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Hilltop Holdings (HTH) Q4 Earnings Miss, Revenues Up Y/Y

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Hilltop Holdings Inc.’s (HTH - Free Report) fourth-quarter 2019 earnings per share of 54 cents lagged the Zacks Consensus Estimate of 56 cents. However, the bottom line compared favorably with the prior-year quarter’s earnings of 30 cents.

Fall in net interest income, due to lower interest rates, along with higher operating expenses hampered quarterly results. However, increase in non-interest income and slight decline in provision for loan losses acted as tailwinds.

Net income applicable to common stockholders was $49.3 million, up 75.4% from the prior-year quarter.

In 2019, earnings per share of $2.44 missed the consensus estimate by a penny but was well above the prior-year figure of $1.28. Net income applicable to common stockholders was $225.3 million, surging 85.5%.

Revenues Improve, Costs Rise

Net revenues in the quarter were $410.6 million, increasing 15.3% year over year. The top line also beat the Zacks Consensus Estimate of $400.6 million.

In 2019, net revenues increased 13.3% to $1.65 billion. It also surpassed the Zacks Consensus Estimate of $1.64 billion.

Net interest income was $111.3 million, down 5.5%. Net interest margin (taxable equivalent basis) was 3.31%, down 45 basis points (bps) from the prior-year quarter.

Non-interest income jumped 25.5% from the year-ago quarter to $299.3 million. This rise was largely driven by higher mortgage loan origination fees, investment and securities advisory fees and commissions, net gains from sale of loans and other mortgage production income, and other income.

Non-interest expenses increased 8.4% to $336.9 million. The increase was due to rise in employees' compensation and benefits costs.

Credit Quality: Mixed Bag

Provision for loan losses was $6.9 million, down nearly 1% year over year. Furthermore, non-performing assets as a percentage of total assets was 0.36%, down 9 bps.

However, non-performing loans were $36.1 million as of Dec 31, 2019, up 6.4%.

Strong Balance Sheet

As of Dec 31, 2019, Hilltop Holdings’ cash and due from banks was $485 million, up 48.7% from the prior quarter. Total shareholders’ equity was $2.1 billion, up 2.2% sequentially.

As of Dec 31, 2019, net loans held for investment increased almost 1% to $7.4 billion. Further, total deposits were $9 billion, up 3.5% from the prior quarter.

Profitability & Capital Ratios Improve

Return on average assets at the end of the reported quarter was 1.40%, up from 0.86% in the prior-year quarter. Also, return on average equity was 9.43%, up from 5.76% in the year-earlier quarter.

Common equity tier 1 capital ratio was 16.69% as of Dec 31, 2019, up from 16.58% as of Dec 31, 2018. Moreover, total capital ratio was 17.55%, reflecting a rise from 17.47% in the prior-year quarter.

Share Repurchase Update

During 2019, Hilltop Holdings repurchased 3.4 million shares at an average price of $21.64 per share.

The company authorized a new share repurchase program through January 2021, under which it may repurchase, in the aggregate, up to $75.0 million of its outstanding shares.

Dividend Hike

Concurrent with the earnings release, Hilltop announced a quarterly cash dividend of 9 cents per common share, representing a hike of 12.5% from the prior payout. The dividend will be paid out on Feb 28 to all shareholders of record as on Feb 14.

Our Take

Given the continued rise in loan balances, Hilltop Holdings’ top-line growth is expected to remain impressive. Also, its efforts to expand via acquisitions are likely to aid profitability through synergies. While higher costs and low interest rates are major near-term concerns, its strong balance sheet is expected to 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

Associated Banc-Corp’s ASB fourth-quarter 2019 adjusted earnings of 45 cents per share outpaced the Zacks Consensus Estimate of 41 cents. However, the figure was 12% below the prior-year quarter number. Earnings excluded certain acquisition-related costs.

East West Bancorp’s EWBC fourth-quarter adjusted earnings per share of $1.28 surpassed the Zacks Consensus Estimate of $1.16. Moreover, the figure was higher than the prior-year quarter level of $1.18 per share.

SVB Financial Group’s SIVB fourth-quarter 2019 earnings of $5.06 per share outpaced the Zacks Consensus Estimate of $4.59. Also, the bottom line was 2% higher than the year-ago quarter’s reported figure.

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