Interest Rate Risk Management - The banking segment's net interest income is significantly influenced by interest rate changes, with a positive gap indicating potential increases in income if rates rise [626]. - The banking segment maintains a strategy to manage interest rate risk through asset/liability management policies, including the use of derivative instruments [625]. - Interest rate risk for the broker-dealer segment is managed by setting limits on the size and duration of positions and monitoring the length of time securities can be held [635]. - The company employs simulation analysis to assess the impact of interest rate changes on net interest income and economic value of equity, providing a more accurate picture than traditional gap analysis [629]. - The company continues to evaluate its interest rate risk position and may adjust its balance sheet to align with management's target rate risk position in the future [631]. - The company has established policies to manage interest rate risk within acceptable limits, focusing on mitigating potential losses [644]. Interest Rate Sensitivity - As of December 31, 2024, a 200 basis point increase in interest rates is projected to increase net interest income by $47,270,000 (11.49%) and economic value of equity by $170,230,000 (10.84%) [630]. - The total interest sensitive assets amount to $12,917,581,000, while total interest sensitive liabilities are $8,876,933,000, resulting in an interest sensitivity gap of $(1,463,151,000) [628]. - The banking segment's interest rate sensitivity indicates that it is asset sensitive overall, primarily due to loans that adjust to the Wall Street Journal Prime rate [627]. - A negative gap in interest rate sensitivity would generally lead to an increase in net interest income during falling interest rates, while a positive gap would adversely affect income [626]. - The estimated impact of a 200 basis point increase in interest rates on net interest income would be $28.8 million, representing a 6.56% increase [649]. - A 100 basis point increase in interest rates would result in a $13.6 million increase in net interest income, or 3.09% [649]. - Conversely, a 200 basis point decrease in interest rates would lead to a $59.6 million decrease in net interest income, or 13.57% [649]. Debt Obligations - As of December 31, 2024, total debt obligations amounted to $350 million, all subject to fixed interest rates [645]. - The broker-dealer segment's total debt securities reached $451.6 million, with corporate obligations contributing $76.5 million [636]. - The weighted average yield for municipal obligations was 4.48%, while corporate obligations had a yield of 5.08% [636]. Mortgage Segment Exposure - The mortgage origination segment is significantly exposed to interest rate risk, affecting mortgage loan originations and related assets [641]. - The mortgage servicing rights (MSR) portfolio is sensitive to interest rate fluctuations, particularly in a declining rate environment [643]. Other Financial Activities - The company redeemed $150 million of Senior Notes on January 15, 2025, using cash on hand [645].

Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $36 million or $0.55 per diluted share for Q4 2024, with a return on average assets of 0.9% and return on average equity of 6.5% [10][22] - For the full year 2024, consolidated income attributable to common stockholders was $113 million, equating to $1.74 per diluted share, with net interest income declining by 11% [25][22] - The common equity Tier 1 capital ratio stood at 21%, and tangible book value per share increased by $1.14 to $29.49 [21] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $51 million of pretax income on $13.3 billion of average assets, with a return on average assets of 1.24% [11] - PrimeLending reported a pretax loss of $9.9 million, primarily due to a reduction in origination lock volumes, although origination volume increased by $438 million compared to Q4 2023 [15][16] - HilltopSecurities generated pretax income of $20 million on net revenues of $125 million, with Public Finance Services seeing a 32% increase in net revenues [17][18] Market Data and Key Metrics Changes - Average deposit balances at PlainsCapital Bank increased by nearly $600 million during the quarter, driven by growth in both core interest-bearing and non-interest-bearing deposits [13] - Total non-interest income for Q4 2024 was $196 million, with mortgage-related income and fees increasing by $4 million compared to Q4 2023 [38] Company Strategy and Development Direction - The company aims to focus on risk management, sound balance sheet positioning, and long-term value creation through its synergistic business model [9] - Hilltop plans to manage interest-bearing deposit betas and reduce asset sensitivity over time, targeting a range of 2% to 4% [34][84] Management's Comments on Operating Environment and Future Outlook - Management noted uncertainty in the market regarding interest rates and inflation, but expressed optimism about the company's positioning for long-term success [47] - The outlook for 2025 includes expectations for average bank loan growth between 2% and 5%, with a focus