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Hilltop Holdings (HTH) Stock Dips on Q1 Earnings Lag, Costs Down

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Shares of Hilltop Holdings Inc. (HTH - Free Report) lost 5.4% in after-market trading following the release of its first-quarter 2022 results. Earnings of 28 cents per share missed the Zacks Consensus Estimate of 51 cents. The bottom line reflects an 80.8% plunge from the prior-year quarter’s $1.46.

Results were negatively impacted by the decline in revenues. Moreover, loans and deposit balances witnessed a decline in the quarter. Profitability ratios also deteriorated. However, lower expenses aided results to some extent.

Net income attributable to Hilltop Holdings was $22.3 million, down from $120.3 million recorded in the prior-year quarter.

Revenues & Expenses Decline

Net revenues were $316.4 million, declining 39.5% year over year. The top line missed the Zacks Consensus Estimate of $368.1 million.

Net interest income declined 5.4% year over year to $99.99 million. The net interest margin (taxable-equivalent basis) was 2.37%, contracting 32 basis points (bps) from the prior-year quarter.

Non-interest income was $216.4 million, down 48.2% year over year. The fall resulted from a decline in almost all fee income components, except for investment and securities advisory fees and commissions.

Non-interest expenses fell 21.9% year over year to $286.4 million. The decline was due to a fall in all cost components except for net occupancy and equipment costs.

As of Mar 31, 2022, net loans held for investment were $7.71 billion, down 1.1% from the end of the prior quarter. Total deposits were $12.67 billion, down 1.2% sequentially.

Credit Quality: A Mixed Bag

In the reported quarter, provision for credit losses was $0.12 million against a reversal of credit losses of $5.1 million in the prior-year quarter. As of Mar 31, 2022, non-performing assets as a percentage of total assets were 0.25%, down 31 bps from the prior-year quarter.

Profitability Ratios Worsen, Capital Ratios Improve

Return on average assets at the end of the reported quarter was 0.53%, down from the prior-year quarter’s 2.90%. Also, the return on average equity was 3.60%, down from 20.58%.

Common equity tier 1 capital ratio was 21.27% as of Mar 31, 2022, up from 19.63% in the corresponding period of 2021. The total capital ratio was 23.85%, reflecting a rise from the year-ago period’s 22.96%.

Share Repurchase Update

In the reported quarter, the company did not repurchase any shares.

Our Take

Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Supported by a solid balance sheet and liquidity position, the company is expected to sustain efficient capital deployment activities in the future, thus continuing to enhance shareholder value.

However, a persistent decline in margins and elevated expenses, stemming from continued investments in franchise, are likely to hurt the bottom line.

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

Truist Financial’s (TFC - Free Report) first-quarter 2022 adjusted earnings of $1.23 per share handily surpassed the Zacks Consensus Estimate of $1.12. The bottom line grew 4.2% from the prior-year quarter.

Truist Financial’s results were aided by modest average loan growth and provision benefits. However, lower revenues, a rise in expenses and relatively lower rates were the major headwinds.

U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, the bottom line compares unfavorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.