Hilltop Q1 2025 Earnings Report

Hilltop EPS Results

• Actual EPS: $0.65
• Consensus EPS: $0.28
• Beat/Miss: Beat by +$0.37
• One Year Ago EPS: $0.42

Hilltop Revenue Results

• Actual Revenue: $318.46 million
• Expected Revenue: $290.68 million
• Beat/Miss: Beat by +$27.78 million
• YoY Revenue Growth: N/A

Hilltop Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: After Market Closes
• Conference Call Date: Friday, April 25, 2025
• Conference Call Time: 9:00AM ET

Hilltop (NYSE:HTH) Holdings, Inc. (NYSE: HTH) is a Dallas, Texas–based financial holding company offering commercial banking, mortgage lending and capital markets services through its three primary subsidiaries: PlainsCapital Corporation, PrimeLending and HilltopSecurities. PlainsCapital provides deposit, lending and treasury management solutions to small and mid-sized businesses, professionals and individuals. PrimeLending specializes in home purchase and refinance loans, serving retail, wholesale and correspondent channels. HilltopSecurities delivers fixed-income sales and trading, equity underwriting, municipal advisory and research services to institutional, corporate and municipal clients.

Over the years, Hilltop has pursued strategic acquisitions and organic growth initiatives to expand its geographic reach and service capabilities. Its commercial banking operations are concentrated in Texas and select regional markets, while mortgage production and capital markets activities extend across multiple states. The company’s diversified business model aims to generate stable fee income and mitigate the impact of interest-rate fluctuations through a balance of lending, advisory and trading revenues.

Hilltop’s management team emphasizes disciplined risk management, strong credit quality and customer-focused service. Jeremy B. Ford, serving as President and Chief Executive Officer, leads the company’s strategic vision and oversees execution across all business lines. Under his guidance, Hilltop continues to leverage the complementary strengths of its subsidiaries to drive long-term growth and deliver value to shareholders.

Hilltop Q1 2025 Earnings Call Transcript

Key Takeaways

• For the first quarter, Hilltop reported net income of $42 million (or $0.65 per diluted share), with a 1.1% return on average assets and 7.8% return on average equity, as stable net interest income offset modest asset yield compression.
• PlainsCapital Bank generated $40 million of pretax income, maintained a 2.97% net interest margin while growing core deposits by $300 million year-over-year, and sustained strong loan pipeline activity despite recording a $9 million credit loss provision for risk migration.
• PrimeLending posted an $8 million pretax loss as elevated rates and housing affordability challenges kept origination volumes pressured, drove mortgage origination fees lower by 29 basis points year-over-year, and prompted a 12% reduction in fixed expenses.
• Hilltop Securities saw a 34% increase in public finance revenues and modest wealth management growth but faced a $7 million decline in fixed income net revenues, resulting in a 7% drop in total net revenues and a 51% decrease in pretax income year-over-year.
• Hilltop’s capital and liquidity remained robust with a 21% CET1 ratio and tangible book value rising $0.53 to $30 per share, while returning $45 million to shareholders through dividends and share repurchases.

Presentation

[Operator]

morning, ladies and gentlemen, and welcome to the Hilltop Holdings First Quarter twenty twenty five Earnings Conference Call and Webcast Call. At this time, all lines are in listen only mode. And following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, 04/25/2025. I would now like to turn the conference call over to Mr. Matt Dunn. Please go ahead.

[Matthew Dunn, Corporate Development Officer & Head of Investor Relations at Hilltop Holdings]

Thank you. Before we get started, please note that certain statements during today's presentation that are not statements of historical fact, including statements concerning such items as our outlook, business strategy, future plans, financial condition, credit risks and trends in credit, allowance for credit losses, liquidity and sources of funding, funding costs, dividends, stock repurchases, subsequent events and impacts of interest rate changes as well as such other items referenced in the preface of our presentation are forward looking statements. These statements are based on management's current expectations concerning future events that by their nature are subject to risks and uncertainties. Our actual results, capital, liquidity and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in the preface of our presentation and those included in our most recent annual and quarterly reports filed with the SEC. Please note that the information presented is preliminary and based upon data available at this time.

