Hancock Holding Company (HBHC) reported third-quarter operating earnings of 59 cents per share, surpassing the Zacks Consensus Estimate by a penny. Moreover, earnings came in 5.4% above the year-ago figure.
Effective cost control along with commendable growth in loans and deposits facilitated Hancock’s better-than-expected performance. However, persistent pressure on top line with a fall in both non-interest income and net interest income continued to weigh on the results. Asset quality displayed a mixed picture.
Net income came in at $46.6 million or 56 cents per share compared with $33.2 million or 40 cents per share in the prior-year quarter.
Performance in Detail
Hancock’s net revenue summed $224.2 million, down 5.5% from the prior-year quarter. However, it outpaced the Zacks Consensus Estimate of $223.0 million.
Net interest income (taxable equivalent) declined 4.5% year over year to $166.2 million. Moreover, net interest margin (NIM) fell 42 basis points (bps) year over year to 3.81%.
Non-interest income totaled $57.9 million, down 8.1% from the prior-year quarter. The reduction was driven by a fall in all the components except an increase in trust fees as well as investment & annuity fees.
Total operating expenses decreased 10.0% year over year to $145.2 million. The fall was due to a decline in all expense components.
As of Sep 30, 2014, total loans grew 13.8% year over year to $13.3 billion. Further, total deposits rose 4.5% year over year to $15.7 billion.
Credit Quality
Credit quality demonstrated mixed figures during the quarter. Net charge-offs from the non-covered loan portfolio came in at $6.4 million or 0.19% of average total loans, compared with $5.4 million or 0.18% of average total loans in the year-ago quarter. Moreover, total nonperforming assets amounted to $147.2 million, down 31.8% year over year.
Further, net provision for loan losses rose 25.1% year over year to $9.5 million.
Capital and Profitability Ratios
Hancock’s capital ratios represented a mixed bag whereas profitability ratios showed strength during the quarter. As of Sep 30, 2014, Tier 1 leverage ratio stood at 9.48%, up from 9.10% as of Sep 30, 2013. However, Tier 1 risk-based capital ratio came in at 11.68%, down from 12.07% as of Sep 30, 2013.
Return on average assets stood at 0.94%, up from 0.70% as of Sep 30, 2013. However, as of Sep 30, 2014, tangible common equity ratio came in at 9.10%, up from 8.68% as of Sep 30, 2013.
Capital Deployment Activities
Hancock repurchased 305,263 shares worth around $10 million during the quarter. This share repurchase was part of the new common stock buyback program authorized by the company’s board of directors in July, under which up to 5%, or approximately 4 million shares can be bought back on or before Dec 31, 2015.
Our Viewpoint
Driven by the prevailing low interest rate environment and sluggish economic recovery, there seems to be no near-term respite for Hancock’s stressed top line. Moreover, weak asset quality continues to pose a challenge.
Nevertheless, the company’s cost-containment measures and efficient organic growth strategies should continue to drive profitability in the quarters ahead.
At present, Hancock carries a Zacks Rank #3 (Hold).
Among other Southeast banks, First Bancorp (FBP), Independent Bank Group, Inc. (IBTX) and HomeTrust Bancshares, Inc. (HTBI) are scheduled to report third-quarter earnings results on Oct 27, Oct 28 and Nov 4, respectively.
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