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Hancock (HBHC) Beats on Q3 Earnings as Revenues Rise
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Hancock Holding Company reported third-quarter 2016 earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate by a penny. Further, it reflects a 13.5% rise from the prior-year quarter.
Better-than-expected results were driven by an improvement in revenues and a decline in expenses. Further, growth in loans and deposits continued to be strong. However, an energy-led rise in provisions remained the undermining factor.
Net income came in at $46.7 million, a rise of 13.5% from the prior-year quarter.
Hancock’s net revenue summed $226.5 million, up 4.4% year over year. However, it lagged the Zacks Consensus Estimate of $237.8 million.
Net interest income grew 4.3% year over year to $163.5 million. However, reported net interest margin (“NIM”) fell 8 basis points from the prior-year quarter to 3.20%.
Non-interest income totaled $63.0 million, up 4.6% from the year-ago quarter. The growth was driven by an improvement in all the components, except insurance commissions and fees as well as investment and annuity fees.
Total operating expenses declined 1.4% year over year to $149.1 million. The fall was primarily driven by net gains on other real estate dispositions, which exceeded other real estate expenses during the quarter.
Deteriorating Credit Quality
Net charge-offs from the non-covered loan portfolio was 0.24% of average total loans, up from 0.09% in the year-ago quarter.
Further, provision for loan losses rose 88.2% year over year to $19.0 million owing to exposure to the stressed energy sector. Also, total nonperforming assets jumped 60.3% year over year to $330.7 million.
Strong Balance Sheet & Profitability Ratios; Capital Ratios Deteriorate
As of Sep 30, 2016, total loans grew 0.2% sequentially to $16.1 billion. Further, total deposits rose 0.4% from the prior month to $18.9 billion.
Return on average assets was 0.80%, up from 0.76% as of Sep 30, 2015. Moreover, as of Sep 30, 2016, return on average common equity was 7.52% compared with 6.70% as of Sep 30, 2015.
As of Sep 30, 2016, Tier 1 leverage ratio was 8.36%, down from 8.85% as of Sep 30, 2015. Further, Tier 1 risk-based capital ratio came in at 10.11%, down from 10.56% as of Sep 30, 2015.
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. However, 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.
Among other Southeast banking stocks, Regions Financial Corporation’s (RF - Free Report) third-quarter 2016 earnings from continuing operations of 24 cents per share surpassed the Zacks Consensus Estimate of 21 cents. Better-than-expected results were driven by impressive growth in fee income and a drastic fall in credit cost.
Bank of the Ozarks, Inc.’s third-quarter 2016 earnings of 66 cents per share surpassed the Zacks Consensus Estimate of 59 cents. Better-than-expected results were driven by a rise in both net interest income and non-interest income during the quarter.
First Horizon National Corp. (FHN - Free Report) posted earnings per share of 27 cents for third-quarter 2016, surpassing the Zacks Consensus Estimate of 25 cents. Better-than-expected results were aided by a rise in both net interest income and non-interest income.
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Hancock (HBHC) Beats on Q3 Earnings as Revenues Rise
Hancock Holding Company reported third-quarter 2016 earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate by a penny. Further, it reflects a 13.5% rise from the prior-year quarter.
Better-than-expected results were driven by an improvement in revenues and a decline in expenses. Further, growth in loans and deposits continued to be strong. However, an energy-led rise in provisions remained the undermining factor.
Net income came in at $46.7 million, a rise of 13.5% from the prior-year quarter.
Revenue Growth & Lower Expenses Support Results
Hancock’s net revenue summed $226.5 million, up 4.4% year over year. However, it lagged the Zacks Consensus Estimate of $237.8 million.
Net interest income grew 4.3% year over year to $163.5 million. However, reported net interest margin (“NIM”) fell 8 basis points from the prior-year quarter to 3.20%.
Non-interest income totaled $63.0 million, up 4.6% from the year-ago quarter. The growth was driven by an improvement in all the components, except insurance commissions and fees as well as investment and annuity fees.
Total operating expenses declined 1.4% year over year to $149.1 million. The fall was primarily driven by net gains on other real estate dispositions, which exceeded other real estate expenses during the quarter.
Deteriorating Credit Quality
Net charge-offs from the non-covered loan portfolio was 0.24% of average total loans, up from 0.09% in the year-ago quarter.
Further, provision for loan losses rose 88.2% year over year to $19.0 million owing to exposure to the stressed energy sector. Also, total nonperforming assets jumped 60.3% year over year to $330.7 million.
Strong Balance Sheet & Profitability Ratios; Capital Ratios Deteriorate
As of Sep 30, 2016, total loans grew 0.2% sequentially to $16.1 billion. Further, total deposits rose 0.4% from the prior month to $18.9 billion.
Return on average assets was 0.80%, up from 0.76% as of Sep 30, 2015. Moreover, as of Sep 30, 2016, return on average common equity was 7.52% compared with 6.70% as of Sep 30, 2015.
As of Sep 30, 2016, Tier 1 leverage ratio was 8.36%, down from 8.85% as of Sep 30, 2015. Further, Tier 1 risk-based capital ratio came in at 10.11%, down from 10.56% as of Sep 30, 2015.
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. However, 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.
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At present, Hancock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Performance of Other Banks
Among other Southeast banking stocks, Regions Financial Corporation’s (RF - Free Report) third-quarter 2016 earnings from continuing operations of 24 cents per share surpassed the Zacks Consensus Estimate of 21 cents. Better-than-expected results were driven by impressive growth in fee income and a drastic fall in credit cost.
Bank of the Ozarks, Inc.’s third-quarter 2016 earnings of 66 cents per share surpassed the Zacks Consensus Estimate of 59 cents. Better-than-expected results were driven by a rise in both net interest income and non-interest income during the quarter.
First Horizon National Corp. (FHN - Free Report) posted earnings per share of 27 cents for third-quarter 2016, surpassing the Zacks Consensus Estimate of 25 cents. Better-than-expected results were aided by a rise in both net interest income and non-interest income.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>