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Is Texas Capital Bank a good bank?

Is Texas Capital Bank a good bank?

Although Texas Capital Bank may be facing a major decline in its share value due to the current banking crisis, it is on the way towards stabilization.  Since the collapses of Silicon Valley Bank (SVB), First Republic, and Signature Bank in early March, investor confidence in regional banks is at an extreme low.  According to a Gallup poll conducted through late April, 48 percent of Americans expressed concerns about the money they deposited in financial institutions (1)

Is Texas Capital Bank a good bank?

What’s worse is that remaining regional banks such as PacWest Bancorp and Western Alliance have found their shares losing over 30 percent of their value.  Part of the reason for this decline can become attributed to high interest rates rather than poor management.  Since March of last year, the Federal Reserve Bank has increased interest rates 10 times in a row. Ultimately increasing it from a near 0% to 5% currently, in order to control inflation (2)

Which banks are in danger of failing 2023?

However, what this also does is lower the prices of US Treasury bonds. And long-term securities most regional banks invested in when the interest rates were near 0% during the COVID pandemic.  Another product of high interest rates is frequent deposit withdrawals.  To pay off these withdrawals, regional banks have to sell the depreciated bonds they bought earlier. As a result, generates a net loss for them.

Is Texas Capital Bank a good bank?

Along with the other regional banks, Texas Capital Bancshares is experiencing major declines in its share value.  Over the past 3 months, its price has declined by approximately 35 percent.  From a high $68.50 mid February, its share prices are approximately $43.15 now (3).  On the other hand, the net income of TCBI is relatively stable.  Between the first quarter of 2022 and 2023, net income only changed by a million dollars. From $39.6 million to $38.7.  TCB’s net interest income has increased by approximately 30 percent. From $183.5 to $235.3 million across the two quarters. However, its non-interest expenses have also increased by approximately 27 percent ($153.1 to $194.0 million). 

Moreover, the fact that TCBI finds itself with a gain in net interest income. However, despite the banking crisis is a testimony to the investor trust TCBI still retains.  In fact, there was a net increase in interest bearing deposits (from $11,945 to $12,679 million)! Between quarter 1 of 2022 and 2023 (4)

Which banks are in danger of failing 2023?

With stable deposits and a successful sale of BankDirect Capital FinanceLLC (“Bank Direct”). Generated about $177.7 million in income last quarter, TCBI handled the crisis well. Furthermore, should be on its way to recovering its deficit in share price once the crisis clears up.

Written by Thomas Wang

Sources

  1. https://www.nytimes.com/2023/05/04/business/regional-banks-stock-price-pacwest.html
  2. https://thewire.in/banking/us-regional-banking-crisis-far-from-over
  3. https://www.marketwatch.com/investing/stock/tcbi/charts?mod=mw_quote_advanced
  4. https://s27.q4cdn.com/172324263/files/doc_financials/2023/q1/1Q2023_Earnings_Presentation_vFinal.pdf
  5. FDIC: Federal Deposit Insurance Corporation