5. Texas Capital Bancshares

Company Profile

Texas Capital Bancshares ( TCBI) of Dallas has seen its stock rise 44% over the past year, to close at $22.11 Monday.

Out of the four targets Olney discussed with TheStreet, he said "TCBI will probably get the most attention," as the "franchise is very good and it is in a fantastic position to be acquired by any out of state bank looking to get into the state." Not only does Texas have a growing market for residential real estate, "it has a friendly tax structure." Olney listed BB&T as possibly having interest in Texas Capital Bancshares following Comerica's deal to acquire Sterling. He also said that "Canadian banks might be interested like TD ( TD)," and that " BBVA ( BBVA) might also be interested because it has a significant presence in Texas. "

Income Statement

The company reported fourth-quarter net income of $12.1 million, or 32 cents a share, increasing from $9.5 million, or 25 cents a share, the previous quarter and $6.4 million, or 18 cents a share, a year earlier. The provision for credit losses in the fourth quarter was $12 million, declining from $13.5 million in the third quarter but up from $6.4 million in the fourth quarter of 2009.

Net interest income increased 16% year-over-year to $66 million in the fourth quarter, as the company grew its deposit base by 32% and its demand deposits (most of which are non-interest-bearing) increased 61%. The fourth-quarter net interest margin was a healthy 4.12%, although it declined from 4.27% the previous quarter and 4.21% a year earlier.

The fourth-quarter return on average assets was 0.72%.

Balance Sheet

Total assets were $6.5 billion as of December 31 and the NPA ratio was 2.39%. The fourth-quarter net charge-off ratio was 1.14% and loan loss reserves covered 1.58% of total loans as of December 31.

Texas Capital Bancshares exited TARP in May 2009. The company's regulatory Tier 1 leverage ratio was 9.4% and its total risk-based capital ratio was 11.8% as of December 31. The tangible common equity ratio was 8.0%.

Stock Ratios

The shares trade for 13 times the consensus 2012 earnings estimate of $1.68 a share.

Analyst Ratings

Five of the 14 analysts covering Texas Capital rate the shares a buy, while the remaining analysts all recommend holding the shares.

Olney estimates the company has "a potential takeout price of $24.09," which would be a 9% premium to Monday's close.

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