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Texas Capital (TCBI) Q2 Earnings Lag Estimate, Revenues Beat

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Texas Capital Bancshares, Inc. TCBI reported second-quarter 2022 earnings per share of 59 cents, missing the Zacks Consensus Estimate of 74 cents. Further, results compare unfavorably with the prior-year quarter’s $1.31.

The results were affected by a decrease in fee income and a rise in expenses. Nonetheless, the net interest income (NII) increased from the prior-year quarter. Further, an improvement in total loans held for investment and deposits reflected a sound balance-sheet position.

Net income available to common stockholders came in at $29.9 million, plunging 56% year over year.

Revenues & Loans Rise, Costs Flare Up

Total revenues increased 2% year over year to $231.7 million. The top line surpassed the Zacks Consensus Estimate of $221.9 million.

NII came in at $205.5 million, up 8% year over year. The rise in NII was mainly from higher yields on average earnings assets, partially offset by an increase in funding costs.

Net interest margin (NIM) increased 66 basis points (bps) year over year to 2.68%.

Non-interest income plummeted 30% to $26.2 million. This decline primarily resulted from a decrease in servicing fee income and other non-interest income.

Non-interest expenses increased 10% to $164.3 million from the prior-year quarter. This was mainly led by increases in salaries and benefits and marketing expenses, partially offset by a decline in servicing-related expenses from the sale of Texas Capital’s mortgage service rights portfolio in 2021.

As of Jun 30, 2022, total loans held for investment increased 11% on a sequential basis to $24.07 billion, while deposits increased marginally to $25.44 billion.

Credit Quality Mixed

Non-accrual loans held for investment were 0.21% of total loans held for investment compared with the prior-year quarter’s figure of 0.36%. Total non-performing assets plunged 42% to $50.5 million from the prior-year quarter.

However, the company recorded a $22 million provision for credit losses in the second quarter of 2022 against a benefit of $19 million in the previous year's quarter. Texas Capital’s net charge-offs were $2.6 million compared with net charge-offs of $2.4 million as of Jun 30, 2021.

Capital Ratios Improved

Tangible common equity to total tangible assets came in at 8.3% compared with the year-earlier quarter’s 7.9%. Leverage ratio was 10.7%, up from 8.4% as of Jun 30, 2021. Common Equity Tier 1 (CET1) ratio was flat at 10.5%.

Our Viewpoint

The company's earnings missed the estimates mainly because of the fall in non-interest income and the rise in expenses. Nonetheless, its revenues beat the estimates on higher NII. Moreover, the significant decline in non-performing assets and improvement in the capital position were encouraging factors.

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

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, 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

U.S. Bancorp USB reported second-quarter 2022 earnings per share of $1.09 (excluding merger and integration-related charges of 10 cents), which beat the Zacks Consensus Estimate of 1.07 per share. However, the results do not compare favorably with the prior-year quarter’s figure of $1.28.
Results were supported by an increase in revenues, average loan growth and lower non-performing assets. The U.S. Bancorp’s credit quality was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

First Republic Bank’s FRC second-quarter 2022 earnings per share of $2.16 surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
Results have been supported by an increase in NII and non-interest income. The First Republic Bank’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.


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