Hilltop Holdings Q4 2025 Hilltop Holdings Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Hilltop Holdings Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Hilltop Holdings Q4 2025 Earnings Conference Call and Webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, 30 January 2026. I would now like to turn the conference over to Mr. Matt Dunne. Thank you. Please go ahead.
Operator: Good morning, ladies and gentlemen, and welcome to the Hilltop Holdings Q4 2025 Earnings Conference Call and Webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, 30 January 2026. I would now like to turn the conference over to Mr. Matt Dunne. Thank you. Please go ahead.
Speaker #1: Good morning, ladies and gentlemen, and welcome to the Hilltop Holdings fourth-quarter 2025 earnings conference call and webcast. At this time, all lines are in listen-only mode.
Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.
Speaker #1: This call is being recorded on Friday, January 30, 2026. And I would now like to turn the conference over to Mr. Matt Dunn. Thank you.
Speaker #1: Please go
Speaker #1: ahead. Thank you.
Matthew Dunn: 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.
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.
Speaker #2: 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.
Speaker #2: These statements are based on management's current expectations 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.
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.
Speaker #2: Please note that certain information presented is preliminary and based upon data available at this time. Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.
Matthew Dunn: Please note that certain information presented is preliminary and based upon data available at this time. 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 presentation over to Jeremy Ford.
Please note that certain information presented is preliminary and based upon data available at this time. 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 presentation over to Jeremy Ford.
Speaker #2: 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.
Speaker #2: I will now turn the presentation over to Jeremy
Speaker #3: Thank you, Matt, and good morning. Before we review the results for the fourth quarter, I would like to spend time discussing the full year 2025.
Jeremy B. Ford: Thank you, Matt, and good morning. Before we review the results for the Q4, I would like to spend time discussing the full year 2025. From a macro perspective, we saw a continued decline in short-term interest rates as the FOMC cut their target rate 3 times, totaling 75 basis points. The yield curve realized a further steepening through the year as long-term interest rates, namely the 10-Year Treasury Note, remained range-bound between 4 and 4.5%. Hilltop, akin to many of our banking peers, has benefited from the increased slope of the yield curve by realizing an increase in net interest income and net interest margin. Specifically, at PlainsCapital Bank, a proactive management of deposit costs has helped to increase NIM by 12 basis points when compared to the prior year.
Jeremy Ford: Thank you, Matt, and good morning. Before we review the results for the Q4, I would like to spend time discussing the full year 2025. From a macro perspective, we saw a continued decline in short-term interest rates as the FOMC cut their target rate 3 times, totaling 75 basis points. The yield curve realized a further steepening through the year as long-term interest rates, namely the 10-Year Treasury Note, remained range-bound between 4 and 4.5%. Hilltop, akin to many of our banking peers, has benefited from the increased slope of the yield curve by realizing an increase in net interest income and net interest margin. Specifically, at PlainsCapital Bank, a proactive management of deposit costs has helped to increase NIM by 12 basis points when compared to the prior year.
Speaker #3: From a macro perspective, we saw a continued decline in short-term interest rates as the FOMC cut their target rate three times totally 75 basis points.
Speaker #3: The yield curve realized a further steepening through the year as long-term interest rates namely the 10-year Treasury note remained range-bound between 4 and 4.5%.
Speaker #3: Hilltop akin to many of our banking peers has benefited from the increased slope of the yield curve by realizing an increase in net interest income and net interest margin.
Speaker #3: Specifically, at PlainsCapital Bank, a proactive management of deposit costs has helped to increase NIM by 12 basis points when compared to the prior year.
Speaker #3: At Prime Lending, the combination of further expense optimization and a tightening in the spread between the going-on mortgage rates and the 10-year Treasury note helped to shrink the operating losses for the year 2025.
Jeremy B. Ford: At PrimeLending, the combination of further expense optimization and a tightening in the spread between the going-on mortgage rates and the 10-Year Treasury Note helped to shrink operating losses for the year 2025. However, the material headwinds of challenging affordability, low new home inventory, and increased ownership expenses continued to weigh on industry volumes and margins. Hilltop Securities, through strong execution in our core competencies, was able to produce a 13.5% pre-tax margin on net revenue of $501 million. Finally, Hilltop returned $229 million to stockholders through the repurchase of shares and common dividends, while delivering $166 million of net income, which represents a 46% increase over the prior year. I would like to thank our colleagues throughout Hilltop for their hard work and dedication in 2025.
At PrimeLending, the combination of further expense optimization and a tightening in the spread between the going-on mortgage rates and the 10-Year Treasury Note helped to shrink operating losses for the year 2025. However, the material headwinds of challenging affordability, low new home inventory, and increased ownership expenses continued to weigh on industry volumes and margins. Hilltop Securities, through strong execution in our core competencies, was able to produce a 13.5% pre-tax margin on net revenue of $501 million. Finally, Hilltop returned $229 million to stockholders through the repurchase of shares and common dividends, while delivering $166 million of net income, which represents a 46% increase over the prior year. I would like to thank our colleagues throughout Hilltop for their hard work and dedication in 2025.
Speaker #3: However, the material headwinds of challenging affordability, low new home inventory, and increased ownership expenses continue to weigh on industry volumes and margins. Hilltop Securities, through strong execution in our core competencies, was able to produce a 13.5% pre-tax margin on net revenue of $501 million.
Speaker #3: Finally, Hilltop returned $229 million to stockholders through the repurchase of shares and common dividends, while delivering $166 million of net income, which represents a 46% increase over the prior year.
Speaker #3: I would like to thank our colleagues throughout Hilltop for their hard work and dedication in 2025. Moving to the fourth quarter, Hilltop reported net income of approximately $42 million, or $0.69 per diluted share.
Jeremy B. Ford: Moving to Q4. Hilltop reported net income of approximately $42 million or $0.69 per diluted share. Return on average assets for the period was 1.1%, and return on average equity was 7.6%. To summarize our lines of businesses, PlainsCapital Bank realized a further expansion in net interest margin while continuing to see strong signs of core loan growth from a robust pipeline. PrimeLending continued to optimize the expense base of the franchise while realizing a healthy, seasonally adjusted origination volume of $2.4 billion. Hilltop Securities saw continued positive results from the wealth management, public finance, and structured finance lines of business. Within the quarter, PlainsCapital Bank generated $43.5 million in pre-tax income and a 1.05% return on average assets.
Moving to Q4. Hilltop reported net income of approximately $42 million or $0.69 per diluted share. Return on average assets for the period was 1.1%, and return on average equity was 7.6%. To summarize our lines of businesses, PlainsCapital Bank realized a further expansion in net interest margin while continuing to see strong signs of core loan growth from a robust pipeline. PrimeLending continued to optimize the expense base of the franchise while realizing a healthy, seasonally adjusted origination volume of $2.4 billion. Hilltop Securities saw continued positive results from the wealth management, public finance, and structured finance lines of business. Within the quarter, PlainsCapital Bank generated $43.5 million in pre-tax income and a 1.05% return on average assets.
Speaker #3: Return on average assets for the period was 1.1%, and return on average equity was 7.6%. To summarize our lines of business, PlainsCapital Bank realized a further expansion in net interest margin while continuing to see strong signs of core loan growth from a robust pipeline.
Speaker #3: Prime Lending continued to optimize the expense base of the franchise while realizing a healthy seasonally adjusted origination volume of 2.4 billion dollars. And Hilltop Securities saw continued positive results from the wealth management, public finance, and structured finance lines of business.
Speaker #3: Within the quarter, PlainsCapital Bank generated $43.5 million in pre-tax income and a 1.05% return on average assets. Net interest margins saw continued expansion to 329 basis points.
Jeremy B. Ford: Net interest margin saw continued expansion to 329 basis points, largely due to the previously mentioned active management of deposit costs. While competition continues to increase within our markets, the bank has successfully increased lender headcount and continues to show a healthy loan pipeline. These metrics signal the great brand reputation at PlainsCapital Bank, where we are known for providing excellent service and value to our banking customers. Total core deposits within our markets showed further increases, which allowed the bank to return an additional $225 million of sweep deposits to our broker-dealer. That balance stands now at $100 million, which is down 82% relative to year-end 2024. Results in the quarter included a $7.9 million provision expense.
Net interest margin saw continued expansion to 329 basis points, largely due to the previously mentioned active management of deposit costs. While competition continues to increase within our markets, the bank has successfully increased lender headcount and continues to show a healthy loan pipeline. These metrics signal the great brand reputation at PlainsCapital Bank, where we are known for providing excellent service and value to our banking customers. Total core deposits within our markets showed further increases, which allowed the bank to return an additional $225 million of sweep deposits to our broker-dealer. That balance stands now at $100 million, which is down 82% relative to year-end 2024. Results in the quarter included a $7.9 million provision expense.
