Hilltop Q2 2025 Earnings Call Transcript

Key Takeaways

  • Positive Sentiment: Hilltop reported $36.1 million in net income (≈$0.57 per diluted share) in Q2, with a 1.0% return on average assets and 6.6% return on average equity.
  • Positive Sentiment: PlainsCapital Bank delivered a 19 bps increase in net interest margin and grew its loan pipeline amid strong Texas customer demand, while core deposits rose by $275 million.
  • Negative Sentiment: PrimeLending’s Q2 pretax gain of $3 million included a $9.5 million legal settlement, but ongoing high rates, elevated home prices and affordability challenges continue to pressure mortgage origination margins.
  • Neutral Sentiment: Hilltop Securities produced $6 million in pretax income on $110 million of revenues, with public finance services up 36% year-over-year and wealth management gains offset by interest rate volatility affecting overall margins.
  • Positive Sentiment: The company maintained a strong capital position (CET1 ratio of 20.8%), raised tangible book value per share to $30.56, and returned over $46 million to shareholders through dividends and share repurchases (including a new $35 million buyback authorization).
AI Generated. May Contain Errors.
Earnings Conference Call
Hilltop Q2 2025
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen, and welcome to the Hilltop Holdings Second Quarter twenty twenty five Earnings Conference Call and Webcast. At this time, note that all participant lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. Also note that this call is being recorded on Friday, 07/25/2025. And I would like to turn the conference over to Matt Dunn. Please go ahead.

Matthew Dunn
Matthew Dunn
Corporate Development Officer & Head - IR 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 cautionary statements referenced in the preference 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
Matthew Dunn
Corporate Development Officer & Head - IR 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. Thank you. I'll now turn the presentation over to Jeremy Ford.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Thank you, Matt, and good morning. For the second quarter, Hilltop reported net income of approximately $36,000,000 or $0.57 per diluted share. Return on average assets for the period was 1% and return on average equity was 6.6%. During the quarter, PlainsCapital Bank realized a meaningful increase in net interest margin and was able to further grow its loan pipeline as customer demand remains strong in Texas. The broker dealer continued to see a strong issuance market in its foundational public finance business and was benefited from a healthy market for its wealth management business.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

TimeLending's results continue to be negatively impacted by a highly competitive and challenging mortgage origination market. From a capital management perspective, Hilltop was able to return over $46,000,000 to stockholders through dividends and share repurchases. In the second quarter, PlainsCapital Bank generated $55,000,000 of pretax income on $12,700,000,000 of average assets, which resulted in a return on average assets of 1.35. Net interest margin at the bank increased by 19 basis points as the blended cost of deposits declined during the quarter by nine basis points due to expected outflows primarily in our highest yielding products. Loan yields across excuse me, loan yields increased by five basis points due to repricing of the loan portfolio into a higher rate environment.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Further, the bank's balance sheet realized the mix shift out of cash and into higher earning assets as seasonal mortgage related loan balances increased throughout the quarter. The bank generated positive growth in its loan portfolio and pipeline. However, we expect stiff competition within our markets to have a dampening effect on near term loan growth. Average total deposit balances at PlainsCapital declined during the quarter as certain large balance customers reallocated their surplus liquidity. We do expect to recapture a material portion of these deposits through the remainder of the year as seasonal inflows occurred during the second half of twenty twenty five.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Core deposits within our markets did continue the trend of strong year over year growth by ending the period approximately $275,000,000 higher. Results in the quarter included a $7,300,000 reversal of credit losses. This was primarily driven by an improvement in underlying asset quality within the collective portfolio and further impacted by a change in the economic scenario utilized in our CECL modeling assumptions. Will is going to provide further commentary on credit in his prepared remarks. Overall, the bank benefited from actively managing deposit costs and expanding lending activity, which resulted from our talented bankers' efforts.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Moving to PrimeLending, where the company reported a pretax gain of $3,000,000 during the quarter. Notably, PrimeLending's results include a nonrecurring legal settlement of $9,500,000 that positively impacted results. While the second quarter typically starts the seasonal uptrend in home buying volumes, which somewhat materialized with an increase in origination volume on a linked quarter and year over year basis, the industry wide headwinds of elevated home prices, persistently high interest rates and overall affordability challenges have not alleviated. Accordingly, competition within the mortgage origination market for muted look volumes continue to put pressure on overall margins. The market has experienced some relief for our homebuyers as existing home listings have increased across the country.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

