Hilltop Holdings (HTH) Q3 Earnings & Revenues Beat Estimates

Hilltop Holdings Inc.’s HTH third-quarter 2020 earnings from continuing operations of $1.69 per share comfortably beat the Zacks Consensus Estimate of 89 cents. Also, the bottom line compares favorably with the prior-year quarter’s earnings of 81 cents.

Results reflect an improvement in revenues aided by growth in non-interest income and a healthy balance-sheet position. However, declining net interest income and higher expenses were major headwinds.

Net income applicable to common stockholders was $153.3 million, up 93.1% from the prior-year quarter.

Revenues Improve, Costs Flare Up

Net revenues came in at $604.6 million, increasing 44.3% year over year. Moreover, the revenue figure surpassed the Zacks Consensus Estimate of $469.6 million.

Net interest income was $101.9 million, down 9.5% from the prior-year quarter. Net interest margin (taxable equivalent basis) came in at 2.57%, contracting 89 basis points (bps) from the prior-year quarter.

Non-interest income surged 64% from the year-ago quarter to $502.7 million. This was largely driven by a rise in all fee income components, except securities commissions and fees.

Non-interest expenses flared up 24.3% from the year-ago quarter to $399.3 million. This upswing mainly resulted from rise in employees' compensation and benefits costs and other costs.

Credit Quality Improves

Provision for loan losses witnessed a reversal of $602,000 compared with the provision of credit losses of $47,000 in the prior-year quarter. The reversal of credit losses mainly reflected changes in reserves on margin loans within the broker-dealer segment.

Non-performing assets as a percentage of total assets were 0.64%, down 27 bps. Also, non-performing loans were $82.1 million as of Sep 30, 2020, up significantly from the $35.5 million recorded in the comparable period of 2019.

Balance Sheet: A Mixed Bag

As of Sep 30, 2020, Hilltop Holdings’ cash and due from banks was $1.3 billion, down 22.3% from the prior quarter. Total shareholders’ equity was $2.4 billion, up 6.4% sequentially.

As of Sep 30, 2020, net loans held for investment inched up 1.3% sequentially to $7.8 billion. However, total deposits were $11.3 billion, down 3.3% from the prior quarter.

Profitability & Capital Ratio Improve

Return on average assets at the end of the reported quarter was 3.71%, up from the prior-year quarter’s 2.26%. Also, return on average equity was 25.94%, up from the year-earlier quarter’s 15.55%.

Common equity tier 1 capital ratio was 19.85% as of Sep 30, 2020, up from 16.15% in the corresponding period of 2019. Moreover, total capital ratio was 23.22%, reflecting a rise from the prior-year quarter’s 16.95%.

Our Take

Hilltop Holdings’ top-line growth is anticipated to be decent on modest loan demand. While higher costs, low interest rates and the pandemic-induced slowdown are major near-term concerns, its strong balance sheet will likely keep supporting financials.

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 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 fourth-quarter fiscal 2020 (ended Sep 30) earnings came in at 45 cents per share, surpassing the Zacks Consensus Estimate of 42 cents. However, the figure reflected a year-over-year plunge of 31.8%.

BancorpSouth Bank BXS delivered a positive earnings surprise of 32.7% in third-quarter 2020 on higher interest income. Net operating earnings of 69 cents per share beat the Zacks Consensus Estimate of 52 cents. The bottom line, however, was flat year over year.

Zions Bancorporation’s ZION third-quarter net earnings per share of $1.01 outpaced the Zacks Consensus Estimate of 86 cents. However, the bottom line compared unfavorably with the year-ago quarter’s $1.17.

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