8-K: Hilltop Holdings Reports Increased Earnings and Announces New Stock Repurchase Program

Hilltop Holdings Inc. announces financial results for Q4 and full year 2024, reporting increased income to common stockholders and authorizing a new $100 million stock repurchase program.

Summary

• Hilltop Holdings reported income to common stockholders of $35.5 million, or $0.55 per diluted share, for the fourth quarter of 2024, compared to $28.7 million, or $0.44 per diluted share, for the fourth quarter of 2023.
• For the full year 2024, income to common stockholders was $113.2 million, or $1.74 per diluted share, compared to $109.6 million, or $1.69 per diluted share, for the full year 2023.
• The Board of Directors declared a quarterly cash dividend of $0.18 per common share, a 6% increase from the prior quarter, payable on February 27, 2025, to stockholders of record as of February 13, 2025.
• A new stock repurchase program was authorized through January 2026, allowing the company to repurchase up to $100.0 million of its outstanding common stock.
• During 2024, Hilltop repurchased 640,042 shares at an average price of $31.04 per share for a total of $19.9 million.
• On January 15, 2025, Hilltop redeemed all of its outstanding 5% senior notes due April 15, 2025, at a redemption price of $150 million.
• On January 27, 2025, Hilltop announced that its merchant bank subsidiary entered into a definitive agreement to sell all of the capital stock of Moser Acquisition, Inc.
• The sale of Moser Acquisition, Inc. is expected to result in an estimated net gain on sale of approximately $23 million to $27 million in the first quarter of 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with increased earnings, a dividend hike, and a stock repurchase program. While acknowledging economic uncertainties, the overall tone is optimistic and suggests strong financial health.

Positives

• Increased income to common stockholders for both Q4 and full year 2024.
• The dividend per share increased by 6% to $0.18.
• The company authorized a new $100 million stock repurchase program.
• Hilltop redeemed $150 million in senior notes, reducing debt.
• The sale of Moser Acquisition, Inc. is expected to result in a significant gain.
• Mortgage loan origination production volume increased to $2.3 billion during the fourth quarter of 2024, compared to $1.8 billion in the fourth quarter of 2023.
• Hilltops consolidated annualized return on average assets and return on average stockholders equity increased for the fourth quarter of 2024.
• Hilltops book value per common share increased to $33.71 at December 31, 2024.
• Total deposits increased to $11.1 billion at December 31, 2024.
• Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio of 12.57% and a Common Equity Tier 1 Capital Ratio of 21.23% at December 31, 2024.

Negatives

• Hilltops consolidated net interest margin decreased to 2.72% for the fourth quarter of 2024, compared to 2.84% in the third quarter of 2024.
• For fourth quarter of 2024, noninterest expense was $262.8 million, compared to $250.8 million in the fourth quarter of 2023, a 4.7% increase.

Risks

• Uncertain economic conditions could impact financial performance in 2025.
• Changes in U.S. Treasury yields and mortgage interest rates could affect profitability.
• Changes in funding costs and inflationary pressures may impact financial results.
• Political environment and international armed conflicts could disrupt supply chains.
• The extent of the impact of uncertain economic conditions on our financial performance during 2025 will depend in part on developments outside of our control, including, among others, the timing and significance of further changes in U.S. Treasury yields and mortgage interest rates, changes in funding costs, inflationary pressures, changes in the political environment and international armed conflicts and their impact on supply chains.

Future Outlook

The company remains focused on protecting its balance sheet and executing its strategic plan to further build on Hilltop's franchise value by serving its customers and the communities in which it operates, while also acknowledging the potential impact of uncertain economic conditions on its financial performance during 2025.

Management Comments

• Jeremy B. Ford, President and CEO of Hilltop, said, 'Over the course of 2024, Hilltop adapted to a new operating environment as the Federal Reserve cut interest rates for the first time since the spring of 2020, and we delivered a year over year increase in pre-tax profitability.'
• He also stated that the company remains focused on protecting its balance sheet and executing on its strategic plan to further build on Hilltop's franchise value by serving its customers and the communities in which it operates.

Industry Context

Hilltop's results reflect the challenges and opportunities in the financial services industry, including adapting to changing interest rate environments, managing credit risks, and navigating economic uncertainties. The company's diversified business model, with banking, broker-dealer, and mortgage origination segments, allows it to capitalize on different market conditions.

Comparison to Industry Standards

• Comparing Hilltop's Tier 1 Leverage Ratio of 12.57% and Common Equity Tier 1 Capital Ratio of 21.23% to peers like Prosperity Bancshares (PB) and Texas Capital Bancshares (TCBI), Hilltop appears to maintain a strong capital position.
• For example, Prosperity Bancshares typically maintains a Tier 1 Leverage Ratio above 10%, while Texas Capital Bancshares aims for a Common Equity Tier 1 Capital Ratio in the range of 9-10%.
• Hilltop's net interest margin of 2.72% is within the range of regional banks, but lower than some high-performing institutions like First Republic Bank (before its acquisition), which often exceeded 3%.
• The mortgage origination volume of $2.3 billion in Q4 2024 is comparable to other regional players like Home BancShares (HOMB), but significantly smaller than national leaders like Rocket Companies (RKT) or United Wholesale Mortgage (UWMC).

Stakeholder Impact

• Shareholders will benefit from increased earnings, dividends, and the stock repurchase program.
• Employees may experience stability and growth opportunities due to the company's positive financial performance.
• Customers can expect continued service and support from a financially healthy institution.
• The company's financial strength may enhance its relationships with suppliers and creditors.

Next Steps

• The company will pay a quarterly cash dividend on February 27, 2025.
• Hilltop will continue to execute its stock repurchase program through January 2026.
• The closing of the sale of Moser Acquisition, Inc. is expected to occur in the first quarter of 2025.
• Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, January 31, 2025.

Key Dates