However, this has not coincided with improvement in affordability. Regarding margins, PrimeLending's reported gain on sale of 228 basis points was up four basis points versus the prior quarter and flat on a year over year basis. However, industry competition continues to put pressure on mortgage origination fees and other related income, where the margin decreased by 11 basis points on a linked quarter basis. PrimeLending's management team continues to focus on reducing expenses in order to ensure efficient operations within the context of the overall mortgage market. For the second quarter, fixed expenses were reduced by 11% on a year over year basis.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

We will continue to look for ways to achieve efficiencies while providing value enhancing services to our customers. During the quarter, Hilltop Securities generated pretax income of $6,000,000 on net revenues of $110,000,000 or a pretax margin of 6%. Speaking to the business lines at Hilltop Securities, Public finance services produced a 36% year over year increase in net revenues as the business line realized strong increases in both advisory and underwriting fees. Structured finance net revenues declined by $1,000,000 from the second quarter of twenty twenty four, primarily due to softer market demand for call protected mortgage product. In wealth management, net revenues increased by $2,500,000 to $47,300,000 when compared to the second quarter of twenty twenty four.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

This increase in performance is primarily due to an increase in advisory fees on improved asset balances and strong market conditions within the securities lending business. Finally, fixed income showed a 43% increase in net revenues on a linked quarter basis, in part due to an increase in demand for municipal bond product. Overall, Hilltop Securities continues to see strong results for public finance and wealth management. However, material interest rate volatility negatively impacted other parts of the business and weighed on the firm's blended pretax margin. Moving to page four.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Hilltop maintains strong capital levels with a common equity Tier one capital ratio of 20.8%. Additionally, our tangible book value per share increased over the prior quarter's level by $0.54 to $30.56 During the period, we returned $12,000,000 to stockholders through dividends and repurchased $35,000,000 in shares. Thank you. I will now turn the presentation over to Will to discuss our financials in more detail.

William Furr
William Furr
CFO at Hilltop Holdings

Thank you, Jeremy. I'll start on page five. As Jeremy noted, for the second quarter of twenty twenty five, Hilltop reported consolidated income attributable to common stockholders of $36,100,000 equating to $0.57 per diluted share. The quarter's results included a year over year increase in net interest income of 7%, stable non interest revenues which did include the benefit of the $9,500,000 legal recovery noted during our first quarter call and a modest increase in non interest expenses. Further, Hilltop reported a net reversal in the provision for credit losses of $7,300,000 which I'll review in more detail as I move to page six.

William Furr
William Furr
CFO at Hilltop Holdings

Allowance for credit losses declined during the quarter by $8,200,000 to $98,000,000 As is noted in the graph, Hilltop recorded net charge offs of approximately $900,000 and increased specific reserves by $1,800,000 In addition, certain upgrades in the portfolio occurred during the quarter resulting in a lowering of the allowance assigned to those credits to $4,900,000 Of note, the office property loan that was downgraded last quarter due to the non renewal of a lease by a large tenant was upgraded this quarter as our client was successful in getting new tenant lease agreements in place during the period. Lastly, the economic factors leveraged for the second quarter analysis improved as we adopted the Moody's baseline forecast scenario, a change from the Moody's slower growth trend alternative forecast scenario used during the first quarter of twenty twenty five. Lastly, it remains of note that we continue to believe that the ACL can be volatile as it's impacted by changes in the mix and makeup of the credit portfolio, net loan growth, credit migration trends and changes to the macroeconomic assumptions and outlook over time. I'm turning to Page seven. Net interest income in the second quarter equated to 110,700,000 including $600,000 of purchase accounting accretion, which declined by $1,400,000 versus the second quarter of twenty twenty four.

William Furr
William Furr
CFO at Hilltop Holdings

Versus the prior year's second quarter, net interest income increased by $7,000,000 or 7%, primarily driven by lower interest bearing deposit cost coupled with lower borrowing costs resulting from our redemption of $200,000,000 of debt in 2025. During the second quarter, net interest margin increased versus the 2025 by 17 basis points to three zero one basis points. The improvement in NIM was largely driven by higher loan yields, lower interest bearing deposit cost and one additional day in the quarter. Our current rate outlook includes two rate reductions, one in the third quarter and one during the fourth quarter. Based on this rate scenario, we expect that NIM levels will moderate at current levels and the net interest income will likely stabilize at a few million dollars per quarter lower than what we recorded during the second quarter.

