Hilltop Holdings Inc. (HTH) reported second-quarter 2014 operating earnings per share of 30 cents, which surpassed both the Zacks Consensus Estimate of 27 cents and the year-ago quarter figure of 24 cents. Notably, net income soared 13.9% year over year to $27.1 million, primarily due to lower expenses and loan loss provisions.
With this result, the company’s average four-quarter beat stands at 2.4%. However, shares dipped 0.6% following the announcement of mixed earnings results.
Hilltop’s total revenue grossed $307.7 million, decreasing 2.5% from $315.5 million in the year-ago quarter, although it exceededthe Zacks Consensus Estimate of $262 million.
Net interest income surged 37% year over year to $104.4 million, primarily driven by higher interest-bearing deposits and loan growth. However, non-interest income plummeted 15% to $203.3 million, reflecting fall in insurance premiums, mortgage loan origination fees as well as sunk advisory fees and commissions.
Hilltop incurred provision for loan losses of $5.5 million in the reported quarter, down from $11.3 million in the year-ago quarter. The total interest expense declined 22.1% to $6.0 million from $7.7 million in the prior-year period, while non-interest expenses fell 3.5% to $251.2 million from $260.4 million in the year-ago period.
Financial Update
As on Jun 30, 2014, Hilltop held cash and due from banks of $674 million, down from $713.1 million at 2013-end, although the securities portfolio remained strong at $1.33 billion, up from $1.26 billion at 2013-end.
Total shareholder equity came in at $1.4 billion at Jun 2014-end, up from $1.3 billion at 2013-end. Moreover, total assets appreciated to $9.4 billion from $8.9 billion at 2013-end.
Meanwhile, total liabilities increased to $8.0 billion from $7.59 billion at 2013-end. Total deposits fell to $6.16 billion from $6.72 billion at 2013-end. At the end of Jun 2014, operating cash outflow surged to $291.7 million against cash flow of $14.6 million in the year-ago period. Nevertheless, the company held free cash of $158 million at Jun 2014-end.
At Jun 2014-end, Hilltop’s insurance operations had a deposit in custody for various investments in State Insurance Departments with carrying values of $8.6 million, down from $9.4 million at 2013-end.
Profitability Metrics
At the end of Jun 2014, Hilltop’s book value increased 12.9% year over year to $14.22 per share, whereas net interest margin improved to 5.18% from 4.33% in the year-ago quarter. Moreover, return on average shareholders’ equity (ROE) rose to 7.99% from 7.29% in the year-ago period.
Hilltop’s risk-based Tier 1 capital ratio was 18.11% at the end of Jun 2014, slightly down from 18.53% at 2013-end. Moreover, PlainsCapital Bank’s risk-based Tier 1 capital ratio was pegged at 13.22% at the end of Jun 2014, marginally lower than 13.38% at the end of 2013.
Stocks to Consider
Hilltop now has a Zacks Rank #3 (Hold). Some better-ranked financial stocks like AmTrust Financial Services Inc. (AFSI), Endurance Specialty Holdings Ltd. (ENH) and White Mountains Insurance Group Ltd. (WTM), all sporting a Zacks Rank #1 (Strong Buy), and are worth consideration.
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