Hilltop Holdings(HTH) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Results Overview Hilltop Holdings Inc.'s Q1 2024 financial results, including key performance, operational highlights, and corporate actions are presented Executive Summary and Highlights Hilltop Holdings Inc. reported increased Q1 2024 income and EPS, driven by credit reversal and broker-dealer growth Key Financial Performance | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :----------------------------------- | :------ | :------ | :----------- | | Income to common stockholders | $27.7 million | $25.8 million | +7.4% | | Diluted EPS | $0.42 | $0.40 | +5.0% | | Reversal of credit losses | $2.9 million | ($2.3 million provision) | N/A | | Consolidated ROAA | 0.74% | 0.69% | +0.05 pp | | Consolidated ROAE | 5.23% | 5.12% | +0.11 pp | | Book value per common share | $32.66 | $31.63 | +3.25% | | Noninterest income | $181.6 million | $162.5 million | +11.8% | | Noninterest expense | $250.0 million | $250.5 million | -0.2% | | Effective tax rate | 22.5% | 11.6% | +10.9 pp | Operational Highlights and Market Trends - Elevated interest rate environment continues to impact net interest margin primarily through increased borrowing costs[5] - Lack of housing inventory and pressured home buying affordability limited mortgage origination volumes[5] - PlainsCapital Bank produced an annualized return on average assets of 1.20%, highlighting steady earnings power[12] - HilltopSecurities delivered a pre-tax margin of 16% on net revenues of $117 million, primarily due to strong results from structured finance and wealth management business lines[12] - PrimeLending's results remain challenged due to elevated mortgage rates and suboptimal housing inventory[12] Corporate Actions - Board of Directors declared a quarterly cash dividend of $0.17 per common share, payable on May 24, 2024[4] - Repurchased 320,042 shares of common stock for $9.9 million at an average price of $31.04 per share during Q1 2024[4] Selected Financial Metrics Detailed financial metrics for Hilltop's consolidated, banking, broker-dealer, and mortgage segments are presented Hilltop Consolidated Selected Financial Data | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :----------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Return on average stockholders' equity | 5.23% | 5.46% | 7.11% | 3.53% | 5.12% | | Return on average assets | 0.74% | 0.75% | 0.94% | 0.47% | 0.69% | | Net interest margin | 2.85% | 2.96% | 3.02% | 3.03% | 3.28% | | Book value per common share ($) | 32.66 | 32.58 | 31.91 | 31.71 | 31.63 | | Dividend payout ratio | 40.06% | 36.35% | 28.12% | 57.37% | 40.25% | Banking Segment Selected Financial Data | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :----------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Net interest margin | 3.00% | 2.94% | 3.08% | 3.11% | 3.40% | | Net recoveries (charge-offs) ($000's)| (4,311) | (674) | 1,556 | (2,884) | (419) | | Return on average assets | 1.20% | 1.12% | 1.20% | 0.89% | 1.44% | | Fee income ratio | 11.5% | 11.2% | 10.5% | 10.0% | 9.6% | | Efficiency ratio | 54.1% | 53.2% | 51.4% | 51.2% | 48.4% | Broker-Dealer Segment Selected Financial Data | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :----------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Net revenue ($000's) | 116,847 | 119,989 | 118,703 | 113,241 | 104,498 | | Compensation as a % of net revenue | 59.4% | 57.3% | 58.9% | 57.7% | 59.7% | | Pre-tax margin | 16.2% | 16.8% | 18.2% | 16.3% | 12.8% | Mortgage Origination Segment Selected Financial Data | Metric | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | | :----------------------------------- | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Total mortgage loan originations - volume ($000's) | 1,676,486 | 1,815,027 | 2,243,701 | 2,451,650 | 1,732,753 | | Net gains from mortgage loan sales (basis points) | 216 | 189 | 198 | 201 | 186 | Consolidated Financial Statements Consolidated Balance Sheets Hilltop Holdings Inc. reported slight decreases in assets and liabilities, with modest equity growth as of March 31, 2024 Consolidated Balance Sheet Highlights (March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 ($000's) | December 31, 2023 ($000's) | Change ($000's) | Change (%) | | :----------------------------------- | :---------------------- | :------------------------- | :-------------- | :--------- | | Total assets | 16,209,633 | 16,466,996 | (257,363) | -1.56% | | Cash and due from banks | 1,710,066 | 1,858,700 | (148,634) | -7.99% | | Loans held for sale | 842,324 | 943,846 | (101,522) | -10.76% | | Total deposits | 10,884,096 | 11,063,192 | (179,096) | -1.62% | | Total liabilities | 14,050,203 | 14,316,667 | (266,464) | -1.86% | | Total stockholders' equity | 2,159,430 | 2,150,329 | 9,101 | 0.42% | Consolidated Income Statements Hilltop's Q1 2024 net interest income decreased, offset by credit loss reversal and increased noninterest income Consolidated Income Statement Highlights (Q1 2024 vs. Q4 2023 vs. Q1 2023) | Item | Q1 2024 ($000's) | Q4 2023 ($000's) | Q1 2023 ($000's) | | :----------------------------------- | :--------------- | :--------------- | :--------------- | | Total interest income | 209,614 | 216,767 | 191,427 | | Total interest expense | 105,993 | 105,541 | 69,722 | | Net interest income | 103,621 | 111,226 | 121,705 | | Provision for (reversal of) credit losses | (2,871) | 1,265 | 2,331 | | Total noninterest income | 181,618 | 178,978 | 162,494 | | Total noninterest expense | 250,023 | 250,845 | 250,470 | | Income before income taxes | 38,087 | 38,094 | 31,398 | | Net income | 29,522 | 30,962 | 