William Furr
William Furr
CFO at Hilltop Holdings

I'm turning to Page eight. Second quarter average total deposits were approximately $10,600,000,000 and reflect an increase of $212,000,000 versus the second quarter of twenty twenty four. During the quarter, we did experience a decline in deposits on an ending balance basis. This decline was expected as it reflects normal seasonal flows related to tax payments, scheduled distributions from certain of our public fund depositors and business flows and distributions from some large C and I clients. We do expect that deposits will begin growing again during the second half of the year.

William Furr
William Furr
CFO at Hilltop Holdings

As a result of our ongoing pricing efforts, interest bearing deposit costs declined from the first quarter levels to two ninety one basis points during the second quarter. During the first 100 basis points of this down rate cycle, PlainsCapital Bank has been able to achieve a 72% interest bearing deposit beta. As we've noted in the past, we expect that with additional rate reductions from the Federal Reserve that we would see our beta levels decline towards our historically modeled betas of 50% to 55%. We will continue to balance fostering our long term customer relationships with prudently managing net interest income over time. Moving to Page nine.

William Furr
William Furr
CFO at Hilltop Holdings

Total non interest income for the 2025 equated to $193,000,000 versus the same period in the prior year. Mortgage revenues declined by $12,000,000 driven primarily by lower valuation marks on the pipeline and lower loan origination fees paid by customers. Second quarter origination volumes increased by 2% versus the prior year period, while mortgage gain on sale margins for loans sold to third parties were stable versus the prior year period at two twenty three basis points. It remains important to note the ongoing challenges in mortgage banking continue as a combination of the current level of mortgage rates, lower home affordability and lower consumer confidence combined to create an environment that remains restrictive and continues to push back a recovery in margins and production volumes across the industry. Growth in Securities Investment Advisory, fees and commissions were driven by strong public finance revenue growth as the MA franchise continues to develop and our underwriting business gains further momentum.

William Furr
William Furr
CFO at Hilltop Holdings

Other income declined versus the prior year driven by lower revenues in structured finance at Hilltop Securities. Of note, the decline at Hilltop Securities was significantly offset by the inclusion of the recorded legal recovery in prime lending of $9,500,000 As we've noted in the past, revenues from structured finance and fixed income capital markets can be volatile from period to period as they're impacted by market volatility, interest rates, market liquidity and production volumes. Turning to page 10. Non interest expenses increased from the same period in the prior year by $5,000,000 to 1.8% to $261,000,000 The increase in expenses versus the prior year second quarter was driven by increases in variable compensation largely at Hilltop Securities and reflect the impact of higher revenue in public finance. In addition, step up in expenses other than variable compensation from the first quarter of this year to the second quarter reflects the previously noted legal recovery that was reported in the first quarter at the bank and equated to $6,500,000 Looking forward, we expect that expenses other than variable compensation will remain relatively stable at current levels as we remain diligently focused on prudent growth of revenue producers while continuing to gain efficiency across our middle and back office functions.

William Furr
William Furr
CFO at Hilltop Holdings

I'm moving to page 11. Second quarter average HFI loans equated to $8,100,000,000 On a period ending basis, HFI loans grew versus the 2025 by $94,000,000 driven by $74,000,000 of growth in CRE lending and $48,000,000 of seasonal growth in our mortgage warehouse lending business. Growth in these portfolios was somewhat offset by declines in C and I lending, which continues to maintain loans in certain segments that are being managed to lower balance levels, including the auto note portfolio that has been reviewed over time. Related to lending activity, we're pleased with both our commercial lending pipelines, which have continued to expand throughout the year and our first half commitment bookings. We recognize that this improved activity will take time to fund and be represented on the balance sheet.

William Furr
William Furr
CFO at Hilltop Holdings

And as a result, we are adjusting our expected full year average loan growth rate to 0% to 2% for 2025. Turning to page 12. Starting in the upper right chart, NPA levels have declined consistently over the last twelve months as we continue to see steady improvement and solid workout in this portfolio. Additionally, in the chart in the upper left, classified and criticized loans as a percentage of bank loans has improved versus the prior year levels to three zero one basis points, down 59 basis points. During the quarter, net charge offs equated 896,000 or five basis points of average loans.

