In This Article:
A month has gone by since the last earnings report for Hilltop Holdings (HTH). Shares have added about 4.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hilltop Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hilltop Holdings Q2 Earnings Beat Estimates, Provisions Surge
Hilltop Holdings’ second-quarter 2020 earnings continuing operations of $1.08 per share beat the Zacks Consensus Estimate of 45 cents. Also, the bottom line compares favorably with the prior-year quarter’s earnings of 64 cents.
Results reflect an improvement in revenues aided by growth in non-interest income and a strong balance-sheet position. However, declining net interest income and higher provisions were major headwinds.
Net income applicable to common stockholders was $128.5 million or $1.42 per share, up from $57.8 million or 62 cents per share in the prior-year quarter.
Revenues Improve, Costs Flare Up
Net revenues came in at $572.7 million, increasing 49% year over year.
Net interest income was $104.6 million, down 2.5% from the prior-year quarter. Net interest margin (taxable equivalent basis) came in at 2.81%, contracting 68 basis points (bps) from the prior-year quarter.
Non-interest income jumped 69.1% from the year-ago quarter to $468.1 million. This was largely driven by a rise in all fee income components, except securities commissions and fees.
Non-interest expenses flared up 21.7% from the year-ago quarter to $370.2 million. This upswing mainly resulted from rise in employees' compensation and benefits costs.
Credit Quality Worsens
Provision for loan losses was $66 million compared with the reversal of credit losses of $672,000 in the prior-year quarter. The company built a significant reserve amid the pandemic-related economic uncertainty.
Non-performing assets as a percentage of total assets were 0.56%, up 19 bps. Also, non-performing loans were $68.3 million as of Jun 30, 2020, up significantly from the $32 million recorded in the comparable period of 2019.
Strong Balance Sheet
As of Jun 30, 2020, Hilltop Holdings’ cash and due from banks was $1.7 billion, up significantly from the prior quarter. Total shareholders’ equity was $2.3 billion, up 6% sequentially. As of Jun 30, 2020, net loans held for investment increased 6.3% sequentially to $7.7 billion. Moreover, total deposits were $11.6 billion, up 17.2% from the prior quarter.