Hilltop Holdings Inc.

Please stand by, your program is about to begin. If you need assistance during your conference today, please press star zero. Good day, everyone, and welcome to today's Hilltop Holdings First Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two. Please note this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Eric Yowie, Executive Vice President.

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 risk, and trends in credit, allowance for credit losses, liquidity and sources of funding, funding costs, the impact and potential impacts of inflation, stock repurchases, dividends, 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 risk and uncertainties. Our actual results, capital, liquidity, and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in the preface of our presentation and those included in our most recent annual and quarterly reports filed with the SEC. Please note that the information presented is preliminary and based upon data available at this time. 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. With that, I will turn the presentation over to Hilltop President and CEO, Jeremy Ford.

Thank you, Eric, and good morning. For the first quarter, Hilltop reported net income of approximately $28 million, or 42 cents per diluted share. Return on average assets for the period was 0.7%, and return on average equity was 5.2%. While the impact of economic headwinds that began in 2022 continue to persist, we are pleased with the strong returns from Plains Capital Bank and Hilltop Securities that allowed us to improve earnings per share over the same period in the prior year. Despite a housing market that remains under pressure, Prime Lending significantly reduced its pre-tax loss from the same period in the prior year through meaningful but hard expense-based rightsizing. The improvement in our consolidated results are a true reflection of ongoing hard work by our teams across Hilltop. We believe that our long-term decision-making strategic initiatives, and cost management efforts positions us to consistently serve clients across our businesses, generate consolidated profitability, return capital to shareholders via share repurchases and dividends, and take advantage of opportunities when they arise. During the quarter, Plains Capital Bank generated $50 million of pre-tax income on $13.1 billion of assets, representing a return on average assets of 1.2%. While our conservative approach to credit has limited outside growth in our loan portfolio, it has also allowed us to prudently optimize the bank's liquidity and funding. Average loans at the bank declined slightly from the fourth quarter, driven primarily by a reduction in national warehouse lending balances, as normal seasonality and a depressed mortgage market continues to restrict this business. We continue to see a pullback in the commercial lending market, due to the higher for longer interest rate environment and increased equity requirements. And we expect this pullback to pressure loan growth for the near future. Our average deposit balance declined 3% during the period, primarily due to the bank returning nearly $380 million of suite deposits back to Hilltop Securities and returning $42 million of brokered CDs. Encouragingly, This planned reduction was partially offset by a $200 million increase in interest-bearing deposits. Results in the quarter include a provision recapture of $2.9 million, which resulted from the impact of net charge-offs, improvements in the economic outlook, and changes in migrations across the portfolio. Overall, asset quality continues to be stable, as criticized loans as a percentage of bank loans has remained relatively flat for the third consecutive period. Moving to prime lending, where the company reported a pre-tax loss of $16.5 million for the period as low housing inventory, escalating home prices, and higher mortgage rates persist. Operating results were negatively impacted by a $7 million valuation adjustment on the MSR asset. We are seeing that the cost-cutting measures implemented during 2022 and 2023 are making a positive impact. as non-variable compensation has decreased by $6 million or 17% since the first quarter of 2023. This has resulted in the pre-tax loss improving despite lower overall revenues relative to the prior year period. Notwithstanding these ongoing challenges, employee engagement and morale remain remarkably high, underscored by the company's recent recognition as one of the top 10 workplaces in the 2024 USA Today ranking. Looking forward, while we believe the next few quarters will remain challenged, we are beginning to see signs for optimism within the mortgage business. In the first quarter, Hilltop Securities generated pre-tax income of $19 million on net revenues of $117 million, marking a 12% increase in revenue over the same period in the prior year. This growth was primarily driven by the mortgage trading business and sweep deposit products within wealth management. Speaking to the lines of business at Hilltop Securities, public finance services generated a 4% increase in net revenues compared to the same period in the last year. Municipal advisory fees and underwriting revenues remained stable, while revenues from the public finance spoke businesses improved due to increased fees on our cash pool products. Our structured finance net revenues increased 53% compared to the same period in the last year. This was primarily due to mortgage-related business activity within the Florida market. While this was a very strong start to the year, we do anticipate a weaker outlook in the coming months as down payment assistance programs have slowed. In wealth management, net revenues were stable compared to last year's first quarter as interest rates have remained elevated. which benefits our FDIC suite program. Our fixed income business remains pressured as the shape of the yield curve continues to act as a headwind for the business. We are still committed to the business and look to further enhance our sales distribution capabilities while upholding our strong culture and risk management practices. Overall, Hilltop Securities performed very well this quarter, and we continue to build on the business with recent hires that we've made from competitors who have pulled out of certain municipal and trading businesses. Moving to page four. Hilltop maintains robust capital levels with a common equity tier one capital ratio of 19.7%. Additionally, our tangible book value per share increased from year end 2023 by 9 cents to $28.44, despite the recent rise in rates. During the period, we returned $21 million to shareholders with $11 million in dividends and $10 million in share repurchases. Now I'd like to give a brief update on the bank leadership transition that I mentioned in the fourth quarter earnings call. As discussed, Jerry Schaffner, the CEO of Plains Capital Bank, will be retiring on May 1st, and I will take over as CEO of the bank with Brian Heflin as president. In preparation, we have established an internal transition team and have been making excellent progress in ensuring a smooth handoff in the coming weeks. We feel we are in an excellent position to build on the bank's incredible legacy, and I look forward to working more closely with Brian, Pete, Daryl, Steve, and everyone else at the bank. Again, I want to thank Jerry for his partnership and friendship, as well as his dedication and leadership over his more than 42 years of service. Now, I will turn the presentation over to Will to discuss our financials in more detail.