expenses.
Elevated expenses and pressure on margin were negatives. Further, results reflect a decline in loan balances. Also, a fall in revenues, a substantial rise in provisions and reserve build related to the coronavirus-led crisis were other key headwinds.
After considering one-time items, net loss available to common stockholders was $19.1 million or 38 cents per share against net income of $80.4 million or $1.60 per share recorded in the prior-year quarter.
Revenues Rise, Costs Escalate
Total revenues declined 9.4% year over year to $240.1 million in the first quarter due to lower net interest and non-interest income. Furthermore, revenues lagged the Zacks Consensus Estimate of $244.6 million.
Texas Capital’s net interest income was $228.3 million, down 3.1% year over year, mainly stemming from a decline in loan yields, partly muted by a decrease in funding costs. Net interest margin, however, contracted 95 basis points (bps) year over year to 2.78%.
Non-interest income declined 61% year over year to $17.8 million. The downside primarily resulted from lower other non-interest income, partially offset by increases in brokered loan fees, servicing income and swap fees.
Non-interest expenses flared up 17.8% year over year to $165.4 million. The upswing mainly resulted from a rise in almost all components of expenses, partly negated by lower marketing expenses.
As of Mar 31, 2020, total loans declined 7.7% on a sequential basis to $25.2 billion, while deposits rose 2.3% sequentially to $27.1 billion.
Credit Quality Deteriorates
Non-performing assets totaled 0.9% of the loan portfolio plus other real estate-owned assets compared with the prior-year quarter’s figure of 0.57%. Total non-performing assets rose 64% to $219.2 million compared with the prior-year quarter.
Provisions for credit losses summed $96 million compared with $20 million in the year-ago quarter. The company’s net charge-offs were $57.7 million compared with $4.6 million as of Mar 31, 2019.
Capital Ratios Steady
The company’s capital ratios displayed a steady position during the first quarter. Tangible common equity to total tangible assets came in at 7.3% compared with the year-earlier quarter’s 8.5%.
Common equity Tier 1 ratio was 9.3%, up from 8.6% in the prior-year quarter. Leverage ratio was 8.5% compared with 10% as of Mar 31, 2019.
Stockholders’ equity was up 8.6% year over year to $2.8 billion as of Dec 31, 2019. The uptrend chiefly allied with the retention of net income.
Our Viewpoint
Texas Capital’s improved top line and a solid balance sheet during the quarter look impressive. Moreover, an improving economic situation is anticipated to drive the company’s performance in the future. The bank’s inability to control expenses and higher non-performing assets will likely affect near-term profitability.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Navient Corporation (NAVI - Free Report) reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.
Bank of Hawaii Corporation (BOH - Free Report) delivered first-quarter 2020 positive earnings surprise of 35.9%. Earnings per share of 87 cents surpassed the Zacks Consensus Estimate of 64 cents. However, the bottom line compares unfavorably with $1.43 reported in the prior-year quarter.
Ally Financial (ALLY - Free Report) reported first-quarter 2020 adjusted loss of 44 cents per share, lagging the Zacks Consensus Estimate for earnings of 71 cents. The figure also deteriorated from the year-ago quarterly earnings of 80 cents per share.
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Texas Capital (TCBI) Q1 Earnings Lag Estimates, Costs Rise
Texas Capital Bancshares Inc. (TCBI - Free Report) reported adjusted loss per share of 11 cents in first-quarter 2020, against the Zacks Consensus Estimate for earnings of 94 cents. The reported figure excluded certain noteworthy items such as the impacts of the MSR impairment charges and merger-related expenses.
Elevated expenses and pressure on margin were negatives. Further, results reflect a decline in loan balances. Also, a fall in revenues, a substantial rise in provisions and reserve build related to the coronavirus-led crisis were other key headwinds.
After considering one-time items, net loss available to common stockholders was $19.1 million or 38 cents per share against net income of $80.4 million or $1.60 per share recorded in the prior-year quarter.
Revenues Rise, Costs Escalate
Total revenues declined 9.4% year over year to $240.1 million in the first quarter due to lower net interest and non-interest income. Furthermore, revenues lagged the Zacks Consensus Estimate of $244.6 million.
Texas Capital’s net interest income was $228.3 million, down 3.1% year over year, mainly stemming from a decline in loan yields, partly muted by a decrease in funding costs. Net interest margin, however, contracted 95 basis points (bps) year over year to 2.78%.
Non-interest income declined 61% year over year to $17.8 million. The downside primarily resulted from lower other non-interest income, partially offset by increases in brokered loan fees, servicing income and swap fees.
Non-interest expenses flared up 17.8% year over year to $165.4 million. The upswing mainly resulted from a rise in almost all components of expenses, partly negated by lower marketing expenses.
As of Mar 31, 2020, total loans declined 7.7% on a sequential basis to $25.2 billion, while deposits rose 2.3% sequentially to $27.1 billion.
Credit Quality Deteriorates
Non-performing assets totaled 0.9% of the loan portfolio plus other real estate-owned assets compared with the prior-year quarter’s figure of 0.57%. Total non-performing assets rose 64% to $219.2 million compared with the prior-year quarter.
Provisions for credit losses summed $96 million compared with $20 million in the year-ago quarter. The company’s net charge-offs were $57.7 million compared with $4.6 million as of Mar 31, 2019.
Capital Ratios Steady
The company’s capital ratios displayed a steady position during the first quarter. Tangible common equity to total tangible assets came in at 7.3% compared with the year-earlier quarter’s 8.5%.
Common equity Tier 1 ratio was 9.3%, up from 8.6% in the prior-year quarter. Leverage ratio was 8.5% compared with 10% as of Mar 31, 2019.
Stockholders’ equity was up 8.6% year over year to $2.8 billion as of Dec 31, 2019. The uptrend chiefly allied with the retention of net income.
Our Viewpoint
Texas Capital’s improved top line and a solid balance sheet during the quarter look impressive. Moreover, an improving economic situation is anticipated to drive the company’s performance in the future. The bank’s inability to control expenses and higher non-performing assets will likely affect near-term profitability.
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 #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Navient Corporation (NAVI - Free Report) reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.
Bank of Hawaii Corporation (BOH - Free Report) delivered first-quarter 2020 positive earnings surprise of 35.9%. Earnings per share of 87 cents surpassed the Zacks Consensus Estimate of 64 cents. However, the bottom line compares unfavorably with $1.43 reported in the prior-year quarter.
Ally Financial (ALLY - Free Report) reported first-quarter 2020 adjusted loss of 44 cents per share, lagging the Zacks Consensus Estimate for earnings of 71 cents. The figure also deteriorated from the year-ago quarterly earnings of 80 cents per share.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>