[Matthew Dunn, Corporate Development Officer & Head of Investor Relations at Hilltop Holdings]

Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information. Additionally, this presentation includes certain non GAAP measures, including tangible common equity and tangible book value per share. A reconciliation of these measures to the nearest GAAP measure may be found in the appendix to this presentation, which is posted on our website at ir.hilltop.com. I will now turn the call over to Jeremy Ford.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

Thank you, Matt, and good morning. For the first quarter, Hilltop reported net income of $42,000,000 or $0.65 per diluted share. Return on average assets for the period was 1.1% and return on average equity was 7.8%. PlainsCapital Bank demonstrated its ability to maintain core customer balances while repricing interest bearing deposits during the quarter. This enabled Hilltop to produce stable net interest income despite modest compression to the overall balance in earning assets.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

The broker dealer recognized a strong quarter from the wealth and public finance business units while weathering a challenging fixed income market. As will be discussed further, the mortgage origination segment continues to be weighed down by ongoing constraints in the mortgage market that did not show signs of subsiding during the first quarter. However, Hilltop's robust capital and liquidity position did enable us to further compound tangible book value per share while returning capital to our stockholders. During the quarter, PlainsCapital Bank generated $40,000,000 of pretax income on $13,000,000,000 of average assets, representing a return on average assets of 0.96%. Average loans at the bank remained relatively stable in the quarter as construction loans and non owner occupied CRE loans increased in balance, though this was offset by a decline in C and I lending.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

The bank continued to see strong development in its loan production pipeline as demand from core customers across our markets remains healthy. Average total deposit balances at the bank decreased during the quarter, primarily due to expected seasonal outflows and select large balance customers repositioning their excess liquidity. However, the trend of strong deposit growth did continue on a year over year basis as average core deposits at the bank increased by nearly $300,000,000 Results in the quarter at the bank included a $9,000,000 provision for credit losses. This expense was primarily due to negative risk rating migration within the portfolio as was partially offset by an improvement in economic conditions within the quarter. Will is going to provide further commentary on credit in his prepared remarks.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

The bank realized a one basis point compression in net interest margin from the fourth quarter to 2.97. This relatively stable margin was primarily driven by a continued decline in the cost of interest bearing deposits alongside the repricing of longer duration earning assets into today's relatively higher interest rate environment. Results at the bank did include a one time insurance recovery that reduced non interest expense by $6,500,000 Overall, the bank continued to show improvement in deposit pricing and loan pipeline growth, which illustrate the quality relationship based banking model at PlainsCapital Bank. Moving to prime lending. The company reported a pretax loss of $8,000,000 during the first quarter.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

As interest rates remain elevated and affordability challenges to homebuyers persist across the country, origination volumes remain under pressure. PrimeLending did experience a modest increase in origination volume on a year over year basis to $1,700,000,000 during the seasonally slower first quarter home buying period. Gain on sale of loans to third parties, including broker fees, increased by six basis points when compared to the fourth quarter. However, PrimeLending experienced a continued downward trend in mortgage origination fees and other related income, which decreased by five basis points quarter over quarter and 29 basis points year over year. Management at PrimeLending continues to actively monitor operating expenses and has reduced the fixed expense base by 12% year over year.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

However, as interest rates remain volatile and the mortgage origination market continues to present headwinds towards increased volumes, we will look to further evaluate the fixed cost structure of prime lending to ensure efficient operations that align with the current environment. In the fourth quarter, Hilltop Securities generated pretax income of $9,000,000 on net revenue of $109,000,000 for a pretax margin of 8%. Speaking to the business lines at Hilltop Securities, Public Finance Services produced a 34% year over year increase in net revenues on an increase in offerings of 11%. Structured Finance net revenues declined $8,000,000 from the first quarter of last year. This decline was driven by a comparatively strong twenty twenty four that was the result of mortgage related business activity within a single states market.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

In Wealth Management, net revenues increased by $1,000,000 compared to last year's first quarter as an increase in retail and wealth production fees more than offset a modest decline in sweep revenue from the firm's FDIC sweep program. Finally, the fixed income business continued to be under pressure as demand from middle market buyers remained subdued and demand for municipal bond product was muted during the quarter. The business unit had a decline in net revenue of $7,000,000 when compared to the first quarter of twenty twenty four. Overall, Hilltop Securities realized strong results in the quarter from the public finance and wealth management business lines, but experienced a material decline in net revenues with the fixed income services line of business. While the broker dealers net revenues declined seven percent year over year, pretax income declined by 51% due to the mix shift in net revenues between the business lines.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

