Texas Capital Bancshares, Inc. TCBI shares gained 2% in yesterday’s trading despite the company’s lower-than-expected fourth-quarter 2023 results. TCBI reported fourth-quarter 2023 earnings per share of 65 cents (excluding non-recurring items), which missed the Zacks Consensus Estimate of 76 cents. Also, earnings compared unfavorably with $4.23 earned in the year-ago quarter.

TCBI's results suffered from a decrease in both net interest income (NII) and non-interest income. Additionally, reduced loan and deposit balances added to the challenges. Nevertheless, a reduction in provisions and expenses provided some relief for the company.

Net income available to common shareholders was $15.8 million, plunging 92.6% from the prior-year quarter.

In 2023, earnings per common share were $3.54, which declined 43% from the previous year and missed the Zacks Consensus Estimate of $3.98. Net income available to common shareholders (GAAP) was $172 million, down 46% year over year.

Revenues and Expenses Decline

Total revenues decreased 53% year over year to $246 million. The top line missed the Zacks Consensus Estimate of $255.02 million.

In 2023, total revenues were $1.08 billion, down 12.2% from the previous year. The top line matched the Zacks Consensus Estimate.

NII was $214.7 million, which declined 13.3% year over year. The fall was primarily due to an increase in funding costs and a decrease in average earning assets, partially offset by a rise in yields on average earning assets.

NIM of 2.93% during the quarter contracted 33 basis points year over year.

Non-interest income plunged 88.8% to $31.3 million. This was primarily due to the non-recurring gain related to the sale of its premium finance subsidiary of $248.5 million recorded in the fourth quarter of 2022.

Non-interest expenses decreased 5.5% to $201.4 million. The fall is mainly due to the decline in occupancy, marketing, legal and professional and other expenses. This was partially offset by an increase in FDIC insurance assessment expenses.

As of Dec 31, 2023, total loans decreased 1.3% on a sequential basis to $20.34 billion. Total deposits decreased 6.3% to $22.4 billion.

Credit Quality: Mixed Bag

Total non-performing assets jumped 68.4% to $81.4 million from the prior-year quarter’s level.

Nonetheless, provision for credit losses aggregated to $19 million, which decreased 44.1% from the year-ago quarter’s level. Also, Texas Capital’s net charge-offs decreased 7.7% to $13.8 million from the previous year.

Capital Ratios: Mixed Bag

Tangible common equity to total tangible assets came in at 10.2% compared with the year-ago quarter’s 9.7%. The leverage ratio was 12.2% compared with 11.5% as of Dec 31, 2022.

The common equity tier 1 ratio was 12.6%, down from the prior-year quarter’s 13%.