Hilltop Holdings(HTH) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Hilltop reported net income of approximately $46 million or $0.74 per diluted share for Q3 2025, with a return on average assets of 1.2% and return on average equity of 8.35% [4] - Net interest income increased by $7.4 million or 7% year-over-year, totaling $112 million, driven by improved deposit costs and growth in higher yielding commercial loans [14] - The allowance for credit losses declined by $2.8 million to $95 million, resulting in a coverage ratio of 1.16% [12] Business Line Data and Key Metrics Changes - PlainsCapital Bank generated $55 million of pre-tax income on $12.6 billion of average assets, with a return on average assets of 1.34% [4] - PrimeLending reported a pre-tax loss of $7 million due to subdued mortgage origination volumes, with existing home sales at their lowest level in over 30 years [6] - Hilltop Securities Inc. produced pre-tax income of $26.5 million on net revenues of $144.5 million, achieving a pre-tax margin of 18% [7] Market Data and Key Metrics Changes - Total core deposits at PlainsCapital increased by 6% on a linked quarter basis, attributed to seasonal cash inflows from large balance customers [5] - Average total deposits remained stable at approximately $10.5 billion year-over-year, with a focus on growing interest-bearing products [16] - Mortgage revenues declined by $3.4 million year-over-year, reflecting challenges in the mortgage banking sector due to higher interest rates and home prices [17][18] Company Strategy and Development Direction - The company aims to maintain strong capital levels with a common equity tier one capital ratio of 20% and plans to continue share repurchases to signal confidence in its stock [9][31] - Hilltop Securities is investing in core areas of expertise and leveraging its national brand to enhance client service [9] - The leadership team is focused on optimizing costs and productivity at PrimeLending while growing the client-facing sales team [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the bank's ability to manage competition and maintain a conservative credit culture despite elevated market competition [5][22] - The outlook for 2025 reflects ongoing uncertainties in the market regarding interest rates and inflation, with a focus on producing quality outcomes for clients [24] - Management does not anticipate significant systemic risk across the portfolio but remains vigilant in assessing potential credit risks [13] Other Important Information - The company returned $11 million to stockholders through dividends and repurchased $55 million in shares during the quarter [9] - A leadership transition is occurring at PlainsCapital Bank, with the promotion of Brent Randall to Chief Credit Officer [10] Q&A Session Summary Question: NII guidance and near-term outlook - Management explained that the NII guidance was not increased due to expected rate cuts and potential asset contraction, emphasizing the balance sheet's asset sensitivity [26][28] Question: Stock buybacks and M&A outlook - Management confirmed a consistent approach to share repurchases given excess capital and discussed opportunities for growth through M&A in the Texas market [30][31] Question: Auto portfolio exposure - Management addressed concerns about the auto portfolio, noting a reduction in commitments and ongoing workout efforts for non-accrual clients [32][33] Question: Broker-dealer fee income - Management highlighted strong performance in public finance and structured finance, while acknowledging that some fee growth may not be sustainable [42][43] Question: Effects of government shutdown - Management indicated no primary effects from the government shutdown on the broker-dealer, but noted potential processing delays in the mortgage space [51][52]