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Texas Capital Bancshares (TCBI) Down 7.9% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Texas Capital Bancshares, Inc. (TCBI - Free Report) . Shares have lost about 7.9% in the past month, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is TCBI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Texas Capital Beats on Q4 Earnings, Records Tax Expense
Driven by top-line strength, Texas Capital reported a positive earnings surprise of around 2.6% in fourth-quarter 2017. Adjusted earnings per share of $1.19 outpaced the Zacks Consensus Estimate by 3 cents.
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.
Including $17.6 million or 35 cents per share write-off of the deferred tax asset related to the recent tax reform, net income came in at $44.7 million or 84 cents per share compared with $48.4 million or 96 cents recorded in the prior-year quarter.
For full-year 2017, earnings per share reached $3.73 per share comparing favorably with the year-ago earnings of $3.11 per share. Net income available to common shareholders was $187.3 million, up 29% year over year.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
For full-year 2017, the company reported revenues of $835.6 million, up 19.3% year over year.
Total revenues (net of interest expense) jumped 21.1% year over year to $230 million in the quarter, driven by higher net interest income and non-interest income. Furthermore, revenues surpassed the Zacks Consensus Estimate of $219.8 million.
Texas Capital’s net interest income was $210.6 million, up 23% year over year, mainly due to rise in loans held for investment. In addition, net interest margin expanded 36 basis points (bps) year over year to 3.47%. This resulted from improvement in loan yields, partially offset by high cost of deposits.
Texas Capital’s non-interest income advanced 3.2% year over year to $19.4 million. The rise was primarily due to an increase in service charges, servicing income, swap fees, wealth management and trust fee income, along with bank-owned life insurance income. These were partially offset by lower brokered loan fees and other income.
However, non-interest expenses flared up 25% year over year to $133.1 million. This mainly stemmed from a rise in almost all components of expenses.
As of Dec 31, 2017, total loans rose 17% year over year to $21.7 billion, while deposits climbed 12% year over year to $19.1 billion.
Credit Quality Improved
Non-performing assets totaled 0.55% of the loan portfolio plus other real estate owned assets, reflecting a year-over-year contraction of 52 bps. Total non-performing assets came in at $113.2 million, down 39.4% year over year.
Provisions for credit losses summed $2 million, down 77.8% year over year. Non-accrual loans were $101.4 million or 0.49% of total loans, against $167.8 million or 0.96% in the year-ago quarter.
Additionally, the company’s net charge-offs tanked 95.4% on a year-over-year basis to $0.96 million.
Steady Capital and Profitability Ratios
The company’s capital ratios demonstrated a steady position. As of Dec 31, 2017, return on average equity was 8.18%, and return on average assets was 0.71% compared with 10.82% and 0.85%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 8.1% compared with 8.5% in the year-earlier quarter.
Stockholders’ equity was up 10% year over year to $2.2 billion as of Dec 31, 2017. The uptrend chiefly allied with retention of net income.
Outlook
Management estimates the contribution of MCA business to total mortgage loans to be around $1 billion in 2018.
Texas Capital projects low- to mid-teens percent growth in average loans held-for-investment (LHI) in 2018 compared to 2017. Growth in average balances for total mortgage finance loans is likely to be flat to low single-digit percent growth for 2018 with seasonal decline in the first quarter. Average deposits are expected to record low- to mid-teens percent growth in 2018.
Net interest earnings are anticipated to record high single digit to low-teens percent growth in 2018.
Management expects net revenues in low-to-mid teens percent growth, with assumption of higher deposit costs.
Net interest margin (NIM) is projected within 3.35-3.45% in 2018, with assumption of no additional rate increases in 2018.
Provision expenses are projected to be around mid-$50 to mid-$60 million in 2018.
Efficiency ratio is projected in the low- to mid-50s range in 2018. Effective tax rate is expected to be 22% in 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been only two moves up in the last two months. In the past month, the consensus estimate has shifted up by 8.3% due to these changes.