27,768 | | Income attributable to Hilltop | 27,668 | 28,671 | 25,800 | Segment Performance Analysis Banking Segment The Banking segment showed solid Q1 2024 performance with positive net interest income and credit loss reversal, boosting pre-tax income Banking Segment Performance (Q1 2024) | Item | Amount ($000's) | | :----------------------------------- | :-------------- | | Net interest income | 91,606 | | Provision for (reversal of) credit losses | (2,853) | | Noninterest income | 11,903 | | Noninterest expense | 56,020 | | Income (loss) before taxes | 50,342 | Broker-Dealer Segment The Broker-Dealer segment achieved strong Q1 2024 noninterest income and positive pre-tax income despite minor credit loss reversal Broker-Dealer Segment Performance (Q1 2024) | Item | Amount ($000's) | | :----------------------------------- | :-------------- | | Net interest income (expense) | 12,269 | | Provision for (reversal of) credit losses | (18) | | Noninterest income | 104,578 | | Noninterest expense | 97,947 | | Income (loss) before taxes | 18,918 | Mortgage Origination Segment The Mortgage Origination segment faced Q1 2024 challenges, reporting net interest expense and a pre-tax loss due to difficult market conditions Mortgage Origination Segment Performance (Q1 2024) | Item | Amount ($000's) | | :----------------------------------- | :-------------- | | Net interest income (expense) | (4,252) | | Provision for (reversal of) credit losses | — | | Noninterest income | 66,700 | | Noninterest expense | 78,898 | | Income (loss) before taxes | (16,450) | Capital and Asset Quality Capital Ratios Hilltop and PlainsCapital Bank maintained strong Q1 2024 capital levels, with key ratios showing improvements year-over-year Hilltop Capital Ratios | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :----------------------------------- | :------------- | :---------------- | :------------- | | Tier 1 capital (to average assets) | 12.49% | 12.23% | 11.82% | | Common equity Tier 1 capital (to risk-weighted assets) | 19.73% | 19.32% | 17.99% | | Total capital (to risk-weighted assets) | 22.79% | 22.34% | 20.75% | PlainsCapital Capital Ratios | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :----------------------------------- | :------------- | :---------------- | :------------- | | Tier 1 capital (to average assets) | 11.00% | 10.55% | 10.69% | | Common equity Tier 1 capital (to risk-weighted assets) | 15.87% | 15.44% | 14.97% | | Total capital (to risk-weighted assets) | 17.06% | 16.58% | 15.94% | Net Interest Margin Analysis Hilltop's consolidated net interest margin decreased year-over-year, driven by higher borrowing costs and a narrower net interest spread - Consolidated Net Interest Margin (taxable equivalent) decreased to 2.87% in Q1 2024 from 3.28% in Q1 2023[15] - Annualized yield on interest-earning assets (gross) increased to 5.78% in Q1 2024 from 5.16% in Q1 2023[15] - Annualized rate on total interest-bearing liabilities increased to 4.06% in Q1 2024 from 2.81% in Q1 2023[15] - Net interest spread decreased to 1.72% in Q1 2024 from 2.35% in Q1 2023[15] Non-Performing Assets Portfolio Hilltop's Q1 2024 showed improved asset quality with decreased non-accrual loans and total non-performing assets Non-Performing Assets (March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 ($000's) | December 31, 2023 ($000's) | | :----------------------------------- | :---------------------- | :------------------------- | | Non-accrual loans | 64,736 | 68,327 | | Non-accrual loans as a % of total loans | 0.73% | 0.76% | | Non-performing assets | 70,462 | 73,422 | | Non-performing assets as a % of total assets | 0.43% | 0.45% | - Non-accrual loans at March 31, 2024, included a reclassified non-owner occupied commercial real estate credit relationship within the hotel/motel portfolio[27] - Loans past due 90 days or more and still accruing were $112.8 million at March 31, 2024, primarily comprised of loans held for sale and guaranteed by U.S. government agencies[21] Company Information and Outlook About Hilltop Holdings Inc. Hilltop Holdings Inc. is a Dallas-based financial holding company with diverse operations in banking, mortgage lending, and securities brokerage - Dallas-based financial holding company with primary lines of business in banking, residential mortgage lending, and broker-dealer services[24] - Operates through PlainsCapital Bank, PrimeLending, Hilltop Securities Inc., and Momentum Independent Network Inc[24] - Employed approximately 3,740 people and operated approximately 325 locations in 48 states as of March 31, 2024[24] Conference Call Information Hilltop Holdings Inc. will host a conference call and webcast on April 19, 2024, to discuss Q1 2024 financial results - Conference call and live webcast scheduled for Friday, April 19, 2024, at 8:00 AM Central (9:00 AM Eastern)[23] - To be hosted by Hilltop President and CEO Jeremy B. Ford and CFO William B. Furr[23] - Access details provided for dialing in (800-579-2543 / 785-424-1789, Conference ID HH1Q24) and webcast (**http://ir.hilltop.com**)[23](index=23&type=chunk) Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties, potentially causing actual results to differ materially - Contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[25] - Key risk factors include credit risks of lending activities, effectiveness of data security controls, changes in general economic and market conditions, changes in the interest rate environment, and risks associated with concentration in real estate related loans[25] - The company does not assume any duty to update forward-looking statements, except as required by law[25]