We have reaffirmed our Outperform rating on
Texas Capital Bancshares Inc.
) based on its solid fundamentals and growth opportunities in the
current economic environment.
Texas Capital reported first-quarter 2012 operating earnings of
70 cents per share, surpassing the Zacks Consensus Estimate of 62
cents. The results were significantly ahead of the prior-year
quarter's earnings of 31 cents per share.
Quarterly results of Texas Capital benefited from an increase in
the top line, aided by higher net interest income as well as
non-interest income. However, it was partially offset by higher
expenses. The improvements in the credit quality metrics were also
Net interest income of $88.2 million, was up 37% from the
year-ago quarter driven by a 46% increase in total loans.
Non-interest income increased 20% to $9.2 billion. Provision for
credit losses plummeted 60% from the year-ago quarter to $3
billion. Yet non-interest expense grew 13% to $52.3 million.
For Texas Capital, which has peers such as
First Financial Bankshares Inc.
), the business model remains a chief growth driver. The company
has grown significantly since its inception, partly based on its
ability to hire local lenders from its national competitors.
Texas Capital continues to perform well on a variety of metrics.
Quite unlike its peers, the company continued to experience growth
in loans and deposits over the past few years. In the midst of a
slowing economy in Texas, we believe that this growth has stemmed
from a gain in market share from its economizing competitors which
struggled against Texas Capital's relationship-based model.
Moreover, the company's efforts to hire experienced bankers and
expand its presence are encouraging. Though the resultant expenses
that continue to grow remain a headwind, going forward we believe
that with an eventual improvement in the Texan economy, the company
would be further poised to experience an increase in earnings.
Encouraging Earnings Estimates Trends
Currently, for Texas Capital, the Zacks Consensus Estimate is
$2.75 per share for 2012, reflecting a projected growth of around
38% year over year. For 2013, the Zacks Consensus Estimate is
pegged at $2.85 per share.
Encouragingly, all the 13 estimates, for both 2012 and 2013,
have moved north in the past 30 days. This moved up the Zacks
Consensus Estimate by 15% for 2012 and 11% for 2013.
Texas Capital retains a Zacks #1 Rank, which translates into a
short-term Strong Buy recommendation.
BANCFIRST OKLA (BANF): Free Stock Analysis
FIRST FIN BK-TX (FFIN): Free Stock Analysis
TEXAS CAP BCSHS (TCBI): Free Stock Analysis
To read this article on Zacks.com click here.