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Texas Capital (TCBI) Q4 Earnings Beat on High Fee Income
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Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of $1.14 in fourth-quarter 2020, inching past the Zacks Consensus Estimate of $1.13. However, results compare unfavorably with the prior-year quarter’s $1.23.
Rise in fee income and lower expenses were driving factors. Yet, fall in net interest income along with pressure on margin were deterrents. Further, results reflect decline in both loans and deposit balances. Moreover, provision for credit losses escalated.
Net income available to common stockholders came in at $57.7 million, down 7% year over year.
For full-year 2020, earnings per share came in at $1.12 per share comparing unfavorably with the year-ago earnings of $5.99 per share. Net income available to common shareholders was $56.5 million, down a whopping 81.3% year over year.
For 2020, the company reported revenues of $1.05 billion, down 1.9% year on year. The top-line figure, however, beat the Zacks Consensus Estimate of $1.04 billion.
Total revenues (net of interest expense) declined slightly year on year to $265.9 million in the fourth quarter, as higher non-interest income was offset by lower net interest income. Revenues, however, surpassed the Zacks Consensus Estimate of $249.4 million.
Texas Capital’s net interest income was $223 million, down 10.2% year over year, as lower interest income was partly muted by decreased interest expenses. Net interest margin, however, shrunk 63 basis points (bps) year over year to 2.32%.
Non-interest income more than doubled on a year-over-year basis to $42.9 million. This significant upside primarily resulted from increased brokered loan fees and servicing income, other non-interest income and gain on sale of loans held for sale (LHS).
Non-interest expenses declined 10.3% year over year to $150.9 million. This decrease mainly resulted from fall in almost all components of expenses, partly negated by higher servicing-related expenses.
As of Dec 31, 2020, total loans declined 3.9% on a sequential basis to $24.8 billion, while deposits dropped 3.1% sequentially to $31 billion.
Credit Quality: A Mixed Bag
Non-performing assets totaled 0.50% of the loan portfolio, plus other real estate-owned assets, compared with the prior-year quarter’s figure of 0.91%. Total non-performing assets plummeted 45.9% year on year to $122 million.
Provisions for credit losses summed $32 million, up 88.2% year on year. The company’s net charge-offs rose significantly on a year-over-year basis to $65.4 million.
Steady Capital and Profitability Ratios
The company’s capital ratios displayed a steady position during the October-December quarter. As of Dec 31, 2020, return on average equity was 8.5%, and return on average assets was 0.61% compared with the 9.26% and 0.74%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 7.1% compared with the year-earlier quarter’s 8.1%.
Common equity Tier 1 ratio was 9.4%, up from the prior-year quarter’s 8.9%. Leverage ratio was 7.5% compared with 8.4% as of Dec 31, 2019.
Stockholders’ equity was up 3.6% year over year to $2.9 billion as of Dec 31, 2020. The uptrend chiefly allied with the retention of net income.
Our Viewpoint
Texas Capital’s controlled expenses and a solid balance sheet during the December-end quarter look impressive. Apart from this, an improving economic situation is anticipated to drive the company’s performance in the days to come. Though growth in fee income is a favorable factor, margin pressure and higher provisions might erode near-term profitability.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
PNC Financial (PNC - Free Report) pulled off fourth-quarter positive earnings surprise of 23% on prudent expense management. Earnings per share of $3.26 surpassed the Zacks Consensus Estimate of $2.65. Also, the bottom line came in 9.8% higher than the prior-year level. Decline in expenses and recapture of provisions came as tailwind. In addition, capital position remained strong. However, decline in revenues on lower interest income and fee income was recorded. Further, contraction of margin and fall in loans were undermining factors.
First Republic Bank delivered an earnings surprise of 5.3% in the October-December period on solid top-line strength. Earnings per share of $1.60 surpassed the Zacks Consensus Estimate of $1.52. Additionally, the bottom line climbed 15.1% from the year-ago quarter. Results were supported by an increase in net interest income and fee income. Moreover, the company’s balance-sheet position was strong during the quarter. Nonetheless, higher expenses and elevated provisions were offsetting factors.
State Street’s (STT - Free Report) fourth-quarter adjusted earnings of $1.69 per share outpaced the Zacks Consensus Estimate of $1.57. However, the figure came in 14.6% lower than the prior-year level. Results for the reported quarter reflected new investment servicing wins of $205 billion, improvement in fee income and lower expenses. Yet, a decline in net interest income mainly due to lower rates was a major headwind.
