Back to top

Image: Bigstock

Hancock (HBHC) Beats on Q2 Earnings as Revenues Rise

Read MoreHide Full Article

Hancock Holding Company reported second-quarter 2016 earnings of 59 cents per share, which easily surpassed the Zacks Consensus Estimate of 44 cents. Further, it reflects a 25% rise from the prior-year figure.

Better-than-expected results were driven by an improvement in the top line. Further, growth in loans and deposits continued to be strong. However, an energy-led rise in provisions and slight increase in operating expenses remained the undermining factors.

Net income came in at $46.9 million, a rise of 35% from the prior-year quarter.

Revenue Growth Supports Results

Hancock’s net revenue summed $228.7 million, up 8% year over year. However, it lagged the Zacks Consensus Estimate of $230.4 million.  

Net interest income grew 9% year over year to $165 million. However, reported net interest margin (“NIM”) fell 5 basis points (bps) from the prior-year quarter to 3.25%.

Non-interest income totaled $63.7 million, up 5% from the year-ago quarter. The growth was driven by an improvement in all the components, except insurance commissions and fee as well as an increase in amortization of FDIC loss share receivable.

Total operating expenses inched up nearly 1% year over year to $150.9 million. The rise was mainly triggered by an increase in personal expenses and other operating costs.

Deteriorating Credit Quality

Net charge-offs from the non-covered loan portfolio was 0.20% of average total loans, up from 0.03% in the year-ago quarter.

Further, provision for loan losses rose significantly year over year to $17.2 million owing to exposure to the stressed energy sector. Also, total nonperforming assets jumped significantly year over year to $325.1 million.

Strong Balance Sheet & Profitability Ratios; Capital Ratios Depict Weakness

As of Jun 30, 2016, total loans grew 11% year over year to $16.0 billion. Further, total deposits rose 9% year over year to $18.8 billion.

Return on average assets was 0.82%, up from 0.67% as of Jun 30, 2015. Moreover, as of Jun 30, 2016, return on average common equity was 7.76% compared with 5.75% as of Jun 30, 2015.

As of Jun 30, 2016, Tier 1 leverage ratio was 8.22%, down from 9.07% as of Jun 30, 2015. Further, Tier 1 risk-based capital ratio came in at 9.81%, down from 10.77% as of Jun 30, 2015.

2016 Guidance Reaffirmed

Management expects core revenues to improve in the near term, as and when revenue initiatives undertaken in the prior quarters mature. Core revenue growth is anticipated within 9–10%.

Also, reported and core NIM is expected to remain stable, while margin pressure is likely to continue.

Core pre-tax, pre-provision growth is projected to be around 25% (assuming no additional rate hikes in 2016) compared to 2014.

Expenses are expected to rise 2% or less.

Based on current trends, loans are anticipated to grow 5–7%, driven by continued development across the footprint. However, it will be slightly offset by ongoing payoffs and pay-downs in the energy portfolio.

Additionally, based on the current expectations, the company revised its outlook upward for provision for loan losses to $105–$145 million.

Management expects effective tax rate to be around 22–24% for the remainder of 2016.

Our Viewpoint

We believe Hancock’s organic and inorganic growth strategies will pay off going forward, supported by its efforts to restructure and streamline the business. Also, the company’s steady liquidity and capital positions remain impressive. Nevertheless, a stressed core NIM amid the persistent low interest rate environment, along with sizeable exposure to the energy sector, can restrict the company’s profitability.

HANCOCK HLDG CO Price, Consensus and EPS Surprise

HANCOCK HLDG CO Price, Consensus and EPS Surprise | HANCOCK HLDG CO Quote

At present, Hancock carries a Zacks Rank #3 (Hold).

Performance of Other Banks

Among other Southeast banking stocks, Regions Financial Corporation (RF - Free Report) posted in-line results in second-quarter 2016. On the other hand, First Horizon National Corp. (FHN - Free Report) and Bank of the Ozarks, Inc.'s second-quarter 2016 earnings beat the Zacks Consensus Estimate.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Regions Financial Corporation (RF) - $25 value - yours FREE >>

First Horizon Corporation (FHN) - $25 value - yours FREE >>

Published in