During the quarter, Hilltop recognized two nonrecurring items that impacted consolidated results. First, we announced in January, our merchant bank realized a preliminary gain on the sale from its investment in Mosier Energy Solutions. This resulted in a positive impact to net income of $23,600,000 or $0.37 per diluted share. Our merchant bank team has worked hard over the past eight years, cultivating a portfolio of attractive investments and building a strong track record. This business is institutional to Hilltop, and we plan to continue to invest in the platform.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

Second, as I previously discussed when overviewing the bank results for the quarter, the bank recognized an insurance recovery that resulted in a positive impact to net income of $5,000,000 or $08 per diluted share. Moving to Page four. Hilltop maintains strong capital levels with a common equity Tier one capital ratio of 21%. Additionally, our tangible book value per share increased from year end 2024 by $0.53 to $30 a share. During the period, we returned $12,000,000 to stockholders through dividends and repurchased $33,000,000 in shares.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

Thank you. I will now turn the presentation over to Will to discuss our financials in more detail.

[William Furr, Executive VP & CFO at Hilltop]

Thank you, Jeremy. I'll start on page five. As Jeremy discussed, for the first quarter of twenty twenty five, Hilltop reported consolidated income attributable to common stockholders of $42,100,000 equating to $0.65 per diluted share. Related to the transaction that we referenced in our fourth quarter call, Hilltop Merchant Banking Group did close on the sale of its ownership stake in the operations of Mosher Acquisition Inc. On 02/24/2025.

[William Furr, Executive VP & CFO at Hilltop]

As a result of this transaction, Hilltop recorded a preliminary gain during the first quarter of '20 '3 point '6 million dollars equating to zero three seven dollars per diluted share. This gain is preliminary as Hilltop continues to own equity shares from the purchaser and those shares were not divested during the first quarter. In addition, we do expect that there will be customary closing and final settlement related items to be recorded during future quarters. Further, during the first quarter, Hilltop did receive an insurance recovery that equated to $6,500,000 This recovery was reported in professional services, non interest expense and impacted the quarter's results by $5,000,000 equating to $08 per diluted share. Lastly, while not a first quarter item, Hilltop received a $9,500,000 settlement related to prior legal matters in early April.

[William Furr, Executive VP & CFO at Hilltop]

This will be recorded in the second quarter's results and will be disclosed as a subsequent event in the first quarter's Form 10 Q filing. I'm turning to page six. During the first quarter, Hilltop increased allowance for credit losses by $5,000,000 to $106,000,000 This increase is largely attributable to the negative migration of certain credit relationships in the portfolio. Most significant downgrade related to an office property that experienced a significant drop in occupancy as one of its key tenants was acquired and the acquiring company did not renew its prior lease in the subject property. In addition, the increase reflects more modest increases in allowance across a number of credits, which are not concentrated in a particular industry or geography.

[William Furr, Executive VP & CFO at Hilltop]

Somewhat offsetting the impact of downgrades in the portfolio, the economic conditions forecasted in Moody's S-five slower trend growth scenario, which Hilltop continued to utilize in CECL modeling during the quarter, offer a modest improvement versus the twelvethirty one scenario. As a result of this change in the economic outlook, the allowance for credit losses related to economic conditions declined by $1,100,000 As of March 31, allowance for credit losses of $106,000,000 yields an ACL to total loan HFI ratio of 1.33%. As we've stated since the introduction of CECL, we continue to believe that the allowance for credit losses could be volatile and future changes in the allowance will be driven by net loan growth in the portfolio, credit migration trends and changes to the macroeconomic outlook over time. Given the current uncertainties regarding inflation, tariffs and potential reciprocal tariffs, interest rates, the future outlook for GDP growth and unemployment rates, volatility could be heightened over the coming quarters. Moving to Page seven.

