Hilltop's Q1 2025 Earnings Call: Navigating Contradictions in Deposit Growth, Loan Expectations, and Financial Strategy

Deposit growth expectations, structured finance revenue expectations, asset sensitivity and balance sheet strategy, loan growth expectations, and deposit cost reduction are the key contradictions discussed in Hilltop's latest 2025Q1 earnings call.



Financial Performance and Net Income:
- Hilltop Holdings reported net income of $42 million or $0.65 per diluted share for Q1 2025.
- The decline in net income compared to the previous year is attributed to a challenging mortgage market and fixed income trading environment.

Deposit Trends and NII Stability:
- Hilltop secured a deposit beta of 64%, achieving a decline in interest-bearing deposit costs from 327 basis points to 297 basis points.
- Despite a decline in average deposit balances, net interest income (NII) remained relatively stable due to the decline in deposit costs and the upward sloping yield curve.

Mortgage Origination Market Challenges:
- PrimeLending reported apretax loss of $8 million in Q1, with origination volumes remaining under pressure due to elevated interest rates and affordability challenges.
- The company experienced a decrease in mortgage origination fees and other related income, which negatively impacted revenue.

Credit Quality and Loan Growth:
- PlainsCapital Bank's loan portfolio saw stable growth, with average loans remaining relatively flat as construction and non-owner-occupied CRE loans increased.
- The bank recognized a $9 million provision for credit losses, reflecting negative risk rating migration within the portfolio, partially offset by improving economic conditions.

Capital Return and Share Repurchase:
- Hilltop returned $12 million to stockholders through dividends and repurchased $33 million in shares, indicating strong financial health and confidence in shareholder value.
- The company maintains a common equity Tier 1 capital ratio of 21% and saw a $0.53 increase in tangible book value per share.