on retaining PrimeLending mortgage loans [44] Other Important Information - Hilltop announced plans to sell its ownership position in Moser Energy Systems, with an estimated after-tax gain of $23 million to $27 million expected to close in Q1 2025 [27] - The allowance for credit losses decreased to $101 million, yielding an ACL to total loans HFI ratio of 1.27% as of December 31, 2024 [30] Q&A Session Summary Question: Inquiry about merchant banking gain and capital priorities - Management confirmed that capital priorities remain unchanged despite the expected gain, with a $100 million share repurchase program authorized for the year [54][55] Question: Clarification on loan growth outlook - Management indicated that while there is optimism in the market, actual loan funding may take time to materialize due to the nature of commercial real estate lending [57][60] Question: Discussion on Structured Finance revenues for 2025 - Management noted that revenues could be impacted by state budgeting processes for down payment assistance programs, which are outside their control [78] Question: Inquiry about asset sensitivity and balance sheet management - Management stated that they aim to reduce asset sensitivity over time and are focusing on retaining hybrid mortgages to achieve this goal [82][88] Question: Clarification on provision volatility - Management explained that the volatility in provisions is influenced by economic conditions and specific portfolio activities, particularly in the auto note segment [90][92]

Financial Highlights - Hilltop Holdings' Q4 2024 EPS diluted was $055[5] - Net income for Q4 2024 was $204 million[5] - Hilltop Securities generated pre-tax income of $204 million in Q4 2024[5] Capital Management - Hilltop returned $110 million to stockholders through dividends in Q4 2024[8] - Tangible book value per share increased to $3371 as of December 31, 2024[10] PlainsCapital Bank Performance - PlainsCapital Bank generated $57 million in pre-tax income in Q4 2024, including a $57 million provision[5] - Average Bank Deposits increased by $595 million, or 52%, from Q3 2024[5] PrimeLending - PrimeLending's origination volume increased to $23 billion in Q4 2024[5] - Non-interest expense at PrimeLending is variable and correlated to revenue generation[15] Asset Quality - Allowance for credit losses (ACL) to total loans HFI was 127% as of December 31, 2024[16] - Non-performing assets totaled $91095 thousand in Q4 2024[57] 2025 Outlook - The company anticipates average loan growth of 1-3% and average deposit growth of 2-5% in 2025[58] - The company expects non-interest expense to increase by 1-4%[58]

Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $36 million or $0.55 per diluted share for Q4 2024, with a return on average assets of 0.9% and return on average equity of 6.5% [5][6] - For the full year 2024, consolidated income attributable to common stockholders was $113 million, equating to $1.74 per diluted share, with net interest income declining by 11% [17][5] - The tangible book value per share increased from year-end 2023 by $1.14 to $29.49 [12][13] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $51 million of pretax income on $13.3 billion of average assets, with average loans declining by approximately 1% [7][8] - PrimeLending reported a pretax loss of $9.9 million during the quarter, driven by a reduction in origination lock volumes, although origination volume increased by $438 million compared to Q4 2023 [9][10] - Hilltop Securities generated pretax income of $20 million on net revenues of $125 million, with public finance services producing a 32% increase in net revenues [11][12] Market Data and Key Metrics Changes - Average deposit balances at PlainsCapital Bank increased by nearly $600 million during the quarter, marking the fourth consecutive quarter of growth in core interest-bearing deposits [7][8] - Total non-interest income for Q4 2024 was $196 million, with mortgage-related income and fees increasing by $4 million compared to Q4 2023 [25][26] Company Strategy and Development Direction - The company aims to focus on risk management, balance sheet positioning, and serving customers to drive long-term value creation [5] - Hilltop plans to manage interest-bearing deposit betas and reduce asset sensitivity over time, targeting a long-term asset sensitivity of 2% to 4% [22][56] Management's Comments on Operating Environment and Future Outlook - Management noted a dramatic shift in the Fed's posture regarding inflation, with three rate cuts totaling 100 basis points in 2024 [4] - The outlook for 2025 reflects uncertainty in the market regarding interest rates and inflation, with expectations for bank loan growth between 2% and 5% [30][28] Other Important Information - The allowance for credit losses decreased by $9.8 million to $101 million, reflecting improved economic conditions and credit migration [19][18] - The company returned $64 million to stockholders during the year through dividends and share repurchases [5][13] Q&A Session Summary Question: Plans for share repurchase given the merchant banking gain - Management confirmed that the priorities for capital allocation have