William Furr
William Furr
CFO at Hilltop Holdings

As is shown on the graph at the bottom right of the page, the allowance for credit loss coverage at the bank ended the second quarter at 1.27%, including mortgage warehouse lending. I'm moving to page 13. As we move into the third quarter of twenty twenty five, there continues to be a lot of uncertainty in the market regarding interest rates, the impact of ongoing higher than Fed target inflation, as well as the resilience of the overall economy. In the face of these uncertainties, we're pleased with the work that our teams are doing each day to support our customers and the communities we serve. We believe that this work is helping us build momentum in the bank and the broker dealer businesses and supporting our focus on returning our mortgage business to profitability.

William Furr
William Furr
CFO at Hilltop Holdings

As is noted in the table, our current outlook for 2025 reflects our current assessment of the economy and the markets where we participate. Further, as the market changes and we adjust our business to respond, we will provide updates to our outlook on our future quarterly calls. Operator, that concludes our prepared comments. I'll turn the call back to you for the Q and A section of the call.

Operator

Thank you, sir. And your first question will be from Woody Lee at KBW. Please go ahead.

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

Good morning guys.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Good morning.

William Furr
William Furr
CFO at Hilltop Holdings

Good morning.

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

I wanted to start the broker dealer business. It looks like the efficiency ratio of the segment has been running a little elevated relative to last year.

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

Is that just a reflection of some mix shift in the revenues in the business? Or is there another dynamic impacting that?

William Furr
William Furr
CFO at Hilltop Holdings

Largely a reflection of the makeup of the revenue of the business as you see. Public Finance Services is up, Structured Finance is kind of flat to down a little. Those are the principal drivers. But it's the profitability or pre tax margin there will always move in concert with kind of the makeup of the revenues of that business.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

And we also had about 1,000,000 point dollars of additional severance costs that we had in the quarter that pinched the margin more.

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

Got it. All right. That's helpful. And then maybe on the fixed expense guide, it looks like the fixed expenses in mortgage segment took a nice step down. But looking at the guidance, looks like non variable expense growth was guided up.

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

Could you just sort of talk about what's driving that incremental pickup in the expense outlook?

William Furr
William Furr
CFO at Hilltop Holdings

Yes. So we're we've said before, we're kind of continuing to see inflation in personnel expenses, healthcare costs and related those kind of structural costs from a personnel perspective. But we're also seeing kind of ongoing inflation in software expense and kind of other computing related expenses really principally related to contract escalators and the like. So we have to we've got to reflect that in our guide and that's kind of what's driving those are two pretty significant items and that's what's driving, the guide a little higher.

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

All right. Got it. And then just last, for me, the NIM took a nice step up in the quarter. And as you called out, I think it's you've achieved the 72% beta through cycle, which which has come in above expectations. I guess, is sort of looking back on that allowed you to achieve this higher than expected beta?

William Furr
William Furr
CFO at Hilltop Holdings

I think a couple of things. One, I think we've continued to improve our overall analytic capability. We've improved kind of our analysis of customer sensitivity and the like. We've also candidly seen I think a more rational marketplace versus when rates were going higher the upgrade cycle. And so by virtue of those two things, it still remains really competitive out there.

William Furr
William Furr
CFO at Hilltop Holdings

But again, our team is focused on making sure we're positioning our overall deposit base and the rates we're paying customers in concert with kind of the competitive environment and we feel like that's we feel like we've been able to do that to this point as I think other financial institutions are also trying to improve net interest margin and NII given some of the challenges we saw in the upgrade environment.

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

All right. Thanks for taking my questions.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Thanks,

William Furr
William Furr
CFO at Hilltop Holdings

Thank you.

Matthew Dunn
Matthew Dunn
Corporate Development Officer & Head - IR at Hilltop Holdings

Next question will be from Tim Mitchell at Raymond James. Please go ahead.

Tim Mitchell
Tim Mitchell
Senior Equity Research Associate at Raymond James Financial

Hey, good morning, everyone. Thanks for taking my questions.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Morning.

