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Home Bank Capital Texas Capital Bank, National Association -- Moody's affirms Texas Capital's ratings

Texas Capital Bank, National Association — Moody’s affirms Texas Capital’s ratings

Rating Action: Moody’s affirms Texas Capital’s ratings (long-term deposits A3); changes outlook to stable from negativeGlobal Credit Research – 22 Feb 2021New York, February 22, 2021 — Moody’s Investors Service (Moody’s) has affirmed the ratings of Texas Capital Bancshares, Inc. and its bank subsidiary, Texas Capital Bank, National Association (together referred to as Texas Capital), along with the affirmation of the bank’s baa2 standalone baseline credit assessment (BCA). Texas Capital Bank, National Association is rated A3/Prime-2 for long- and short-term deposits. Texas Capital Bancshares, Inc. has a long-term issuer rating of Baa3. At the same time, Moody’s changed the ratings outlook back to stable from negative.Affirmations:..Issuer: Texas Capital Bancshares, Inc….. Issuer Rating, Affirmed Baa3, stable from negative….Subordinate Regular Bond/Debenture, Affirmed Baa3….Pref. Stock Non-cumulative, Affirmed Ba2(hyb)..Issuer: Texas Capital Bank, National Association…. Adjusted Baseline Credit Assessment, Affirmed baa2…. Baseline Credit Assessment, Affirmed baa2…. ST Counterparty Risk Assessment, Affirmed P-2(cr)…. LT Counterparty Risk Assessment, Affirmed Baa1(cr)…. ST Counterparty Risk Rating, Affirmed P-2…. LT Counterparty Risk Rating, Affirmed Baa2…. ST Deposit Rating, Affirmed P-2…. LT Deposit Rating, Affirmed A3, stable from negative…. Subordinate Regular Bond/Debenture, Affirmed Baa3Outlook Actions:..Issuer: Texas Capital Bancshares, Inc…..Outlook, Changed to stable from negative..Issuer: Texas Capital Bank, National Association….Outlook, Changed to stable from negativeRATINGS RATIONALEThe affirmation of Texas Capital’s ratings reflects improvements in the bank’s liquidity profile, capitalization and asset concentrations, which have offset weakness in asset quality performance and significantly reduced profitability owing to the fallout from the coronavirus pandemic. Moody’s said the change in outlook to stable from negative reflects its view that Texas Capital will continue to improve its asset quality and capitalization over the next 12-18 months.Moody’s assessment of Texas Capital’s asset risk incorporates the risks associated with its historically rapid loan growth and asset concentrations. These risks manifested in the bank’s elevated loan losses in 2018, 2019 and 2020 primarily in its energy and leveraged loan portfolios. Moody’s believes these losses highlight the risks associated with rapid loan growth that the bank pursued in prior years, as well as the risks for elevated loss content in leveraged loans from looser industry-wide underwriting standards. Positively, the bank has worked to reduce its exposure to the energy sector, which accounted for 29% of its tangible common equity (TCE) base at year-end 2020, down from 54% at year-end 2019. Additionally, it has managed down its leveraged loan portfolio. Furthermore, the bank’s concentration to commercial real estate (CRE) has declined and now…

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