Speaker #3: Largely due to the previously mentioned active management of deposit costs. While competition continues to increase within our markets, the bank has successfully increased lender headcount and continues to show a healthy loan pipeline.
Speaker #3: These metrics signal the great brand reputation at Plains Capital Bank, where we are known for providing excellent service and value to our banking customers.
Speaker #3: Total core deposits within our markets showed further increases, which allowed the bank to return an additional 225 million dollars of sweep deposits to our broker-dealer.
Speaker #3: That balance stands now at 100 million dollars, which is down 82% relative to year-end 2024. Results in the quarter included a 7.9 million dollar provision expense.
Speaker #3: This was largely due to the stress of—excuse me—this was largely driven by two stressed auto note credits that we have discussed in prior quarters.
Jeremy B. Ford: This was largely driven by two stressed auto note credits that we have discussed in prior quarters. Will is going to provide further commentary on credit in his prepared remarks. Overall, the bank continues to show tailwinds from strong loan growth, healthy core funding trends, and a positive interest rate environment that supports our expanded net interest margin. Moving to PrimeLending, where the company reported a pre-tax loss of $5 million during the fourth quarter. We realized a seasonally healthy start to the winter months from an origination volume perspective, as a decline in going on mortgage rates spurred on a modest rebound relative to the very subdued second and third quarters of this year. However, profitability remains challenged as headwinds within the broader mortgage industry continue to weigh on total volumes and margins.
This was largely driven by two stressed auto note credits that we have discussed in prior quarters. Will is going to provide further commentary on credit in his prepared remarks. Overall, the bank continues to show tailwinds from strong loan growth, healthy core funding trends, and a positive interest rate environment that supports our expanded net interest margin. Moving to PrimeLending, where the company reported a pre-tax loss of $5 million during the fourth quarter. We realized a seasonally healthy start to the winter months from an origination volume perspective, as a decline in going on mortgage rates spurred on a modest rebound relative to the very subdued second and third quarters of this year. However, profitability remains challenged as headwinds within the broader mortgage industry continue to weigh on total volumes and margins.
Speaker #3: Will is going to provide further commentary on credit in his prepared remarks. Overall, the bank continues to show tailwinds from strong loan growth, healthy core funding trends, and a positive interest rate environment that supports our expanded net interest margin.
Speaker #3: Moving to Prime Lending, the company reported a pre-tax loss of $5 million during the fourth quarter. We realized a seasonally healthy start to the winter months, from an origination volume perspective, as a decline in going-on mortgage rates spurred on a modest rebound relative to the very subdued second and third quarters of this year.
Speaker #3: However, profitability remains challenged, as headwinds within the broader mortgage industry continue to weigh on total volumes and margins. As is typical, we expect for the first quarter of the year to be a seasonally slow home buying environment, which should impact Prime Lending's origination volume.
Jeremy B. Ford: As is typical, we expect for Q1 of the year to be a seasonally slow home buying environment, which should impact PrimeLending's origination volume. During this prolonged mortgage cycle, we have executed on several operational cost reductions at PrimeLending to optimize the business and create a more efficient platform. We will continue to pursue increased levels of efficiency while investing in ways to organically grow production headcount and total origination volumes in order to expand our operating leverage. During the quarter, Hilltop Securities generated pre-tax income of $26 million on net revenues of $138 million, for a pre-tax margin of 18%. Speaking to the business lines at Hilltop Securities. Public Finance Services rounded out a very strong year by producing a 20% year-over-year increase in net revenues as it capitalized on increased industry issuance volumes.
As is typical, we expect for Q1 of the year to be a seasonally slow home buying environment, which should impact PrimeLending's origination volume. During this prolonged mortgage cycle, we have executed on several operational cost reductions at PrimeLending to optimize the business and create a more efficient platform. We will continue to pursue increased levels of efficiency while investing in ways to organically grow production headcount and total origination volumes in order to expand our operating leverage. During the quarter, Hilltop Securities generated pre-tax income of $26 million on net revenues of $138 million, for a pre-tax margin of 18%. Speaking to the business lines at Hilltop Securities. Public Finance Services rounded out a very strong year by producing a 20% year-over-year increase in net revenues as it capitalized on increased industry issuance volumes.
Speaker #3: During this prolonged mortgage cycle, we have executed on several operational cost reductions at PrimeLending to optimize the business and create a more efficient platform.
Speaker #3: We will continue to pursue increased levels of efficiency, while investing in ways to organically grow production headcount and total origination volumes, in order to expand our operating leverage.
Speaker #3: During the quarter, Hilltop Securities generated pre-tax income of $26 million on net revenues of $138 million, for a pre-tax margin of 18%.
Speaker #3: Speaking to the business lines at Hilltop Securities, public finance services rounded out a very strong year by producing a 20% year-over-year increase in net revenues, as it capitalized on increased industry issuance volumes.
Speaker #3: Structured finance net revenues increased by $2 million versus the fourth quarter of 2024. A decline in trading revenues was offset by a material increase in lock volumes on a year-over-year basis.
Jeremy B. Ford: Structured Finance net revenues increased by $2 million versus Q4 2024. A decline in trading revenues was offset by a material increase in lock volumes on a year-over-year basis. In Wealth Management, net revenues increased by 16% to $53 million when compared to Q4 2024. The continued healthy results in 2025 are due in part to the growth from our advisory fees on higher managed balances and improved transaction revenues. Further, strengthened revenues generated by sweep deposits continues to bolster our results. Finally, Fixed Income Services showed a modest increase in net revenues versus the prior year, as both sales and trading revenues improved year-over-year. Overall, Hilltop Securities delivered another strong quarter to round out a favorable year for the firm.
Structured Finance net revenues increased by $2 million versus Q4 2024. A decline in trading revenues was offset by a material increase in lock volumes on a year-over-year basis. In Wealth Management, net revenues increased by 16% to $53 million when compared to Q4 2024. The continued healthy results in 2025 are due in part to the growth from our advisory fees on higher managed balances and improved transaction revenues. Further, strengthened revenues generated by sweep deposits continues to bolster our results. Finally, Fixed Income Services showed a modest increase in net revenues versus the prior year, as both sales and trading revenues improved year-over-year. Overall, Hilltop Securities delivered another strong quarter to round out a favorable year for the firm.
Speaker #3: In wealth management, net revenues increased by 16% to 53 million dollars when compared to the fourth quarter of 2024. The continued healthy results in 2025 are due in part to the growth from our advisory fees on higher managed balances, and improved transaction revenues.
Speaker #3: Further, strength in revenues generated by sweep deposits continues to bolster our results. Finally, fixed income services showed a modest increase in net revenues versus the prior year, as both sales and trading revenues improved year-over-year.
Speaker #3: Overall, Hilltop Securities delivered another strong quarter to round out a favorable year for the firm. We continue to focus on executing on our strategic initiatives, as we aim to be a full solution provider to our clients.
Jeremy B. Ford: We continue to focus on executing on our strategic initiatives as we aim to be a full solution provider to our clients. Moving to page 4. Hilltop maintains solid capital levels with a Common Equity Tier 1 capital ratio of 19.7%. Additionally, our tangible book value per share increased over the prior quarter by $0.60 to $31.83. During the period, we returned $11 million to stockholders through dividends and repurchased $61 million in shares. Thank you. I'll now turn the presentation over to Will to discuss our financials in more detail.
We continue to focus on executing on our strategic initiatives as we aim to be a full solution provider to our clients. Moving to page 4. Hilltop maintains solid capital levels with a Common Equity Tier 1 capital ratio of 19.7%. Additionally, our tangible book value per share increased over the prior quarter by $0.60 to $31.83. During the period, we returned $11 million to stockholders through dividends and repurchased $61 million in shares. Thank you. I'll now turn the presentation over to Will to discuss our financials in more detail.
Speaker #3: Moving to page four, Hilltop maintains solid capital levels, with a common equity Tier 1 capital ratio of 19.7%. Additionally, our tangible book value per share increased over the prior quarter by 60 cents to 31 dollars and 83 cents.