not changed and they have authorization for a $100 million share repurchase program [34][35] Question: Loan growth outlook and assumptions - Management indicated that while there is strong pipeline activity, actual fundings may take a couple of quarters to materialize [39][41] Question: Margin commentary and NII guidance - The guidance for net interest income encapsulates two expected Fed rate cuts, with asset sensitivity impacting NII performance [45][46] Question: Structured finance revenues outlook for 2025 - Management noted that structured finance revenues depend on state funding for down payment assistance programs, which are outside their control [52] Question: Volatility in provision for credit losses - Management explained that the provision volatility is due to economic assumptions and specific portfolio activities, particularly in the auto note portfolio [60][62]

Core Viewpoint - Hilltop Holdings Inc. reported better-than-expected fourth-quarter 2024 earnings, with a significant increase in net income and non-interest income, despite challenges in net interest income and loan balances [1][2][4]. Financial Performance - Fourth-quarter 2024 earnings per share were 55 cents, exceeding the Zacks Consensus Estimate of 28 cents, and rose 25% year-over-year [1][2]. - Net income attributable to common stockholders was $35.5 million, up 23.9% year-over-year, surpassing the estimate of $17 million [2]. - Total revenues for the fourth quarter were $301.1 million, a 3.7% increase year-over-year, exceeding the Zacks Consensus Estimate of $284.4 million [4]. Revenue and Income Breakdown - In 2024, total revenues were $1.19 billion, slightly down year-over-year but above the Zacks Consensus Estimate of $1.17 billion [4]. - Net interest income (NII) declined 5.2% year-over-year to $105.5 million, below the estimate of $107 million [4][5]. - Non-interest income increased by 9.3% year-over-year to $195.6 million, driven by growth in various components except mortgage loan origination fees [5]. Asset and Deposit Trends - As of December 31, 2024, net loans held for investment were $7.8 billion, showing a slight sequential decline [6]. - Total deposits increased by 2.5% from the previous quarter to $11.1 billion, surpassing the estimate of $10.5 billion [6]. Credit Quality and Provisions - The company recorded a reversal of provision for credit losses of $5.9 million in the fourth quarter, compared to a provision of $1.3 million in the prior-year quarter [7]. - Non-performing assets as a percentage of total assets increased to 0.56%, up 11 basis points from the year-ago quarter [7]. Profitability and Capital Ratios - Return on average assets improved to 0.92%, up from 0.75% in the prior-year quarter [8]. - Return on average stockholders' equity rose to 6.50%, compared to 5.46% in the previous year [8]. - The common equity tier 1 capital ratio increased to 21.23%, up from 19.32% year-over-year [8].

Core Insights - Hilltop Holdings (HTH) reported revenue of $301.07 million for Q4 2024, a year-over-year increase of 3.8% and an EPS of $0.55 compared to $0.44 a year ago, exceeding the Zacks Consensus Estimate of $284.4 million by 5.86% and delivering an EPS surprise of 96.43% against a consensus estimate of $0.28 [1] Financial Performance Metrics - Average Outstanding Balance of interest-earning assets was $15.37 billion, exceeding the average estimate of $15.13 billion [4] - Net Interest Margin was reported at 2.7%, slightly below the average estimate of 2.8% [4] - Efficiency Ratio stood at 57.8%, significantly better than the estimated 88.9% [4] - Non-accrual loans amounted to $88.15 million, slightly above the estimate of $85.92 million [4] - Non-performing assets were reported at $91.10 million, compared to the average estimate of $93.48 million [4] - Net Interest Income (FTE) was $106.21 million, surpassing the average estimate of $105.33 million [4] - Total Noninterest Income reached $195.59 million, exceeding the average estimate of $179.65 million [4] - Investment and securities advisory fees and commissions were $37.51 million, close to the estimate of $37.52 million [4] - Mortgage loan origination fees were $30.11 million, below the estimate of $31.69 million [4] - Noninterest income from other sources was $49.07 million, exceeding the average estimate of $39.23 million [4] - Net gains from the sale of loans and other mortgage production income were $43.55 million, slightly above the estimate of $43.30 million [4] Stock Performance - Hilltop Holdings shares returned +3.5% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3]