Tim Mitchell
Tim Mitchell
Senior Equity Research Associate at Raymond James Financial

Just want to start on the loan growth commentary and some of the puts and takes there. So it sounds like pipelines are strong and growing, and it'll take some time to fund some of these commitments.

Tim Mitchell
Tim Mitchell
Senior Equity Research Associate at Raymond James Financial

But I think Jeremy made some comments about competition picking up in the markets and that may be weighing on loan growth. Just kind of curious if could kind of walk through the puts and takes there and just the way you're thinking about growing the balance sheet right now versus protecting the margin if competition starts to pick up on the loan side.

William Furr
William Furr
CFO at Hilltop Holdings

So if you think about kind of where loan growth is and you just look at our kind of Page 11, you can see loans have been pretty stable here over the last twelve months. And as I think about a few things, we look at our mortgage warehouse lending, we'll just break it down in a piece part. So we look at mortgage warehouse lending that seasonally elevated here in the second quarter generally kind of carries into the third quarter, but obviously starts to wind lower in the fourth quarter. From a one to four family retention perspective, as you can see there in the graph, we've maintained those balances. So the retention levels have been consistent with kind of keeping balances reasonably stable.

William Furr
William Furr
CFO at Hilltop Holdings

And again, that's been our goal. We're not looking to meaningfully grow that one to four family position. So then that leaves largely our commercial real estate and then C and I portfolios. And again in commercial real estate, we've seen growth as I noted in some of my commentary. But in our C and I portfolios, we've got a few portfolios most notably the auto note portfolio, which has been in decline and we've been intentionally kind of moving that lower.

William Furr
William Furr
CFO at Hilltop Holdings

And so that's offsetting some of the overall growth. So that's really what's capturing kind of what's driving the average balance. As Jeremy noted and as we've noted, we've seen material increases in our pipeline and strength across the businesses. Our bankers continue to do good work with our clients in that regard. And we've also seen improvements in what we call credit approved.

William Furr
William Furr
CFO at Hilltop Holdings

So those credits that we've already gone through the underwriting and are credit approved, we still got to win that business, but we've seen material increases in that as well. The booked fundings are up year on year substantially. But as I noted in my comments, it will take somewhere between ninety and one hundred and eighty days generally for those to start to build on the balance sheet. So all of those things are factored into the 0% to 2% loan growth outlook for the balance of this year and that's a full year average basis.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

I would just add on, you know, we are seeing a lot of activity and, you know, being able to be successful commercial particularly on the commercial real estate competitive side, losing deals, not so much due to rate, but due to, you know, structure and other terms.

Tim Mitchell
Tim Mitchell
Senior Equity Research Associate at Raymond James Financial

Okay. Very helpful. And then just a follow-up on the margin. Just kind of with that 2% to 4% NII range and the two rate cuts in your outlook given your asset sensitivity, is kind of the higher end of that range reflected if we don't get that cut? And then kind of if we don't see those cuts, you just kind of walk us through the puts and takes around NII and the margin?

William Furr
William Furr
CFO at Hilltop Holdings

Yes. So we as we noted, we had $111,000,000 quarter. As I noted in my comments, we expect that to kind of trend a few million dollars a quarter below that on a go forward basis. We've been at 105,000,000 for the last three quarters will be certainly be higher than that we expect. And so the real kind of puts and takes there is and we had a in the 111 we had an improvement in our stock loan business as they were able to achieve kind of higher margins in that business.

William Furr
William Furr
CFO at Hilltop Holdings

And so that will we don't expect that necessarily be recurring or certainly to occur each quarter. So that's the largest driver of the reduction there. From a net interest income perspective though, obviously the deposit beta assumption that we make going forward is the largest. So if we don't get rate cuts, obviously that helps us a little bit from asset sensitivity perspective. But I would say, relative to our modeled asset sensitivity, obviously net income is up.

William Furr
William Furr
CFO at Hilltop Holdings

So we've been able to outperform kind of the model results. And we feel like we'll be able to continue to do that, through maybe the next the immediate next rate cut whenever that occurs. But we also do believe there's going to be points from a deposit cost perspective where customers become more sensitive and that will cause us to necessarily move closer to 50% to 55% through the cycle beta that we've historically modeled to. Secondly, as it relates to net interest income, if we see those rate cuts come through, we will see some of our more sensitive assets reprice immediately whether that be variable rate loans that are linked to prime or our cash balances as well. So those are the things that would drive down NII.