Speaker #3: During the period, we returned 11 million dollars to stockholders through dividends and repurchased 61 million dollars in shares. Thank you. I'll now turn the presentation over to Will to discuss our financials in more
Speaker #3: detail. Thank you,
William B. Furr: Thank you, Jeremy. I'll start on page five. As Jeremy discussed, for Q4 2025, Hilltop reported consolidated income attributable to common stockholders, $41.6 million, equating to $0.69 per diluted share. The fourth quarter results include $7.8 million provision for credit loss, which reflects the combined impacts of net charge-offs during the period, and a modest deterioration in the economic condition outlook. Even with higher provision expense versus the prior year, we are pleased with solid growth in net interest income, which grew 7% versus the prior year. Non-interest income, which grew 11% versus the prior year, both of which contributed to a 26% improvement in Hilltop's diluted EPS. Turning to page six.
Will Furr: Thank you, Jeremy. I'll start on page five. As Jeremy discussed, for Q4 2025, Hilltop reported consolidated income attributable to common stockholders, $41.6 million, equating to $0.69 per diluted share. The fourth quarter results include $7.8 million provision for credit loss, which reflects the combined impacts of net charge-offs during the period, and a modest deterioration in the economic condition outlook. Even with higher provision expense versus the prior year, we are pleased with solid growth in net interest income, which grew 7% versus the prior year. Non-interest income, which grew 11% versus the prior year, both of which contributed to a 26% improvement in Hilltop's diluted EPS. Turning to page six.
Speaker #2: Jeremy. I'll start on page five. As Jeremy discussed, for the fourth quarter of 2025, Hilltop reported consolidated income attributable to common stockholders, 41.6 million dollars, equating to 69 cents per diluted share.
Speaker #2: The fourth quarter results include 7.8 million dollars provision for credit loss, which reflects the combined impacts of net charge-offs during the period, and a modest deterioration in the economic condition outlook.
Speaker #2: Even with higher provision expense versus the prior year, we are pleased with solid growth in net interest income, which grew 7% versus the prior year, and non-interest income, which grew 11% versus the prior year, both of which contributed to a 26% improvement in Hilltop's diluted EPS.
Speaker #2: Turning to page six, for the full year of 2025, Hilltop reported consolidated income attributable to common stockholders of 165.6 million dollars, equating to 2 dollars and 64 cents per diluted share, representing growth of 46% and 52% versus the prior year's results, respectively.
William B. Furr: For the full year of 2025, Hilltop reported consolidated income attributable to common stockholders of $165.6 million, equating to $2.64 per diluted share, representing growth of 46% and 52% versus the prior year's results, respectively. During the year, total revenues, including both net interest income and non-interest income, increased by 8% to approximately $1.3 billion, while expenses grew by 2%, resulting in positive operating leverage of 6% for the year-end 2025. I'm moving to page seven. Hilltop's allowance for credit losses decreased during the quarter by $3.6 million to $91.5 million. During the quarter, Hilltop recorded net charge-offs of $11.5 million.
For the full year of 2025, Hilltop reported consolidated income attributable to common stockholders of $165.6 million, equating to $2.64 per diluted share, representing growth of 46% and 52% versus the prior year's results, respectively. During the year, total revenues, including both net interest income and non-interest income, increased by 8% to approximately $1.3 billion, while expenses grew by 2%, resulting in positive operating leverage of 6% for the year-end 2025. I'm moving to page seven. Hilltop's allowance for credit losses decreased during the quarter by $3.6 million to $91.5 million. During the quarter, Hilltop recorded net charge-offs of $11.5 million.
Speaker #2: During the year, total revenues, including both net interest income and non-interest income, increased by 8% to approximately $1.3 billion, while expenses grew by 2%, resulting in positive operating leverage of 6% for the year-end 2025.
Speaker #2: Moving to page seven, Hilltop's allowance for credit losses decreased during the quarter by $3.6 million, to $91.5 million. During the quarter, Hilltop recorded net charge-offs of $11.5 million. Included in these net charge-offs were write-downs of $9.5 million, related to been referenced on prior calls.
William B. Furr: Included in these net charge-offs were write-downs of $9.5 million related to two large auto note credits that have been referenced on prior calls. During the fourth quarter, the expected cash flows from the two loan portfolios that support these credits declined substantially from prior period estimates. As a result, management decided to mark these assets to the updated fair value, thereby recognizing the charge-offs versus building and carrying an outsized allowance against these loans. Of the net charge-off amount for these auto credits, approximately $5.7 million had been previously reserved. In addition, the allowance for credit losses increased modestly for portfolio migration and some deterioration in the macroeconomic outlook. At year-end, allowance for credit losses of $91.5 million yields an ACL to total loans HFI ratio of 1.1%.
Included in these net charge-offs were write-downs of $9.5 million related to two large auto note credits that have been referenced on prior calls. During the fourth quarter, the expected cash flows from the two loan portfolios that support these credits declined substantially from prior period estimates. As a result, management decided to mark these assets to the updated fair value, thereby recognizing the charge-offs versus building and carrying an outsized allowance against these loans. Of the net charge-off amount for these auto credits, approximately $5.7 million had been previously reserved. In addition, the allowance for credit losses increased modestly for portfolio migration and some deterioration in the macroeconomic outlook. At year-end, allowance for credit losses of $91.5 million yields an ACL to total loans HFI ratio of 1.1%.
Speaker #2: During the fourth quarter, the expected cash flows from the two loan portfolios that support these credits declined substantially, from prior period estimates. As a result, management decided to mark these assets to the updated fair value, thereby recognizing the charge-offs versus building and carrying an outsized allowance against these loans.
Speaker #2: Of the net charge-off amount for these auto credits approximately 5.7 million reserved. In addition, the allowance for credit losses increased modestly for portfolio migration, and some deterioration in the macroeconomic outlook.
Speaker #2: At year-end, allowance for credit losses of 91.5 million dollars yields an ACL to total loans HFI ratio of 1.1%. As we've seen over time, ACL can be volatile as it's impacted by economic assumptions, as well as changes in the mix and makeup of the credit portfolio.
William B. Furr: As we've seen over time, ACL can be volatile as it's impacted by economic assumptions, as well as changes in the mix and makeup of the credit portfolio. We continue to believe that future changes in the allowance for credit losses will be driven by net loan growth in the portfolio, credit migration trends, and changes to the macroeconomic outlook over time. Turning to page 8. Net interest income in Q4 equated to $112.5 million, which included $1 million of purchase accounting accretion, remaining relatively stable with the prior quarter and increasing by $7 million versus the prior year. Net interest margin increased versus Q4 2024 by 30 basis points to 302 basis points.
As we've seen over time, ACL can be volatile as it's impacted by economic assumptions, as well as changes in the mix and makeup of the credit portfolio. We continue to believe that future changes in the allowance for credit losses will be driven by net loan growth in the portfolio, credit migration trends, and changes to the macroeconomic outlook over time. Turning to page 8. Net interest income in Q4 equated to $112.5 million, which included $1 million of purchase accounting accretion, remaining relatively stable with the prior quarter and increasing by $7 million versus the prior year. Net interest margin increased versus Q4 2024 by 30 basis points to 302 basis points.
Speaker #2: We continue to believe that future changes in the allowance for credit losses will be driven by net loan growth, and the portfolio credit migration trends and changes to the macroeconomic outlook over time.
Speaker #2: Turning to page eight, net interest income in the fourth quarter equated to 112.5 million dollars, which included 1 million dollars of purchase accounting accretion, remaining stable relative with the prior quarter and increasing by 7 million dollars versus the prior year.
Speaker #2: Net interest margin increased versus the fourth quarter of 2024 by 30 basis points, to 3.02%. The improvement in NIM and net interest income continues to be driven by the solid work our bank team is doing on managing deposit costs and growing lower-cost deposits within the bank.
William B. Furr: The improvement in NIM and net interest income continues to be driven by the solid work our bank team is doing on managing deposit costs and growing lower cost deposits within the bank. Through this portion of the cycle, we've maintained a 68% interest-bearing deposit beta, which is substantially improved versus our previous ALM model results of 50 to 55%. While the team continues to focus on creating value for our clients while managing our overall net interest income, we do expect that the interest-bearing deposit beta will fall towards 60 to 65% if the Federal Reserve reduces rates an additional two to three times during this portion of the rate cycle. Moving to page 9. Q4 average total deposits are approximately $10.7 billion, declining versus Q4 2024 by $233 million.
The improvement in NIM and net interest income continues to be driven by the solid work our bank team is doing on managing deposit costs and growing lower cost deposits within the bank. Through this portion of the cycle, we've maintained a 68% interest-bearing deposit beta, which is substantially improved versus our previous ALM model results of 50 to 55%. While the team continues to focus on creating value for our clients while managing our overall net interest income, we do expect that the interest-bearing deposit beta will fall towards 60 to 65% if the Federal Reserve reduces rates an additional two to three times during this portion of the rate cycle.