Core Viewpoint - Hilltop Holdings reported quarterly earnings of $0.55 per share, significantly exceeding the Zacks Consensus Estimate of $0.28 per share, marking a 96.43% earnings surprise [1][2] Financial Performance - The company achieved revenues of $301.07 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 5.86% and showing an increase from $290.2 million year-over-year [2] - Over the last four quarters, Hilltop Holdings has consistently surpassed consensus EPS estimates [2] Stock Performance - Hilltop Holdings shares have increased approximately 3.5% since the beginning of the year, outperforming the S&P 500's gain of 2.7% [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.27 on revenues of $283.12 million, while for the current fiscal year, the estimate is $1.48 on revenues of $1.22 billion [7] - The estimate revisions trend for Hilltop Holdings is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Banks - Southeast industry, to which Hilltop Holdings belongs, is currently ranked in the top 10% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Performance - Hilltop reported Q4 2024 income to common stockholders of $35.5 million, or $0.55 per diluted share, up from $28.7 million, or $0.44 per diluted share in Q4 2023[1]. - For the full year 2024, income to common stockholders was $113.2 million, or $1.74 per diluted share, compared to $109.6 million, or $1.69 per diluted share in 2023[1]. - Net income attributable to Hilltop for Q4 2024 was $35.52 million, up from $29.69 million in Q3 2024, representing a 19.0% increase[12]. - Basic earnings per share for Q4 2024 was $0.55, up from $0.46 in Q3 2024[12]. - Net interest income for the year ended December 31, 2024, was $420.250 million, down from $469.548 million in 2023[20]. Income and Revenue - Noninterest income for Q4 2024 was $195.6 million, a 9.3% increase from $179.0 million in Q4 2023[10]. - Total interest income for Q4 2024 was $208.59 million, a decrease of 1.1% from $211.04 million in Q3 2024[12]. - Noninterest income totaled $195.59 million in Q4 2024, slightly down from $200.44 million in Q3 2024[12]. - The adjustment to interest income for Q4 2024 was $0.7 million, compared to $0.6 million for Q4 2023[1]. - For the year ended December 31, 2024, the adjustment to interest income was $2.5 million, down from $2.7 million in 2023[1]. Asset and Deposit Growth - Total assets increased to $16.3 billion at December 31, 2024, compared to $15.9 billion at September 30, 2024[11]. - Total deposits rose to $11.1 billion at December 31, 2024, up from $10.8 billion at September 30, 2024[11]. - Total assets increased to $16.324 billion as of December 31, 2024, compared to $16.271 billion at the end of the previous year[19]. Loan Performance - The reversal of credit losses in Q4 2024 was $5.9 million, compared to a reversal of $1.3 million in Q3 2024 and a provision for credit losses of $1.3 million in Q4 2023[10]. - Mortgage loan origination production volume increased to $2.3 billion in Q4 2024, up from $1.8 billion in Q4 2023, representing a 27.8% increase[10]. - Total mortgage loan originations volume for Q4 2024 was $2.25 billion, a decrease from $2.31 billion in Q3 2024[13]. - Non-accrual loans amounted to $88.149 million, representing 1.00% of total loans as of December 31, 2024, compared to 1.02% in the previous quarter[18]. - Non-performing assets totaled $91.095 million, accounting for 0.56% of total assets as of December 31, 2024[18]. Capital and Ratios - The Tier 1 capital ratio for Hilltop was 12.57% as of December 31, 2024, down from 12.95% in the previous quarter[17]. - The total capital ratio for Hilltop was 24.40% as of December 31, 2024, up from 23.68% in the previous quarter[17]. - Return on average stockholders' equity improved to 6.50% in Q4 2024 from 5.51% in Q3 2024[13]. - The net interest spread for the year ended December 31, 2024, was 1.68%, compared to 2.03% in the previous year[20]. Operational Efficiency - Hilltop's consolidated net interest margin decreased to 2.72% in Q4 2024, down from 2.84% in Q3 2024[10]. - The efficiency ratio for the banking segment was 57.8% in Q4 2024, compared to 55.2% in Q3 2024, indicating increased operational costs[13]. - Net interest income after provision for credit losses was $111.34 million for Q4 2024, compared to $106.31 million in Q3 2024, reflecting a 4.8% increase[12]. Dividends and Stock Repurchase - The Board of Directors declared a quarterly cash dividend of $0.18 per common share, a 6% increase from the prior quarter[2]. - Cash dividends declared per common share remained stable at $0.17 for both Q4 2024 and Q3 2024[12]. - Hilltop authorized a new stock repurchase program of up to $100 million through January 2026[2]. Company Overview and Future Outlook - Hilltop Holdings will host a live webcast and conference call on January 31, 2025, to review Q4 and full year 2024 financial results[22]. - As of December 31, 2024, Hilltop employed approximately 3,650 people and operated 280 locations across 48 states[23]. - Hilltop Holdings' common stock is listed on the New York Stock Exchange under the symbol "HTH"[23]. - The company provides business and consumer banking services through PlainsCapital Bank and residential mortgage lending via PrimeLending[23]. - Hilltop's broker-dealer subsidiaries offer a full range of securities brokerage and investment banking services[23]. Risks and Security - The company faces various risks including credit risks, changes in interest rates, and competition in its banking and mortgage segments[24]. - Hilltop's forward-looking statements are subject to known and unknown risks that may cause actual results to differ materially[24]. - The company emphasizes the importance of effective data security controls to mitigate risks from cyber attacks[24].

