Hilltop Holdings Inc.’s HTH second-quarter 2019 earnings per share of 62 cents easily surpassed the Zacks Consensus Estimate of 38 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 35 cents.

Results were primarily driven by an increase in revenues. Moreover, the company recorded provision benefits in the quarter, which was a tailwind. Further, loans and deposit balances remained strong. However, rise in expenses hurt results to some extent.

Net income applicable to common stockholders was $57.8 million, up from $33.1 million registered in the prior-year quarter.

Revenues Improve, Costs Rise

Net revenues were $420.7 million, increasing 9.5% year over year. The reported figure surpassed the Zacks Consensus Estimate of $380.8 million.

Net interest income was $107.9 million, reflecting 2.9% year-over-year rise. Net interest margin (taxable equivalent basis) was 3.49%, up 2 basis points (bps) from the prior-year quarter.

Non-interest income increased 12% from the year-ago quarter to $312.9 million. This rise was due to an increase in mortgage loan origination fees, investment and securities advisory fees and commissions, and other income.

Non-interest expenses increased 1.5% to $343.7 million. This upside can be attributed to rise in employees’ compensation and benefits costs, net occupancy and equipment costs, and loss and loss adjustment expenses.

Credit Quality Improves

In the reported quarter, the company recorded recovery for loan losses of nearly $0.7 million against provision for loan losses of $0.3 million reported in the prior-year quarter.

Moreover, non-performing assets as a percentage of total assets was 0.37% at the end of the quarter, down 25 bps from the year-ago quarter. Furthermore, non-performing loans were nearly $32 million as of Jun 30, 2019, down from $47.2 million as of Jun 30, 2018.

Strong Balance Sheet

As of Jun 30, 2019, Hilltop Holdings’ cash and due from banks was $342 million, up from $313.2 million at the prior quarter end. Total shareholders’ equity was nearly $2.1 billion, up 1.8% from the end of the first quarter of 2019.

Total deposits were $8.5 billion, up 2% from the prior quarter end figure.

Profitability Ratios Improve, Capital Ratios Deteriorate

Return on average assets at the end of the reported quarter was 1.74%, up from 1.03% witnessed in the prior-year quarter. Additionally, return on average equity was 11.63%, up from 6.95% in the year-earlier quarter.

Common equity tier 1 capital ratio was 16.32% as of Jun 30, 2019, down from 17.61% as of Jun 30, 2018. Moreover, total capital ratio was 17.14%, reflecting a decline from 18.58% recorded in the prior-year quarter.

Our Take

Given the continued rise in loan balances, the company’s top-line growth is expected to remain impressive. Moreover, its efforts to expand via acquisitions will likely aid profitability through earnings synergies. While higher costs, owing to continued investments in franchise and inorganic growth strategy, are likely to curb the company’s bottom-line growth, its strong balance sheet should 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

Washington Federal’s WAFD third-quarter fiscal 2019 (ended Jun 30) earnings were 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The figure reflected year-over-year growth of 10%.

Hancock Whitney Corporation’s HWC second-quarter 2019 operating earnings per share of $1.01 were in line with the Zacks Consensus Estimate. The bottom line was 5.2% higher than the year-ago figure.

Ally Financial Inc.’s ALLY second-quarter 2019 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of 88 cents. Further, the bottom line compared favorably with 83 cents recorded in the prior-year quarter.

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