Speaker #2: Through this portion of the cycle, we've maintained a 68% interest-bearing deposit beta, which is substantially improved versus our previous ALM model results of 50 to 55%.
Speaker #2: While the team continues to focus on creating value for our clients, while managing our overall net interest income, we do expect that the interest-bearing deposit beta will fall towards 60 to 65% if the Federal Reserve reduces rates and additional 2 to 3 times during this portion of the rate cycle.
Moving to page 9. Q4 average total deposits are approximately $10.7 billion, declining versus Q4 2024 by $233 million. The decline in average deposits was driven by management's decision to return, on average, $397 million of HTS sweep deposits back to Hilltop Securities to be deployed into their FDIC-insured sweep deposit program. On an ending balance basis, deposits increased by approximately $200 million from Q3 of 2025, net of the return of sweep deposits of $225 million. The growth in customer deposits was driven by expanded commercial relationships, coupled with positive seasonal deposit trends from our public sector clients at the bank.
Speaker #2: Moving to page nine, fourth quarter average total deposits are approximately 10.7 billion dollars, declining versus the fourth quarter of 2024 by 233 million. The decline in average deposits was driven by management's decision to return on average 397 million dollars of HTS sweep deposits back to Hilltop Securities to be deployed into their FDIC-insured sweep deposit program.
William B. Furr: The decline in average deposits was driven by management's decision to return, on average, $397 million of HTS sweep deposits back to Hilltop Securities to be deployed into their FDIC-insured sweep deposit program. On an ending balance basis, deposits increased by approximately $200 million from Q3 of 2025, net of the return of sweep deposits of $225 million. The growth in customer deposits was driven by expanded commercial relationships, coupled with positive seasonal deposit trends from our public sector clients at the bank.
Speaker #2: On an ending balance basis, deposits increased by approximately 200 million dollars from the third quarter of 2025, net of the return of sweep deposits of 225 million dollars.
Speaker #2: The growth in customer deposits was driven by expanded commercial relationships, coupled with positive seasonal deposit trends from our public sector clients at the bank.
Speaker #2: As a result of our ongoing pricing efforts, average interest-bearing deposit cost declined to 2.69%. This is a decrease of 21 basis points versus the third quarter of 2025 levels, which supports a decline in total deposit cost of 2%, down 44 basis points from the prior-year period.
William B. Furr: As a result of our ongoing pricing efforts, average interest-bearing deposit cost declined to 269 basis points, a decrease of 21 basis points versus Q3 2025 levels, which supports a decline in total deposit cost of 2%, which were down 44 basis points from the prior year period. Currently, we expect that interest-bearing deposit costs will move somewhat lower over the coming quarters and then stabilize until we see any additional movement by the Federal Reserve on short-term rates. Moving to page 10. Total non-interest income for Q4 2025 equated to $217 million. Q4 mortgage-related income and fees increased by $2.5 million versus Q4 2024, driven by improvement in both locked and originated volumes versus the same period in the prior year.
As a result of our ongoing pricing efforts, average interest-bearing deposit cost declined to 269 basis points, a decrease of 21 basis points versus Q3 2025 levels, which supports a decline in total deposit cost of 2%, which were down 44 basis points from the prior year period. Currently, we expect that interest-bearing deposit costs will move somewhat lower over the coming quarters and then stabilize until we see any additional movement by the Federal Reserve on short-term rates.
Speaker #2: Currently, we expect that interest-bearing deposit cost will move somewhat lower over the coming quarters, and then stabilize until we see any additional movement by the Federal Reserve on short-term rates.
Speaker #2: Moving to page ten, total non-interest income for the fourth quarter of 2025 equated to 217 million dollars, fourth quarter mortgage-related income and fees increased by 2.5 million dollars versus the fourth quarter of 2024, driven by improvement in both lock and originated volumes versus the same period in the prior year.
Moving to page 10. Total non-interest income for Q4 2025 equated to $217 million. Q4 mortgage-related income and fees increased by $2.5 million versus Q4 2024, driven by improvement in both locked and originated volumes versus the same period in the prior year.
Speaker #2: While signs of improvement in our mortgage business are emerging, some of the significant macro challenges persist, whereby the combination of higher interest rates, home price inflation, insurance, and elevated tax costs continue to pressure volumes and margins.
William B. Furr: While signs of improvement in our mortgage business are emerging, some of the significant macro challenges persist, whereby the combination of higher interest rates, home price inflation, insurance, and elevated tax costs continue to pressure volumes and margins. Versus the same period prior year, purchase mortgage volumes were relatively stable at $1.9 billion, and refinance volumes increased by $168 million, or 49%, versus the prior year period. During the fourth quarter of 2025, gain on sale margins improved by 19 basis points for loans sold to third parties versus the prior year period. Largely offsetting the higher gain on sale margins were lower mortgage loan origination fees, which declined by 25 basis points versus the prior year, demonstrating that as mortgage interest rates have declined throughout 2025, our customers' desire to buy down their mortgage rate has also diminished.
While signs of improvement in our mortgage business are emerging, some of the significant macro challenges persist, whereby the combination of higher interest rates, home price inflation, insurance, and elevated tax costs continue to pressure volumes and margins. Versus the same period prior year, purchase mortgage volumes were relatively stable at $1.9 billion, and refinance volumes increased by $168 million, or 49%, versus the prior year period.
Speaker #2: Versus the same period prior year, purchased mortgage volumes were relatively stable at $1.9 billion, and refinance volumes increased by $168 million, or 49%, versus the prior year period.
Speaker #2: During the fourth quarter of 2025, gain on sale margins improved by 19 basis points, for loans sold to third parties versus the prior year period.
During the fourth quarter of 2025, gain on sale margins improved by 19 basis points for loans sold to third parties versus the prior year period. Largely offsetting the higher gain on sale margins were lower mortgage loan origination fees, which declined by 25 basis points versus the prior year, demonstrating that as mortgage interest rates have declined throughout 2025, our customers' desire to buy down their mortgage rate has also diminished.
Speaker #2: Largely offsetting the higher gain on sale margins, were lower mortgage loan origination fees, which declined by 25 basis points versus the prior year, demonstrating that as mortgage interest rates have declined throughout 2025, our customers' desire to buy down their mortgage rate has also diminished.
Speaker #2: During the fourth quarter, public finance, wealth management, and structured finance business lines within Hilltop Securities all generated higher fee income versus the prior year period.
William B. Furr: During the fourth quarter, public finance, wealth management, and structured finance business lines within Hilltop Securities all generated higher fee income versus the prior year period. Public finance benefited from higher market debt offerings across our customer base, and wealth benefited from the performance in the equity markets, coupled with continued efforts to grow our producer and client base. Structured finance results reflect higher lock volumes from first-time home buyers across the state housing agencies we support. Other non-interest income grew by $4.6 million versus the prior year period, largely driven by valuation adjustments and return on certain investments within our merchant banking investment portfolio.
During the fourth quarter, public finance, wealth management, and structured finance business lines within Hilltop Securities all generated higher fee income versus the prior year period. Public finance benefited from higher market debt offerings across our customer base, and wealth benefited from the performance in the equity markets, coupled with continued efforts to grow our producer and client base. Structured finance results reflect higher lock volumes from first-time home buyers across the state housing agencies we support. Other non-interest income grew by $4.6 million versus the prior year period, largely driven by valuation adjustments and return on certain investments within our merchant banking investment portfolio.
Speaker #2: Public finance benefited from higher market debt offerings across our customer base, and wealth benefited from the performance in the equity markets, coupled with continued efforts to grow our producer and client base.
Speaker #2: Structured finances results reflect higher lock volumes from first-time homebuyers across the state housing agencies we support. Other non-interest income grew by 4.6 million dollars versus the prior year period, largely driven by valuation adjustments and return on certain investments within our merchant banking investment portfolio.
Speaker #2: As we've noted in the past, it is important to recognize that both the fixed income services and structured finance businesses at Hilltop Securities can be volatile from period to period, as they're impacted by interest rates, overall market liquidity, and production trends.
William B. Furr: As we've noted in the past, it is important to recognize that both the fixed income services and structured finance businesses at Hilltop Securities can be volatile from period to period, as they're impacted by interest rates, overall market liquidity, and production trends. I'm turning to page 11. Non-interest expenses increased from the same period in the prior year by $6 million to $269 million, driving the increase in non-interest expense for higher variable compensation expenses, principally within the mortgage and securities businesses. In addition, compensation expenses were elevated during Q4 2025 by $2.4 million of severance-related costs, as well as an increase in overall healthcare costs.
