Sign in

You're signed outSign in or to get full access.

HH

Hilltop Holdings Inc. (HTH)·Q4 2024 Earnings Summary

Executive Summary

  • EPS diluted rose 24% year over year to $0.55, with net income attributable to Hilltop up 24% to $35.5 million; consolidated NIM compressed to 2.72% from 2.84% in Q3, reflecting higher cash balances and lower loan yields .
  • Banking delivered pre-tax income of $50.6 million (ROAA 1.24%); Broker-Dealer net revenue was $126.4 million with a 16.1% pre-tax margin; PrimeLending posted a $9.9 million pre-tax loss despite 24% higher origination volume versus Q4 2023 .
  • Hilltop raised the quarterly dividend 6% to $0.18 and authorized a new $100 million buyback through January 2026; it also redeemed $150 million of 5% senior notes in January and expects a $23–$27 million net gain on sale from Moser in Q1 2025 .
  • 2025 outlook: average bank loans and deposits growth of 2%–5%, NII down 0%–2% on an asset-sensitive balance sheet assuming two Fed cuts; mortgage volume $9–$10B; effective tax rate 22%–24% .

What Went Well and What Went Wrong

What Went Well

  • PlainsCapital Bank grew average deposits by ~$595 million QoQ and cut the total cost of deposits 31 bps; pre-tax income reached $50.6 million, aided by a $5.7 million provision recapture as criticized loans declined .
  • Broker-Dealer delivered $126.4 million net revenue and 16.1% pre-tax margin, with Structured Finance net revenue of $30.2 million supported by down payment assistance programs; Wealth Management net revenues increased QoQ .
  • Tangible book value per share rose to $29.49; CET1 ratio improved to 21.23%, underscoring balance sheet strength and capacity for capital return .
    “We remain focused on protecting our balance sheet and executing on our strategic plan to further build on Hilltop’s franchise value” — Jeremy B. Ford .

What Went Wrong

  • Consolidated NIM fell 12 bps QoQ to 2.72%, driven by immediate repricing of ~$2B excess cash at the Fed and lower loan yields; Bank NIM declined 7 bps to 2.98% .
  • PrimeLending’s pre-tax loss of $9.9 million reflected softer lock volumes and continued pressure on origination fees; management expects seasonally slower Q1 2025 to weigh on results .
  • A ~$5 million negative valuation adjustment on an owned office facility weighed on expenses; auto note finance credits drove $3.6 million of net charge-offs within the quarter .

Financial Results

Core Financials vs Prior Periods

MetricQ2 2024Q3 2024Q4 2024
Diluted EPS ($)$0.31 $0.46 $0.55
Net Income Attributable to Hilltop ($MM)$20.33 $29.69 $35.52
Net Interest Income ($MM)$103.65 $105.04 $105.48
Noninterest Income ($MM)$193.31 $200.44 $195.59
Noninterest Expense ($MM)$256.46 $264.31 $262.76
Net Interest Margin (%)2.90% 2.84% 2.72%
ROAA (%)0.59% 0.84% 0.92%
ROAE (%)3.84% 5.51% 6.50%
Efficiency Ratio (%)86.4% 86.5% 87.3%
Provision for (Reversal of) Credit Losses ($MM)+$10.93 $(1.27) $(5.85)
EOP Deposits ($B)$10.37 $10.79 $11.07
EOP Loans HFI, net ($B)$8.06 $7.87 $7.85

Estimates vs Actuals (S&P Global)

MetricQ2 2024Q3 2024Q4 2024
Consensus EPS ($)N/A (unavailable)N/A (unavailable)N/A (unavailable)
Actual EPS ($)$0.31 $0.46 $0.55
Consensus Revenue ($MM)N/A (unavailable)N/A (unavailable)N/A (unavailable)

Note: S&P Global consensus estimates were unavailable for this period due to data access constraints.

Segment Breakdown (Q4 2024)

Segment (Q4)Net Interest Income ($000s)Noninterest Income ($000s)Noninterest Expense ($000s)Income Before Taxes ($000s)Additional
Banking94,946 11,411 61,426 50,596 Bank NIM 2.98%
Broker-Dealer12,046 114,321 106,181 20,373 Net Revenue $126,367; Pre-tax margin 16.1%
Mortgage Origination(3,627) 73,740 80,022 (9,909) Gain-on-sale to third parties 226 bps

KPIs and Operating Drivers

KPIQ2 2024Q3 2024Q4 2024
Mortgage Origination Volume ($B)$2.38 $2.31 $2.25
Gain-on-Sale to Third Parties (bps)233 224 226
Broker-Dealer Net Revenue ($MM)$104.27 $124.26 $126.37
PrimeLending Pre-tax Income (Loss) ($MM)$1.35 $(8.72) $(9.91)
Net Charge-offs (Bank) ($000s)(83) (2,894) (3,950)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Average Bank Loans GrowthFY 2025N/A2%–5% New
Average Bank Deposits GrowthFY 20252024 guide: down 0%–3% (excl. sweep/brokered) 2%–5% Raised
Net Interest IncomeFY 2025N/A (commentary on NIM drift lower) Down 0%–2% (assumes two Fed cuts) New
Mortgage Origination VolumeFY 2025N/A$9–$10B; gain-on-sale stable, market dependent New
Broker-Dealer FeesFY 2025N/AUp 1%–4% New
Non-variable ExpensesFY 2025Stable $185–$190MM/quarter commentary Up 1%–4% Raised
Provision ExpenseFY 2025N/A20–30 bps of average loans HFI New
Effective Tax Rate (GAAP)FY 2025N/A (Q4 actual 14.2% with discrete benefits) 22%–24% Higher vs Q4 actual
DividendQ1 2025$0.17 prior quarter $0.18 (+6%) Raised
Share RepurchaseThrough Jan 2026~$55MM remaining under 2024 program (as of Q2) New $100MM authorization Expanded

