Texas Capital (TCBI) Q2 Earnings Top Estimates on Revenue Rise
Shares of Texas Capital Bancshares,Inc. TCBI gained 1.9% on Jul 20 normal trading session on the NYSE after it reported second-quarter 2023 earnings per share of $1.33, up from 59 cents in the prior-year quarter. Also, the bottom line surpassed the Zacks Consensus Estimate of 94 cents.
TCBI’s results were aided by rising revenues and improving capital ratios. However, results were affected by increased expenses and deteriorating credit quality.
Net income available to common stockholders amounted to $64.3 million, jumping from $29.8 million in the prior-year quarter.
Revenues and Costs Rise
Total revenues increased 20% year over year to $278 million due to an improvement in both non-interest income and net interest income (NII). The top line handily surpassed the Zacks Consensus Estimate of $270 million.
NII was $232 million, climbing 12.9% year over year. The rise was aided by higher yields on average earning assets partially offset by an increase in funding costs and a decline in total average earning assets.
The net interest margin expanded 61 basis points to 3.29%.
Non-interest income increased 75.3% to $46 million. This was primarily due to a rise in investment banking and trading income, and other non-interest income partially offset by a fall in brokered loan fees.
Non-interest expenses increased 10.6% to $181.6 million. The rise is mainly attributable to an increase in salaries and benefits expenses as well as higher legal, professional, and communications and technology expenditures.
As of Jun 30, 2023, total loans improved 6.2% on a sequential basis to $21.33 billion. Further, total deposits increased 5.1% to $23.32 billion.
Credit Quality Deteriorates
Total non-performing assets jumped 60.4% to $81 million from the prior-year quarter’s level. Texas Capital’s net charge-offs were $8.2 million compared with $2.6 million in the year-earlier quarter.
Nonetheless, provision for credit losses aggregated to $7 million compared with the year-ago quarter’s $22 million.
Capital Ratios Improve
Tangible common equity to total tangible assets came in at 9.6% compared with the year-ago quarter’s 8.3%. Common Equity Tier 1 ratio was 12.2%, up from the prior-year quarter’s 10.5%.
However, leverage ratio was 12.4% compared with 10.7% as of Jun 30, 2022.
Our Viewpoint
A rise in revenues, growth in loans and deposit balances as well as a decent capital position during the second quarter look impressive for Texas Capital. However, increasing expenses 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
Commerce Bancshares Inc.’s CBSH second-quarter 2023 earnings per share of $1.02 surpassed the Zacks Consensus Estimate of 93 cents. The bottom line increased 10.9% from the prior-year quarter.
Results of CBSH benefited from an increase in NII driven by a rise in loan balance and higher interest rates. Also, non-interest income grew during the quarter.
Synovus Financial Corp. SNV reported second-quarter 2023 adjusted earnings per share of $1.16, which surpassed the Zacks Consensus Estimate of $1.14. However, the bottom line declined marginally from the prior-year quarter’s reported number.
Higher interest rates and decent loan growth supported NII of SNV. However, results were adversely impacted by a rise in provisions due to a challenging operating backdrop and higher expenses.
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