Hilltop Outperforms on Q3 Earnings

Zacks

Hilltop Holdings Inc. (HTH) reported third-quarter 2013 operating earnings per share of 36 cents. The results surpassed the Zacks Consensus Estimate of 31 cents and also improved substantially from the loss of 7 cents incurred in the year-ago quarter. Consequently, net income stood at $31.8 million, rebounding from a net loss of $4.0 million in the year-ago quarter.

Hilltop’s total revenues stood at $277.3 million, spiking from both the Zacks Consensus Estimate of $263 million and the year-ago quarter figure of $40.9 million. Net interest income rose to $71.5 million from $1.2 million in the year-ago quarter, while non-interest income jumped to $205.8 million from $39.6 million a year ago.

The year-over-year upside was primarily attributable to robust growth in both interest and non-interest income, primarily due to the inclusion of banking, mortgage origination and financial advisory operations through the acquisition of PlainsCapital Corp. in Nov 2012. However, total revenue lagged from $307.6 million reported in the sequentially prior quarter.

However, Hilltop incurred provision for loan losses of $10.7 million in the reported quarter, lower than $11.3 million in the second-quarter 2013. Meanwhile, total interest expense surged 171% year over year to $7.8 million, whereas non-interest expenses radically amplified to $216.6 million from $46.8 million in the year-ago period.

Meanwhile, pre-tax income from insurance operations rebounded to $4.3 million from a loss of $6.0 million in the year-ago quarter. Higher premiums and lower loss and loss adjusted expenses, which were partially offset by higher underwriting expenses. Subsequently, combined ratio improved to 94.0% from 114.2% in the prior-year quarter.

Financial Update

As on Sep 30, 2013, Hilltop held cash and due from banks of $976.2 million, down from $722 million as on Dec 31, 2012, along with a strong securities portfolio worth $1.32 billion, up from $1.08 billion at 2012-end.

Total shareholder equity stood at $1.21 billion at the end of Sep 2013, up from $1.15 billion at 2012-end. Moreover, total assets appreciated to $9.09 billion from $7.29 billion at 2012-end.

Meanwhile, total liabilities increased to $7.89 billion from $6.14 billion at 2012-end. Total deposits surged to $6.94 billion from $4.7 billion at 2012-end.

At the end of Sep 2013, operating cash flow stood at $462.7 million compared with cash outflow of $13.7 million at the end of Sep 2012. Hilltop held over $177 million of free cash at the end of Sep 2013, lower than $200 million at 2012-end.

At Sep 2013-end, Hilltop’s insurance operations had a deposit in custody for various investments in State Insurance Departments with carrying values of $9.4 million, up from $9.3 million at 2012-end.

Profitability Metrics

At the end of Sep 2013, Hilltop’s book value increased 3.3% from sequentially prior quarter to $13.00 per share. Sequentially, net interest margin also improved to 4.45% from 4.33%. Return on average shareholders’ equity (:ROE) increased to 10.92% from 7.29% in the prior quarter.

However, Hilltop’s risk-based Tier 1 capital ratio stood at 16.56% at the end of Sep 2013, down from 18.35% at the end of Jun 2013. Moreover, PlainsCapital Bank’s risk-based Tier 1 capital ratio was pegged at 12.76% at the end of Sep 2013, slightly lower than 12.77% at the end of Jun 2013.

Others

Along with Hilltop, other outperformers in the insurance sector include Hallmark Financial Services Inc. (HALL), CNA Financial Corp. (CNA) and Endurance Specialty Holdings Ltd. (ENH) carry a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on CNA
Read the Full Research Report on HALL
Read the Full Research Report on ENH


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