Little Upside for Texas Capital

Texas Capital Bancshares, Inc.’s (TCBI - Analyst Report) first-quarter operating results were $0.30 per share versus $0.29 per share recorded in the prior-year period. Results came in ahead of our expectation, driven by a substantially lower-than-expected provision for loan losses recorded for the quarter.

Growth remains paramount, as first-quarter average net loans expanded 25.9% year-over-year. Credit quality issues appear to have been contained presently. In our opinion, industry overhangs out-weigh TCBI’s results for the quarter; as such, we continue to rate the shares of this company as a Hold.

We have adjusted our 2008 and 2009 EPS expectation, following a review of the quarter. TCBI currently trades at 12.6x the consensus forward estimate a 7.6% discount to the small-cap peer group median. On a price-to-book basis, the shares now trade at a 10.7% discount to the small-caps, versus a 10.0% discount at the time of our last report.

Our six-month target of $17.25 per share equates to 1.40x our projected book value six months out. This target price also equates to 13.8x of our 2008 projected earnings per share. With no dividend to supplement the return, this equates to a 5.8% expected return over that period.

Read the full analyst report on TCBI