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Hilltop Holdings (HTH) Gains on Q2 Earnings Beat, Lower Expenses
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Shares of Hilltop Holdings Inc. (HTH - Free Report) rose 1.8% in the after-hours trading following the release of better-than-expected second-quarter 2024 results. Earnings of 31 cents per share handily beat the Zacks Consensus Estimate of 24 cents. The bottom line improved 10.7% from the prior-year quarter.
Results primarily benefited from higher non-interest income and a fall in expenses. Also, lower provision for credit losses was a positive. Improvements in profitability and capital ratios were other tailwinds. However, a decline in net interest income (NII) was a spoilsport.
Net income attributable to common stockholders was $20.3 million, up 12.1% year over year. Our estimate for the metric was $15.1 million.
Revenues & Expenses Decline
Net revenues were $297 million, which declined 3.9% year over year. However, the top line surpassed the Zacks Consensus Estimate of $279.8 million.
NII declined 12.4% year over year to $103.7 million. Our estimate for the metric was $103.9 million.
The net interest margin (NIM) (taxable-equivalent basis) was 2.92%, down 11 basis points (bps) year over year. We had expected NIM to be 2.72%.
Non-interest income was $193.3 million, up 1.4% year over year. The increase was driven by a rise in net gains from sale of loans and other mortgage production income, and investment and securities advisory fees and commissions. We had projected the metric to be $174 million.
Non-interest expenses declined 3.9% from the prior-year quarter to $256.5 million. We projected total non-interest expenses of $255.5 million.
As of Jun 30, 2024, net loans held for investment were $8.1 billion, up 1.3% sequentially. Total deposits were $10.4 billion, down 4.7% from the end of the previous quarter. Our estimates for net loans held for investment and total deposits were $7.9 billion and $10.7 billion, respectively.
Credit Quality: Mixed Bag
In the second quarter of 2024, Hilltop Holdings recorded a provision for credit losses of $10.9 million, down 26.3% from the prior-year quarter.
As of Jun 30, 2024, non-performing assets, as a percentage of total assets, were 0.70%, which increased 45 bps from the year-ago quarter.
Profitability & Capital Ratios Improve
Return on average assets at the end of the reported quarter was 0.59%, up from the prior year quarter’s 0.47%. The return on average stockholders’ equity was 3.84%, which rose from 3.53%.
The common equity tier 1 capital ratio was 19.45% as of Jun 30, 2024, up from 17.61% in the corresponding period of 2023. The total capital ratio was 22.57%, up from the year-ago period’s 20.41%.
Share Repurchase Update
In the reported quarter, the company repurchased 0.32 million shares for $9.9 million at an average price of $30.98 per share.
Our Take
Low mortgage origination volumes amid the current high interest rates will likely hurt the company’s Mortgage Origination segment’s performance to some extent in the near term. Poor asset quality is another major concern, which makes us apprehensive about Hilltop Holdings’ growth potential.
Hilltop Holdings Inc. Price, Consensus and EPS Surprise
Prosperity Bancshares Inc.’s (PB - Free Report) second-quarter 2024 adjusted earnings per share of $1.22 beat the Zacks Consensus Estimate of $1.20. Moreover, the bottom line compared favorably with adjusted earnings of $1.21 in the prior-year quarter.
PB’s results benefited from lower provisions and an increase in NII. A rise in deposits and loans was another positive. However, a fall in adjusted non-interest income and rising expenses were major headwinds for PB.
East West Bancorp, Inc.’s (EWBC - Free Report) second-quarter 2024 adjusted earnings per share of $2.07 surpassed the Zacks Consensus Estimate of $1.97. However, the bottom line declined 5.9% from the prior-year quarter.
EWBC’s results were primarily aided by an increase in adjusted non-interest income. Also, deposit and loan balances increased sequentially in the quarter. However, lower NII and higher adjusted non-interest expenses and provisions were the undermining factors.
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Hilltop Holdings (HTH) Gains on Q2 Earnings Beat, Lower Expenses
Shares of Hilltop Holdings Inc. (HTH - Free Report) rose 1.8% in the after-hours trading following the release of better-than-expected second-quarter 2024 results. Earnings of 31 cents per share handily beat the Zacks Consensus Estimate of 24 cents. The bottom line improved 10.7% from the prior-year quarter.
Results primarily benefited from higher non-interest income and a fall in expenses. Also, lower provision for credit losses was a positive. Improvements in profitability and capital ratios were other tailwinds. However, a decline in net interest income (NII) was a spoilsport.
Net income attributable to common stockholders was $20.3 million, up 12.1% year over year. Our estimate for the metric was $15.1 million.
Revenues & Expenses Decline
Net revenues were $297 million, which declined 3.9% year over year. However, the top line surpassed the Zacks Consensus Estimate of $279.8 million.
NII declined 12.4% year over year to $103.7 million. Our estimate for the metric was $103.9 million.
The net interest margin (NIM) (taxable-equivalent basis) was 2.92%, down 11 basis points (bps) year over year. We had expected NIM to be 2.72%.
Non-interest income was $193.3 million, up 1.4% year over year. The increase was driven by a rise in net gains from sale of loans and other mortgage production income, and investment and securities advisory fees and commissions. We had projected the metric to be $174 million.
Non-interest expenses declined 3.9% from the prior-year quarter to $256.5 million. We projected total non-interest expenses of $255.5 million.
As of Jun 30, 2024, net loans held for investment were $8.1 billion, up 1.3% sequentially. Total deposits were $10.4 billion, down 4.7% from the end of the previous quarter. Our estimates for net loans held for investment and total deposits were $7.9 billion and $10.7 billion, respectively.
Credit Quality: Mixed Bag
In the second quarter of 2024, Hilltop Holdings recorded a provision for credit losses of $10.9 million, down 26.3% from the prior-year quarter.
As of Jun 30, 2024, non-performing assets, as a percentage of total assets, were 0.70%, which increased 45 bps from the year-ago quarter.
Profitability & Capital Ratios Improve
Return on average assets at the end of the reported quarter was 0.59%, up from the prior year quarter’s 0.47%. The return on average stockholders’ equity was 3.84%, which rose from 3.53%.
The common equity tier 1 capital ratio was 19.45% as of Jun 30, 2024, up from 17.61% in the corresponding period of 2023. The total capital ratio was 22.57%, up from the year-ago period’s 20.41%.
Share Repurchase Update
In the reported quarter, the company repurchased 0.32 million shares for $9.9 million at an average price of $30.98 per share.
Our Take
Low mortgage origination volumes amid the current high interest rates will likely hurt the company’s Mortgage Origination segment’s performance to some extent in the near term. Poor asset quality is another major concern, which makes us apprehensive about Hilltop Holdings’ growth potential.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Banks
Prosperity Bancshares Inc.’s (PB - Free Report) second-quarter 2024 adjusted earnings per share of $1.22 beat the Zacks Consensus Estimate of $1.20. Moreover, the bottom line compared favorably with adjusted earnings of $1.21 in the prior-year quarter.
PB’s results benefited from lower provisions and an increase in NII. A rise in deposits and loans was another positive. However, a fall in adjusted non-interest income and rising expenses were major headwinds for PB.
East West Bancorp, Inc.’s (EWBC - Free Report) second-quarter 2024 adjusted earnings per share of $2.07 surpassed the Zacks Consensus Estimate of $1.97. However, the bottom line declined 5.9% from the prior-year quarter.
EWBC’s results were primarily aided by an increase in adjusted non-interest income. Also, deposit and loan balances increased sequentially in the quarter. However, lower NII and higher adjusted non-interest expenses and provisions were the undermining factors.