As we've noted in the past, it is important to recognize that both the fixed income services and structured finance businesses at Hilltop Securities can be volatile from period to period, as they're impacted by interest rates, overall market liquidity, and production trends. I'm turning to page 11. Non-interest expenses increased from the same period in the prior year by $6 million to $269 million, driving the increase in non-interest expense for higher variable compensation expenses, principally within the mortgage and securities businesses. In addition, compensation expenses were elevated during Q4 2025 by $2.4 million of severance-related costs, as well as an increase in overall healthcare costs.
Speaker #2: Turning to page eleven, non-interest expenses increased from the same period in the prior year by 6 million dollars to 269 million dollars. Driving the increase in non-interest expense were higher variable compensation expenses principally within the mortgage and securities businesses.
Speaker #2: In addition, compensation expenses were elevated during the fourth quarter of 2025 by $2.4 million of severance-related costs, as well as an increase in overall healthcare costs.
Speaker #2: Looking forward, we expect expenses other than variable compensation to remain relatively stable between $180 million and $190 million per quarter, as our ongoing focused efforts related to streamlining our operations and improving productivity continue to support lower headcount and improve throughput across our franchise, helping to offset the ongoing inflationary pressures that persist in the market.
William B. Furr: Looking forward, we expect expenses other than variable compensation to remain relatively stable between $180 and 190 million per quarter, as our ongoing focused efforts related to streamlining our operations and improving productivity continue to support lower headcount and improve throughput across our franchise, helping to offset the ongoing inflationary pressures that persist in the market. Moving to page 12. Fourth quarter average HFI loans equated to $8.2 billion and grew by 1.8% versus the prior quarter. On a period-ending basis, HFI loans increased versus the fourth quarter of 2024 by $361 million, driven by growth in commercial real estate lending. While the economy in Texas remains resilient, we do expect the competition for funded loans will remain very intense.
Looking forward, we expect expenses other than variable compensation to remain relatively stable between $180 and 190 million per quarter, as our ongoing focused efforts related to streamlining our operations and improving productivity continue to support lower headcount and improve throughput across our franchise, helping to offset the ongoing inflationary pressures that persist in the market. Moving to page 12. Fourth quarter average HFI loans equated to $8.2 billion and grew by 1.8% versus the prior quarter. On a period-ending basis, HFI loans increased versus the fourth quarter of 2024 by $361 million, driven by growth in commercial real estate lending. While the economy in Texas remains resilient, we do expect the competition for funded loans will remain very intense.
Speaker #2: Moving to page twelve, fourth quarter average HFI loans equated to $8.2 billion, and grew by 1.8% versus the prior quarter. On a period-ending basis, HFI loans increased versus the fourth quarter of 2024 by $361 million, driven by growth in commercial real estate lending.
Speaker #2: While the economy in Texas remains resilient, we do expect that competition for funded loans will remain very intense. As we look forward to 2026, we are expecting that full-year average bank loan growth of 4% to 6%, excluding the impact of loans retained from prime lending and mortgage warehouse lending.
William B. Furr: As we look forward to 2026, we are expecting a full year average bank loan growth of 4% to 6%, excluding the impact of loans retained from PrimeLending and Mortgage Warehouse Lending. I'm moving to page 13. As is shown in the chart on the bottom left of the page, net charge-offs for the fourth quarter related to $11.5 million. As noted earlier, the most significant charge-offs in the period related to the two auto note finance credits that we've discussed on prior calls, which accounted for $9.5 million of net charge-offs during the quarter. We previously reserved $5.7 million for these credits, and as a result, the full $9.5 million did not impact provision expense in the period.
As we look forward to 2026, we are expecting a full year average bank loan growth of 4% to 6%, excluding the impact of loans retained from PrimeLending and Mortgage Warehouse Lending. I'm moving to page 13. As is shown in the chart on the bottom left of the page, net charge-offs for the fourth quarter related to $11.5 million. As noted earlier, the most significant charge-offs in the period related to the two auto note finance credits that we've discussed on prior calls, which accounted for $9.5 million of net charge-offs during the quarter. We previously reserved $5.7 million for these credits, and as a result, the full $9.5 million did not impact provision expense in the period.
Speaker #2: I'm moving to page thirteen, as is shown in the chart on the bottom left of the page. Net charge-offs for the fourth quarter related to $11.5 million.
Speaker #2: As noted earlier, the most significant charge-offs in the period related to the two auto note finance credits that we've discussed on prior calls, which accounted for $9.5 million of net charge-offs during the quarter.
Speaker #2: We previously reserved $5.7 million for these credits, and as a result, the full $9.5 million did not impact provision expense in the period.
Speaker #2: For the full year of 2025, net charge-offs equated to 16.9 million dollars, or 21 basis points of full-year average HFI loans. While we're disappointed by the charge-offs related to the auto credits, we believe that credit quality remains stable across the portfolio, and do not currently see any large systemic areas of concern.
William B. Furr: For the full year of 2025, net charge-offs equated to $16.9 million, or 21 basis points of full year average HFI loans. But we're disappointed by the charge-offs related to the auto credits. We believe the credit quality remains stable across the portfolio and do not currently see any large systemic areas of concern. As is shown on the graph at the bottom right of the page, the allowance for credit loss coverage at the bank ended the fourth quarter at 1.15%, including Mortgage Warehouse Lending. I'm moving to page 14. As we moved into 2026, there continues to be a lot of uncertainty in the market regarding interest rates, inflation, and the overall health of the economy. That said, we've provided our current outlook metrics for the coming year.
For the full year of 2025, net charge-offs equated to $16.9 million, or 21 basis points of full year average HFI loans. But we're disappointed by the charge-offs related to the auto credits. We believe the credit quality remains stable across the portfolio and do not currently see any large systemic areas of concern. As is shown on the graph at the bottom right of the page, the allowance for credit loss coverage at the bank ended the fourth quarter at 1.15%, including Mortgage Warehouse Lending. I'm moving to page 14. As we moved into 2026, there continues to be a lot of uncertainty in the market regarding interest rates, inflation, and the overall health of the economy. That said, we've provided our current outlook metrics for the coming year.
Speaker #2: As is shown on the graph at the bottom right of the page, the allowance for credit loss coverage at the bank ended the fourth quarter at 1.15%, including mortgage warehouse lending.
Speaker #2: I'm moving to page fourteen, as we moved into 2026, there continues to be a lot of uncertainty in the market regarding interest rates, inflation, and the overall health of the economy.
Speaker #2: That said, we provided our current outlook metrics for the coming year. As we've noted in the past, we're pleased with the work that our team has delivered to position our company for long-term success.
William B. Furr: As we've noted in the past, we're pleased with the work that our team has delivered to position our company for long-term success. Our outlook for 2026 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'll provide updates to our outlook on our future quarterly calls. Operator, that concludes our prepared comments. We'll turn the call back to you for the Q&A section of the call.
As we've noted in the past, we're pleased with the work that our team has delivered to position our company for long-term success. Our outlook for 2026 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'll provide updates to our outlook on our future quarterly calls. Operator, that concludes our prepared comments. We'll turn the call back to you for the Q&A section of the call.
Speaker #2: Our outlook for 2026 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'll provide updates to our outlook on our future quarterly calls.
Speaker #2: Operator, that concludes our prepared comments, and we'll turn the call back to you for the Q&A section of the call.
Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star, followed by one on your telephone keypad.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from the line of Matt Olney from Stephens. Please go ahead.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from the line of Matt Olney from Stephens. Please go ahead.
Speaker #1: You will hear a prompt that Johan has been raised, and should you wish to cancel your request, please press star followed by the two.
Speaker #1: If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from the line of Matt Olney from Stephens.
Speaker #1: Please go
Speaker #1: ahead. Hey, thanks.
Matt Olney: Hey, thanks. Good morning, guys.
Matt Olney: Hey, thanks. Good morning, guys.
Speaker #2: Good morning, guys.
Speaker #3: Good morning.
William B. Furr: Good morning.
Will Furr: Good morning.
Operator: Good morning.
Jeremy Ford: Good morning.
Matt Olney: I'll start on the broker-dealer. It looks like those broker-dealer fees were good in the quarter, and guidance calls for those to be relatively stable in 2026. I was hoping you could speak to a few of the business lines and expectations for 2026. And then I guess part two of that, that pre-tax margin, I think it's been 13.5% over the last 2 years. Is that a good baseline to assume for 2026? Thanks.
