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Hilltop Holdings (HTH) Gains on Q1 Earnings Beat, Cost Decline
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Shares of Hilltop Holdings Inc. (HTH - Free Report) gained 1.7% in the after-market trading, following the release of its first-quarter 2023 results. The company’s earnings of 40 cents per share easily outpaced the Zacks Consensus Estimate of 23 cents. The bottom line increased 42.9% from the prior-year quarter. Our estimate for earnings was 22 cents.
Results primarily benefited from higher rates and rising loan balance, which led to an increase in net interest income. Also, lower expenses acted as a tailwind. However, lower non-interest income mainly due to the weak mortgage business and a significant rise in provisions were the undermining factors.
Net income attributable to Hilltop Holdings was $25.8 million, up 16% year over year. Our estimate for the metric was $13.9 million.
Revenues & Expenses Decline
Net revenues were $284.2 million, declining 10.2% year over year. The top line beat the Zacks Consensus Estimate of $277.6 million. Our estimate for revenues was $279.3 million.
Net interest income grew 21.7% year over year to $121.7 million. Our estimate was $122.2 million. The net interest margin (taxable-equivalent basis) was 3.28%, expanding 91 basis points (bps) year over year.
Non-interest income was $162.5 million, plunging 24.9% year over year. The decline mainly resulted from a drastic fall in net gains from the sale of loans and other mortgage production income. Our estimate for the metric was $157.2 million.
Non-interest expenses fell 12.5% year over year to $250.5 million. The decline was due to a fall in almost all expense components, except for costs related to professional services. We projected expenses of $255.1 million.
As of Mar 31, 2023, net loans held for investment were $8.1 billion, up 1.2% from the end of the prior quarter. Total deposits were $11.1 billion, down 1.9% sequentially.
Credit Quality: A Mixed Bag
In the reported quarter, the company recorded a provision for credit losses of $2.3 million, up significantly from the prior-year quarter. We had projected provisions of $4.6 million. As of Mar 31, 2023, non-performing assets as a percentage of total assets were 0.18%, down from 0.25% in the prior-year quarter.
Profitability Ratios Improve, Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.69%, up from the prior-year quarter’s 0.53%. The return on average equity was 5.12%, up from 3.60%.
Common equity tier 1 capital ratio was 17.99% as of Mar 31, 2023, down from 21.27% in the corresponding period of 2022. The total capital ratio was 20.75%, reflecting a fall from the year-ago period’s 23.85%.
Share Repurchase Update
In the quarter under review, HTH repurchased $4.5 million worth of shares at $31.15 per share.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Higher interest rates and a rise in loan demand are expected to support the company’s revenues. However, because of the company’s continued investments in franchise, expenses are anticipated to increase in the near term, hurting profits to an extent.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
U.S. Bancorp’s (USB - Free Report) first-quarter 2023 earnings per share (excluding merger and integration-related charges) of $1.16 handily beat the Zacks Consensus Estimate of $1.13 per share. The bottom line grew 17.2% from the prior-year quarter.
USB’s results benefited from an increase in NII, supported by higher interest rates. However, a decline in non-interest income (largely on lower mortgage banking income) and higher expenses were the headwinds. Also, USB’s credit quality deteriorated in the reported quarter.
Citizens Financial Group (CFG - Free Report) reported first-quarter 2023 earnings per share of $1, missing the Zacks Consensus Estimate of $1.11. Nonetheless, the bottom line rose from 93 cents in the year-ago quarter.
CFG’s results reflect NII growth on an increase in interest-earning assets. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors for CFG.
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Hilltop Holdings (HTH) Gains on Q1 Earnings Beat, Cost Decline
Shares of Hilltop Holdings Inc. (HTH - Free Report) gained 1.7% in the after-market trading, following the release of its first-quarter 2023 results. The company’s earnings of 40 cents per share easily outpaced the Zacks Consensus Estimate of 23 cents. The bottom line increased 42.9% from the prior-year quarter. Our estimate for earnings was 22 cents.
Results primarily benefited from higher rates and rising loan balance, which led to an increase in net interest income. Also, lower expenses acted as a tailwind. However, lower non-interest income mainly due to the weak mortgage business and a significant rise in provisions were the undermining factors.
Net income attributable to Hilltop Holdings was $25.8 million, up 16% year over year. Our estimate for the metric was $13.9 million.
Revenues & Expenses Decline
Net revenues were $284.2 million, declining 10.2% year over year. The top line beat the Zacks Consensus Estimate of $277.6 million. Our estimate for revenues was $279.3 million.
Net interest income grew 21.7% year over year to $121.7 million. Our estimate was $122.2 million. The net interest margin (taxable-equivalent basis) was 3.28%, expanding 91 basis points (bps) year over year.
Non-interest income was $162.5 million, plunging 24.9% year over year. The decline mainly resulted from a drastic fall in net gains from the sale of loans and other mortgage production income. Our estimate for the metric was $157.2 million.
Non-interest expenses fell 12.5% year over year to $250.5 million. The decline was due to a fall in almost all expense components, except for costs related to professional services. We projected expenses of $255.1 million.
As of Mar 31, 2023, net loans held for investment were $8.1 billion, up 1.2% from the end of the prior quarter. Total deposits were $11.1 billion, down 1.9% sequentially.
Credit Quality: A Mixed Bag
In the reported quarter, the company recorded a provision for credit losses of $2.3 million, up significantly from the prior-year quarter. We had projected provisions of $4.6 million. As of Mar 31, 2023, non-performing assets as a percentage of total assets were 0.18%, down from 0.25% in the prior-year quarter.
Profitability Ratios Improve, Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.69%, up from the prior-year quarter’s 0.53%. The return on average equity was 5.12%, up from 3.60%.
Common equity tier 1 capital ratio was 17.99% as of Mar 31, 2023, down from 21.27% in the corresponding period of 2022. The total capital ratio was 20.75%, reflecting a fall from the year-ago period’s 23.85%.
Share Repurchase Update
In the quarter under review, HTH repurchased $4.5 million worth of shares at $31.15 per share.
Our Take
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Higher interest rates and a rise in loan demand are expected to support the company’s revenues. However, because of the company’s continued investments in franchise, expenses are anticipated to increase in the near term, hurting profits to an extent.
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
U.S. Bancorp’s (USB - Free Report) first-quarter 2023 earnings per share (excluding merger and integration-related charges) of $1.16 handily beat the Zacks Consensus Estimate of $1.13 per share. The bottom line grew 17.2% from the prior-year quarter.
USB’s results benefited from an increase in NII, supported by higher interest rates. However, a decline in non-interest income (largely on lower mortgage banking income) and higher expenses were the headwinds. Also, USB’s credit quality deteriorated in the reported quarter.
Citizens Financial Group (CFG - Free Report) reported first-quarter 2023 earnings per share of $1, missing the Zacks Consensus Estimate of $1.11. Nonetheless, the bottom line rose from 93 cents in the year-ago quarter.
CFG’s results reflect NII growth on an increase in interest-earning assets. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors for CFG.