Texas Capital Bancshares Inc.
) reported disappointing second-quarter 2013 results with
operating earnings of 52 cents per share, significantly below the
Zacks Consensus Estimate of 80 cents. Moreover, results lagged
the year-ago earnings of 76 cents.
Higher expenses were the primary reason for the earnings miss.
Moreover, the company recorded elevated level of provision for
credit losses. However, this was partially offset by an increase
in top line, aided by improvement in both net interest income and
Net income available to common shareholders came in at $21.6
million compared with $29.6 million in the prior-year quarter.
Quarter in Detail
Total revenue reached $118.4 million in the quarter, up 11.7%
year over year. Moreover, revenues surpassed the Zacks Consensus
Estimate of $115 million.
Texas Capital's net interest income was $101.2 million, up 11.7%
from the year-ago quarter. Total loans increased 20% and deposits
elevated 20% from the prior-year period. However, net interest
margin decreased 30 basis points year over year to 4.19%.
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 $11.1 million advanced
5.7% 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
27% year over year to $68.7 million. The growth mainly reflects
higher salaries and employee benefit expenses primarily related
to organization changes as well as expenses associated with
performance-based incentives due to the increase in stock price.
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 0.68% of the loan portfolio plus other real estate
owned assets, reflecting a year-over-year decline of 67 basis
points. The increase in provision reflects significant growth in
loans held for investment during the quarter.
Non-accrual loans decreased and came in at $38.5 million or 0.51%
of loans held for investment compared with $56.4 million, or
0.91% in the prior-year quarter.
However, provisions for credit losses were $7.0 million, up from
$1.0 million in the prior-year quarter. Net charge-offs increased
to $2.4 million from $0.5 million in the prior-year quarter. Net
charge-offs as a percentage of average loans were 0.13%, up 9
basis points year over year.
Capital ratios were also mixed in the quarter. Texas Capital's
tangible common equity to total tangible assets was 7.9%, up from
7.2% in the prior-year quarter. Return on average equity was
9.94% and return on average assets was 0.95%, compared with
18.08% and 1.40%, respectively, for the year-ago quarter.
Stockholders' equity escalated 52% year over year to $1.0 billion
as of Jun 30, 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
first-quarter 2013 along with the 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
), is expected to report second-quarter earnings on Jul 31, 2013.
Texas Capital carries a Zacks Rank #3 (Hold). Some south-west
banks that are worth considering include
First Financial Bankshares Inc.
Prosperity Bancshares Inc.
) with a Zacks Rank #2 (Buy).
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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