Texas Capital Bancshares Inc.
) reported dismal third-quarter 2013 results with operating
earnings of 74 cents per share, missing the Zacks Consensus
Estimate by a sliver. Moreover, results lagged the year-ago
earnings of 80 cents.
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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Higher expenses and lower top line were the primary reasons for
the earnings miss. Moreover, the company recorded an elevated
level of provision for credit losses. However, improvement in net
interest income along with elevated loans and deposits acted as
Net income available to common shareholders came in at $31.0
million compared with $32.5 million in the prior-year quarter.
Quarter in Detail
Total revenue reached $125.6 million in the quarter, down 11.5%
year over year. However, revenues surpassed the Zacks Consensus
Estimate of $118 million.
Texas Capital's net interest income was $108.8 million, up 12.3%
from the year-ago quarter. Total loans increased 11.8% to $10.4
billion, while deposits elevated 34.3% to $9.0 billion from the
prior-year period. However, net interest margin decreased 15
basis points year over year to 4.21%.
The decline stemmed from an expansion in loans with lower yields,
partially offset by 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 $10.4 million inched down
1.9% year over year. The decrease was mainly backed by a fall in
brokered loan fees earned in the mortgage warehouse lending unit
and reduced service charges on deposit accounts and swap fees.
Texas Capital's non-interest expense bolstered 16% year over year
to $62 million. The growth mainly reflects higher salaries and
employee benefit expenses primarily related to business growth.
Credit metrics were a mixed bag in the quarter. Non-performing
assets equaled 0.60% of the loan portfolio plus other real estate
owned assets, reflecting a year-over-year decline of 56 basis
points. Net charge-offs decreased to $0.05 million from $1.2
million in the prior-year quarter.
Non-accrual loans decreased and came in at $35.7 million or 0.44%
of loans held for investment compared with $57.3 million, or
0.87% in the prior-year quarter. However, provisions for credit
losses were $5.0 million, up 66.7% from $3.0 million in the
prior-year quarter. The increase in provision reflects
significant growth in loans held for investment during the
Capital ratios were also mixed in the quarter. Texas Capital's
tangible common equity to total tangible assets was 8.3%, up from
7.9% in the prior-year quarter. Return on average equity was
13.74% and return on average assets was 1.25%, compared with
17.27% and 1.40%, respectively, for the year-ago quarter.
Stockholders' equity escalated 33% year over year to $1.1 billion
as of Sep 30, 2013. The increase was mainly related to the
offering of 6 million preferred shares for net proceeds of $145.1
million in the first quarter of 2013 along with the retention of
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 mounting expenses remain a concern for the
company, we believe that with an eventual improvement in the
Texan economy, the company will deliver better earnings.
Another south-west bank,
BOK Financial Corporation
), is expected to report third-quarter earnings on Oct 30, 2013.
Texas Capital carries a Zacks Rank #4 (Sell). Some south-west
banks that are worth considering include
Banc of California, Inc.
) with a Zacks Rank #1 (Strong Buy), while
First Financial Bankshares Inc.
) carries a Zacks Rank #2 (Buy).