Hilltop Holdings(HTH) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Hilltop Holdings Inc. reported net income of $42 million, or$ 0.65 per diluted share, with a return on average assets of 1.1% and return on average equity of 7.8% for Q1 2025 [6][22] - The tangible book value per share increased from year-end 2024 by $0.53 to$ 30 per share [21] - Net interest income for the first quarter was $105 million, reflecting a year-over-year increase of$ 1.5 million or 1.4% [29] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $40 million pretax income on$ 13 billion of average assets, with a return on average assets of 0.96% [8] - PrimeLending reported a pretax loss of $8 million, with origination volumes under pressure due to elevated interest rates [12][13] - Hilltop Securities experienced a 34% year-over-year increase in net revenues from Public Finance Services, while structured finance net revenues declined by$ 8 million [15][16] Market Data and Key Metrics Changes - Average total deposits at the bank decreased by approximately $89 million or 1% versus the fourth quarter of 2024, with an ending balance decline of$ 233 million [31] - Average loans held for investment (HFI) remained stable at $7.9 billion, with expectations of loan growth between 0% to 3% for the full year [38][39] Company Strategy and Development Direction - The company plans to continue investing in its merchant banking platform while managing its fixed cost structure in response to market conditions [20][14] - Management is focused on right-sizing the mortgage business to align with current market conditions and is actively pursuing growth in its loan officer pool [76] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the ongoing volatility in the market due to interest rates and inflation, but remains optimistic about the company's balance sheet positioning [43] - The outlook for 2025 reflects current economic assessments, with expectations for modest growth in various segments despite market uncertainties [44] Other Important Information - The company recognized two nonrecurring items impacting consolidated results: a gain from the sale of Mosier Energy Solutions and an insurance recovery, contributing positively to net income [19][20] - The allowance for credit losses increased by$ 5 million to $106 million, reflecting negative migration in certain credit relationships [26] Q&A Session Summary Question: What was the size of the downgraded office credit? - The downgraded office credit was approximately$ 18 million, with improvements in classified loans driven by smaller credits migrating positively [50] Question: Can deposit costs decrease further? - Management indicated that while there is potential for deposit costs to decrease, they are balancing this with the need to grow customer deposits [52][54] Question: Will there be a reversal of seasonal deposit outflows in Q2 2025? - Seasonal outflows are expected to continue into Q2 due to tax season, but growth in core customer deposits is anticipated afterward [62][64] Question: How is the mortgage business positioned for future improvements? - Management believes the mortgage business will see slow but steady improvement, with efforts to right-size operations for the next 12 to 18 months [75] Question: What is the outlook for loan growth? - The loan growth outlook has been reduced, but the pipeline remains strong, with expectations for modest growth in the one to four family portfolio [78][79] Question: Will stock repurchases continue? - The company has $67 million available for stock repurchases and is evaluating market conditions for potential buybacks [81] Question: How much of the expense improvement was due to the insurance recovery? - The insurance recovery had a limited impact on overall expense improvement, as the company has focused on optimizing and stabilizing expenses [86]