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HH

Hilltop Holdings Inc. (HTH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS was $0.65, with income attributable to Hilltop of $42.1M; results benefited from two non‑recurring items: a preliminary after‑tax gain of $23.6M ($0.37 EPS) from a merchant banking sale and a $5.0M insurance recovery ($0.08 EPS) .
  • Consolidated net interest margin improved to 2.84% from 2.72% in Q4, as interest‑bearing deposit costs fell to 2.97% and the yield curve steepened; provision for credit losses was $9.3M, driven by risk rating migration, notably an ~$18M office credit downgrade .
  • Against Wall Street consensus, HTH delivered a broad beat: EPS $0.65 vs $0.465 consensus (beat $0.185), and revenue $0.309B vs $0.287B consensus (beat ~$$0.023B); expect estimates to reflect one‑time gains and lower deposit costs going forward* .
  • 2025 outlook: average loans HFI +0% to +3%, deposits +2% to +5%, NII +0% to +2% (assumes two Fed cuts), provision 25–40 bps of average loans, GAAP tax rate 22%–24% .
  • Capital return remained active: $33.3M buybacks and $0.18 dividend declared; CET1 was 21.29% and TBVPS rose to $30.02 (BVPS $34.29), supporting buyback capacity and balance sheet resilience .

What Went Well and What Went Wrong

What Went Well

  • Deposit cost management and NIM stability: consolidated NIM rose to 2.84%; interest‑bearing deposit costs declined to 2.97% and management achieved a 64% realized beta on the first 100 bps of Fed cuts .
  • Public Finance/Wealth outperformed at HilltopSecurities; despite broker‑dealer net revenue down 7% YoY, pretax income reflected mix dynamics, while Public Finance net revenues rose 34% YoY on 11% more offerings .
  • Management tone: “Hilltop delivered strong consolidated financial results... supported by a gain from our merchant banking business,” with TBVPS compounding while returning capital to shareholders .

What Went Wrong

  • Credit costs rose: provision for credit losses of $9.3M vs reversals in recent quarters; ACL increased $5M to $106M, including downgrade of an ~$18M office exposure .
  • Mortgage origination remained challenged: PrimeLending posted a pre‑tax loss of $8.3M; origination volume was $1.7B (seasonally slow), though gain‑on‑sale improved; 2025 mortgage volume outlook cut to $8–$9.5B .
  • Fixed Income Services headwinds: muted municipal demand and middle‑market buyer activity weighed on broker‑dealer results; variable comp as % of net revenue rose to 62.7%, pressuring margins .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions) – S&P Global*$288.11$306.93$309.12
Net Interest Income ($USD Millions)$103.62 $105.48 $105.12
Noninterest Income ($USD Millions)$181.62 $195.59 $213.34
Noninterest Expense ($USD Millions)$250.02 $262.76 $251.47
Income Before Taxes ($USD Millions)$38.09 $44.17 $57.65
Income Attributable to Hilltop ($USD Millions)$27.67 $35.52 $42.12
Diluted EPS ($USD)$0.42 $0.55 $0.65
Margins & ReturnsQ1 2024Q4 2024Q1 2025
Net Interest Margin (%)2.85% 2.72% 2.84%
ROAA (%)0.74% 0.92% 1.13%
ROAE (%)5.23% 6.50% 7.82%
Effective Tax Rate (%)22.5% 14.2% 22.7%
Estimates vs ActualsQ1 2024Q4 2024Q1 2025
Consensus EPS Mean ($)*$0.25$0.28$0.465
Company Diluted EPS ($)$0.42 $0.55 $0.65
Consensus Revenue Mean ($USD Millions)*$274.55$286.72$286.66
Actual Revenue ($USD Millions) – S&P Global*$288.11$306.93$309.12
Segment Breakdown (Q1 2025) ($USD Thousands)BankingBroker-DealerMortgage OriginationCorporateEliminationsConsolidated
Net Interest Income (Expense)90,550 11,568 (1,397) (869) 5,265 105,117
Provision for (Reversal of) Credit Losses9,372 (34) — — — 9,338
Noninterest Income10,810 96,937 67,775 43,379 (5,561) 213,340
Noninterest Expense51,930 99,323 74,660 25,891 (331) 251,473
Income (Loss) Before Taxes40,058 9,216 (8,282) 16,619 35 57,646
KPIsQ1 2024Q4 2024Q1 2025
Total Deposits ($USD Billions)$10.88 $11.07 $10.83
Loans HFI, Net ($USD Billions)$7.96 $7.85 $7.86
Non-Accrual Loans ($USD Millions)$64.74 $88.15 $81.48
Consolidated NIM (%)2.85% 2.72% 2.84%
Mortgage Originations Volume ($USD Billions)$1.68 $2.25 $1.74
Mortgage Gain on Sale – As Reported (bps)216 221 224

