Back to top

Image: Bigstock

Hilltop Holdings (HTH) Q2 Earnings Beat Estimates, Stock Up

Read MoreHide Full Article

Hilltop Holdings Inc.’s (HTH - Free Report) shares appreciated 2.3%, as the company’s second-quarter 2020 earnings of $1.08 per share beat the Zacks Consensus Estimate of 45 cents. Also, the bottom line compares favorably with the prior-year quarter’s earnings of 64 cents.

Results reflect an improvement in revenues aided by growth in non-interest income and a strong balance-sheet position. However, declining net interest income and higher provisions were major headwinds.

Net income applicable to common stockholders was $128.5 million, up significantly from the prior-year quarter.

Revenues Improve, Costs Flare Up

Net revenues came in at $572.7 million, increasing 49% year over year.

Net interest income was $104.6 million, down 2.5% from the prior-year quarter. Net interest margin (taxable equivalent basis) came in at 2.81%, contracting 68 basis points (bps) from the prior-year quarter.

Non-interest income jumped 69.1% from the year-ago quarter to $468.1 million. This was largely driven by a rise in all fee income components, except securities commissions and fees.

Non-interest expenses flared up 21.7% from the year-ago quarter to $370.2 million. This upswing mainly resulted from rise in employees' compensation and benefits costs.

Credit Quality Worsens

Provision for loan losses was $66 million compared with the reversal of credit losses of $672,000 in the prior-year quarter. The company built a significant reserve amid the pandemic-related economic uncertainty.

Non-performing assets as a percentage of total assets were 0.56%, up 19 bps. Also, non-performing loans were $68.3 million as of Jun 30, 2020, up significantly from the $32 million recorded in the comparable period of 2019.

Strong Balance Sheet

As of Jun 30, 2020, Hilltop Holdings’ cash and due from banks was $1.7 billion, up significantly from the prior quarter. Total shareholders’ equity was $2.3 billion, up 6% sequentially.

As of Jun 30, 2020, net loans held for investment increased 6.3% sequentially to $7.7 billion. Moreover, total deposits were $11.6 billion, up 17.2% from the prior quarter.

Profitability & Capital Ratio Improve

Return on average assets at the end of the reported quarter was 3.30%, up from the prior-year quarter’s 1.74%. Also, return on average equity was 23.32%, up from the year-earlier quarter’s 11.63%.

Common equity tier 1 capital ratio was 18.46% as of Jun 30, 2020, up from 16.32% in the corresponding period of 2019. Moreover, total capital ratio was 21.82%, reflecting a fall from the prior-year quarter’s 17.14%.

Our Take

Hilltop Holdings’ top-line growth is anticipated to remain decent, supported by modest loan demand. While higher costs, low interest rates and the pandemic-induced slowdown are major near-term concerns, its strong balance sheet will likely keep supporting financials.

Hilltop Holdings Inc. Price, Consensus and EPS Surprise

Hilltop Holdings Inc. Price, Consensus and EPS Surprise

Hilltop Holdings Inc. price-consensus-eps-surprise-chart | 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

Zions Bancorporation’s (ZION - Free Report) second-quarter net earnings per share of 34 cents missed the Zacks Consensus Estimate of 37 cents. Moreover, the bottom line compared unfavorably with the year-ago quarter’s 99 cents.

Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2020 (ended Jun 30) earnings were 46 cents per share, missing the Zacks Consensus Estimate by a penny. The figure also declined 31.3% year over year.

Associated Banc-Corp’s (ASB - Free Report) second-quarter 2020 adjusted earnings of 26 cents per share came in line with the Zacks Consensus Estimate. The bottom-line figure, nevertheless, slumped 49% year over year. Earnings excluded gain on the sale of Associated Benefits and Risk Consulting in the reported quarter.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>