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Texas Capital (TCBI) Q4 Earnings Beat on High Fee Income
Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of $1.14 in fourth-quarter 2020, inching past the Zacks Consensus Estimate of $1.13. However, results compare unfavorably with the prior-year quarter’s $1.23.
Rise in fee income and lower expenses were driving factors. Yet, fall in net interest income along with pressure on margin were deterrents. Further, results reflect decline in both loans and deposit balances. Moreover, provision for credit losses escalated.
Net income available to common stockholders came in at $57.7 million, down 7% year over year.
For full-year 2020, earnings per share came in at $1.12 per share comparing unfavorably with the year-ago earnings of $5.99 per share. Net income available to common shareholders was $56.5 million, down a whopping 81.3% year over year.
Revenues Down, Loans & Deposits Decrease, Costs Decline
For 2020, the company reported revenues of $1.05 billion, down 1.9% year on year. The top-line figure, however, beat the Zacks Consensus Estimate of $1.04 billion.
Total revenues (net of interest expense) declined slightly year on year to $265.9 million in the fourth quarter, as higher non-interest income was offset by lower net interest income. Revenues, however, surpassed the Zacks Consensus Estimate of $249.4 million.
Texas Capital’s net interest income was $223 million, down 10.2% year over year, as lower interest income was partly muted by decreased interest expenses. Net interest margin, however, shrunk 63 basis points (bps) year over year to 2.32%.
Non-interest income more than doubled on a year-over-year basis to $42.9 million. This significant upside primarily resulted from increased brokered loan fees and servicing income, other non-interest income and gain on sale of loans held for sale (LHS).
Non-interest expenses declined 10.3% year over year to $150.9 million. This decrease mainly resulted from fall in almost all components of expenses, partly negated by higher servicing-related expenses.
As of Dec 31, 2020, total loans declined 3.9% on a sequential basis to $24.8 billion, while deposits dropped 3.1% sequentially to $31 billion.
Credit Quality: A Mixed Bag
Non-performing assets totaled 0.50% of the loan portfolio, plus other real estate-owned assets, compared with the prior-year quarter’s figure of 0.91%. Total non-performing assets plummeted 45.9% year on year to $122 million.
Provisions for credit losses summed $32 million, up 88.2% year on year. The company’s net charge-offs rose significantly on a year-over-year basis to $65.4 million.
Steady Capital and Profitability Ratios
The company’s capital ratios displayed a steady position during the October-December quarter. As of Dec 31, 2020, return on average equity was 8.5%, and return on average assets was 0.61% compared with the 9.26% and 0.74%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 7.1% compared with the year-earlier quarter’s 8.1%.
Common equity Tier 1 ratio was 9.4%, up from the prior-year quarter’s 8.9%. Leverage ratio was 7.5% compared with 8.4% as of Dec 31, 2019.
Stockholders’ equity was up 3.6% year over year to $2.9 billion as of Dec 31, 2020. The uptrend chiefly allied with the retention of net income.
Our Viewpoint
Texas Capital’s controlled expenses and a solid balance sheet during the December-end quarter look impressive. Apart from this, an improving economic situation is anticipated to drive the company’s performance in the days to come. Though growth in fee income is a favorable factor, margin pressure and higher provisions might erode 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
Texas Capital currently 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
PNC Financial (PNC - Free Report) pulled off fourth-quarter positive earnings surprise of 23% on prudent expense management. Earnings per share of $3.26 surpassed the Zacks Consensus Estimate of $2.65. Also, the bottom line came in 9.8% higher than the prior-year level. Decline in expenses and recapture of provisions came as tailwind. In addition, capital position remained strong. However, decline in revenues on lower interest income and fee income was recorded. Further, contraction of margin and fall in loans were undermining factors.
First Republic Bank delivered an earnings surprise of 5.3% in the October-December period on solid top-line strength. Earnings per share of $1.60 surpassed the Zacks Consensus Estimate of $1.52. Additionally, the bottom line climbed 15.1% from the year-ago quarter. Results were supported by an increase in net interest income and fee income. Moreover, the company’s balance-sheet position was strong during the quarter. Nonetheless, higher expenses and elevated provisions were offsetting factors.
State Street’s (STT - Free Report) fourth-quarter adjusted earnings of $1.69 per share outpaced the Zacks Consensus Estimate of $1.57. However, the figure came in 14.6% lower than the prior-year level. Results for the reported quarter reflected new investment servicing wins of $205 billion, improvement in fee income and lower expenses. Yet, a decline in net interest income mainly due to lower rates was a major headwind.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>