William Furr
William Furr
CFO at Hilltop Holdings

The deposit beta and outperformance in that regard will help mitigate some of that. And so that's really the basis of the guide as we look forward.

Tim Mitchell
Tim Mitchell
Senior Equity Research Associate at Raymond James Financial

Okay. Thanks. Thanks for taking my question.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Thank you.

William Furr
William Furr
CFO at Hilltop Holdings

Thank you.

Operator

Next question will be from Jordan Gantt at Stephens. Please go ahead.

Jordan Ghent
Senior Research Associate at Stephens Inc.

Hey, good morning. I just had a question on the capital. So you guys bought back a decent amount of shares during the quarter. And just kind of if you could talk about what's your appetite going forward for that? And maybe what's going to drive that?

Jordan Ghent
Senior Research Associate at Stephens Inc.

And then also kind of maybe what you're hearing on M and A discussions?

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Sure. This is Jeremy. We're really happy or pleased with the share repurchases that we've had year to date. We bought about $68,000,000 of our stock at, you know, at about tangible book value. And so and I think you probably noticed our board just authorized increasing our share repurchase by $35,000,000.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

So that'll be a $135,000,000 of total authorization for year 02/2025. So, you know, our anticipation is just to try to continue to to work towards that. And then as far as, you know, m and a, obviously, it's been a a very active quarter, in year, with the Huntington deal and the Prosperity deal, kind of two different deals. So, and and other things throughout the country. So, you know, I I guess that there's you know, we we expect to see a lot of activity in m a in m and a, and, you know, we'll continue to to evaluate things.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

I mean, I think, our stock is is is trades at a discount on a on a tangible book value basis. So we'll be looking hopefully for more cash type deals.

Jordan Ghent
Senior Research Associate at Stephens Inc.

Got it. Thanks. And then maybe just one more question, kind of going towards credit. Can you I think you talked about the office property that was upgraded, but can you kind of talk more about what drove the improvement within the classified loans?

William Furr
William Furr
CFO at Hilltop Holdings

Yes. So as we looked at classified, we had some pay downs and that was the largest driver of the overall decreases. And so we continue to see the workout activities across both our nonperforming assets as well as our classified and criticized portfolios continue to be worked well across the credit by the credit team. And so for the period pay downs and what we call refinances out were the largest drivers of the reduction.

Jordan Ghent
Senior Research Associate at Stephens Inc.

Okay. And then maybe just one more question, kind of going to the deposit cost. In your opening comments you talked about how there's a large outflow more of your higher yielding deposit products. Kind of where do you do you still think you can see more of that in the coming quarters or is that kind of dried up?

William Furr
William Furr
CFO at Hilltop Holdings

Well, Jeremy's note, that is seasonal to some extent in nature. And so some of those deposit flows were related to public fund customers. Others were what I'd call normal seasonal operational flows from some of our C and I clients. So we expect those will we expect those to go out in the late first quarter, second quarter every year. We also then expect them to kind of begin to rebuild in the second half of the year.

William Furr
William Furr
CFO at Hilltop Holdings

So it wasn't an outflow or an exit of a client or clients. It was just their normal flows. We benefited from it in the second quarter and we'll see we expect largely those deposits will come back in the third and fourth quarters.

Jordan Ghent
Senior Research Associate at Stephens Inc.

Okay. Thanks for taking my questions.

Jeremy Ford
Jeremy Ford
Chairman, President and CEO at Hilltop

Thanks.

William Furr
William Furr
CFO at Hilltop Holdings

Thank you.

Operator

Thank you. And at this time, we have no other questions registered, which will conclude our conference call for today. We would like to thank you for taking the time to attend and ask that you please disconnect your lines. Have yourselves a good weekend.

Executives
    • Matthew Dunn
      Matthew Dunn
      Corporate Development Officer & Head - IR
    • Jeremy Ford
      Jeremy Ford
      Chairman, President and CEO
    • William Furr
      William Furr
      CFO
Analysts
    • Woody Lay
      Vice President at Keefe, Bruyette & Woods (KBW)
    • Tim Mitchell
      Senior Equity Research Associate at Raymond James Financial
    • Jordan Ghent
      Senior Research Associate at Stephens Inc.