Driven by top-line strength, Texas Capital Bancshares Inc. TCBI 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. Moreover, the figure surpassed the Zacks Consensus Estimate of $827.6 million.
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.
Our Viewpoint
Texas Capital’s improved top line and a better balance sheet during the quarter impress us. However, bleak economic situation might hurt the company’s performance in the future. Though its inability to control expenses may hamper near-term profitability, improvement in margin remains a favorable factor.
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise
Texas Capital Bancshares, Inc. Price, Consensus and EPS Surprise | Texas Capital Bancshares, Inc. Quote
Currently, Texas Capital carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
People's United Financial Inc. PBCT recorded positive earnings surprise of 11.1% in fourth-quarter 2017. The company reported net earnings of 30 cents per share, beating the Zacks Consensus Estimate of 27 cents. The reported figure was up 25% year over year.
First Republic Bank’s FRC fourth-quarter 2017 results registered a negative earnings surprise of 4.3%, reflecting elevated expenses. Earnings per share came in at $1.10, missing the Zacks Consensus Estimate of $1.15. However, the figure improved 6.8% from the year-ago tally.
Comerica Inc. CMA pulled off a positive earnings surprise of 5.8% in the fourth quarter. Adjusted earnings per share of $1.28 surpassed the Zacks Consensus Estimate of $1.21. Also, the bottom line compares favorably with the prior-year quarter figure of 99 cents.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 – Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 – Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment