Texas Capital Bancshares Inc.
) reported second-quarter 2012 operating earnings of 76 cents per
share, surpassing the Zacks Consensus Estimate by a nickel. The
results were significantly ahead of the prior-year quarter's
earnings of 44 cents per share.
Quarterly results of Texas Capital benefited from an increase in
the top line, aided by an augmentation of both net interest income
as well as non-interest income. However, it was partially offset by
Separately, the company announced that it has started a public
offering of $1.75 million shares of common stock with the
underwriters having a 30-day option to buy an additional 15% of the
total amount of common stock for Texas Capital for covering
over-allotments. Proceeds from this offering would be used by Texas
Capital for its business and capital support.
Quarter in Detail
Texas Capital's net interest income was $90.6 million, up 27%
from the year-ago quarter. Total loans increased 37% while deposits
were 23% more than the prior-year period. Net interest margin
decreased 37 basis points (bps) year over year to 4.49%.
The decrease in net interest margin stemmed from an expansion in
loans with lower yields. However, that was partially offset by the
benefit from a reduction in funding costs. Yet, growth in loans
offset the negative impact from a fall in yields and hence
attributed to the augmentation of the net interest income.
Texas Capital's non-interest income of $10.5 million, advanced
32% year over year. The increase was mainly backed by the rise in
brokered loan fees earned in the mortgage warehouse lending
However, Texas Capital's non-interest expense grew 19% year over
year to $54.0 million. The growth mainly reflects higher salaries
and employee benefit expenses primarily related to business
expansion as well as expenses associated with performance-based
incentives due to the increase in stock price.
Credit metrics improved during the quarter at Texas Capital. Net
charge-offs decreased to $0.5 million from $0.8 million in the
prior quarter and $10.5 million in the year-ago quarter.
Net charge-offs as a percentage of average loans on a trailing
12-month basis were 0.20%, down 20 bps sequentially and 86 bps year
over year. Provisions for credit losses were $1.0 million in the
reported quarter, down from $3.0 million in the prior quarter and
$8.0 million in the year-ago quarter.
Non-performing assets equaled 1.35% of the loan portfolio plus
other real estate owned assets, reflecting a sequential drop of 7
bps and a year-over-year decline of 68 bps.
Capital ratios improved slightly in the quarter. Texas Capital's
Tier 1 capital ratio was 9.5%, flat sequentially, while leverage
ratio was 9.0%, up 10 bps sequentially. However, return on average
equity was 18.08% and return on average assets was 1.40% for the
reported quarter, up from 17.36% and 1.33%, respectively, for the
For Texas Capital, which has peers such as
First Financial Bankshares Inc.
Cullen/Frost Bankers Inc.
), the business model remains a chief growth driver. Besides, the
gain in market share from its competitors and organic growth are
impressive. Credit quality improvement is also encouraging.
The company's efforts to hire experienced bankers and expand its
presence are encouraging. Though the resulting expenses that
continue to grow remain a concern, we believe that with an eventual
improvement in the Texas economy, the company would be poised to
experience a further increase in earnings.
Texas Capital retains a Zacks #2 Rank, which translates into a
short-term Buy recommendation. Considering the company's
fundamentals, we also have Outperform recommendation on the
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