[William Furr, Executive VP & CFO at Hilltop]

Net interest income in the first quarter equated to $105,000,000 including $1,000,000 purchase accounting accretion. Versus the prior year period, net interest income increased by $1,500,000 or 1.4% driven by our efforts to lower deposit costs as short term market rates have declined. While our focus on growing deposits remains paramount to our go to market approach, our team at the bank was able to achieve an interest bearing deposit beta from the current 100 basis points of reductions by the Federal Reserve of 64%. While we are pleased with this outcome, we recognize that the competitive intensity and pricing pressures could escalate in the future. And as such, we're not changing our model through the cycle deposit beta outlook of 55%.

[William Furr, Executive VP & CFO at Hilltop]

In addition to the improved interest bearing deposit beta outcome, the yield curve has steepened since last year and that benefited NII during the quarter, specifically versus the prior year period as higher yields on retained mortgages, certain MBS securities and mortgage loans held for sale remained somewhat elevated while shorter term rates declined. Our estimates for future NII and NIM currently reflect our expectation that the Fed will execute two additional rate reductions in 2025. Turning to page eight. First quarter average total deposits were approximately $10,900,000,000 and have declined by approximately $89,000,000 or 1% versus the fourth quarter of twenty twenty four. On an ending balance basis, deposits declined $233,000,000 or $10,800,000,000 from the prior quarter ending balance level.

[William Furr, Executive VP & CFO at Hilltop]

The decline in deposit balances reflects the impact of Hilltop's payoff of $150,000,000 of maturing senior debt during the quarter coupled with the movement of certain customer funds from deposits into treasury and other investment products in our private banking group. During the quarter, total interest bearing deposit costs declined with the blended rate equating to two ninety seven basis points as of March 31, down from three twenty seven basis points at December 31. Moving to Page nine. Total non interest income for the first quarter of twenty twenty five equated to $213,300,000 This reflects approximately $42,000,000 related to the previously mentioned Moser transaction. First quarter mortgage related income and fees increased by $1,000,000 versus the first quarter of twenty twenty four, reflecting stable year over year origination volumes.

[William Furr, Executive VP & CFO at Hilltop]

While the mortgage market had begun to somewhat stabilize during the fourth quarter and the beginning of the first quarter, volatility created by concerns over tariffs and variability in overall market rates has impacted demand in the later part of the first quarter. As a result of the demand trends we've seen during recent weeks, we have reduced our mortgage production volume expectation to $8,000,000,000 to $9,500,000,000 for the full year of 2025. In addition, we expect the gain on sale margins will remain relatively stable at the current levels given the environmental challenges. In addition, Securities and Investment Advisory revenues increased by $10,000,000 versus the prior year period driven primarily by improved activity in Public Finance and Wealth Management. Growth seen in these business segments was somewhat offset by ongoing challenges in fixed income trading.

[William Furr, Executive VP & CFO at Hilltop]

Growth in other non interest income equated to $21,000,000 was largely driven by the sale of Mosier. However, the impact of this transaction was somewhat offset by lower revenues in the structured finance business at Hilltop Securities. It remains important to recognize that both the fixed income services and structured finance businesses at Hilltop Securities could be volatile from period to period as they're impacted by interest rates, overall market liquidity, production trends, which may include any additional subsidies provided by states to support their down payment assistance programs. Turning to Page 10. Non interest expenses remained relatively stable from the same period in the prior year.

[William Furr, Executive VP & CFO at Hilltop]

As is noted next to the table in the upper right of the page, the Mosher sale impacted non interest expenses by $11,300,000 which was somewhat offset by the impact of the legal recovery, which equated to $6,500,000 and was reported in professional services. Looking forward, we expect expenses other than variable compensation will remain relatively stable as the ongoing focused efforts related to streamlining our operations and improving productivity continue to support lower headcount and improved throughput across our franchise helping to offset the ongoing inflationary pressures that persist in the market. Moving to page 11. First quarter average HFI loans equated to $7,900,000,000 which was stable with fourth quarter levels. During the fourth quarter and carrying into the first quarter of twenty twenty five, we've seen improving activity across our commercial loan pipelines.

[William Furr, Executive VP & CFO at Hilltop]

Growth in the pipeline has been geographically dispersed but centered in commercial real estate lending. Further, while the most recent pipeline trends have been encouraging, we do expect that volatility resulting from tariffs and the potential for reciprocal tariffs could cause clients to pause and reevaluate projects over the coming months and quarters. This expectation is captured in our current loan guidance representing growth of 0% to 3% for full year average loans. As noted in prior quarters, we continue to retain mortgages originated at PrimeLending and we expect to continue to do so in the coming quarters. Our current expectation is it will retain between 10,000,000 and $30,000,000 per month.

