Hilltop Holdings (HTH) Misses Q1 Earnings, Revenue Estimates

Hilltop Holdings Inc. (NYSE:HTH) recorded a negative earnings surprise of 20.6% in the first quarter of 2017. The company’s earnings per share of 27 cents lagged the Zacks Consensus Estimate of 34 cents and declined 3.6% year over year.

Lower net interest income and non-interest income affected the results. Further, the balance sheet and profitability ratios remained weak. However, the company witnessed lower expenses during the quarter.

Net income applicable to common stockholders came in at $26.4 million, down 4.1% year over year.

Revenue Decline More than Offsets Lower Costs

The company’s operating revenues for the quarter were $363.5 million, down 2% year over year. The figure also missed the Zacks Consensus Estimate of $393 million.

Net interest income for the quarter declined 1.9% year over year to $92.1 million. Net interest margin was 3.52%, up 15 basis points (bps) from the prior-year quarter.

Non-interest income fell 2.1% year over year to $271.4 million mainly due to lower income from sale of loans and other mortgage production income, reduced investment and securities advisory fees and commission income along with low insurance premium earned.

However, non-interest expenses reduced 1.4% year over year to $320.5 million, mainly attributable to lower occupancy and equipment expenses, loss adjustment expenses, policy acquisition and other underwriting expenses and other expenses.

Mixed Credit Quality

Provision for loan losses was $1.7 million, down roughly 50% year over year. Non-covered non-performing assets as a percentage of total assets was 0.28% compared with 0.24% in the prior-year quarter.

Non-covered non-performing loans were $28.8 million, up 6.4% year over year.

Weak Balance Sheet

As of Mar 31, 2017, Hilltop’s cash and due from banks was $545.9 million, up 18.4% sequentially. Further, total shareholders’ equity was $1.9 billion, almost flat compared with the prior month.

Further, total assets were $12.3 billion as of Mar 31, 2017, down 3.1% sequentially. Also, total liabilities declined 3.8% from the prior-quarter to $10.4 billion.

Profitability Weakens, Capital Ratios Improve

Hilltop’s annualized return on average assets at the end of the reported quarter was 0.88%, down from 0.96% recorded in the prior-year quarter. Additionally, return on average equity was 5.73%, down from 6.32%.

Common equity tier 1 capital was 19.03%, significantly up year over year. Also, total capital ratio was significantly up to 20.12% year over year.

Hilltop 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

First Horizon National Corporation (NYSE:FHN) posted earnings per share of 23 cents for first-quarter 2017, in line with the Zacks Consensus Estimate. A fall in non-interest income was primarily responsible for its weak results. The company also witnessed poor capital ratios.

Hancock Holding Company (NASDAQ:HBHC) reported first-quarter 2017 adjusted earnings of 63 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. Further, this compares favorably with the prior- year quarter adjusted earnings of 54 cents.

Associated Banc-Corp (NYSE:ASB) reported first-quarter 2017 earnings per share of 35 cents, outpacing the Zacks Consensus Estimate of 32 cents. Also, the figure represents an increase of 29.6% from the prior-year quarter. Better-than-expected results were primarily driven by an
improvement in revenues and lower expenses.

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