Speaker #2: I'll start on the broker-dealer; it looks like those broker-dealer fees were good in the quarter, and guidance calls for those to be relatively stable in 2026.
Matt Olney: I'll start on the broker-dealer. It looks like those broker-dealer fees were good in the quarter, and guidance calls for those to be relatively stable in 2026. I was hoping you could speak to a few of the business lines and expectations for 2026. And then I guess part two of that, that pre-tax margin, I think it's been 13.5% over the last 2 years. Is that a good baseline to assume for 2026? Thanks.
Speaker #2: I was hoping you could speak to a few of the business lines and expectations for '26, and then I guess, kind of part two of that, that pre-tax margin—I think it's been 13.5% over the last two years.
Speaker #2: Is that a good baseline to assume for 2026? Thanks.
Speaker #3: So, thanks for the question. You know, I think as we look into 2026, we feel very good about the franchise that is Hilltop Securities and the four primary business lines there.
William B. Furr: So, thanks for the question. You know, I think as we look into 2026, we feel very good about the franchise that is Hilltop Securities and the four primary business lines there. To go through them, public finance had really saw record originations both in the industry as well as here, and we expect that to remain reasonably strong going into the year 2026, notwithstanding kind of market changes. But our current view is that public finance, that business is set up to do well, and the investments we've made there continue to bear fruit. We continue to work diligently on our fixed income services. We've noted over the last couple of quarters, and maybe years, that's been a challenging business.
Will Furr: So, thanks for the question. You know, I think as we look into 2026, we feel very good about the franchise that is Hilltop Securities and the four primary business lines there. To go through them, public finance had really saw record originations both in the industry as well as here, and we expect that to remain reasonably strong going into the year 2026, notwithstanding kind of market changes. But our current view is that public finance, that business is set up to do well, and the investments we've made there continue to bear fruit. We continue to work diligently on our fixed income services. We've noted over the last couple of quarters, and maybe years, that's been a challenging business.
Speaker #3: We go through them public finance had really saw record originations both in the industry as well as here. And we expect that to remain reasonably strong going into the year 2026, notwithstanding kind of market changes, but our current view is that public finance, that business is set up to do well in the investments we've made there continue to bear fruit.
Speaker #3: We continue to work diligently on our fixed income services. We've noted over the last couple of quarters, and maybe years, that it's been a challenging business.
William B. Furr: It seems to be moderating and producing solid results, again, relative to the investments we've made and expectations. So, fixed income services, we're optimistic about. Wealth management, as we noted, has benefited from both the overall improved equity market conditions and the continuation of that this year. But we expect that business, given, again, investments we've made in people, our ability to attract and retain customers, as well as, some of the technology where investments -- investments we've made there, that business to continue to improve, over time. But it is market dependent based on kind of how the overall markets perform. And in structured finances, as we've always said, has a, is directly correlated to first-time homebuyers across the housing agencies we support.
Speaker #3: It seems to be moderating and producing solid results again relative to the investments we've made and expectations. optimistic about. as we noted, has benefited from So fixed income services we're Wealth management, both the overall improved equity market conditions and the continuation of that this year.
It seems to be moderating and producing solid results, again, relative to the investments we've made and expectations. So, fixed income services, we're optimistic about. Wealth management, as we noted, has benefited from both the overall improved equity market conditions and the continuation of that this year. But we expect that business, given, again, investments we've made in people, our ability to attract and retain customers, as well as, some of the technology where investments -- investments we've made there, that business to continue to improve, over time. But it is market dependent based on kind of how the overall markets perform. And in structured finances, as we've always said, has a, is directly correlated to first-time homebuyers across the housing agencies we support.
Speaker #3: But we expect that business, given again investments we've made in people, our ability to attract and retain customers, as well as some of the technology we're investments we've made there, that business to continue to improve over time.
Speaker #3: But it is market-dependent, based on kind of how the overall market's performed. And then structured finances, as we've always said, is directly correlated to first-time homebuyers across the housing agencies we support.
William B. Furr: We believe there's going to continue to be a robust market for that going forward. But as we've noted in the past, we have seen certain states that have provided support, and, you know, that's certainly been helpful for overall origination volume, and we'll see if they continue to provide that support in the future.
Speaker #3: We believe there's going to continue to be a robust market for that going forward, but as we've noted in the past, we have seen certain states that have provided support, and you know, that's certainly been helpful for overall origination volume and we'll see if they continue to provide that support in the future.
We believe there's going to continue to be a robust market for that going forward. But as we've noted in the past, we have seen certain states that have provided support, and, you know, that's certainly been helpful for overall origination volume, and we'll see if they continue to provide that support in the future.
Speaker #4: Yeah, and I would just add, you know, I'm we're really pleased with Hilltop Securities, the year they had this year and last, and the great management team, great businesses.
Jeremy B. Ford: Yeah, and I would just add, you know, we're really pleased with Hilltop Securities, the year they had this year and last, and the great management team, great businesses. And our public finance business, we're celebrating our 80th anniversary this year for it. So that just, I think is a good indication of what a dominant public finance business we've had for a long time.
Jeremy Ford: Yeah, and I would just add, you know, we're really pleased with Hilltop Securities, the year they had this year and last, and the great management team, great businesses. And our public finance business, we're celebrating our 80th anniversary this year for it. So that just, I think is a good indication of what a dominant public finance business we've had for a long time.
Speaker #4: And our public finance business, we're celebrating our 80th anniversary this year. We're it. So that just I think is a good indication of what a dominant public finance business we've had for a long
Speaker #4: time. And your question
William B. Furr: Your question on pre-tax margin, it has been, you know, consistently 13.5% for the last couple of years. We've historically guided, that's going to be low double digits to low teens, so 10% to 13%, 14%. So we feel like this is an appropriate range, what we've seen, and certainly look forward to having a solid year in 2026.
Will Furr: Your question on pre-tax margin, it has been, you know, consistently 13.5% for the last couple of years. We've historically guided, that's going to be low double digits to low teens, so 10% to 13%, 14%. So we feel like this is an appropriate range, what we've seen, and certainly look forward to having a solid year in 2026.
Speaker #3: On pre-tax margin, it has been, you know, consistently 13.5% for the last couple of years. We've historically guided that's going to be low double digits to low teens, so 10 to 13, 14%.
Speaker #3: So we feel like this is an appropriate range. What we've seen and certainly look forward to having a solid year in
Speaker #3: '26. Okay.
Matt Olney: Okay, appreciate the color there. And then I guess the guidance, I believe, also assumes 3 Fed cuts during 2026. I assume that impacts both NII and the broker-dealer fees. Just big picture, any color on the sensitivity of that, if we were to get just, you know, on the low end of that, 1 cut or even 2 cuts? Help us appreciate kind of what that would look like for NII and then the broker fee income.
Matt Olney: Okay, appreciate the color there. And then I guess the guidance, I believe, also assumes 3 Fed cuts during 2026. I assume that impacts both NII and the broker-dealer fees. Just big picture, any color on the sensitivity of that, if we were to get just, you know, on the low end of that, 1 cut or even 2 cuts? Help us appreciate kind of what that would look like for NII and then the broker fee income.
Speaker #2: Appreciate the color there, and then I guess the guidance, I believe, also assumes three Fed cuts during '26. I assume that impacts both NII and the broker-dealer fees.
Speaker #2: Just big picture, any color on the sensitivity of that if we were to get, just, you know, on the low end of that—one cut or even two cuts?
Speaker #2: Help us appreciate kind of what that would look like for NII and then the broker fee
Speaker #2: income. Yeah, I
William B. Furr: Yeah, I think broker fee income is going to be a little more difficult because there are clearly puts and takes there as it relates to, you know, certain things would improve if rates move lower, certain things will, you know, sweep income, for example, could be pressured. But that would be, you know, I'd say single-digit millions of dollars. At, from an NII perspective, you know, we've noted it was an objective of ours to reduce overall asset sensitivity. We've continued to do that. As you can see in the deck, we've got kind of modeled asset sensitivity on instantaneous and parallel basis of just over 4%.
Will Furr: Yeah, I think broker fee income is going to be a little more difficult because there are clearly puts and takes there as it relates to, you know, certain things would improve if rates move lower, certain things will, you know, sweep income, for example, could be pressured. But that would be, you know, I'd say single-digit millions of dollars. At, from an NII perspective, you know, we've noted it was an objective of ours to reduce overall asset sensitivity. We've continued to do that. As you can see in the deck, we've got kind of modeled asset sensitivity on instantaneous and parallel basis of just over 4%.
