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Texas Capital (TCBI) Down 2.9% Since Earnings Report: Can It Rebound?
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More than a month has gone by since the last earnings report for Texas Capital Bancshares, Inc. (TCBI - Free Report) . Shares have lost about 2.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Texas Capital Beats Q3 Earnings & Revenue Estimates
Driven by top-line strength, Texas Capital reported a positive earnings surprise of around 1% in third-quarter 2017. Earnings per share of $1.12 outpaced the Zacks Consensus Estimate by a penny. Moreover, the bottom line came in 28.7% higher than the prior-year quarter figure of 87 cents.
Better-than-expected results were driven by rise in revenues and lower provisions. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses remained the undermining factor.
Net income available to common shareholders was $56.2 million, up 39.5% year over year.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
Total revenues (net of interest expense) jumped 21.8% year over year to $223.4 million in the quarter, driven by higher net interest income and non-interest income. Moreover, revenues surpassed the Zacks Consensus Estimate of $213.1 million.
Texas Capital’s net interest income was $204.4 million, up 22.6% year over year. In addition, net interest margin expanded 45 basis points (bps) year over year to 3.59%. This resulted from improvement in earning asset composition and the favorable impact of increased interest rates on loan yields.
Texas Capital’s non-interest income surged 13.8% year over year to $19 million. The rise was primarily due to an increase in service charges, servicing income, wealth management and trust fee income, along with bank owned life insurance income. These were partially offset by lower brokered loan fees, swap fees and other income.
However, non-interest expenses increased 21.1% year over year to $114.8 million. This mainly stemmed from a rise in almost all components of expenses.
As of Sep 30, 2017, total loans rose 16.9% year over year to $21.4 billion while deposits climbed 5.5% year over year to $19.1 billion.
Credit Quality: A Mixed Bag
Non-performing assets totaled 0.67% of the loan portfolio plus other real estate owned assets, reflecting a year-over-year contraction of 40 bps. Total non-performing assets came in at $136.3 million, down 27.5% year over year.
Provisions for credit losses summed $20 million, down 9.1% year over year. Non-accrual loans were $118.2 million or 0.58% of total loans, against $169.1 million or 0.96% in the year-ago quarter.
However, the company’s net charge-offs increased 44.6% on a year-over-year basis to $10.7 million.
Steady Capital and Profitability Ratios
The company’s capital ratios demonstrated a steady position. As of Sep 30, 2017, return on average equity was 11.2% and return on average assets was 0.99% compared with 10.2% and 0.78%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 8.2% compared with 7% in the prior-year quarter.
Stockholders’ equity was up 25% year over year to $2.2 billion as of Sep 30, 2017. The uptrend was chiefly allied with retention of net income and proceeds from common stock offering during fourth-quarter 2016.
Outlook
Management estimates the contribution of MCA business to total mortgage loans to increase further in 2017. MCA is expected to be profitable for 2017, with average balances in excess of $900 million for the year.
Texas Capital projects low double-digit percent growth in average loans held-for-investment (LHI) in 2017 compared to 2016. Average balances for total mortgage finance loans including warehouse and MCA is likely to be $4.5-$4.9 billion, up from the previous guidance of $4.4 billion. Total average for 2017 is anticipated to be about $4.7 billion, in line with 2016, despite the benefit of the refinance activity.
Average warehouse volumes for Q4 are expected to be $3.6-$4 billion.
Management forecasts growth in average deposits in mid-single-digits with continued improvement in the Demand Deposits Account (DDA) composition. Fourth-quarter deposit growth is expected to come majorly from interest-bearing deposits. Seasonally, liquidity levels are expected to be up in the fourth quarter as warehouse volumes will be down and management will continue to increase deposits.
Management expects net revenues in mid-to-high teens percent growth.
Net interest margin (NIM) is projected within 3.35-3.45% in 2017.
Regarding expenses, non-interest expenses are expected to grow at low-teens percent and provision expenses are projected to be around low to mid-$50 million in 2017.
The fourth-quarter FAS 123R expense is expected to be consistent with the third-quarter expense of $6.1 million with the assumption of no significant change in stock price. For 2017, total FAS 123R expense is anticipated to be around $21 million.
Efficiency ratio is projected in the low to mid 50’s range in 2017.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
Texas Capital Bancshares, Inc. Price and Consensus
At this time, Texas Capital's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Texas Capital (TCBI) Down 2.9% Since Earnings Report: Can It Rebound?
