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Hancock Holding (HBHC) Beats on Q4 Earnings, Provisions Up

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Hancock Holding Company released its fourth-quarter and full-year 2017 results. Adjusted earnings per share for the quarter came in at 86 cents, surpassing the Zacks Consensus Estimate of 83 cents. Also, the bottom line compares favorably with the prior-year quarter’s earnings of 64 cents.

Results benefited from an improvement in both net interest income and non-interest income. Further, growth in loans and deposits remained strong. However, an increase in expenses and higher provisions were the key dampeners.

After considering the impact of the $19.5 million or 22 cents per share tax reform related re-measurement charge of the net deferred tax asset (DTA), net income for the quarter came in at $55.4 million or 64 cents per share.

For 2017, net income came in at $215.6 million or $2.48 per share, up from $149.3 million or $1.87 per share registered in the prior year.

Revenues Improve, Expenses Escalate

Hancock’s net revenues for the quarter came in at $277.7 million, up 18.8% year over year. However, the figure lagged the Zacks Consensus Estimate of $282.7 million.

Net revenues for 2017 were $1.06 billion, up 16.5% year over year. However, the figure lagged the Zacks Consensus Estimate of $1.09 billion.

Quarterly net interest income grew 24% year over year to $208 million. Also, net interest margin (NIM) on a tax-equivalent basis increased 22 basis points from the prior-year quarter to 3.48%.

Non-interest income totaled $69.7 million, reflecting an increase of 5.8% from the year-ago quarter. The growth was primarily driven by an improvement in service charges on deposit accounts, bank card and ATM fees, and Investment and annuity fees.

Total operating expenses increased 7.5% year over year to $168.1 million. The rise was primarily due to higher personnel expense, net occupancy expense, amortization of intangibles and other operating expense.

Credit Quality: Mixed Bag

Net charge-offs from the non-covered loan portfolio was 0.44% of average total loans, decreasing from 0.50% in the year-ago quarter.

However, total nonperforming assets increased 6.4% year over year to $400.8 million. Also, provision for loan losses increased 3.7% year over year to roughly $15 million.

Strong Balance Sheet; Profitability & Capital Ratios Deteriorate

As of Dec 31, 2017, total loans were $19 billion, up 1.2% sequentially. Further, total deposits increased 3.3% from the prior quarter to $22.3 billion.

Return on average assets was 0.82% at the end of the quarter, down from 0.88% in the prior-year quarter. Moreover, return on average common equity was 7.67% compared with 8.19% in the prior-year quarter end.

As of Dec 31, 2017, Tier 1 leverage ratio was 8.34%, down from 9.56% in the year ago figure. Further, Tier 1 risk-based capital ratio came in at 10.08%, decreasing from 11.26% as of Dec 31, 2016.

Outlook

Management continues to expect charge-offs from energy-related credits to approximate up to $95 million.

Moreover, the company expects to have a strong capital position along with sufficient reserves.  

Our Viewpoint

Hancock remains well positioned for revenue growth in the future, given its persistent improvement in loans and deposit balances. Also, the company’s improving net interest margin should further aid top line. However, persistently rising operating expenses remains a major concern for the company.

Hancock Holding Company Price, Consensus and EPS Surprise
 

Hancock Holding Company Price, Consensus and EPS Surprise | Hancock Holding Company Quote

Presently, Hancock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other Southeast banking stocks, results are expected from First Horizon National Corporation (FHN - Free Report) and Regions Financial Corporation (RF - Free Report) on Jan 19, while BancorpSouth, Inc. is slated to report its numbers on Jan 24.

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