Texas Capital Q3 Earnings & Revenues Beat on Record Fee Income Growth

Texas Capital Bancshares, Inc. TCBI reported third-quarter 2024 adjusted earnings per share of $1.62, which beat the Zacks Consensus Estimate of 97 cents. Moreover, earnings compared favorably with $1.18 reported in the year-ago quarter.

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Shares of Texas Capital rose 2.7% following the release of its third-quarter earnings, which highlighted a record high non-interest income.

In the third quarter of 2024, the company included a $179.6 million loss on sale of available-for-sale (AFS) debt securities ($2.92 net loss per diluted share) and restructuring expense of $5.9 million (10 cents net loss per diluted share), partially offset by a $651,000 release of Federal Deposit Insurance Corporation (“FDIC”) special assessment accrual (1 cent net income per diluted share).

TCBI's results benefited from an increase in net interest income (NII), fee income and higher loan and deposit balances. However, an increase in expenses was the undermining factor.
 
Net loss available to common shareholders (GAAP basis) was $65.6 million against net income available to common shareholders of $57.3 million reported in the prior-year quarter.

TCBI’s Revenues and Expenses Rise

Total revenues on an adjusted basis increased 9.3% year over year to $304.9 million. Also, the top line surpassed the Zacks Consensus Estimate of $279.6 million.

NII was $240.1 million, which increased 3.4% year over year. The rise was driven by increases in average total loans held for investment and yields on average earning assets, partially offset by an increase in average interest-bearing liabilities.

NIM of 3.16% during the third quarter increased 3 basis points year over year.

Non-interest income (excluding the loss from on AFS Securities Sale) jumped 38.2% to $64.8 million. The rise was mainly driven by an increase in service charges on deposit accounts, wealth management and trust fee income investment banking and advisory fees and other income.

Non-interest expenses (after adjusting for FDIC special assessment and restructuring expenses) increased 5.4% to $190.1 million. The rise was due to increases in salaries and benefits, occupancy expense and communications and technology expense, partially offset by decreases in legal and professional expense.

TCBI’s Loans and Deposits Increase

As of Sept. 30, 2024, total loans held for investment increased 2.4% on a sequential basis to $22.3 billion. Total deposits increased 8.6% to $25.9 billion.

TCBI’s Credit Quality: Mixed Bag

Total non-performing assets jumped 40.9% to $88.9 million from the prior-year quarter’s level.

Furthermore, provision for credit losses aggregated to $10 million, which plunged 44.4% from the year-ago quarter’s level. Also, Texas Capital’s net charge-offs declined 32% to $6.1 million from the year-ago quarter.

TCBI’s Capital Ratios: A Mixed Bag

As of Sept. 30, 2024, tangible common equity to total tangible assets increased to 9.7% compared with 9.4% in the year-ago quarter. 

The leverage ratio was 11.4% in the third quarter of 2024, down from 12.1% as of Sept. 30, 2023. The common equity tier 1 ratio was 11.2%, which declined from the prior-year quarter’s 12.7%.

TCBI’s Strategic Initiatives

Texas Capital’s quarterly strategic initiatives included the acquisition of a $332 million commercial loan portfolio and a balance sheet repositioning, where proceeds from the $1.2 billion sale of lower-yielding AFS securities were reinvested into higher-yielding assets.

Our View on TCBI

Texas Capital continues to execute its strategic plan to enhance top-line growth going forward. Also, the bank’s increasing NII and fee income will further support the top line. However, elevated expenses on technological advancements are near-term concerns.
 

Currently, TCBI 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

Hancock Whitney Corp.’s HWC third-quarter 2024 earnings per share of $1.33 beat the Zacks Consensus Estimate of $1.31. The bottom line compared favorably with $1.12 registered in the year-ago quarter.

HWC’s results were aided by an increase in non-interest income and NII. Lower expenses and provisions were positives. However, the decline in total loans and deposits affected the results to some extent.

Synovus Financial Corp. SNV reported third-quarter 2024 adjusted earnings per share of $1.23, which surpassed the Zacks Consensus Estimate of $1.09. This compares to earnings of 84 cents a year ago.

SNV’s results benefited from strong growth in non-interest revenues, a fall in expenses and provisions for credit losses. Also, improving loans and deposit balances were tailwinds. However, a decline in NII and a rise in non-performing loans were major headwinds.

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Synovus Financial Corp. (SNV): Free Stock Analysis Report
 
Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report
 
Hancock Whitney Corporation (HWC): Free Stock Analysis Report

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