Hilltop (HTH) Q4 2023 earnings summary

Executive summary

• Q4 income attributable to common stockholders was $28.7MM, or $0.44 per diluted share, vs. $25.6MM and $0.39 a year earlier; FY 2023 was $109.6MM and $1.69 per diluted share, vs. $113.1MM and $1.60.

• PlainsCapital Bank and HilltopSecurities posted Q4 pre-tax income, while PrimeLending recorded a pre-tax loss.

• Strong capital, liquidity and diversified broker-dealer businesses supported results amid challenging market conditions.

Financial highlights

• Q4 net interest income was $111.2MM, down 10% YoY; noninterest income was $179.0MM, up 5.4%, and noninterest expense was $250.8MM, down 1.0%.

• Q4 income before taxes was $38.1MM vs. $36.2MM YoY; net income was $31.0MM vs. $26.6MM.

• FY 2023 net interest income rose 2% to $466.8MM; noninterest income fell 12% to $729.0MM and noninterest expense declined 9% to $1,028.3MM.

• FY pre-provision net revenue was $167.5MM, up 2% YoY; provision for credit losses was $18.4MM vs. $8.3MM. Q4 provision was $1.3MM.

• Total assets were $16.5B at Dec. 31, 2023; loans net of allowance were $7.6B and deposits were $11.1B.

Outlook and guidance

• FY 2024 average bank loan growth forecast at 0%-2%, before PrimeLending retained mortgages and mortgage warehouse lending; expected mortgage retention is $0-$20MM monthly.

• Average deposits expected to decline 0%-5%, excluding brokered and broker-dealer sweep deposits; NIB migration to IB expected to continue, with NIB at 26%-29% of year-end deposits.

• NII expected to decline 3%-7%, driven by higher average deposit costs; outlook assumes Fed funds rates remain stable until Q4, subject to market conditions.

• Mortgage gain-on-sale margin forecast at 175-195 bps and origination volume at $8-$10B; broker-dealer fees expected to decline 0%-5%.

• Non-variable expenses expected to decline 1%-3%; provision forecast at 20-40 bps of average HFI loans and GAAP effective tax rate at 22%-24%.