Texas Capital BancShares Inc. ( TCBI - Analyst Report ) has been on a roll for the last several months, hitting a number of new all-time highs and jumping more than 70% since October 2011. With first-quarter EPS growth of 126% year-over-year and a long-term growth projection of about 10%, this regional banking stock has plenty of momentum.

The company became a Zacks #1 Rank (Strong Buy) stock on March 27, riding on the enthusiasm over its strong credit quality, steady capital position and consecutive earnings surprises.

First Quarter EPS Soars

Texas Capital reported first quarter 2012 earnings per share of 70 cents on April 25, beating the Zacks Consensus Estimate by 13% and improving upon last year's 31 cents. An increased top line and a reduced provision for credit losses led to the solid year-over-year growth. However, higher non-interest expense was a problem.

Net interest income was $88.2 million, up 37% from the year-ago quarter on the back of a 46% jump in total loans. Non-interest income increased 20% to $9.2 billion. Non-interest expense grew 13% to $52.3 million. Provision for credit losses was down 60% from the year-ago quarter to $3 billion.

Earnings Estimates Flying High

Currently, the Zacks Consensus Estimate for 2012 is $2.75 per share, an expected year-over-year growth of about 38%. For 2013, the Zacks Consensus Estimate is pegged at $2.85 per share.

For each year, all 13 estimates have been revised upward in the past 30 days, pushing the Zacks Consensus Estimate higher by 15% for 2012 and 11% for 2013.

Valuation Not So Cheap

Texas Capital currently trades at forward P/E of 14.1x, a 5% premium to the peer group average of 13.4x. Also, on a price-to-book basis, shares currently trade at 2.3x, a 63% premium to the peer group average of 1.4x.

However, Texas Capital has a trailing 12-month return on equity (ROE) of 15.1%, well above the 10.6% of its peers. This implies that the company reinvests its earnings more efficiently than its peer group.

Chart: TCBI Continues to Show Strength

Texas Capital began trending higher with the market recovery in March 2009, but shares got an extra boost in October 2011 after the company reported strong third quarter 2011 results with a 12% earnings surprise.

The company continuously outperformed its 200-day moving average and the S&P 500's performance over the last six months. The year-to-date return for the stock came in at 26.5% compared with the S&P 500’s return of 7.6%.

About the Company

Headquartered in Dallas, Texas, this entity operates as the holding company for Texas Capital Bank, National Association that provides various banking products and services. Texas Capital focuses primarily on middle-market business customers and high-net-worth individuals in each of the five major metropolitan markets of Texas. The company was founded in 1996 and conducted business through thirteen full-service banking locations and one operations center as of December 31, 2011. With a market capital of about $1.46 billion, Texas Capital competes with BOK Financial Corporation (BOKF) and BancFirst Corporation (BANF).