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Hilltop Holdings (HTH) Q4 Earnings Beat, Revenues & Costs Rise

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Hilltop Holdings Inc.’s HTH fourth-quarter 2020 earnings from continuing operations of $1.30 per share surpassed the Zacks Consensus Estimate of $1.28. The bottom line reflects a significant rise from the prior-year quarter’s reported number.

Results for the quarter benefited from growth in revenues, partly offset by higher expenses. The balance sheet position remained strong. Moreover, the company recorded a reversal of credit losses, which was a major tailwind.

Net income applicable to common stockholders was $116.4 million, up significantly from $49.3 million recorded in the prior-year quarter.

For 2020, earnings from continuing operations of $4.58 per share lagged the Zacks Consensus Estimate of $4.68. However, the figure compares favorably with the prior-year earnings of $2.29 per share. Net income applicable to common stockholders was $447.8 million, up 98.8% from 2019.

Revenues Improve, Expenses Rise

Quarterly net revenues were $555.3 million, up 48.3% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $524.5 million.

For the year, net revenues of $2.11 billion surpassed the Zacks Consensus Estimate of $2.08 billion. The top line increased 40.8% year over year.

Net interest income for the quarter was $107.4 million, down 3.1% from the prior-year quarter. Net interest margin (taxable equivalent basis) was 2.72%, contracting 59 basis points (bps) from the prior-year quarter.

Non-interest income surged 69.9% from the year-ago quarter to $447.9 million. The upside resulted from an increase in all fee income components.

Non-interest expenses flared up 30.7% from the year-ago quarter to $402.3 million. The rise was due to an increase in all cost components except for net occupancy and equipment costs.

Credit Quality: Mixed Bag

In the reported quarter, the company recorded reversal of credit losses of $3.5 million against provision for credit losses of $6.9 million in the prior-year quarter.

However, as of Dec 31, 2020, non-performing assets as a percentage of total assets was 0.60%, up from 0.37% recorded at the end of the prior-year quarter. Non-performing loans were $79.9 million, up from $38.3 million recorded in the comparable period of 2019.

Balance Sheet Strong

As of Dec 31, 2020, Hilltop Holdings’ cash and due from banks were $1.06 billion, down 16.8% from the prior quarter. Net loans held for investment were $7.54 billion, down 3.2% from the prior-quarter end. Total deposits were $11.24 billion, down marginally from the prior quarter.

Total shareholders’ equity was $2.35 billion, down 3.6% sequentially.

Profitability & Capital Ratios Improve

Return on average assets at the end of the reported quarter was 2.83%, up from the prior-year quarter’s 1.40%. Also, return on average equity was 20.56%, up from the year-earlier quarter’s 9.43%.

Common equity tier 1 capital ratio was 18.97% as of Dec 31, 2020, up from 16.70% in the corresponding period of 2019. Moreover, total capital ratio was 22.34%, reflecting a rise from the prior-year quarter’s 17.55%.

Dividend Hike

Concurrent with the earnings release, the company announced a quarterly cash dividend of 12 cents per share, representing a hike of 33.3% from the prior payout. The dividend will be paid out on Feb 26 to shareholders of record as of Feb 15.

Our Take

Hilltop Holdings’ deposit mix along with its increased focus on improving fee income will likely continue to support the top line. The company's business-restructuring efforts to diversify operations as a profitable banking operation remain commendable.

Hilltop Holdings Inc. Price, Consensus and EPS Surprise

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 Major Banks

Successful cost-saving initiatives and unexpected release of reserves supported Wells Fargo’s WFC fourth-quarter 2020 earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line compared favorably with the prior-year quarter figure of 60 cents.

Citigroup C delivered an earnings surprise of 53.3% in the fourth quarter on reserve releases. Income from continuing operations per share of $2.07 for the quarter handily outpaced the Zacks Consensus Estimate of $1.35. Results were, however, down 3.7% from the prior-year quarter.

Unexpected large reserve releases along with solid capital markets performance drove JPMorgan’s JPM fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72. Results included credit reserve releases. Excluding these, earnings amounted to $3.07 per share. The company earned $2.57 in the prior-year quarter.

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