Hancock Holding (HBHC) Q1 Earnings In Line, Provisions Down

Hancock Holding Company’s (NASDAQ:HBHC) first-quarter 2018 adjusted earnings per share of 90 cents came in line with the Zacks Consensus Estimate. Also, the figure represents an improvement of nearly 55.2% year over year.

Results benefited from an improvement in both net interest income and non-interest income along with lower provisions. Further, growth in loans and deposits remained strong. However, an increase in expenses was the key dampener.

After considering the impact of several non-recurring items, net income for the quarter was $72.5 million or 83 cents per share, up from $49 million or 57 cents per share in the prior-year quarter.

Revenues Improve, Expenses Escalate

Hancock’s net revenues were $271.9 million, up 10.9% year over year. However, the figure lagged the Zacks Consensus Estimate of $281.7 million.

Net interest income grew 13.2% year over year to $205.7 million. Net interest margin (NIM) on a tax-equivalent basis was 3.37%, stable year over year.

Non-interest income totaled $66.3 million, reflecting an increase of 4.3% from the year-ago quarter. The growth was driven by an improvement in all components except secondary mortgage market operations.

Total operating expenses increased 5% year over year to $164.9 million. The rise was due to an increase in almost all cost components except net occupancy and equipment expense.

Credit Quality: Mixed Bag

Net charge-offs from the non-covered loan portfolio was 0.26% of average total loans, decreasing from 0.70% in the year-ago quarter. Also, provision for loan losses decreased 23.4% year over year to roughly $12.3 million.

However, total nonperforming assets increased 43.2% year over year to $468.3 million.

Strong Balance Sheet; Profitability Ratios Improve, Capital Ratios Mixed

As of Mar 31, 2018, total loans were $19.1 billion, up from $19 billion recorded in the prior quarter end. Further, total deposits increased 1% from the prior quarter to $22.5 billion.

Return on average assets was 1.08% at the end of the quarter, up from 0.80% in the prior-year quarter. Moreover, return on average common equity was 10.23% compared with 7.27% in the prior-year quarter end.

As of Mar 31, 2018, Tier 1 leverage ratio was 8.56%, down from 8.79% in the year-ago figure. However, Tier 1 risk-based capital ratio was 10.47%, increasing from 10.16% as of Mar 31, 2017.

Outlook

Management continues to expect charge-offs from energy-related credits to approximate up to $95 million.

Moreover, the company expects to have a strong capital position along with sufficient reserves.

Our Viewpoint

Hancock remains well positioned for revenue growth in the future, given its persistent improvement in loans and deposit balances. Also, its improving net interest margin should further aid top line. However, persistently rising operating expenses remains a major concern for the company. Also, its exposure toward risky loan portfolios makes us apprehensive.

Presently, Hancock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other Southeast banking stocks, results are expected from Regions Financial Corporation (NYSE:RF) on Apr 20, Synovus Financial Corp. (NYSE:SNV) on Apr 24 and Carolina Financial Corporation (NASDAQ:CARO) on Apr 30.

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