Texas Capital Bancshares Inc.’s (TCBI) fourth quarter earnings of 18 cents per share were slightly ahead of the Zacks Consensus Estimate of 16 cents. The company had earned 11 cents in the year-ago quarter. The better-than-expected results were primarily driven by an increase in net interest income and lower loan loss provisions, partially offset by higher expenses.
For the full year 2009, Texas Capital reported operating earnings of 55 cents per share compared to 89 cents in 2008, reflecting the issuance of 4.6 million shares in May 2009. Texas Capital’s net interest income was $55.1 million, up 6.9% sequentially and 42.3% year-over-year. The improvement was due to an increase in average earning assets.
Net interest margin was 4.21%, up 15 basis points (bps) sequentially and 80 bps year-over-year, driven by low funding costs and improved yields on earning assets. The company has posted a 6% sequential and 14% year-over-year growth in loans while deposits were up 5% sequentially and 24% from the prior-year period.
Non-interest income increased to $7.8 million, 9.5% sequentially and 31.3% year-over-year, primarily driven by an increase in brokered loan fees.
Credit metrics remained stressed. Net charge-offs as a percentage of average loans on a 12-month trailing basis were 46 bps, up 5 bps sequentially and 11 bps year-over-year. Non-performing assets equaled 2.74% of the loan portfolio plus other real estate owned assets, down 3 bps sequentially but up 93 bps year-over-year.
However, Texas Capital has reported an improvement in provisions for loan losses which were $10.5 million in the reported quarter, compared to $13.5 million in the prior quarter and $11.0 million in the year-ago quarter.
Non-interest expense increased 15.5% sequentially and 50.5% year-over-year to $42.8 million. Results reflect an increase in salaries and employee benefit expenses primarily due to business expansion.
Texas Capital’s Tier 1 capital ratio was 10.7% (up 70 bps year-over-year) and leverage ratio was 10.5%, up 30 bps from the year-ago quarter.
Texas Capital has separately announced that that it has entered into an equity distribution agreement with Morgan Stanley & Co. Inc. (MS) to sell up to $40 million of its common shares.
Though credit metrics remain stretched in the quarter, Texas Capital’s strong loan and deposit growth and continued expansion in net interest margin is impressive.
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