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Hancock Holding (HBHC) Tops on Q1 Earnings, Revenues Surge


Hancock Holding Company HBHC reported first-quarter 2017 adjusted earnings of 63 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. Further, this compares favorably with the prior- year quarter adjusted earnings of 54 cents.

The better-than-expected results were primarily driven by a year-over-year improvement in the top line. Growth in loans and deposits remained strong. Further, an improvement in profitability and capital ratios were on the positive side. Additionally, an energy-led fall in provisions helped release the burden to some extent. However, higher expenses and a rise in non-performing assets remained the undermining factors.

Results excluded several one-time items. After considering these, net income for the quarter came in at $49 million or 57 cents per share, significantly up from $3.8 million or 5 cents per share in the prior-year quarter.

Revenue Growth Supports Improved Results

Hancock’s net revenue for the quarter totaled $245.2 million, up 10.9% year over year. Revenues came in line with the Zacks Consensus Estimate.

Quarterly net interest income grew 11.6% year over year to $181.7 million. Also, reported net interest margin (NIM) rose 14 basis points from the prior-year quarter to 3.37%.

Non-interest income totaled $63.5 million, up 9.1% from the year-ago quarter. The growth was driven by an improvement in all the components, except trust fees, insurance commissions and fees, securities transaction fees and other income.

Total operating expenses increased 4.8% year over year to $163.5 million. The rise was primarily due to higher personnel, net occupancy expenses and other operating expenses.

Credit Quality: A Mixed Bag

Net charge-offs from the non-covered loan portfolio was 0.70% of average total loans, up from 0.54% in the year-ago quarter. Also, total nonperforming assets increased 6.6% year over year to $327.1 million.

However, provision for loan losses declined 73.4% year over year to roughly $16 million, thanks to the rebound in oil prices.

Strong Balance Sheet; Improved Profitability & Capital Ratios

As of Mar 31, 2017, total loans grew 8.7% sequentially to $18.2 billion. Further, total deposits rose 2.6% from the prior month to $19.9 billion.

Return on average assets was 0.80%, up from 0.07% as of Mar 31, 2016. Moreover, as of Mar 31, 2017, return on average common equity was 7.27% compared with 0.64% as of Mar 31, 2016.

As of Mar 31, 2017, Tier 1 leverage ratio was 8.79%, up from 8.14% as of Mar 31, 2016. Further, Tier 1 risk-based capital ratio came in at 10.24%, up from 9.69% as of Mar 31, 2016.

Outlook for 2017

Excluding any significant changes in the tax code, the company expects effective tax rate to be in the range of 25%-27% for 2017.

Further, management estimates charge-offs from energy related credits to be roughly in the range of $65-$95 million. The company expects additional charge-offs in the energy portfolio, though it believes these will be manageable.

Moreover, the company expects to have strong capital position along with sufficient reserves.

Our Viewpoint

We believe Hancock’s organic and inorganic growth strategies will accelerate revenue generation going forward, supported by its efforts to restructure the business model. Further, the company's efforts to upgrade online banking facility are expected to lower expenses in the quarters ahead.

Hancock Holding Company Price, Consensus and EPS Surprise

At present, Hancock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Among other Southeast banking stocks, First Horizon National Corporation FHN posted earnings per share of 23 cents for first-quarter 2017, in line with the Zacks Consensus Estimate. A fall in non-interest income was primarily responsible for its weak results. The company also experienced poor capital ratios.

Both Capstar Financial Holdings, Inc. CSTR and Trustmark Corporation TRMK are scheduled to report their quarterly earnings reports on Apr 26.

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