Texas Capital Bancshares Inc.
) has reported disappointing fourth-quarter 2012 results with
operating earnings of 76 cents per share lagging the Zacks
Consensus Estimate of 83 cents. However, the results were
significantly ahead of the year-ago earnings of 67 cents.
Higher expenses were the primary reason behind the earnings miss.
However, the negative was partly offset by an increase in the top
line, aided by improvement in both net interest income and
For the full year 2012, Texas Capital reported net income of
$120.7 million or $3.01 per share compared with $76.1 million or
$1.99 per share. Net income was however behind the Zacks
Consensus Estimate of $3.08 per share.
Quarter in Detail
Texas Capital's net interest income was $101.2 million, up 15%
from the year-ago quarter. Total loans increased 30% and deposits
elevated 34% from the prior-year period. Net interest margin
decreased 33 basis points (bps) year over year to 4.27%.
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
contributed to higher net interest income.
Texas Capital's non-interest income of $12.8 million advanced 43%
year over year. The increase was mainly backed by increase in
brokered loan fees earned in the mortgage warehouse lending unit
and elevation in other income which included swap fees and gain
on sales of other real estate owned (OREO).
However, Texas Capital's non-interest expense bolstered 19% year
over year to $60.1 million. Non-interest expense for the fourth
quarter of 2012 includes a pre-tax charge of $4.0 million ($0.06
per share after tax) for settlement of the judgment of $65.5
million in Oklahoma district court. 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.
Moreover, legal and professional costs moved up. These negatives
were partly offset by a decline in allowance and other carrying
costs for OREO expense.
Credit metrics were mixed during the quarter. Net charge-offs
increased to $3.5 million from $1.2 million in the prior quarter
and $3.4 million in the year-ago quarter.
Net charge-offs as a percentage of average loans were 0.21%, up
13 bps sequentially but down 4 bps year over year. Provisions for
credit losses were $4.5 million, up from $3.0 million in the
prior quarter but down from $6.0 million in the year-ago quarter.
However, non-performing assets equaled 1.06% of the loan
portfolio plus other real estate owned assets, reflecting a
sequential drop of 10 bps and a year-over-year decline of 52 bps.
Capital ratios were also a mixed bag in the quarter. Texas
Capital's Tier 1 capital ratio was 10.1% compared with 10.4% in
the prior quarter and 9.6% in the year-ago quarter. Moreover,
return on average equity was 15.35% and return on average assets
was 1.27%, compared with 17.97% and 1.40%, respectively, for the
prior quarter and 17.05% and 1.28% for the year-ago quarter.
Moreover, stockholders' equity escalated 36% year over year to
$836.2 million as of Dec 31, 2012, mainly related to the offering
of 2.3 million common shares for net proceeds of $87 million as
well as 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
), will report its fourth-quarter earnings on Jan 30, 2013.
Texas Capital retains a Zacks Rank #2 (Buy). Among other
Prosperity Bancshares Inc.
First Financial Bankshares Inc.
) are worth considering. Both these companies also carry a Zacks
BOK FINL CORP (BOKF): Free Stock Analysis
FIRST FIN BK-TX (FFIN): Free Stock Analysis
PROSPERITY BCSH (PB): Free Stock Analysis
TEXAS CAP BCSHS (TCBI): Free Stock Analysis
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