[William Furr, Executive VP & CFO at Hilltop]

Turning to page 12. First quarter's results include $4,300,000 of net charge offs, which did reduce nonperforming assets modestly from the year end 2024 levels. Net charge offs in the quarter represented a set of credits across multiple industries, including auto note financing, single family construction and non owner occupied real estate. Special mention loans depicted in the upper left chart on the page did increase during the quarter, largely driven by the downgraded credits I discussed earlier in my comments. Regarding credit overall, we do not see any prevailing trends that cause undue concern in our portfolio.

[William Furr, Executive VP & CFO at Hilltop]

However, we continue to monitor all aspects of the portfolio very closely as higher interest rates, potentially lower utilization rates in certain segments of commercial real estate and an expected slowdown in economic activity have had and may continue to have a negative impact on our clients and our portfolio. Moving to page 13. As we move through the second quarter of twenty twenty five, there continues to be a lot of uncertainty in the market regarding interest rates, inflation and the overall health of the economy. We're pleased with the current positioning of our balance sheet and the ongoing work that our team is executing each day to push our company forward through what has been a challenging operating environment. As is noted in the table, our outlook for 2025 reflects our current assessment of the economy and the markets where we participate.

[William Furr, Executive VP & CFO at Hilltop]

Further, as the market changes and we adjust our business to respond, we will provide updates to our outlook on future quarterly calls. Operator, that concludes our prepared comments, and we'll turn the call back to you for the Q and A section of the call.

[Operator]

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. You. your first question comes from Woody Lay from KBW. Please go ahead.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Hey, good morning guys. Morning. Wanted to start on criticized loans with a couple of follow ups there. How big was the office credit that was downgraded in the quarter? And then it also looks like classified improved some quarter over quarter. What drove the improvement there?

[William Furr, Executive VP & CFO at Hilltop]

Yes. So the office credit we referenced was about $18,000,000 an $18,000,000 credit. Some of the positive migration and classifieds with just a series of kind of smaller credits that migrated, of consequence there.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Got it. I appreciate that. And then maybe shifting over to deposit costs. I mean it was a really strong quarter with deposit costs moving lower. Do you think there's capacity to move that lower?

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

And correspondingly, do you think the NIM can see some improvement?

[William Furr, Executive VP & CFO at Hilltop]

I think things done to this point has very good. And I feel like we've taken advantage of the 100 basis points reduction that we've seen from the Federal Reserve. We're certainly looking across the portfolio and every opportunity to minimize overall deposit costs. But again that is being balanced with the focus on continuing to grow customer deposits, continuing to expand our relationships. We're doing both.

[William Furr, Executive VP & CFO at Hilltop]

Obviously, if the Fed were to move additionally from here, we'd expect to see deposit rates go lower. But I would expect them to trend modestly lower from a deposit interest bearing deposit rate perspective from here. But again, the largest portion of the work from the first one hundred basis points has been completed. As that relates to NIM, I think NIM and NII, we've been very pleased that NII has remained reasonably stable over the last twelve months. And again, that reflects the strong work the team has done from a deposit beta perspective, but it also reflects the fact that yield curve has kind of a naturally upward sloping shape today and it didn't have that for a long window of time.

[William Furr, Executive VP & CFO at Hilltop]

So that upward sloping curve does give us some confidence that NII has stabilized at these levels albeit that somewhat market dependent and we'll continue to watch that. But we do feel comfortable today with a view that says NII stabilized at these levels.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

Yes. And your NII guide of up 0% to 2%, do you have the deposit beta assumption you're using for that guide?

[William Furr, Executive VP & CFO at Hilltop]

5%.

[Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)]

All right. Thanks for taking my questions.

[William Furr, Executive VP & CFO at Hilltop]

Yes, sir.

[Operator]

Thank you. And your next question comes from Andrew Garcicza from Piper Sandler. Please go ahead.

[Andrew Gorczyca, Research Analyst at Piper Sandler Companies]

Hey, good morning everybody.