Speaker #3: I think broker fee income is going to be a little more difficult because there are clearly puts and takes there as it relates to, you know, certain things would improve if rates move lower; certain things will—sweep income, for example—could be pressured.
Speaker #3: But that would be, you know, I'd say, single-digit millions of dollars. From an NII perspective, you know, we've noted that it was an objective of ours to reduce overall asset sensitivity.
Speaker #3: We've continued to do that. As you can see in the deck, we've got kind of modeled asset sensitivity on instantaneous and parallel basis of just over 4%.
William B. Furr: And so every 25 basis points in that environment on an annual basis is about $4.5 million of NII.
Speaker #3: And so every 25 basis points in that environment, on an annual basis, is about $4.5 million of NII.
And so every 25 basis points in that environment on an annual basis is about $4.5 million of NII.
Matt Olney: Okay, that's great. I'll step back. Thank you.
Matt Olney: Okay, that's great. I'll step back. Thank you.
Speaker #2: you.
Speaker #3: Thank you. Thank
William B. Furr: Thank you.
Will Furr: Thank you.
Jeremy B. Ford: Thank you.
Jeremy Ford: Thank you.
Speaker #1: Thank you. And your next question you. comes from the line of Michael Rose from Raymond James. Please go
Operator: Thank you, and your next question comes from the line of Michael Rose from Raymond James. Please go ahead.
Operator: Thank you, and your next question comes from the line of Michael Rose from Raymond James. Please go ahead.
Speaker #1: ahead. Hey, good
Michael Rose: Hey, good morning, guys. Thanks for taking my questions.
Michael Rose: Hey, good morning, guys. Thanks for taking my questions.
Speaker #5: Morning, guys. Thanks for taking my questions. I just wanted to discuss capital. Obviously, nice to see the dividend increase, but I think the buyback authorization was down from last year and maybe a little bit less than at least what I was looking for.
Jeremy B. Ford: Good morning.
Jeremy Ford: Good morning.
Michael Rose: Just wanted to discuss capital. Obviously, nice to see the dividend increase, but I think the buyback authorization was down from last year and maybe a little bit less than at least what I was looking for. Can you just kind of discuss, you know, kind of capital priorities? And, you know, clearly, we've seen a lot of M&A in and around your markets. You know, I know you guys are kind of always in the hunt for deals. Just wanted to see if there's kind of any update from your perspective. I know you're a little bit hindered by the currency at this point, but, you know, has the opportunity set improved from here? Thanks.
Michael Rose: Just wanted to discuss capital. Obviously, nice to see the dividend increase, but I think the buyback authorization was down from last year and maybe a little bit less than at least what I was looking for. Can you just kind of discuss, you know, kind of capital priorities? And, you know, clearly, we've seen a lot of M&A in and around your markets. You know, I know you guys are kind of always in the hunt for deals. Just wanted to see if there's kind of any update from your perspective. I know you're a little bit hindered by the currency at this point, but, you know, has the opportunity set improved from here? Thanks.
Speaker #5: Can you just kind of discuss, you know, capital priorities? And, you know, clearly we've seen a lot of M&A in and around your markets.
Speaker #5: You know, I know you guys are kind of always in the hunt for deals. Just wanted to see if there's kind of any update from your perspective.
Speaker #5: I know you're a little bit hindered by the currency at this point. But, you know, has the opportunity set improved from here? Thanks.
Speaker #4: Yeah, thanks, Michael. No, I think, you know, we're really pleased with the capital we deployed and the way we were able to do it in 2025.
Jeremy B. Ford: Yeah, thanks, Michael. No, I think, you know, we're really pleased with the capital we deployed and, the way we were able to do it in 2025. I think it's a strong message that we've increased our dividend by 11%, and so that should be well received. And, you know, our share repurchase authorization of $125 million, I think is about pretty standard for what we authorized at the beginning of the year. And then it'll just be, something that we monitor throughout the year as far as, the deployment of that. So that's kind of on the capital priorities. On the M&A, I mean, clearly, it's been an extremely active year in Texas and, a lot of deals being announced.
Jeremy Ford: Yeah, thanks, Michael. No, I think, you know, we're really pleased with the capital we deployed and, the way we were able to do it in 2025. I think it's a strong message that we've increased our dividend by 11%, and so that should be well received. And, you know, our share repurchase authorization of $125 million, I think is about pretty standard for what we authorized at the beginning of the year. And then it'll just be, something that we monitor throughout the year as far as, the deployment of that. So that's kind of on the capital priorities. On the M&A, I mean, clearly, it's been an extremely active year in Texas and, a lot of deals being announced.
Speaker #4: I think it's a strong message that we've increased our dividend by 11%. And so that should be well received. And, you know, our share repurchase authorization of $125 million, I think is about pretty standard for what we authorize at the beginning of the year.
Speaker #4: And then it'll just be something that we monitor throughout the year as far as the deployment of that. So that's kind of on the capital priorities.
Speaker #4: On the M&A, I mean, clearly it's been an extremely active year in Texas and a lot of deals being announced. You know, I guess at the forefront, yes, we are and continue to evaluate acquisition opportunities.
Jeremy B. Ford: You know, I guess the forefront, yes, we are and continue to evaluate acquisition opportunities. But at the same time, you know, we're also trying to make sure that we continue to focus on our own organic growth and, you know, try to take advantage of some of the dislocation that this may cause.
You know, I guess the forefront, yes, we are and continue to evaluate acquisition opportunities. But at the same time, you know, we're also trying to make sure that we continue to focus on our own organic growth and, you know, try to take advantage of some of the dislocation that this may cause.
Speaker #4: But at the same time, you know, we're also trying to make sure that we continue to focus on our own organic growth and, you know, try to take advantage of some of the dislocation that this may
Speaker #4: cause. Perfect.
Michael Rose: Perfect. Maybe just to ask the flip side of the question on the M&A conversation. I mean, there's not a lot of properties left in the state of size. You guys are clearly one of them. You know, I know there's decent insider ownership here, but you know, we just love to you know, kind of discuss the potential possibility to maybe partner with a larger institution and... you know, have you had any you know, kind of informal or formal, you're probably not going to answer this, but any reach out from any larger banks at this point?
Michael Rose: Perfect. Maybe just to ask the flip side of the question on the M&A conversation. I mean, there's not a lot of properties left in the state of size. You guys are clearly one of them. You know, I know there's decent insider ownership here, but you know, we just love to you know, kind of discuss the potential possibility to maybe partner with a larger institution and... you know, have you had any you know, kind of informal or formal, you're probably not going to answer this, but any reach out from any larger banks at this point?
Speaker #2: Maybe just to ask the flip side of the question, on the M&A conversation, I mean, there's not a lot of properties left in the state of size.
Speaker #2: You guys are clearly one of them. You know, I know there's decent insider ownership here, but, you know, we just love to, you know, kind of discuss the potential possibility to maybe partner with a larger institution.
Speaker #2: And, you know, have you had any kind of informal or formal—you're probably not going to answer this—but any reach out from any larger banks at this point?
Speaker #4: You know, for what we can disclose or discuss, you know, obviously we're going to remain open to that and do what's in the best interest of the shareholders.
Jeremy B. Ford: No, from what we can disclose or discuss, you know, obviously, we're going to remain open to that and do what's in the best interest of the shareholders. You know, I think that our business model is different than, you know, a lot of the other more pure play banks, which is, you know, limited in the universe of people that, or bigger banks that would be attracted to it.
Jeremy Ford: No, from what we can disclose or discuss, you know, obviously, we're going to remain open to that and do what's in the best interest of the shareholders. You know, I think that our business model is different than, you know, a lot of the other more pure play banks, which is, you know, limited in the universe of people that, or bigger banks that would be attracted to it.
Speaker #4: You know, I think that our business model is different than a lot of the other more pure play banks. Which is, you know, limited to the universe of people that are bigger banks that have been would be attracted to
Speaker #4: it. Okay, helpful.
Michael Rose: Okay, helpful. Maybe one, just final one for me, just the, the NII guide. You know, I think it implies some further core margin compression. Well, if you can just maybe, at least for Q1, just kind of, you know, talk about the expectation. You know, I understand Matt's question as well, but it would seem like there'd be a little bit more core margin pressure as we move into the, you know, first couple quarters of the year.
Michael Rose: Okay, helpful. Maybe one, just final one for me, just the, the NII guide. You know, I think it implies some further core margin compression. Well, if you can just maybe, at least for Q1, just kind of, you know, talk about the expectation. You know, I understand Matt's question as well, but it would seem like there'd be a little bit more core margin pressure as we move into the, you know, first couple quarters of the year.
