Texas Capital BancShares

Earnings momentum for Texas Capital BancShares Inc. ( TCBI - Analyst Report ) has advanced in the past 7 days following this major regional bank’s impressive third quarter results. Shares have surged approximately 48.1% year-to-date. Furthermore, this Zacks #1 Rank (Strong Buy) has delivered positive earnings surprises for the last six quarters with an average beat of 11.1%. Strong fundamentals should help TCBI to maintain its growth trend going forward.

Solid Third Quarter

On October 24, Texas Capital BancShares reported third quarter earnings per share of 80 cents, topping the Zacks Consensus Estimate by 2.6% and year-ago earnings by 43.0%. The upsurge was primarily due to the strengthening of the top line, aided by an increase in both net interest income and non-interest income.

Net interest income climbed 22% year over year to $96.9 million. Non-interest income increased 39.0% to $10.6 million. However, the net interest margin contracted 45 basis points to 4.36%, stemming from an expansion in loans with lower yields. The company's non-interest expenses rose 16% to $53.5 million over the same period.

Credit metrics continued to improve at Texas Capital BancShares. The provision for loan losses was $3.0 million, down 57.1% from the year-ago quarter with net charge-offs exhibiting a declining trend. Net charge-offs as a percentage of average loans were 0.08%, down 40 basis points year over year.

Earnings Estimates on the Rise

The Zacks Consensus Estimate for 2012 is up 2.0% to $3.08 in the past 7 days as all 13 estimates were revised higher. The Zacks Consensus Estimate for 2013 advanced 3.7% to $3.40 in the same timeframe as 11 of 13 increased.

The Zacks Consensus Estimate for 2012 reflects a year-over-year growth of about 54.8%, while the expected growth rate for 2013 is 10.3%.

Reasonable Valuation

Shares of Texas Capital BancShares currently trade at 15.2x 12-month forward earnings, a 9.4% premium to the peer group average of 13.9x. Its price to book ratio of 2.3 is at a 64.3% premium to the industry median of 1.4.

The company has a trailing 12-month ROE of 16.7%, compared with the peer group average of 10.1%. Considering the recent share price fluctuations and consistent growth trends, there is a strong possibility of considerable upside from the current levels.

Chart Resonates Growth Potential

Texas Capital BancShares has witnessed sturdy price momentum since December 2011. Moreover, the company has been continuously outperforming its 200-day moving average over the past year, showing a steady growth trend. The year-to-date return for the stock came in at 48.1% compared with the S&P 500’s return of 12.3%.

Texas Capital BancShares operates as the holding company for Texas Capital Bank, which provides various banking products and services. The company was founded in 1996 and conducts business through 13 banking offices mainly in Dallas, Houston, Fort Worth, Austin, and San Antonio, along with 1 operations center. With a market cap of about $1.9 million, Texas Capital BancShares competes with BOK Financial Corporation (BOKF), among others.

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