Texas Capital Bancshares Inc. ( TCBI ) reported
disappointing first-quarter 2013 results with operating earnings of
80 cents per share marginally lagging the Zacks Consensus Estimate
of 82 cents. However, results came in significantly ahead of the
year-ago earnings of 70 cents.BOK FINL CORP (BOKF): Free Stock Analysis
ReportPROSPERITY BCSH (PB): Free Stock Analysis
ReportSOUTHSIDE BANCS (SBSI): Free Stock Analysis
ReportTEXAS CAP BCSHS (TCBI): Free Stock Analysis
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Higher expenses were the primary reason behind the earnings miss.
However, this was partially offset by an increase in top line,
aided by improvement in both net interest income and non-interest
Net income available to common shareholders came in at $33.1
million compared with $27.1 million in the prior-year
Quarter in Detail
Total revenue reached $115 million in the quarter, up 12.7% year
over year. Moreover, revenues surpassed the Zacks Consensus
Estimate of $114 million.
Texas Capital's net interest income was $98 million, up 11.4% from
the year-ago quarter. Total loans increased 18% and deposits
elevated 28% from the prior-year period. However, net interest
margin decreased 27 basis points year over year to 4.27%.
The decline stemmed from an expansion in loans with lower yields,
partially offset by reduction in funding costs. Yet, growth in
loans offset the negative impact from a fall in yields, and hence
contributed to higher net interest income.
Texas Capital's non-interest income of $11 million advanced 22%
year over year. The increase was mainly backed by a rise in
brokered loan fees earned in the mortgage warehouse lending unit
and elevation in service charges on deposit accounts and swap
On the flip side, Texas Capital's non-interest expense bolstered
7% year over year to $55.7 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
Moreover, marketing costs moved up. These negatives were partially
offset by a decline in allowance and other carrying costs for other
real estate owned (OREO) expense.
Credit metrics were a mixed bag in the quarter. Non-performing
assets equaled 0.83% of the loan portfolio plus other real estate
owned assets, reflecting a year-over-year decline of 59 basis
Provisions for credit losses were $2.0 million, down from $3.0
million in the prior-year quarter. Non-accrual loans also decreased
and came in at $43.4 million or 0.63% of loans held for investment
compared with $50.2 million, or 0.87% in the prior-year
However, net charge-offs increased to $1.2 million from $0.8
million in the prior-year quarter. Net charge-offs as a percentage
of average loans were 0.07%, up 1 basis point year over year.
Capital ratios were also mixed in the quarter. Texas Capital's
tangible common equity to total tangible assets was 8.4%, up from
7.3% in the prior-year quarter. Moreover, return on average equity
was 15.82% and return on average assets was 1.38%, compared with
17.36% and 1.33%, respectively, for the year-ago quarter.
Stockholders' equity escalated 57% year over year to $1.0 billion
as of Mar 31, 2013. The increase was mainly related to the offering
of 2.3 million common shares for net proceeds of $87 million in the
third quarter of 2012, the offering of 6.0 million shares of
preferred shares for net proceeds of $145.1 million in the quarter
under review along with retention of net income.
Texas Capital's market share gains and organic growth is
impressive. Its efforts to hire experienced bankers and expand its
worldwide presence are also encouraging.
Though the resultant expenses that continue to mount remain a
concern for the company, we believe that with an eventual
improvement in the Texan economy, the company will deliver better
Another south-west bank, BOK Financial
Corporation ( BOKF ), is expected to
report first-quarter earnings on Apr 30, 2013.
Texas Capital carries a Zacks Rank #4 (Sell). Among other
south-west banks, Southside Bancshares Inc. ( SBSI ) with a Zacks
Rank #2 (Buy), and Prosperity Bancshares Inc. ( PB ) with a Zacks Rank
#3 (Hold), are worth considering.