[William Furr, Executive VP & CFO at Hilltop]

Good morning.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

Good morning.

[Andrew Gorczyca, Research Analyst at Piper Sandler Companies]

Noted seasonal commercial outflows of deposits in 1Q twenty twenty five, should we expect any reversal of that in 2Q twenty twenty five?

[William Furr, Executive VP & CFO at Hilltop]

Well, there's so this is Will. A few things. One, we do we always expect a seasonal outflow as you noted in Q1 just based on kind of activity and customer activity we see in the fourth quarter. That said, we do also see a seasonal impact related to taxes tax season at April 15. So that carries into the second quarter.

[William Furr, Executive VP & CFO at Hilltop]

And then after that April 15 window has passed, we generally start to see core customer deposits start to build and rebuild through balance of the year. So, there while the first quarter clearly has a normal seasonal flow that carries into I'd say tax season. From there we expect to see again growth from a customer deposit perspective as both you get some rebuilding, but you also get client acquisition and expansion that goes on through the balance of the year.

[Andrew Gorczyca, Research Analyst at Piper Sandler Companies]

Got it. That makes sense. Appreciate that. And then with TBA lock volumes up quarter over quarter, are you seeing any early signs that could support a rebound in structured finance this quarter?

[William Furr, Executive VP & CFO at Hilltop]

I think with TBA what has a key factor in that has been some support that certain states have provided to their down payment assistance program over time. We generally hear about that incremental support as the state budgets start to be deployed generally in the middle of the year. So right now that would be the most significant driver of incremental activity. Otherwise, the team continues to work to support customers every day with their down payment assistance programs. But again, the most significant driver of uptick would be additional support, which we are we will wait and see how those states put forward their budgets for 2025, '20 '20 '6.

[Andrew Gorczyca, Research Analyst at Piper Sandler Companies]

Got it. Thank you for taking my questions and congrats on the quarter.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

Thank you.

[Operator]

Thank you. And your next question comes from Tim Mitchell from Raymond James. Please go ahead.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Hey, good morning, everyone. Morning. Morning. Two questions kind of on fees. First, just a follow-up on the Hilltop Securities.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Just given the volatility we've seen in the bond markets recently, just how your businesses were impacted by that? And if we continue to see ongoing volatility, what are your expectations? And then secondly, just some of your comments around the mortgage business and rightsizing that for the environment. We've also just seen some other banks in your markets leaning more into mortgage. So I was just curious kind of the way you think about that kind of as we look ahead and if rates do come down and the market starts to improve, just your thoughts on positioning and whatnot?

[William Furr, Executive VP & CFO at Hilltop]

This is Will. I'll take that in the order you provided it there. So from volatility perspective, certainly, on the day of the tariff announcements, the market started to move pretty aggressively. Rates started to adjust. I'd say most impacted was our municipal portfolio, which was I'd say reasonably well documented by a number of market participants publicly whether that be public journals or otherwise.

[William Furr, Executive VP & CFO at Hilltop]

And so we've managed through that. It certainly had an impact in the April trading period and we're continuing to work our way back from an overall trading perspective there. But that volatility and valuation impact certainly impacted the trading results in the first part of the second quarter. So a challenging environment in the first quarter persisted from a fixed income, but related to the overall variability and volatility created from tariffs that really took place in the first couple of weeks of April. As it relates to mortgage, I'll start there.

[William Furr, Executive VP & CFO at Hilltop]

Again, we've what we've continued to say is, we have seen a slow and steadying improvement in the overall business over time. That seems to have taken based on what we're seeing in the last couple of weeks of March and the first couple of weeks of April, A little bit of a step back, I think also related to some of the variability coming from tariff announcements and the like, as well as interest rates, that moved around the ten year rallied under four and then moved back to four fifty. So there was a lot of activity there for customers to digest. Our view is that mortgage will continue to heal at slow pace on a go forward basis while variability here in the short run has been apparent and impacted activity. We do believe it's generally on a trajectory of modest but slow improvement.

