On May 7, 2014, we issued an updated research report on
Texas Capital Bancshares Inc.
). This commercial bank recently reported disappointing
first-quarter 2014 results. Results were impacted by higher
expenses, elevated level of provision for credit losses and lower
mortgage finance volumes, partially offset by organic growth. We
remain cautious on Texas Capital due to the current economic
uncertainties across the industry.
Texas Capital reported first-quarter 2014 earnings of 60 cents per
share, lagging the Zacks Consensus Estimate by 17.81%. Net income
was down 22% year over year to $25.8 million.
Texas Capital continues to incur higher expenses, which rose 24.5%
year over year in first-quarter 2014. This reflects poor expense
control and is expected to adversely affect top- and bottom-line
growth. Though the company's efforts to hire experienced bankers
and expand its presence are encouraging, the resultant expenses,
which continue to rise at the same rate as revenues, negate the
incremental effects of business expansion.
Texas Capital's business is mainly concentrated in Texas. We
apprehend that lack of diversifying efforts will hamper the
company's top- and bottom-line growth in the near future.
Further, there are certain concerns that may mar the company's
financials in the near term. These include absence of credible
improvement in the mortgage market, declining net interest margin
due to a low interest rate environment and the prevailing stringent
Following first-quarter results, the Zacks Consensus Estimate for
full-year 2014 declined 8.9% to $2.87 per share over the last 30
days. Also, the same for 2015 decreased 6.3% to $3.58 per share,
over the same time frame. Hence, Texas Capital currently carries a
Zacks Rank #5 (Strong Sell).
Key Picks from the Sector
Some better-ranked companies in the same sector include
Chemical Financial Corporation
MidWest One Financial Group, Inc.
). While Chemical Financial and MidWest One Financial sport a Zacks
Rank #1 (Strong Buy), BancFirst carries a Zacks Rank #2 (Buy).
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