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Hilltop Holdings (HTH) Beats on Q1 Earnings as Revenues Rise

Zacks Equity Research

Hilltop Holdings Inc.’s HTH first-quarter 2019 earnings per share of 41 cents easily surpassed the Zacks Consensus Estimate of 26 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 25 cents per share. The reported quarter’s results included the impact of certain costs associated with significant leadership changes and other efficiency initiative-related charges.

Results were primarily driven by an increase in revenues. Moreover, loans and deposit balances remained strong. However, higher expenses hurt results to some extent. Also, the company recorded an increase in provisions during the quarter.

Net income applicable to common stockholders was $38.8 million, up from $24.4 million registered in the prior-year quarter.

Revenues Improve, Costs Rise

Net revenues were $361.4 million, increasing 6.7% year over year. The reported figure surpassed the Zacks Consensus Estimate of $338.9 million.

Net interest income was $108.9 million, reflecting rise of 5.3% year over year. Net interest margin (taxable equivalent basis) was 3.70%, up 17 basis points (bps) from the prior-year quarter.

Non-interest income increased 7.4% from the year-ago quarter to $252.5 million. This rise was due to an increase in mortgage loan origination fees, investment and securities advisory fees and commissions, and other income.

Non-interest expenses increased marginally to $309.1 million. This upside can be attributed to rise in employees' compensation and benefits costs, and net occupancy and equipment costs.

Credit Quality: A Mixed Bag

During the reported quarter, the company recorded provision for loan losses of nearly $1 million against recovery for loan losses of $1.8 million reported in the prior-year quarter.

However, non-performing assets as a percentage of total assets was 0.40% at the end of the quarter, down 23 bps from the year-ago quarter. Furthermore, non-performing loans were nearly $30.9 million as of Mar 31, 2019, down from $45.2 million as of Mar 31, 2018.

Strong Balance Sheet

As of Mar 31, 2019, Hilltop Holdings’ cash and due from banks was $313.2 million compared with $644.1 million at the prior-quarter end. Total shareholders’ equity was nearly $2 billion, marginally up from the end of the fourth quarter of 2018.

Total deposits were $8.3 billion, down 2.8% from the prior-quarter end figure.

Profitability Ratios Improve, Capital Ratios Deteriorate

Return on average assets at the end of the reported quarter was 1.21%, up from 0.77% witnessed in the prior-year quarter. Additionally, return on average equity was 8.04%, up from 5.19% in the year-earlier quarter.

Common equity tier 1 capital ratio was 16.75% as of Mar 31, 2019, down from 18.60% as of Mar 31, 2018. Moreover, total capital ratio was 17.64%, reflecting a decline from 19.63% recorded in the prior-year quarter.

Our Take

Elevated expense levels, owing to continued investments in franchise and inorganic growth strategy, are likely to curb the company’s bottom-line growth. However, increasing loan demand and strong balance sheet should keep supporting financials.

Hilltop Holdings Inc. Price, Consensus and EPS Surprise

Hilltop Holdings Inc. Price, Consensus and EPS Surprise | Hilltop Holdings Inc. Quote

Hilltop Holdings currently has 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

Washington Federal’s WAFD second-quarter fiscal 2019 (ended Mar 31) earnings were 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.5%.

Hancock Whitney Corporation’s HWC first-quarter 2019 operating earnings per share of $1 surpassed the Zacks Consensus Estimate of 98 cents. Further, the reported figure was 11.1% higher than the year-ago figure.

Ally Financial Inc.’s ALLY first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

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