[William Furr, Executive VP & CFO at Hilltop]

And to our to the comments we've made, it's our objective to make sure we continue to work to right size the business for what we think the next twelve to eighteen months will bring in that business. Last thing I'll say is we've we are aggressively pursuing growing our loan officer pool or those folks that are out originating loans. And so that's we are on offense in that regard, trying to attract new talent to our platform, but we're also being cautious around how we how those expenses are incurred, to ensure that again we rightsize the business for what we believe the market to be.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Got it. Thanks for the color. And then on the loan growth outlook, which is reduced and it makes sense given all the uncertainty and whatnot. Just can you talk a little bit more about your pipelines and what you're hearing And then I think, obviously, the monthly mortgage retention was as higher this year versus last year.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Just if loan growth is needed, just how you think maybe lower versus higher end of that 10,000,000 to $30,000,000 range as we go through the year?

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

I mean, I think that as far as just pipeline and customer activity, we've still seen that be relatively strong. And we've had a couple quarters of of good fundings. So feel good about our clients and and what we're doing. At the same time, we see our pull through rates are challenged, and it's a very competitive environment. But, you know, we're really committed to trying to restore balanced growth at the bank.

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

And Will, you can speak to the interplay with the prime purchases.

[William Furr, Executive VP & CFO at Hilltop]

Yes. So mortgage retention, we've got a 10,000,000 to $30,000,000 Just as a perspective, we have about $10,000,000 of runoff per month. So if we retain $10,000,000 the balance would stay reasonably flat. Our expectation is we'll retain closer to the higher end of that twenty million to thirty million dollars per month. And so you will see some modest growth in that one to four family portfolio certainly for the next couple of quarters. That's our expectation.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Great. If I could sneak one last one in on the buyback, which you guys leaned into this quarter, obviously. Assuming the we don't see a significant rebound in the market, is it fair to assume that you'll continue yeah, repurchasing stock?

[Jeremy Ford, President and Chief Executive Officer at Hilltop]

I mean, I think, we have a hundred million dollar authorization. We bought back 33, so we have 67,000,000, available, and we're certainly evaluating where we trade and value. And so it's it's certainly something that we're considering.

[Tim Mitchell, Equity Research Associate at Raymond James Financial]

Got it. Alright. Thanks for taking my questions.

[Operator]

Thank you. And your last question comes from Jordan Hent from Stephens. Please go ahead.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

Hey, good morning guys. Good morning. I just had a question on expenses. So it looks like 1Q you had the benefit from the insurance recovery. Now guidance improved a bit going to flat to 2% growth.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

How much of that improvement was from the insurance recovery?

[William Furr, Executive VP & CFO at Hilltop]

Actually not a lot. I mean, that certainly benefits. But practically speaking, I think if you look at our presentation, you can see that our expenses excluding kind of variable compensation or other than variable compensation been reasonably stable. Team has done a lot of hard work from an optimization perspective and an efficiency perspective both at our mortgage company but across the organization to keep expenses stable. And so that continues to be our objective and our guidance reflects that.

[William Furr, Executive VP & CFO at Hilltop]

But it's a lot of work across the organization to continue to kind of offset what we've seen in inflation and otherwise operating expense growth.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

Got it. And then just kind of following up on that. I know you said that you expect expenses to be stable. Is there like kind of a run rate you could give for the fixed side of it?

[William Furr, Executive VP & CFO at Hilltop]

Well, I think, yes, I think if you look at page 10 of our chart, can see there we've been in the 185,000,000 to 190,000,000 range for the better part of four quarters. If you adjust the Q1 number there for the tax excuse me, for the legal benefit, you'll see that as well. So that would give you a reasonable perspective of kind of where we expect to operate going forward.

[Jordan Ghent, Senior Research Associate at Stephens Inc.]

Got it. Thanks for taking my questions.

[Operator]

Thank you. And ladies and gentlemen, this does conclude your conference call for today. I thank you very much for your participation. You may disconnect.

Participants

Executives

• Matthew Dunn, Corporate Development Officer & Head of Investor Relations
• Jeremy Ford, President and Chief Executive Officer
• William Furr, Executive VP & CFO

Analysts

• Woody Lay, Vice President at Keefe, Bruyette & Woods (KBW)
• Andrew Gorczyca, Research Analyst at Piper Sandler Companies
• Tim Mitchell, Equity Research Associate at Raymond James Financial
• Jordan Ghent, Senior Research Associate at Stephens Inc.