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Hilltop Holdings (HTH) Q2 Earnings & Revenues Lag Estimates

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Hilltop Holdings Inc.’s (HTH - Free Report) second-quarter 2018 earnings per share of 35 cents lagged the Zacks Consensus Estimate of 41 cents. Moreover, the figure compared unfavorably with the prior-year quarter’s earnings of 63 cents per share.

Results were primarily hurt by a decrease in revenues. Also, while the company witnessed a decline in provisions, overall credit quality metrics worsened. Further, profitability ratios deteriorated. However, lower expenses acted as a tailwind.

Net income applicable to common stockholders for the quarter under review was $33.1 million, down from $62.5 million registered in the prior-year quarter.

Revenues & Costs Decrease

Net revenues for the quarter were $384.3 million, down 16.6% year over year. Also, the figure lagged the Zacks Consensus Estimate of $392.3 million.

Net interest income was $104.8 million, reflecting a 9.6% decline year over year. Net interest margin (taxable equivalent basis) was 3.47%, down 52 basis points (bps) from the prior-year quarter.

Non-interest income decreased 18.9% from the year-ago quarter to $279.4 million. The decline was due to a fall in all components except mortgage loan origination fees, and securities commissions and fees.

Non-interest expenses decreased 7.6% year over year to $338.5 million. This was attributable to a decline in all cost components.

Credit Quality: Mixed Bag

During the reported quarter, provision for loan losses amounted to $0.3 million, significantly down from $5.9 million in the prior-year quarter.

However, non-covered non-performing assets as a percentage of total assets were 0.33% at the end of the reported quarter, up 7 bps from the prior-year quarter. Also, non-covered non-performing loans were nearly $42 million as of Jun 30, 2018, up from $29.5 million as of Jun 30, 2017.

Balance Sheet

As of Jun 30, 2018, Hilltop Holdings’ cash and due from banks was $353.4 million compared with $470.1 million in the prior-quarter end. Total shareholders’ equity was $1.9 billion, marginally down sequentially.

Total deposits were nearly $7.8 billion, down 1.8% from the prior-quarter end figure. Net non-covered loans were $6.3 billion as of Jun 30, 2018, up 2.7% from the prior-quarter end.

Profitability Ratios Deteriorate, Capital Ratios Improve

Return on average assets at the end of the reported quarter was 1.03%, down from 1.94% in the prior-year quarter. Additionally, return on average equity was 6.95%, down from 13.24% in the year-ago quarter.

Common equity tier 1 capital ratio was 17.61% as of Jun 30, 2018, up from 17.53% as of Jun 30, 2017. Also, total capital ratio was 18.58%, reflecting an increase from 18.57% in the prior-year quarter.

Our Take

The company has a solid organic growth strategy in place, supported by improving loan and deposit balances. Also, given a solid balance sheet and liquidity position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities. However, because of its continued investments in franchise, overall expenses are anticipated to increase in the near term, thereby hurting bottom-line growth.

Hilltop Holdings Inc. Price, Consensus and EPS Surprise
 

Hilltop Holdings Inc. Price, Consensus and EPS Surprise | Hilltop Holdings Inc. Quote

Hilltop Holdings currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2018 adjusted earnings per share of 96 cents surpassed the Zacks Consensus Estimate by a cent. Results benefited from an improvement in net interest income, and decline in expenses and provisions. However, an increase in non-performing assets and lower net interest margin were the downside.

Commerce Bancshares, Inc.’s (CBSH - Free Report) second-quarter 2018 earnings per share of $1.01 surpassed the Zacks Consensus Estimate of 89 cents. Results primarily benefited from an improvement in net interest income as well as non-interest income. Also, a decrease in provisions was a tailwind. However, elevated operating expenses acted as a headwind.

First Republic Bank’s second-quarter 2018 earnings per share came in at $1.20, outpacing the Zacks Consensus Estimate of $1.15. Revenues improved from the prior-year quarter. In addition, a considerable rise in loans and deposit balances was recorded. However, despite rising rates, net interest margin disappointed on high deposit costs. Further, higher expenses and non-performing assets were the undermining factors.

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