Earnings Call Themes & Trends

TopicQ-2 (Q2 2024)Q-1 (Q3 2024)Current (Q4 2024)Trend
Asset sensitivity & NIMAsset sensitivity ~5%; NIM up 5 bps QoQ; aiming closer to neutral Asset sensitivity ~7%; expect modest NIM pressure as deposits lag rate cuts Asset sensitivity ~6.5%; target 2%–4%; NIM compressed with higher Fed cash; reinvest securities and retain hybrids Steadily reducing asset sensitivity; NIM under pressure near-term
Deposits & pricingIB deposit cost ~3.59%; managing betas; non-brokered growth Average deposits stable; cost peaked, slight rise; money market migration Average deposits +$595MM QoQ; IB costs down; expect further declines then stabilize Improving deposit mix and costs trending lower
Structured Finance/DPASoft volumes; expect second-half increase with DPA renewals Strong YoY; DPA support drove TBA locks; volatility acknowledged $30.2MM net revenue; lock volume fell; dependence on state programs Positive but episodic; program-dependent
Mortgage originationPositive pre-tax; gain-on-sale +12 bps Pre-tax loss; MSR mark; gain-on-sale 224 bps Pre-tax loss; gain-on-sale 226 bps; origination +24% YoY; near-term headwinds Gradual improvement in volumes; profitability still challenged
Credit (Auto note)Two credits downgraded; ACL build; portfolio shrinking Paydowns improved NPLs; cautious outlook $3.6MM charge-off on auto note; ACL 1.27% total loans HFI Working through exposures; overall credit stable
Capital actionsBuybacks $9.9MM in Q2; dividend $0.17 Dividend $0.17; strong capital Dividend $0.18; $100MM buyback; $150MM debt redemption; expected gain on Moser Capital return stepped up; de-leveraging

Management Commentary

  • “Favorable operating results from the banking and broker-dealer business units helped to produce a quarter-over-quarter and year-over-year increase in pretax income.” — Jeremy B. Ford .
  • “Net interest margin declined... we are pleased that net interest income remained stable versus the third quarter as overall deposit costs declined.” — William B. Furr .
  • “Asset sensitivity remained elevated… targeting 2–4% asset sensitive position over time.” — Company presentation .
  • “PrimeLending realized a 24% increase in origination volume vs Q4 2023 but continued to face a challenging mortgage market.” — Jeremy B. Ford .

Q&A Highlights

  • Buybacks/capital: Management plans to be active under the new $100MM authorization during open windows; no ASR planned; priorities unchanged despite expected merchant banking gain .
  • Loan growth outlook: Pipelines are stronger but fundings lag; expect retaining $10–$30MM/month of PrimeLending hybrid mortgages ($120–$360MM/year) to support 2%–5% loan growth .
  • NII guide sensitivity: Assumes two Fed cuts; fewer cuts would improve NII given asset sensitivity; deposit repricing continues with maturing CDs and lower offered rates .
  • Asset sensitivity strategy: Reinvest $250–$300MM of securities cash flows at ~4.50%–4.75% vs ~3.10% current yield; increase retention of 3/5/7-year hybrid ARMs; reduce PCB sweep deposits; lower excess Fed cash to $300–$750MM target .
  • Deposits: Q4 benefited from episodic client inflows; expect normalization in Q1; ongoing focus on treasury services and operating accounts .
  • Credit: Specific CRE upgrades; cautious stance given rates and utilization; auto note portfolio remains under close watch .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q4 2024 were unavailable due to data access constraints; therefore, no formal beat/miss assessment is provided. Based on reported results, EPS and pre-tax income improved YoY while NIM compressed QoQ, which could drive mixed estimate revisions (up for EPS, cautious on NIM-sensitive metrics) .

Key Takeaways for Investors

  • Banking momentum (deposit growth, lower deposit costs) and strong capital ratios provide resilience as NIM pressures persist; asset sensitivity is being methodically reduced via securities reinvestment and mortgage retention .
  • Broker-Dealer’s diversified fee streams (public finance, structured finance, wealth) delivered a 16% pre-tax margin; expect continued volatility tied to rates, liquidity, and state DPA programs .
  • Mortgage origination volumes improved YoY, but profitability remains challenged; management is resizing fixed costs and leveraging hybrid ARM retention to stabilize earnings .
  • Capital return accelerates: dividend increased to $0.18 and $100MM buyback authorization; debt redemption reduces interest expense and adds flexibility; merchant banking sale expected to add $23–$27MM net in Q1 .
  • 2025 guide sets realistic guardrails (loans/deposits +2%–5%, NII down 0%–2%, provision 20–30 bps, tax 22%–24%); fewer-than-assumed Fed cuts would be a positive for NII given asset sensitivity .
  • Near-term trading: Watch for Q1 deposit normalization and mortgage seasonality; medium-term thesis hinges on executing balance sheet repositioning and sustaining Broker-Dealer margins amid rate path uncertainty .