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Hilltop Holdings (HTH) Q1 Earnings Miss, Revenues Down Y/Y

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Hilltop Holdings Inc.’s (HTH - Free Report) first-quarter 2018 earnings per share of 25 cents lagged the Zacks Consensus Estimate of 32 cents. Moreover, the figure compared unfavorably with the prior-year quarter’s earnings of 27 cents per share.

Results were primarily hurt by a decrease in non-interest income. Also, while the company witnessed a recovery from loan losses during the reported quarter, overall credit quality metrics worsened. Further, profitability and capital ratios declined. However, lower expenses and higher net interest income acted as tailwinds.

Net income applicable to common stockholders for the quarter was $24.4 million, down from $26.4 million registered in the prior-year quarter.

Revenues & Costs Decrease

Net revenues for the quarter were $338.6 million, decreasing 6.9% year over year. Also, the figure lagged the Zacks Consensus Estimate of $364.5 million.

Net interest income for the quarter was $103.4 million, increasing 12.3% year over year. Net interest margin (taxable equivalent basis) was 3.53%, up 4 basis points (bps) from the prior-year quarter.

Non-interest income decreased 13.4% from the year-ago quarter to $235.1 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 3.8% year over year to $308.2 million. This was attributable to a decline in all cost components except net occupancy and equipment costs.

Credit Quality: Mixed Bag

During the reported quarter, the company witnessed a recovery from loan losses of $1.8 million as against a provision of $1.7 million in the prior-year quarter.

However, non-covered non-performing assets as a percentage of total assets were 0.32% at the end of the quarter, up 4 bps from the prior-year quarter. Also, non-covered non-performing loans were $39.4 million as of Mar 31, 2018, up from $28.8 million as of Mar 31, 2017.

Strong Balance Sheet

As of Mar 31, 2018, Hilltop Holdings’ cash and due from banks was $470.1 million compared with $487 million in the prior-quarter end. Total shareholders’ equity was $1.9 billion, marginally up sequentially.

Net non-covered loans were $6.2 billion as of Mar 31, 2018, down marginally from the prior-quarter end. Total deposits were nearly $8 billion, almost in line with the prior-quarter figure.

Profitability & Capital Ratios Deteriorate

Return on average assets at the end of the reported quarter was 0.77%, down from 0.88% in the prior-year quarter. Additionally, return on average equity was 5.19%, decreasing from 5.73% in the year-ago quarter.

Common equity tier 1 capital ratio was 18.60% as of Mar 31, 2018, down from 19.03% as of Mar 31, 2017. Also, total capital ratio was 19.63%, declining from 20.12% in the prior-year quarter.

Our Take

The company has 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 Holding Company’s first-quarter 2018 adjusted earnings per share of 90 cents were in line with the Zacks Consensus Estimate. Results benefited from an improvement in both net interest income and non-interest income along with lower provisions. Further, growth in loans and deposits remained strong. However, an increase in expenses was the key dampener.

Commerce Bancshares, Inc’s (CBSH - Free Report) first-quarter 2018 earnings per share of 92 cents surpassed the Zacks Consensus Estimate of 80 cents. Results primarily benefited from an improvement in both net interest income and non-interest income. However, higher expenses acted as a headwind.

First Republic Bank (FRC - Free Report) registered a positive earnings surprise of 1.29% in first-quarter 2018, reflecting higher revenues. Earnings per share were $1.13, outpacing the Zacks Consensus Estimate of $1.06. Revenues improved from the prior-year quarter. In addition, considerable rise in loans and deposit balances was recorded. However, despite rising rates, net interest margin disappointed on high deposit costs. In addition, higher provisions and expenses were undermining factors.

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