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Hilltop Holdings (HTH) Q3 Earnings Beat, Revenues & Costs Fall
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Hilltop Holdings Inc.’s (HTH - Free Report) third-quarter 2021 earnings from continuing operations of $1.15 per share handily outpaced the Zacks Consensus Estimate of 86 cents. The bottom line, however, reflects a 32% plunge from the prior-year quarter’s $1.69.
Results gained from a fall in expenses, a rise in net interest income, and higher provision benefit. Further, deposits balance improved during the quarter. However, lower non-interest income on the back of dismal mortgage banking performance and decline in loan balance were the major headwinds.
Net income applicable to common stockholders was $92.9 million, down 39.4% from the prior-year quarter.
Revenues Fall, Expenses Decline
Net revenues came in at $473 million, declining 21.8% year over year. However, the top line beat the Zacks Consensus Estimate of $428.1 million.
Net interest income grew 3.1% to $105.1 million. Yet, the net interest margin (taxable equivalent basis) was 2.54%, contracting 3 basis points (bps) from the prior-year quarter.
Non-interest income was $367.9 million, down 26.8%. This fall resulted from lower net gains from the sale of loans and other mortgage production income, mortgage loan origination fees, and other income.
Non-interest expenses fell 11.1% to $355.2 million. This decline was mainly due to a decrease in employees' compensation and benefits costs, and net occupancy and equipment costs.
As of Sep 30, 2021, net loans held for investment were $7.44 billion, down 1.1%. Total deposits were $11.73 billion, rising 3.4%.
Credit Quality Improves
Provisions for credit losses were a benefit of $5.8 million, up from 0.6 million in the prior-year quarter. Further, as of Sep 30, 2021, non-performing assets as a percentage of total assets were 0.47%, down 18 bps from the prior-year quarter.
Profitability Ratios Decline, Capital Ratios Improve
Return on average assets at the end of the reported quarter was 2.13%, down from the prior-year quarter’s 3.71%. Also, the return on average equity was 14.96%, down from 25.94%.
Common equity tier 1 capital ratio was 21.28% as of Sep 30, 2021, up from 19.85% in the corresponding period of 2020. Total capital ratio was 24%, reflecting a rise from the year-ago period’s 23.22%.
Share Repurchase Update
During the quarter, the company repurchased 2.2 million shares for $74 million.
Additionally, in October, the company authorized an additional $50 million buyback plan. Hence, as of Oct 28, Hilltop Holdings has nearly $76 million of available share repurchase capacity through January 2022.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. However, pressure on margins due to near-zero interest rates is a concern as it might hurt the top line in the near term.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.
Commerce Bancshares Inc.’s (CBSH - Free Report) third-quarter 2021 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of $1.00. The bottom line, however, declined almost 1% from the prior-year quarter.
East West Bancorp’s (EWBC - Free Report) third-quarter 2021 earnings per share of $1.57 outpaced the Zacks Consensus Estimate of $1.50. The bottom line jumped 40.2% from the prior-year quarter’s 70 cents.
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Hilltop Holdings (HTH) Q3 Earnings Beat, Revenues & Costs Fall
Hilltop Holdings Inc.’s (HTH - Free Report) third-quarter 2021 earnings from continuing operations of $1.15 per share handily outpaced the Zacks Consensus Estimate of 86 cents. The bottom line, however, reflects a 32% plunge from the prior-year quarter’s $1.69.
Results gained from a fall in expenses, a rise in net interest income, and higher provision benefit. Further, deposits balance improved during the quarter. However, lower non-interest income on the back of dismal mortgage banking performance and decline in loan balance were the major headwinds.
Net income applicable to common stockholders was $92.9 million, down 39.4% from the prior-year quarter.
Revenues Fall, Expenses Decline
Net revenues came in at $473 million, declining 21.8% year over year. However, the top line beat the Zacks Consensus Estimate of $428.1 million.
Net interest income grew 3.1% to $105.1 million. Yet, the net interest margin (taxable equivalent basis) was 2.54%, contracting 3 basis points (bps) from the prior-year quarter.
Non-interest income was $367.9 million, down 26.8%. This fall resulted from lower net gains from the sale of loans and other mortgage production income, mortgage loan origination fees, and other income.
Non-interest expenses fell 11.1% to $355.2 million. This decline was mainly due to a decrease in employees' compensation and benefits costs, and net occupancy and equipment costs.
As of Sep 30, 2021, net loans held for investment were $7.44 billion, down 1.1%. Total deposits were $11.73 billion, rising 3.4%.
Credit Quality Improves
Provisions for credit losses were a benefit of $5.8 million, up from 0.6 million in the prior-year quarter. Further, as of Sep 30, 2021, non-performing assets as a percentage of total assets were 0.47%, down 18 bps from the prior-year quarter.
Profitability Ratios Decline, Capital Ratios Improve
Return on average assets at the end of the reported quarter was 2.13%, down from the prior-year quarter’s 3.71%. Also, the return on average equity was 14.96%, down from 25.94%.
Common equity tier 1 capital ratio was 21.28% as of Sep 30, 2021, up from 19.85% in the corresponding period of 2020. Total capital ratio was 24%, reflecting a rise from the year-ago period’s 23.22%.
Share Repurchase Update
During the quarter, the company repurchased 2.2 million shares for $74 million.
Additionally, in October, the company authorized an additional $50 million buyback plan. Hence, as of Oct 28, Hilltop Holdings has nearly $76 million of available share repurchase capacity through January 2022.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. However, pressure on margins due to near-zero interest rates is a concern as it might hurt the top line in the near term.
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 #2 (Buy). 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) third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.
Commerce Bancshares Inc.’s (CBSH - Free Report) third-quarter 2021 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of $1.00. The bottom line, however, declined almost 1% from the prior-year quarter.
East West Bancorp’s (EWBC - Free Report) third-quarter 2021 earnings per share of $1.57 outpaced the Zacks Consensus Estimate of $1.50. The bottom line jumped 40.2% from the prior-year quarter’s 70 cents.