Texas Capital (TCBI) Q1 Earnings Beat Estimates, NII Falls Y/Y

Texas Capital Bancshares, Inc. TCBI reported first-quarter 2024 earnings per share of 62 cents (excluding non-recurring items), which beat the Zacks Consensus Estimate of 59 cents. However, earnings compared unfavorably with 70 cents reported in the year-ago quarter.

TCBI's results benefitted from an increase in non-interest income and higher loan and deposit balances. Additionally, strong capital position and lower provisions were other positives. However, a decline in net interest income (NII) and an increase in expenses were the undermining factors.
Net income available to common shareholders was $21.8 million, plunging 36.4% from the prior-year quarter.

Revenues Decline and Expenses Rise

Total revenues decreased 6% year over year to $256.3 million. The top line surpassed the Zacks Consensus Estimate of $253.3 million.

NII was $215 million, which declined 8.6% year over year. The fall was primarily due to an increase in funding costs, partially offset by a rise in yields on average earning assets.

NIM of 3.03% during the quarter contracted 30 basis points year over year.

Non-interest income increased 10.5% to $41.3 million. The rise was mainly driven by an increase in investment banking and advisory fees.

Non-interest expenses increased 4.3% to $202.4 million. The increase was primarily due to a rise in legal and professional costs, communications and technology expenses and FDIC insurance assessment, partly offset by a decline in marketing expenses.

As of Mar 31, 2024, total loans increased 2.4% on a sequential basis to $20.83 billion. Total deposits increased 7.1% to $23.9 billion.

Credit Quality: Mixed Bag

Total non-performing assets increased 8.7% to $102.1 million from the prior-year quarter’s level.

Nonetheless, provision for credit losses aggregated to $19 million, which decreased 32.1% from the year-ago quarter’s level. Also, Texas Capital’s net charge-offs plunged 45.9% to $10.8 million from the year-ago quarter.

Capital Ratios Improves

Tangible common equity to total tangible assets came in at 9.8% compared with the year-ago quarter’s 9.7%. The leverage ratio was 12.4% compared with 12% as of Mar 31, 2023.

The common equity tier 1 ratio was 12.4%, which remained flat from the prior-year quarter.

Capital Distribution Activities

TCBI repurchased 529,338 shares of its common stock at a weighted average price of $59.27 per share during the first quarter.

Our Viewpoint

The company’s focus on growing loan and deposit balances will likely support its financials in the upcoming period. Also, the bank’s share repurchase program seems sustainable on the back of decent liquidity and a robust capital position. However, elevated expenses on technological advancements and lower NII are near-term concerns.

Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise

Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise

Texas Capital Bancshares, Inc. price-consensus-eps-surprise-chart | Texas Capital Bancshares, Inc. Quote

Currently, TCBI 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

Citigroup Inc.’s C first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.

Citigroup witnessed declines in total loans and deposits in the quarter. Also, a decline in revenues and deteriorating credit quality are near-term woes.

Wells Fargo & Company’s WFC first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.

WFC’s results benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in net interest income and loan balances and an increase in expenses were the undermining factors.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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