Yahoo Finance Hilltop Holdings Inc (HTH) Q1 2024 Earnings Call Transcript Highlights: Key Financial Outcomes ...
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
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.
Q: What are your expectations for the gain on sale margin in the mortgage segment for the rest of the year? A: Jeremy Ford expects the gain on sale margins to remain around 216 basis points, with total per loan revenue staying between 370 and 380 basis points. Variability in revenue mix is anticipated, but aggregate revenue per loan is expected to remain stable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
