Hilltop Holdings(US:HTH)2025-04-25 14:00Financial Data and Key Metrics Changes - Hilltop reported net income of $42 million or $0.65 per diluted share for Q1 2025, with a return on average assets of 1.1% and return on average equity of 7.8% [5][16] - The common equity Tier one capital ratio stood at 21%, and tangible book value per share increased from year-end 2024 by $0.53 to $30 per share [14][15] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $40 million of pretax income on $13 billion of average assets, representing a return on average assets of 0.96% [6] - PrimeLending reported a pretax loss of $8 million, with origination volume increasing year-over-year to $1.7 billion, but faced a decline in mortgage origination fees [10][11] - Hilltop Securities generated pretax income of $9 million on net revenue of $109 million, with Public Finance Services seeing a 34% year-over-year increase in net revenues [11][12] Market Data and Key Metrics Changes - Average total deposit balances at PlainsCapital Bank decreased by approximately $89 million or 1% compared to Q4 2024, but increased by nearly $300 million year-over-year [8][21] - The bank experienced a one basis point compression in net interest margin to 2.97% [9] Company Strategy and Development Direction - The company plans to continue investing in its merchant banking platform and maintain a focus on growing customer deposits while managing deposit costs [13][15] - Management is actively monitoring operating expenses at PrimeLending and has reduced the fixed expense base by 12% year-over-year [10] Management Comments on Operating Environment and Future Outlook - Management expressed concerns about the ongoing volatility in the mortgage origination market and the impact of interest rates on affordability for homebuyers [10][11] - The company expects to see a modest improvement in economic conditions but acknowledges potential volatility due to inflation and tariffs [19][29] Other Important Information - Hilltop recognized a preliminary gain of $23.6 million from the sale of its investment in Mosier Energy Solutions, impacting net income positively [13][16] - The company returned $12 million to stockholders through dividends and repurchased $33 million in shares during the quarter [15] Q&A Session Summary Question: What was the size of the downgraded office credit? - The downgraded office credit was approximately $18 million, with positive migration in classified loans driven by smaller credits [32] Question: Can deposit costs move lower and improve NIM? - Management indicated that deposit costs have been reduced significantly, and while further reductions are possible, NIM has stabilized [33][34] Question: Should we expect a reversal of seasonal deposit outflows in Q2? - Management expects core customer deposits to rebuild after the tax season, leading to growth in deposits through the remainder of the year [44][45] Question: How were businesses impacted by bond market volatility? - The municipal portfolio was most impacted by volatility, but management is working to recover from the trading challenges faced [52] Question: What is the outlook for mortgage business and loan growth? - Management anticipates a slow and steady improvement in the mortgage business, while also focusing on right-sizing operations for the current market [55][56] Question: How much of the expense improvement was due to the insurance recovery? - The insurance recovery had a limited impact on overall expense guidance, which remains stable due to ongoing optimization efforts [63][64]