• Net Income: $36 million or $0.55 per diluted share for Q4 2024.
• Return on Average Assets: 0.9% for the period.
• Return on Average Equity: 6.5% for the period.
• Plains Capital Bank Pre-Tax Income: $51 million on $13.3 billion of average assets.
• Average Loans Decline: Approximately 1% in the quarter.
• Average Deposit Increase: Nearly $600 million during the quarter.
• Provision for Credit Losses Reversal: $5.7 million.
• Net Interest Margin Compression: 7 basis points to 2.98% for the bank.
• Prime Lending Pre-Tax Loss: $9.9 million during the quarter.
• Hilltop Securities Pre-Tax Income: $20 million with net revenues of $125 million.
• Common Equity Tier 1 Capital Ratio: 21%.
• Tangible Book Value Per Share: Increased by $1.14 to $29.49.
• Dividends Returned to Stockholders: $11 million during the period.
• Allowance for Credit Losses: Decreased by $9.8 million to $101 million.
• Net Interest Income: $105.5 million for Q4 2024.
• Non-Interest Income: $196 million for Q4 2024.
• Non-Interest Expenses: Increased by $12 million to $263 million.
• Average HFI Loans: $7.9 billion for the fourth quarter.
• Net Charge-Offs: $3.9 million for Q4 2024.

• Warning! GuruFocus has detected 3 Warning Sign with HTH.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hilltop Holdings Inc (NYSE:HTH) reported a net income of approximately $36 million for the fourth quarter of 2024, showing a positive financial performance.
• The company experienced growth in core deposits at PlainsCapital Bank, enhancing its liquidity position.
• Hilltop Holdings Inc (NYSE:HTH) returned $64 million to stockholders, demonstrating a commitment to shareholder value.
• Hilltop Securities generated pre-tax income of $20 million with net revenues of $125 million, indicating strong performance in its business lines.
• The company maintained strong capital levels with a common equity tier one capital ratio of 21% and increased its tangible book value per share by $1.14 to $29.49.

Negative Points

• Prime Lending reported a pre-tax loss of $9.9 million during the fourth quarter, primarily due to a reduction in origination lock volumes.
• The net interest margin at PlainsCapital Bank experienced a compression of seven basis points from the third quarter to 2.98%.
• Hilltop Holdings Inc (NYSE:HTH) recognized a negative valuation adjustment of $5 million related to an owned office facility intended for sale.
• The fixed income business at Hilltop Securities faced challenging market conditions, resulting in a decline in net revenues of $10 million compared to the fourth quarter of 2023.
• The company anticipates continued challenges in the mortgage market, which may negatively impact Prime Lending's operating results in the first quarter of 2025.

Q & A Highlights

Q: Any plans for an accelerated share repurchase (ASR) or more aggressive buyback given the expected gain from the merchant banking sale? A: Jeremy Ford, President and CEO, stated that the priorities haven't changed due to the specific gain. They have authorization for a $100 million share repurchase program for the year, which will be executed during open windows. They aim to be active with share repurchases this year, unlike last year when they held off due to looming debt maturities.

Q: Can you provide more details on the loan growth outlook and assumptions for paydowns and borrower activity? A: William Furr, CFO, explained that the range is wide due to uncertainty in the rate cycle. They have seen pipeline growth, particularly in commercial lending, but it may take a few quarters to manifest in funded loans. They expect to retain $10 million to $30 million per month in prime mortgage loans, which could result in $120 million to $360 million retained annually.

Q: How does the guidance for net interest income (NII) account for potential rate cuts, and what if there are no cuts? A: William Furr noted that the guidance includes two rate cuts across the year. Hilltop is asset-sensitive, so fewer cuts could improve NII. They expect deposit rates to continue falling through the first quarter and stabilize until further Fed actions.

Q: What is the outlook for structured finance revenues in 2025, given the strong performance in 2024? A: William Furr mentioned that structured finance has benefited from state housing authorities' support for down payment assistance programs. The continuation of such support is uncertain and could impact revenues. They cannot comment on state budgeting processes, which are outside their control.

Q: How do you plan to manage asset sensitivity over the longer term, and what changes might be made to the balance sheet? A: William Furr stated that they aim for 2% to 4% asset sensitivity. They have restarted investments in the securities portfolio and increased retention of hybrid mortgages. They plan to move broker dealer sweep deposits back to the broker dealer, which will help reduce asset sensitivity over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.