Hilltop Holdings (HTH) Q4 2025: Net Income Jumps 46% as Deposit Cost Discipline Drives Margin Upside
Hilltop Holdings delivered a decisive turnaround in 2025, with net income up 46% year over year, propelled by disciplined deposit cost management and margin expansion at PlainsCapital Bank. The quarter showcased resilience in core banking, stable fee income across Hilltop Securities, and continued headwinds in mortgage origination. Management’s guidance signals measured optimism for 2026, with a focus on organic growth, prudent capital deployment, and navigating persistent macro volatility.
Summary
- Deposit Cost Control Yields Results: Active management of deposit pricing supported margin gains and improved earnings power.
- Broker-Dealer Delivers Consistency: Hilltop Securities maintained double-digit pre-tax margins, offsetting mortgage segment weakness.
- Measured Outlook for 2026: Management targets stable loan growth and expense discipline amid rate and market uncertainty.
Performance Analysis
Hilltop Holdings posted a strong financial rebound in 2025, with net income attributable to common stockholders rising 46% year over year and diluted EPS up 52%. The bank’s total revenues increased 8% to approximately $1.3 billion, while operating expenses grew just 2%, resulting in positive operating leverage of 6%. PlainsCapital Bank, the company’s core banking unit, expanded net interest margin (NIM) by 12 basis points for the year and 30 basis points year over year in Q4, reaching 3.29%. This was achieved through aggressive deposit cost management and growth in lower-cost deposits, even as average total deposits declined modestly due to strategic return of sweep balances to Hilltop Securities.
Non-interest income rose 11% versus the prior year, buoyed by fee growth in public finance, wealth management, and structured finance at Hilltop Securities. Mortgage origination, while seasonally stronger in Q4, remained pressured by industry-wide affordability challenges, with PrimeLending reporting a pre-tax loss of $5 million for the quarter. Credit quality was mixed: net charge-offs spiked due to two previously disclosed auto note credits, but the overall allowance for credit losses (ACL) ratio remained stable at 1.1% of loans held for investment.
- Margin Expansion Outpaces Peers: PlainsCapital’s NIM growth was a standout, supported by 21 basis point decline in average interest-bearing deposit costs since Q3.
- Fee Income Stability Offsets Mortgage Drag: Hilltop Securities’ pre-tax margin held at 13.5%, with public finance and wealth management as primary contributors.
- Credit Event Contained: Auto note charge-offs were largely reserved for in prior periods, minimizing incremental provision impact.
Capital deployment was robust, with $229 million returned to shareholders in 2025 via dividends and buybacks, and tangible book value per share increasing by $0.60 in Q4 to $31.83. The company’s CET1 capital ratio stood at a conservative 19.7%.
Executive Commentary
"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 Plains Capital Bank, a proactive management of deposit costs has helped to increase NIM by 12 basis points when compared to the prior year."
Jeremy Ford, Chief Executive Officer
"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."
Will, Chief Financial Officer
Strategic Positioning
1. Deposit Cost Discipline as a Competitive Lever
Hilltop’s focused approach to deposit pricing—actively managing interest-bearing deposit betas and returning sweep balances to its broker-dealer—drove margin gains and insulated the bank from broader funding cost pressures. This discipline enabled the bank to sustain NIM expansion even as competition for deposits intensified in core Texas markets.
2. Diversified Fee Income Anchors Stability
Hilltop Securities, the broker-dealer segment, demonstrated resilience with a 13.5% pre-tax margin and stable fee contributions from public finance, wealth, and structured finance. Public finance net revenue grew 20% year over year, while wealth management fees benefited from rising equity markets and client acquisition. This diversification offset ongoing mortgage origination weakness and provided ballast to overall earnings.
3. Mortgage Platform Optimization Amid Industry Headwinds
PrimeLending continued to execute cost reductions and platform optimization, narrowing losses despite persistent margin and volume pressure from elevated rates and affordability constraints. Management’s expectation is for origination revenue per loan to remain stable in the 350 to 360 basis point range, reflecting a steady but subdued market recovery rather than a sharp rebound.
