Financial holding company Hilltop Holdings (NYSE: HTH) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 8.3% year on year to $332.7 million. Its GAAP profit of $0.74 per share was 46.5% above analysts’ consensus estimates.

Is now the time to buy HTH? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Hilltop Holdings delivered a third quarter that surpassed Wall Street’s expectations, prompting a positive market reaction. According to CEO Jeremy Ford, PlainsCapital Bank’s expansion in net interest margin and solid growth in core loans and deposits were major contributors, while HilltopSecurities benefitted from robust revenue across all business lines. However, the mortgage segment continued to experience headwinds due to subdued home buying activity and margin compression. Ford noted, “PrimeLending’s results reflect a dampened summer home buying market where both volumes and margins remained under pressure.”

Looking ahead, Hilltop Holdings' guidance is shaped by expectations for stable net interest income and continued competition in Texas lending, alongside ongoing pressure in the mortgage segment. CFO William Furr stated management anticipates “modest downward pressure” on net interest income as interest rates decline, but highlighted a focus on cost control and selective hiring in PrimeLending to restore profitability. Management remains attentive to portfolio credit risks and expects further improvement in asset quality, with Ford emphasizing, “We believe that we are poised for continued growth and success, while staying true to the bank’s legacy and credit culture.”

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to expansion in net interest margin at PlainsCapital Bank, strength in HilltopSecurities, and resilient credit quality, despite persistent challenges in the mortgage segment.

• Net interest margin expansion: PlainsCapital Bank saw its net interest margin increase by 7 basis points, driven by effective deposit cost management and higher-yielding commercial loans. Management credits this margin improvement to a focus on repricing and optimizing the deposit base, which has helped offset a competitive lending environment in Texas.

• Deposit and loan growth: Core deposits at PlainsCapital Bank rose 6% sequentially, supported by seasonal inflows from large customers. Despite heightened local competition, the bank achieved strong growth in core loans, with commercial real estate lending leading the way and a robust pipeline suggesting sustained activity.

• Mortgage pressures persist: PrimeLending reported a pretax loss, with CEO Ford citing a “dampened summer home buying market” that kept origination volumes and margins under pressure. Management is responding by reducing fixed expenses and focusing on recruiting experienced mortgage originators to weather the anticipated slow seasonality in the coming quarters.

• HilltopSecurities drives fee income: The broker-dealer division posted a strong pretax margin, benefiting from broad revenue growth in public finance, structured finance, wealth management, and municipal products. Notably, public finance services saw a 28% year-over-year boost in net revenues, signaling successful underwriting and advisory efforts.

• Credit quality remains solid: The quarter included a $2.6 million reversal of credit losses, attributed to improving asset quality and a healthier economic outlook. Management emphasized ongoing vigilance in credit monitoring, particularly in areas like auto lending, where exposure is being steadily reduced and managed closely.

Drivers of Future Performance

Management expects the forward outlook to be shaped by stable net interest income, persistent mortgage headwinds, and active credit risk management.

• Interest rate and margin dynamics: CFO William Furr indicated that net interest income may face “modest downward pressure” due to anticipated rate cuts by the Federal Reserve. The bank’s asset-sensitive balance sheet means that lower rates will have an immediate impact on yields, even as deposit costs adjust more slowly. Management projects deposit betas—a measure of how deposit costs move with interest rates—to decline gradually but remain above 60% through the rate cycle, impacting margin resilience.

• Mortgage segment recovery efforts: Management is focused on restoring profitability at PrimeLending by further optimizing costs and recruiting top mortgage talent. While the broader mortgage market is stabilizing, challenges remain due to high interest rates and affordability constraints. Ford stated that “homebuyers continue to face affordability challenges,” and that margins and fee income are expected to stay under pressure during the seasonally slower quarters ahead.

• Credit and competitive landscape: The competitive lending environment in Texas is expected to persist, which could pressure loan growth and pricing. Management is closely monitoring credit quality, especially in segments such as auto lending, and does not anticipate any systemic portfolio risks. They remain disciplined in maintaining conservative credit standards and responding to any negative credit migration.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) PlainsCapital Bank’s ability to sustain loan and deposit growth amid ongoing competition in Texas, (2) the recovery trajectory and cost structure improvements at PrimeLending as the mortgage market stabilizes, and (3) whether HilltopSecurities can maintain its momentum across multiple business lines. Attention will also be paid to credit quality trends and the impact of further interest rate changes on margins.

Hilltop Holdings currently trades at $33.81, up from $32.44 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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