The effect of common stock and subordinated note offerings led
Texas Capital Bancshares Inc.
) to post disappointing first-quarter 2014 results wherein
earnings per share of 60 cents lagged the Zacks Consensus
Estimate of 74 cents. The reported figure was also below 80 cents
per share earned in the year-ago quarter.
Results also suffered due to a rise in expenses and higher levels
of provision for credit losses. However, improvement in net
interest income and increased loans and deposits were the
Net income available to common shareholders was $25.8 million,
down 22% from the prior-year quarter.
Performance in Detail
Total revenue reached $127.0 million in the quarter, up 10.0%
year over year. The rise was driven by higher interest income.
Moreover, revenues surpassed the Zacks Consensus Estimate of
Texas Capital's net interest income was $108.3 million, up 10.5%
from the year-ago quarter. Total loans increased 22% to $11.6
billion while deposits increased 26% to $9.7 billion from the
However, net interest margin decreased 28 basis points (bps) year
over year to 3.99%. The decline stemmed from rise in loans with
lower yields and due to the impact of subordinated note offering.
Texas Capital's non-interest income of $10.4 million declined
8.2% year over year. The decrease was mainly due to a fall in
brokered loan fees, which resulted from declining mortgage
finance volumes and lower swap fees.
Texas Capital's non-interest expenses rose 24.5% year over year
to $69.3 million. This rise was mainly owing to higher salaries
and employee benefits, partly offset by a fall in marketing
Credit metrics were a mixed bag in the quarter. Nonperforming
assets equaled 0.39% of the loan portfolio plus other real estate
owned assets, reflecting a year-over-year decline of 21 bps.
Total nonperforming assets declined 21.1% year over year to $45.6
However, the company's net charge-offs increased 71.1% year over
year to $2.0 million. Non-accrual loans came in at $43.2 million
or 0.37% of total loans as against $43.4 million or 0.46% in the
prior-year quarter. Provisions for credit losses were $5.0
million, significantly up from the prior-year quarter.
Capital and Profitability Ratios
Texas Capital's tangible common equity to total tangible assets
was 8.7%, up from 8.4% in the prior-year quarter. Return on
average equity was 10.20% and return on average assets was 1.01%,
compared with 15.82% and 1.38%, respectively, in the year-ago
Stockholders' equity escalated 21% year over year to $1.2 billion
as of Mar 31, 2014. The increase was mainly related to the
offering of 1.9 million common shares in the first quarter of
Growth in Texas Capital's loans and deposits indicate that it is
growing organically. The company's capital raising will also
likely improve results going forward.
Though mounting expenses remain a concern, we believe that with
top-line growth, the company will report better earnings in the
Currently, Texas Capital has a Zacks Rank #3 (Hold).
About Other Southwest Banks
First Financial Bankshares Inc
) first-quarter 2014 earnings of 70 cents per share beat the
Zacks Consensus Estimate of 66 cents. Results benefited from
higher revenues, partially offset by a rise in expenses.
BOK Financial Corp.
) is slated to report results on Apr 30.
Banc of California, Inc.
) is expected to release its earnings on May 14.
BANC OF CA INC (BANC): Free Stock Analysis
BOK FINL CORP (BOKF): Free Stock Analysis
FIRST FIN BK-TX (FFIN): Free Stock Analysis
TEXAS CAP BCSHS (TCBI): Free Stock Analysis
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