4. Robust Capital and Conservative Credit Posture
Hilltop’s conservative capital stack, with a CET1 ratio of 19.7% and increased tangible book value, supports both shareholder returns and flexibility for opportunistic M&A or organic expansion. The company’s approach to credit—recognizing and resolving legacy auto note exposures—signals a willingness to address portfolio risk proactively, even as overall credit quality remains stable.
Key Considerations
This quarter underscores Hilltop’s ability to balance margin expansion, fee income diversification, and capital discipline while navigating sector-specific and macroeconomic headwinds.
Key Considerations:
- Loan Pipeline Momentum: PlainsCapital enters 2026 with a $2.6 billion loan pipeline, indicating strong underlying demand and client expansion in core Texas markets.
- Competitive Loan Pricing Pressure: Lower rates are compressing loan yields by 35 basis points, intensifying competition and requiring continued focus on relationship-based lending.
- Stable Broker-Dealer Outlook: Management expects Hilltop Securities’ pre-tax margin to remain in the low double digits, with fee income stability across business lines.
- Expense Management Offsets Inflation: Ongoing cost controls and platform streamlining are expected to hold non-variable expenses steady between $180 and $190 million per quarter, counteracting inflationary headwinds.
Risks
Persistent macro uncertainty—especially around interest rate policy, inflation, and competitive deposit pricing—remains a structural risk for Hilltop’s margin and loan growth trajectory. The mortgage platform is vulnerable to further volume and margin erosion if affordability worsens. Additionally, episodic credit events, like the auto note charge-offs, highlight the need for ongoing vigilance in portfolio monitoring. Volatility in fee income from market-sensitive lines at Hilltop Securities could also pressure results in adverse environments.
Forward Outlook
For Q1 2026, Hilltop guided to:
- Stable to modestly lower interest-bearing deposit costs as the Fed holds rates steady.
- Continued organic loan growth, with full-year average bank loan growth targeted at 4% to 6% (excluding mortgage warehouse lending).
For full-year 2026, management maintained guidance:
- Broker-dealer pre-tax margin in the low double digits (10% to 14%).
- Stable mortgage origination revenue per loan in the 350 to 360 basis point range.
Management highlighted several factors that will shape 2026:
- Three anticipated Fed rate cuts, which will impact both NII and fee income streams.
- Ongoing focus on capital deployment, with a $125 million buyback authorization and an 11% dividend increase.
Takeaways
Hilltop’s 2025 performance demonstrates the value of diversified revenue streams, disciplined cost management, and proactive capital allocation in a volatile environment.
- Margin Management Delivers: PlainsCapital’s NIM expansion, achieved through deposit pricing discipline, was a key earnings driver and competitive differentiator.
- Fee Income Anchors Stability: Hilltop Securities’ consistent margins and business mix provided resilience against mortgage-related headwinds.
- Watch Credit and Mortgage Trends: Investors should monitor for further credit events and signs of mortgage market stabilization or renewed pressure as 2026 unfolds.
Conclusion
Hilltop Holdings enters 2026 with momentum in core banking, robust capital, and a proven ability to manage through sector headwinds. While macro and competitive dynamics remain fluid, the company’s diversified model and operational discipline position it to capitalize on loan growth opportunities and withstand market volatility.
Industry Read-Through
Hilltop’s results reinforce several sector-wide themes for regional banks: disciplined deposit cost management is critical for margin preservation as rates fall, while diversified fee income streams can offset cyclical pressure in mortgage and lending. The Texas market remains competitive for both deposits and loans, with pricing pressure intensifying as rates decline. Broker-dealer and wealth management units are increasingly vital for earnings stability, especially as mortgage cycles remain subdued. For peers, the quarter highlights the need for proactive credit risk management and ongoing platform efficiency to sustain returns in a challenging macro environment.