Hilltop's Q4 Earnings Top Y/Y, Revs Up

Zacks Equity Research

Hilltop Holdings Inc. (HTH) reported fourth-quarter 2013 operating earnings per share of 34 cents. Although the result missed the Zacks Consensus Estimate by 4 cents, it improved substantially from 13 cents earned in the year-ago quarter. Consequently, net income soared to $29.5 million from $8.6 million in the year-ago quarter.

However, the market reaction remained moderate as the shares of Hilltop dipped almost 0.05% in the last two trading sessions following the announcement of the financial results.  

Hilltop’s total revenues grossed $281.1 million, spiking 108.4% from the year-ago quarter equivalent of $134.9 million. However, total revenue lagged $294.8 million reported in the sequentially prior quarter. Net interest income rose to $88.6 million from $25.2 million in the year-ago quarter, while non-interest income jumped to $182.5 million from $109.7 million a year ago.

The year-over-year upside was primarily attributable to robust growth in both interest and non-interest income, along with lower provision for loan losses. These were partially offset by higher interest and non-interest expenses.

Hilltop incurred provision for loan losses of $2.2 million in the reported quarter, lower than $3.8 million in the year-ago quarter. Meanwhile, total interest expense surged to $10 million from $3.8 million in the prior-year period, whereas non-interest expenses radically amplified to $219.8 million from $115.9 million in the year-ago period.

Full-Year 2013 Highlights

For full year 2013, Hilltop generated net income of $121 million or $1.40 per share, remarkably rebounding from net loss of $5.9 million or 10 cents per share in 2012. Including special charges, reported net loss was $7.7 million in 2012.

Total revenue surged to $1.18 billion in 2013 from $263 million in 2012. Net premiums earned increased 7.4% year over year to $157.5 million.

Meanwhile, total interest and non-interest expenses grossed $944.6 million in 2013 versus $235.7 million in 2012. Provision for loan losses stood at $37.2 million, significantly higher than $3.8 million in 2012. Moreover, combined ratio improved to 102.6% from 108.8% in 2012.

Financial Update

As on Dec 31, 2013, Hilltop held cash and due from banks of $713.1 million, down from $722 million at 2012-end, along with a strong securities portfolio worth $1.26 billion, up from $1.08 billion at 2012-end.

Total shareholder equity stood at $1.31 billion at 2013-end, up from $1.15 billion at 2012-end. Moreover, total assets appreciated to $8.90 billion from $7.29 billion at 2012-end.

Meanwhile, total liabilities increased to $7.59 billion from $6.14 billion at 2012-end. Total deposits surged to $6.72 billion from $4.7 billion at 2012-end.

At the end of Dec 2013, operating cash flow stood at $396.7 million compared with $115.2 million at the end of 2012. Hilltop held over $164 million of free cash at the end of Dec 2013, lower than $205 million at 2012-end.

At Dec 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 Dec 2013, Hilltop’s book value increased 7.5% year over year to $13.27 per share. However, net interest margin dipped slightly to 4.47% from 4.64% in 2012. Return on average shareholders’ equity (:ROE) increased to 11% from a negative of 0.62% in 2012.

Hilltop’s risk-based Tier 1 capital ratio stood at 18.53% at the end of Dec 2013, up from 17.72% at the end of 2012. Moreover, PlainsCapital Bank’s risk-based Tier 1 capital ratio was pegged at 13.38% at the end of 2013, higher than 11.83% at the end of 2012.

Others

While Hilltop carries a Zacks Rank #3 (Hold), some better-ranked financial stocks include American Financial Group Inc. (AFG), EMC Insurance Group Inc. (EMCI) and OneBeacon Insurance Group Ltd. (OB). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on HTH
Read the Full Research Report on OB
Read the Full Research Report on EMCI
Read the Full Research Report on AFG


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