Lower Revenues Drag Hancock Q4 Earnings - Analyst Blog
January 24 2014 - 09:40AM
Zacks
Hancock Holding Co.’s (HBHC) fourth-quarter
operating earnings of 55 cents per share missed the Zacks Consensus
Estimate by a penny due to fall in revenues. However, this was up
1.9% from the year-ago quarter figure of 54 cents.
Lower-than-expected results were due to decline in revenues, partly
offset by a slight drop in operating expenses and significant
decline in provision for loan losses. Further, credit quality and
profitability ratios improved and capital ratios were a mixed bag
in the quarter.
After considering certain non-recurring expenses, net income in the
quarter was $34.7 million, down 26.2% year over year.
For the full year 2013, operating earnings were $2.22 per share, up
4.2% year over year. Moreover, this outpaced the Zacks Consensus
Estimate of $2.09.
Performance in Detail
On an operating basis, Hancock’s total revenue came in at $234.5
million, down 8.2% from the prior-year quarter. However, it
surpassed the Zacks Consensus Estimate of $233.0 million.
For 2013, total revenue (operating basis) was $968.248 million,
down 4.6% year over year. However, it outpaced the Zacks Consensus
Estimate of $942.0 million.
Net interest income (taxable equivalent) declined 8.2% from the
year-ago quarter to $178.1 million. Moreover, net interest margin
(NIM) fell 39 basis points from the prior-year quarter to
4.09%.
Non-interest income (excluding securities transaction gain) was
$58.9 million, down 8.4% from the prior-year quarter. The decline
mainly resulted from decrease in secondary mortgage market
operations, service charges on deposit accounts as well as other
income, partially offset by higher trust fees.
Total operating expenses were $157.1 million, down 0.5% year over
year. The fall was mainly due to decrease in personnel expense, net
occupancy expense and other real estate owned expense, partially
offset by increase in other operating expense.
Total loans, excluding loans held for sale, amounted to $12.3
billion as of Dec 31, 2013, up 6.4% year over year. However, total
deposits fell 2.4% from Dec 31, 2012 level to $15.4 billion.
Credit Quality
Credit quality considerably improved in the quarter. Net
charge-offs from the non-covered loan portfolio were $5.2 million
or 0.17% of average total loans, compared with $28.0 million or
0.97% of average total loans in the year-ago quarter. Moreover,
total nonperforming assets were $185.9 million, down 27.4% year
over year.
Further, provision for loan losses was $7.3 million, down 73.9%
from the prior-year quarter.
Capital and Profitability Ratios
Hancock’s capital ratios were a mixed bag and profitability ratios
improved. As of Dec 31, 2013, Tier 1 leverage ratio was 9.36%, up
from 9.11% as of Dec 31, 2012. However, Tier 1 risk-based capital
ratio was 11.87%, declining from 12.64% as of Dec 31, 2012.
On an operating basis, return on average assets improved to 0.99%
from 0.97% as of Dec 31, 2012. As of Dec 31, 2013, tangible common
equity ratio was 9.00%, up from 8.77%.
Performance of Other Southeast Banks
F.N.B. Corp.’s (FNB) fourth-quarter operating
earnings were in line with the Zacks Consensus Estimate. Rise in
revenues, growth in loans and deposit balances, strong capital
ratios and an improved asset quality were the positives. However,
higher operating expenses and deteriorating profitability ratios
were headwinds.
First Horizon National Corp.’s (FHN)
fourth-quarter 2013 earnings per share outpaced the Zacks Consensus
Estimate. Results reflected lower-than-anticipated expenses on the
back of prudent expense management. However, lower-than-expected
revenues were a concern.
BancorpSouth, Inc.’s (BXS) fourth-quarter 2013
earnings per share beat the Zacks Consensus Estimate by a penny.
Results benefited from increased net interest revenue, lower
expenses and the absence of provision for credit losses. These
positives were partially offset by decline in non-interest
revenues.
Our Viewpoint
Hancock’s consistent capital deployment program makes it an
attractive option for yield-seeking investors. Further, we expect
the company’s organic and inorganic growth strategies to be
successful on the back of a stable liquidity position. However,
persistently rising operating expenses, a low rate environment and
increased regulations will likely dent Hancock’s performance in the
near term.
At present, Hancock carries a Zacks Rank #3 (Hold).
BANCORPSOUTH (BXS): Free Stock Analysis Report
FIRST HRZN NATL (FHN): Free Stock Analysis Report
FNB CORP (FNB): Free Stock Analysis Report
HANCOCK HLDG CO (HBHC): Free Stock Analysis Report
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