Texas Capital Bancshares, Inc. Price and Consensus
At this time, TCBI has a poor Growth Score of F, however its Momentum is doing a lot better with an A. However, the stock was also 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
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, TCBI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Texas Capital Bancshares (TCBI) Down 7.9% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Texas Capital Bancshares, Inc. (TCBI - Free Report) . Shares have lost about 7.9% in the past month, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is TCBI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Texas Capital Beats on Q4 Earnings, Records Tax Expense
Driven by top-line strength, Texas Capital reported a positive earnings surprise of around 2.6% in fourth-quarter 2017. Adjusted earnings per share of $1.19 outpaced the Zacks Consensus Estimate by 3 cents.
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.
Including $17.6 million or 35 cents per share write-off of the deferred tax asset related to the recent tax reform, net income came in at $44.7 million or 84 cents per share compared with $48.4 million or 96 cents recorded in the prior-year quarter.
For full-year 2017, earnings per share reached $3.73 per share comparing favorably with the year-ago earnings of $3.11 per share. Net income available to common shareholders was $187.3 million, up 29% year over year.
Revenues Rise, Loans & Deposits Go Up, Costs Escalate
For full-year 2017, the company reported revenues of $835.6 million, up 19.3% year over year.
Total revenues (net of interest expense) jumped 21.1% year over year to $230 million in the quarter, driven by higher net interest income and non-interest income. Furthermore, revenues surpassed the Zacks Consensus Estimate of $219.8 million.
Texas Capital’s net interest income was $210.6 million, up 23% year over year, mainly due to rise in loans held for investment. In addition, net interest margin expanded 36 basis points (bps) year over year to 3.47%. This resulted from improvement in loan yields, partially offset by high cost of deposits.
Texas Capital’s non-interest income advanced 3.2% year over year to $19.4 million. The rise was primarily due to an increase in service charges, servicing income, swap fees, wealth management and trust fee income, along with bank-owned life insurance income. These were partially offset by lower brokered loan fees and other income.
However, non-interest expenses flared up 25% year over year to $133.1 million. This mainly stemmed from a rise in almost all components of expenses.
As of Dec 31, 2017, total loans rose 17% year over year to $21.7 billion, while deposits climbed 12% year over year to $19.1 billion.
Credit Quality Improved
Non-performing assets totaled 0.55% of the loan portfolio plus other real estate owned assets, reflecting a year-over-year contraction of 52 bps. Total non-performing assets came in at $113.2 million, down 39.4% year over year.
Provisions for credit losses summed $2 million, down 77.8% year over year. Non-accrual loans were $101.4 million or 0.49% of total loans, against $167.8 million or 0.96% in the year-ago quarter.
Additionally, the company’s net charge-offs tanked 95.4% on a year-over-year basis to $0.96 million.
Steady Capital and Profitability Ratios
The company’s capital ratios demonstrated a steady position. As of Dec 31, 2017, return on average equity was 8.18%, and return on average assets was 0.71% compared with 10.82% and 0.85%, respectively, recorded in the year-ago quarter. Tangible common equity to total tangible assets came in at 8.1% compared with 8.5% in the year-earlier quarter.
Stockholders’ equity was up 10% year over year to $2.2 billion as of Dec 31, 2017. The uptrend chiefly allied with retention of net income.
Outlook
Management estimates the contribution of MCA business to total mortgage loans to be around $1 billion in 2018.
Texas Capital projects low- to mid-teens percent growth in average loans held-for-investment (LHI) in 2018 compared to 2017. Growth in average balances for total mortgage finance loans is likely to be flat to low single-digit percent growth for 2018 with seasonal decline in the first quarter. Average deposits are expected to record low- to mid-teens percent growth in 2018.
Net interest earnings are anticipated to record high single digit to low-teens percent growth in 2018.
Management expects net revenues in low-to-mid teens percent growth, with assumption of higher deposit costs.
Net interest margin (NIM) is projected within 3.35-3.45% in 2018, with assumption of no additional rate increases in 2018.
Provision expenses are projected to be around mid-$50 to mid-$60 million in 2018.
Efficiency ratio is projected in the low- to mid-50s range in 2018. Effective tax rate is expected to be 22% in 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been only two moves up in the last two months. In the past month, the consensus estimate has shifted up by 8.3% due to these changes.
Texas Capital Bancshares, Inc. Price and Consensus
Texas Capital Bancshares, Inc. Price and Consensus | Texas Capital Bancshares, Inc. Quote
VGM Scores
At this time, TCBI has a poor Growth Score of F, however its Momentum is doing a lot better with an A. However, the stock was also 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
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, TCBI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.