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Average Bank Loans HFI (ex. retained/warehouse)FY 2025—+0% to +3% Initiated
Average Bank DepositsFY 2025—+2% to +5% Initiated
Net Interest Income GrowthFY 2025—+0% to +2% (assumes two Fed cuts) Initiated
Noninterest IncomeFY 2025—Mortgage volume $8–$9.5B; Broker‑dealer fees +1% to +4% Initiated
Non‑variable ExpensesFY 2025—+0% to +2% (variable tracks fee rev.) Initiated
Provision / Avg Loans HFIFY 2025—25–40 bps (market dependent) Initiated
GAAP Effective Tax RateFY 2025—22%–24% Initiated
DividendQ2 2025$0.17$0.18 declared Raised QoQ
Share Repurchases2025 Program$100M auth. (Jan 2025)$33.3M repurchased in Q1; $67M remaining Executed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Deposit costs & NIMNIM stepped down Q3→Q4; deposit growth Q4 Deposit costs declined to 2.97%; consolidated NIM rose to 2.84%; realized 64% beta on first 100 bps of cuts Improving/stabilizing
Credit quality & provisioningReversals in Q3 and Q4; NPLs improved Q3 Provision $9.3M; ACL to loans HFI 1.33%; ~$18M office downgrade Cautious/defensive
Mortgage marketQ3/Q4 volumes improved but MSR volatility; gain‑on‑sale up Q4 PrimeLending pre‑tax loss; volume $1.7B; gain‑on‑sale bps +QoQ; FY volume cut to $8–$9.5B Slow healing; near‑term headwinds
Broker‑dealer mixStructured Finance strong in 2024; pre‑tax margin 16% in Q4 Public Finance/Wealth strong; Fixed Income weak; pre‑tax margin 8.5% Mixed; margin pressure
Macro/tariffs & ratesEntering rate‑cut cycle; optimizing earning assets Volatility around tariff announcements affected muni portfolio and April trading; outlook assumes two Fed cuts Volatile; cautious
Capital & buybacksNew $100M authorization in Jan 2025 $33.3M repurchased; CET1 21.29%; TBVPS $30.02; dividend $0.18 Ongoing capital return

Management Commentary

  • “Hilltop delivered strong consolidated financial results during the first quarter, supported by a gain from our merchant banking business, despite a challenging operating environment.” – Jeremy Ford, CEO .
  • “Net interest income...increased by $1.5M YoY...driven by our efforts to lower deposit costs...interest‑bearing deposit beta...of 64%.” – William Furr, CFO .
  • “Public Finance Services produced a 34% year‑over‑year increase in net revenues...Fixed Income business continued to be under pressure.” – Jeremy Ford .
  • “Allowance build primarily driven by collective portfolio changes, partially offset by net charge‑offs; ACL $106M (1.33% of loans HFI).” – William Furr .

Q&A Highlights

  • Credit migration: ~$18M office credit downgraded; improvement in classifieds from smaller credits migrating .
  • Deposit costs/NIM: capacity to modestly lower deposit rates further if Fed cuts; NII appears stabilized at current levels; NII guide assumes 5% deposit beta going forward .
  • Structured Finance & muni volatility: tariff news hit muni valuations/trading in early April; watching state budget support for down‑payment assistance .
  • Mortgage positioning: active rightsizing; hiring loan officers with expense discipline; expect slow healing despite near‑term variability .
  • Buybacks: $67M authorization remaining; ongoing evaluation of valuation and trading levels .

Estimates Context

  • EPS: Company reported $0.65 vs consensus $0.465 — bold beat; note ~$0.44 EPS from one‑offs ($0.37 merchant banking, $0.08 insurance), which may drive estimate revisions* .
  • Revenue: $0.309B vs consensus $0.287B — bold beat; broker‑dealer mix and merchant banking gain supported noninterest income* .
  • Expect Street to adjust models for lower deposit costs (2.97%), NIM stabilization (2.84%), and updated 2025 volume/provision outlooks* .

Note: Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Near‑term EPS strength benefitted from one‑time gains; underlying NII is stabilizing on deposit cost reductions and a steeper curve, supporting core earnings durability .
  • Credit remains a swing factor: watch CRE office exposures and criticized loans; ACL at 1.33% and provision guide 25–40 bps signal proactive stance .
  • Fee income mix is shifting: Public Finance/Wealth resilient, Fixed Income soft; Structured Finance trajectory hinges on state program support and muni market stability .
  • Mortgage remains pressured but strategically resized; gain‑on‑sale margins improved and retention of $20–$30M/month could modestly lift 1–4 family balances .
  • Balance sheet strength (CET1 21.29%, TBVPS $30.02) underpins continued buybacks and dividend, offering downside support in volatile macro conditions .
  • Trading implication: stock likely sensitive to signs of continued deposit cost relief, credit migration headlines (particularly office), and updates on 2025 NII trajectory and fee businesses .
  • Medium‑term: if Fed cuts materialize and mortgage stabilizes, NII and fee momentum could gradually improve; watch execution against deposit growth (+2%–5%) and loan growth (+0%–3%) targets .