• Net Income: $28 million

• Earnings Per Share (EPS): $0.42 per diluted share

• Return on Average Assets: 0.7%

• Return on Average Equity: 5.2%

• Pre-Tax Income (PlainsCapital Bank): $50 million

• Bank Assets: $13.1 billion

• Pre-Tax Loss (PrimeLending): $16.5 million

• Pre-Tax Income (HilltopSecurities): $19 million

• Net Revenues (HilltopSecurities): $117 million

• Common Equity Tier 1 Capital Ratio: 19.7%

• Tangible Book Value Per Share: $28.44

• Shareholder Returns: $21 million ($11 million in dividends and $10 million in share repurchases)

• Net Interest Income: $104 million

• Total Non-Interest Income: $182 million

• Warning! GuruFocus has detected 3 Warning Sign with HTH.

Release Date: April 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Could you walk us through the reserve release this quarter and explain the differences in economic trends compared to other banks? A: Jeremy Ford, President and CEO, explained that Hilltop uses the Moody's S7 scenario for CECL evaluation, which predicted a shift in the timing of a potential recession from Q1 2024 to Q1 2025, leading to a reserve release. Unlike other banks that might use multiple scenarios, Hilltop sticks to one, which might explain the difference in approaches.

Q: Why not weight the downside scenarios higher in your evaluations? A: William Furr, CFO, noted that Hilltop uses a single scenario that they believe reflects the economic outlook accurately, rather than averaging multiple scenarios, which is likely why their approach differs from other banks.

Q: Can you discuss the impact of a higher-for-longer interest rate environment on the broker dealer segment? A: Jeremy Ford highlighted that higher rates have slowed underwritings in public finance, benefiting wealth management sweeps but challenging the fixed income business due to the shape of the yield curve. A normalized curve would likely benefit public finance and fixed income, offsetting potential declines in wealth management.

Q: What are the signs of improvement in the mortgage business, and what is the expected recovery timeline? A: Jeremy Ford mentioned a generational, pent-up demand for housing, with markets adjusting to higher mortgage rates around 6.5%. He anticipates a gradual recovery without a sharp increase, as PrimeLending has reduced platform costs to leverage future revenue improvements.

Q: Could you provide more details on the new hires within HilltopSecurities and their expected impact? A: William Furr clarified that while the new hires are part of normal business investments, they are high-quality additions expected to be productive and accretive. These hires come from competitors exiting certain businesses, which could enhance HilltopSecurities' capabilities.