Stock Performance - Hilltop Holdings Inc (HTH) shares hit a new 52-week low of $27 85 during Friday's trading session [1] - Over the past year, the stock has declined 18 7%, underperforming the industry, Zacks Finance sector, and S&P 500 index [1] - HTH stock has performed worse than its peers, Commerce Bancshares Inc (CBSH) and Hancock Whitney Corp (HWC) [1] Headwinds for Hilltop Holdings - Excessive reliance on fee-based revenues, with non-interest income accounting for 65% of total revenues, growing only 4 6% YoY in the first nine months of 2024 [2] - Deteriorating asset quality, with net charge-offs to average total loans increasing by 9 bps to 0 12% and non-accrual loans to total loans jumping 68 bps to 1 02% YoY [3] - Challenging macroeconomic outlook and anticipated increase in delinquencies likely to further deteriorate asset quality [4] - Subdued mortgage origination segment performance, with mortgage volumes declining 44 2% in 2022 and 34 9% in 2023, with the downtrend persisting in the first nine months of 2024 [7] - Mortgage origination volumes expected to remain subdued due to mortgage rates creeping back toward 7% [11] Supporting Factors for Hilltop Holdings - Relatively higher rates aiding net interest income (NII), with a CAGR of 1 5% over the five years ended in 2023 [12] - Net interest margin (NIM) increased to 3 09% in 2023 from 2 88% in 2022, expected to stabilize gradually as the Fed lowers interest rates [13] - Encouraging capital distributions, with total debt at $1 31 billion and cash and due from banks at $1 96 billion as of Sept 30, 2024 [16] - Regular dividend hikes since 2016, with an annualized dividend growth of 16 2% over the last five years [17] - Share repurchase plan with $55 2 million worth of authorization remaining as of Sept 30, 2024 [19] - Prudent expense management, with non-interest expenses reflecting a negative CAGR of 10 9% over the three years ended in 2023 [20] - Variable expenses expected to decline 1-3% in 2024 [22] - Bullish analyst sentiments, with the Zacks Consensus Estimate for 2025 earnings moving marginally upward to $1 55 per share [23] Final Thoughts - Prudent expense management and a solid balance sheet likely to support Hilltop Holdings' financials [26] - Relatively higher rates expected to aid NII, though higher funding costs may strain margin expansion [26] - Weak asset quality, subdued mortgage origination volumes, and high reliance on fee-based revenues remain major near-term headwinds [26]

Core Viewpoint - Hilltop Holdings (HTH) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which are a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is effective for individual investors as it focuses on earnings estimate revisions, which are strongly correlated with near-term stock price movements [2][4]. - The upgrade reflects an improvement in Hilltop Holdings' underlying business, suggesting that investor sentiment may lead to increased stock prices [5]. Earnings Estimate Revisions - For the fiscal year ending December 2024, Hilltop Holdings is expected to earn $1.48 per share, which represents a decrease of 12.4% from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Hilltop Holdings has increased by 9%, indicating a positive trend in earnings estimates [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Hilltop Holdings' upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [10][11].