More than a month has gone by since the last earnings report for Texas Capital Bancshares, Inc. (TCBI - Free Report) . Shares have lost about 2.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Texas Capital Beats Q3 Earnings & Revenue Estimates
Driven by top-line strength, Texas Capital reported a positive earnings surprise of around 1% in third-quarter 2017. Earnings per share of $1.12 outpaced the Zacks Consensus Estimate by a penny. Moreover, the bottom line came in 28.7% higher than the prior-year quarter figure of 87 cents.
Better-than-expected results were driven by rise in revenues and lower provisions. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses remained the undermining factor.
Net income available to common shareholders was $56.2 million, up 39.5% year over year.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
Total revenues (net of interest expense) jumped 21.8% year over year to $223.4 million in the quarter, driven by higher net interest income and non-interest income. Moreover, revenues surpassed the Zacks Consensus Estimate of $213.1 million.
Texas Capital’s net interest income was $204.4 million, up 22.6% year over year. In addition, net interest margin expanded 45 basis points (bps) year over year to 3.59%. This resulted from improvement in earning asset composition and the favorable impact of increased interest rates on loan yields.
Texas Capital’s non-interest income surged 13.8% year over year to $19 million. The rise was primarily due to an increase in service charges, servicing income, wealth management and trust fee income, along with bank owned life insurance income. These were partially offset by lower brokered loan fees, swap fees and other income.
However, non-interest expenses increased 21.1% year over year to $114.8 million. This mainly stemmed from a rise in almost all components of expenses.
As of Sep 30, 2017, total loans rose 16.9% year over year to $21.4 billion while deposits climbed 5.5% year over year to $19.1 billion.
Credit Quality: A Mixed Bag
Non-performing assets totaled 0.67% of the loan portfolio plus other real estate owned assets, reflecting a year-over-year contraction of 40 bps. Total non-performing assets came in at $136.3 million, down 27.5% year over year.
Provisions for credit losses summed $20 million, down 9.1% year over year. Non-accrual loans were $118.2 million or 0.58% of total loans, against $169.1 million or 0.96% in the year-ago quarter.
However, the company’s net charge-offs increased 44.6% on a year-over-year basis to $10.7 million.
Steady Capital and Profitability Ratios
The company’s capital ratios demonstrated a steady position. As of Sep 30, 2017, return on average equity was 11.2% and return on average assets was 0.99% compared with 10.2% and 0.78%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 8.2% compared with 7% in the prior-year quarter.
Stockholders’ equity was up 25% year over year to $2.2 billion as of Sep 30, 2017. The uptrend was chiefly allied with retention of net income and proceeds from common stock offering during fourth-quarter 2016.
Outlook
Management estimates the contribution of MCA business to total mortgage loans to increase further in 2017. MCA is expected to be profitable for 2017, with average balances in excess of $900 million for the year.
Texas Capital projects low double-digit percent growth in average loans held-for-investment (LHI) in 2017 compared to 2016. Average balances for total mortgage finance loans including warehouse and MCA is likely to be $4.5-$4.9 billion, up from the previous guidance of $4.4 billion. Total average for 2017 is anticipated to be about $4.7 billion, in line with 2016, despite the benefit of the refinance activity.
Average warehouse volumes for Q4 are expected to be $3.6-$4 billion.
Management forecasts growth in average deposits in mid-single-digits with continued improvement in the Demand Deposits Account (DDA) composition. Fourth-quarter deposit growth is expected to come majorly from interest-bearing deposits. Seasonally, liquidity levels are expected to be up in the fourth quarter as warehouse volumes will be down and management will continue to increase deposits.
Management expects net revenues in mid-to-high teens percent growth.
Net interest margin (NIM) is projected within 3.35-3.45% in 2017.
Regarding expenses, non-interest expenses are expected to grow at low-teens percent and provision expenses are projected to be around low to mid-$50 million in 2017.
The fourth-quarter FAS 123R expense is expected to be consistent with the third-quarter expense of $6.1 million with the assumption of no significant change in stock price. For 2017, total FAS 123R expense is anticipated to be around $21 million.
Efficiency ratio is projected in the low to mid 50’s range in 2017.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
Texas Capital Bancshares, Inc. Price and Consensus
Texas Capital Bancshares, Inc. Price and Consensus | Texas Capital Bancshares, Inc. Quote
VGM Scores
At this time, Texas Capital's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.