Speaker #2: Maybe just one final one for me—just the NII guide. You know, I think it implies some further core margin impression or compression. Well, if you can, just maybe at least for the first quarter, just kind of, you know, talk about the expectation, understanding Matt's question as well.
Speaker #2: But it would seem like there'd be a little bit more core margin pressure as we move into the first couple quarters of the year.
Speaker #3: Well, I think what we've seen is pretty solid action and activity on our deposit cost side, so we feel like that's sustainable at this point.
William B. Furr: Well, I think what we've seen is pretty solid action and activity on our deposit cost side, so we feel like that's sustainable at this point. Again, we obviously don't control what the Fed does, so we'll play along as they make their updates and changes. We are and have seen, as noted on an ending balance basis, pretty solid loan growth across the bank. So all those things we think are constructive to Net Interest Income. But again, we do maintain an asset-sensitive balance sheet, and as a result, if the Fed does continue reducing rates, we'll be impacted by that.
Will Furr: Well, I think what we've seen is pretty solid action and activity on our deposit cost side, so we feel like that's sustainable at this point. Again, we obviously don't control what the Fed does, so we'll play along as they make their updates and changes. We are and have seen, as noted on an ending balance basis, pretty solid loan growth across the bank. So all those things we think are constructive to Net Interest Income. But again, we do maintain an asset-sensitive balance sheet, and as a result, if the Fed does continue reducing rates, we'll be impacted by that.
Speaker #3: Again, we obviously don't control what the Fed does, so we'll play along as they make their updates and changes. We are and have seen as noted on an ending balance basis, seen pretty solid loan growth across the bank.
Speaker #3: So, all those things we think are constructive to net interest income. But again, we do maintain an asset-sensitive balance sheet, and as a result, if the Fed does continue reducing rates, we'll be impacted by that.
Speaker #3: But given they didn't take action in January, again, view that as reasonably constructive for the first quarter. From our perspective.
William B. Furr: But given they didn't take action in January, again, view that as reasonably constructive for the first quarter from our perspective.
But given they didn't take action in January, again, view that as reasonably constructive for the first quarter from our perspective.
Speaker #2: Helpful. Appreciate it. Thanks, guys.
Michael Rose: Helpful. Appreciate it. Thanks, guys.
Michael Rose: Helpful. Appreciate it. Thanks, guys.
Jeremy B. Ford: Mm-hmm.
Jeremy Ford: Mm-hmm.
Speaker #1: Thank you. And your next question comes from the line of Fod Lai from KBW. Please go ahead.
Operator: Thank you. And your next question comes from the line of Woody Lay from KBW. Please go ahead.
Operator: Thank you. And your next question comes from the line of Woody Lay from KBW. Please go ahead.
Speaker #1: ahead. Hey, good morning,
Woody Lay: Hey, good morning, guys.
Woody Lay: Hey, good morning, guys.
Speaker #5: guys. Maybe starting on
William B. Furr: Morning.
Will Furr: Morning.
Speaker #3: Morning.
Jeremy B. Ford: Morning.
Jeremy Ford: Morning.
Woody Lay: Maybe starting on loan growth, you know, it's a nice quarter on that front. Could you just talk about the loan pipeline entering 2026, and maybe also talk about just the loan pricing competition that you're seeing in your markets?
Woody Lay: Maybe starting on loan growth, you know, it's a nice quarter on that front. Could you just talk about the loan pipeline entering 2026, and maybe also talk about just the loan pricing competition that you're seeing in your markets?
Speaker #5: loan growth, you know, it's a nice quarter. On that front, could you just talk about the loan pipeline entering 2026 and maybe also talk about just the loan pricing competition that you're seeing in your
Speaker #5: markets? Sure.
Jeremy B. Ford: Sure. Yeah, our loan pipeline going into 2026 is about $2.6 billion, which is on the high side for us. It built up higher, and then we had a lot of pull through. But we're feeling really good about the organic loan growth that we're experiencing in our markets, and just the expanding client reach that we've had. So I feel really good about the loan portfolio building. You know, on the pricing side, clearly, with rates coming down, we're, you know, our, I think going on yield came down about 35 basis points in the quarter. So we are seeing that, you know, just with the rate environment.
Jeremy Ford: Sure. Yeah, our loan pipeline going into 2026 is about $2.6 billion, which is on the high side for us. It built up higher, and then we had a lot of pull through. But we're feeling really good about the organic loan growth that we're experiencing in our markets, and just the expanding client reach that we've had. So I feel really good about the loan portfolio building. You know, on the pricing side, clearly, with rates coming down, we're, you know, our, I think going on yield came down about 35 basis points in the quarter. So we are seeing that, you know, just with the rate environment.
Speaker #4: Yeah, our loan pipeline going into '26 is about $2.6 billion, which is on the high side for us. It built up higher, and then we had a lot of pull-through.
Speaker #4: But we're feeling really good about the organic loan growth that we're experiencing in our markets, and just the expanding client reach that we've had.
Speaker #4: So, I feel really good about the loan portfolio building. You know, on the pricing side, clearly with rates coming down, our, I think, ongoing yield came down about 35 basis points in the quarter.
Speaker #4: So we are seeing that, you know, just with the rate.
Speaker #4: environment. Yeah.
Woody Lay: Yeah, that makes sense. And then maybe just last for me, shifting over to mortgage. I appreciate the origination volume expectation provided in the outlook. But just any thoughts on gain on sale margins over the coming year?
Woody Lay: Yeah, that makes sense. And then maybe just last for me, shifting over to mortgage. I appreciate the origination volume expectation provided in the outlook. But just any thoughts on gain on sale margins over the coming year?
Speaker #5: That makes sense. And then maybe just last for me, shifting over to mortgage. I appreciate the origination volume expectation providing the outlook. But just any thoughts on gain on sale margins over the coming year?
Speaker #3: You know, I think where we, as we look forward, you know, I think we expect total revenue between both gain on sale margin and mortgage origination fees really to be stable.
William B. Furr: Yeah, I think as we look forward, you know, I think we expect total revenue between both gain on sale margin and mortgage origination fees really to be stable. If you look, you know, in our chart, if you kind of add those two bars together, you'll see they've been very stable. The mix changes as rates change and customers' preferences to buy down their rate or otherwise changes, but overall revenue around that 350 to 360 basis point range is kind of our expectation into the future. That's obviously down from what you would see in a more robust market.
Will Furr: Yeah, I think as we look forward, you know, I think we expect total revenue between both gain on sale margin and mortgage origination fees really to be stable. If you look, you know, in our chart, if you kind of add those two bars together, you'll see they've been very stable. The mix changes as rates change and customers' preferences to buy down their rate or otherwise changes, but overall revenue around that 350 to 360 basis point range is kind of our expectation into the future. That's obviously down from what you would see in a more robust market.
Speaker #3: If you look, you know, in our chart, if you kind of add those two bars together, you'll see they've been very stable. The mix changes as rates change and customers' preferences to buy down their rate or otherwise changes.
Speaker #3: But overall revenue, around that 350 to 360 basis point range, is kind of our expectation into the future. That's obviously down from what you would see in a more robust market.
Speaker #3: But again, our view has been and continues to be we're going to see a steady improvement in the overall mortgage market, not a hockey stick change and as a result, we'd expect kind of aggregate revenues, gross revenues to be
William B. Furr: But again, our view has been and continues to be, we're going to see a steady improvement in the overall mortgage market, not a hockey stick change, and as a result, we'd expect kind of aggregate revenues, gross revenues to be stable.
But again, our view has been and continues to be, we're going to see a steady improvement in the overall mortgage market, not a hockey stick change, and as a result, we'd expect kind of aggregate revenues, gross revenues to be stable.
Speaker #3: stable. All right, perfect.
Woody Lay: All right, perfect. I'll hop back in the queue. Thanks for taking my questions.
Woody Lay: All right, perfect. I'll hop back in the queue. Thanks for taking my questions.
Speaker #2: I'll hop back in the queue. Thanks for taking my question.
Speaker #2: questions. Thank
Speaker #2: questions. Thank
William B. Furr: Thank you.
Will Furr: Thank you.
Speaker #3: you. Thank you.
Operator: Thank you. That ends our question and answer session. Ladies and gentlemen, this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Thank you. That ends our question and answer session. Ladies and gentlemen, this concludes today's call. Thank you for participating. You may all disconnect.
