Shares of Hilltop Holdings Inc. HTH gained almost 1% in response to better-than-expected second-quarter 2022 results. Earnings of 45 cents per share easily outpaced the Zacks Consensus Estimate of 32 cents. However, the bottom line plunged 62.8% from the prior-year quarter.
Results benefited from higher rates and rising loan balance, which led to an increase in net interest income (NII). Also, lower expenses acted as a tailwind. However, lower non-interest income, mainly due to the weak mortgage business, was the undermining factor. Further, a worsening U.S. economic outlook resulted in higher provisions during the quarter.
Net income attributable to Hilltop Holdings was $33.3 million, down 66.4% year over year.
Revenues & Expenses Decline
Net revenues were $351.3 million, declining 21.5% year over year. The top line beat the Zacks Consensus Estimate of $328 million.
Net interest income grew 3.8% year over year to $112.1 million. The net interest margin (taxable-equivalent basis) was 2.76%, expanding 13 basis points (bps).
Non-interest income was $239.3 million, plunging 29.6%. The decline mainly resulted from a drastic fall in net gains from the sale of loans and other mortgage production income.
Non-interest expenses fell 13.1% to $298.5 million. The decline was due to a fall in all almost expense components.
As of Jun 30, 2022, net loans held for investment were $7.84 billion, up 1.7% from the end of the prior quarter. Total deposits were $11.92 billion, down 5.8%.
Credit Quality: A Mixed Bag
Provision for credit losses was $5.3 million against a reversal of credit losses of $28.7 million in the prior-year quarter. As of Jun 30, 2022, non-performing assets as a percentage of total assets were 0.22%, down 29 bps from the prior-year quarter.
Profitability & Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.80%, down from the prior-year quarter’s 2.29%. Also, the return on average equity was 5.82%, down from 16.42%.
Common equity tier 1 capital ratio was 17.24% as of Jun 30, 2022, down from 20.22% in the corresponding period of 2021. The total capital ratio was 19.90%, reflecting a fall from the year-ago period’s 23.48%.
Share Repurchase Update
In the reported quarter, HTH paid $442.3 million to repurchase nearly 14.87 million shares at a price of $29.75 per share pursuant to the tender offer completed in May 2022.
Hilltop Holdings’ restructuring efforts to diversify business as a profitable banking operation are commendable. Further, higher interest rates and a rise in loan demand are expected to support the company’s revenues. However, elevated expenses stemming from continued investments in the franchise, and an increase in provisions are near-term concerns.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
Hilltop Holdings Inc. price-consensus-eps-surprise-chart | Hilltop Holdings Inc. Quote
Hilltop Holdings currently carries 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 third-quarter fiscal 2022 (ended Jun 30) earnings of 91 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The figure reflects a year-over-year jump of 49.2%.
Results were primarily aided by higher revenues and improving loan balances. However, an increase in expenses and higher provisions were the undermining factors for WAFD.
Commerce Bancshares Inc.’s CBSH second-quarter 2022 earnings of 96 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, plunged 27.3% from the prior-year quarter.
Results benefited from an improvement in net interest income, a rise in loan balance and a modest increase in non-interest income. However, an increase in non-interest expenses and higher provisions were the major headwinds for CBSH.
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