Hilltop Holdings Inc.

Good morning, ladies and gentlemen, and welcome to the Hilltop Holdings fourth quarter 2024 earnings conference call and webcast. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference over to Matt Dunn. Please go ahead.

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. 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 I'll now turn the presentation over to Jeremy Ford.

Thank you, Matt, and good morning. Before we cover the results from the quarter, I would like to spend some time reviewing the full year of 2024. During the year, we saw a dramatic shift in the Fed's posture regarding inflation and their corresponding target rate. The FOMC cut rates three times in 2024, totaling 100 basis points of reduction. Further, the yield curve realized a material change in shape as long-term rates, namely the 10-year Treasury note, fluctuated over 100 basis points from peak to trough over the course of the year. Through prudent management, Hilltop produced an increase in consolidated pre-tax income year over year, despite the volatility of both short and long-term rates. Further, during the year, Hilltop realized growth in core deposits at Plains Capital Bank, enhanced our liquidity position by returning non-core excess funding, continued progress towards operational efficiency with improved financial results at Prime Lending, invested further in the foundational business units at Hilltop Securities, and returned $64 million to stockholders. As we embark upon a new year, we will continue to focus on risk management, sound balance sheet positioning, and the commitment we have to serve our customers and communities, which we believe will drive long-term value creation through economic cycles with our synergistic and durable business model. Moving to the fourth quarter. Hilltop reported net income of approximately $36 million, or 55 cents per diluted share. Return on average assets for the period was 0.9%, and return on average equity was 6.5%. Favorable operating results from the banking and broker-dealer business units helped to produce a quarter-over-quarter and year-over-year increase in pre-tax income. Hilltop realized another quarterly improvement in net interest income, primarily due to a growth in average earning assets, though consolidated net interest margin at Hilltop and net interest margin at the bank did experience compression in the quarter. We will comment further on the bank's NIM later in our prepared remarks. During the quarter, Plains Capital Bank generated $51 million of pre-tax income on $13.3 billion of average assets, representing a return on average assets of 1.24%. Average loans at the bank declined by approximately 1% in the quarter, primarily due to a modest decrease in average core loan balances on a linked quarter basis. The bank realized an increase in its loan production pipeline pull-through rate as borrowers grow more accustomed to the new interest rate environment. We expect that it will take several quarters for the increase in borrower activity to materialize into an increase in funded loans held on our balance sheet. Average deposit balances at the bank increased by nearly $600 million during the quarter, which was driven by an increase in both core interest-bearing deposits and non-interest-bearing deposits. The increase in core interest-bearing deposits represents the fourth straight quarter of growth. Results in the quarter at the bank included a reversal of provision for credit losses of $5.7 million. This recapture was primarily due to positive migration in the loan portfolio as total criticized loans declined by approximately $34 million during the quarter, as well as an improvement in collective economic conditions. Will is going to provide further commentary on credit in his prepared remarks. The bank realized a seven basis point compression in net interest margin from the third quarter to 2.98%. This change was primarily attributable to the immediate repricing of cash held at the Fed, which experienced growth and balance during the quarter as the rates on both earning assets and interest-bearing liabilities declined. Overall, the bank showed steady improvement through the year in terms of funding, credit quality, and loan pipeline growth. Moving to prime lending, where the company reported a pre-tax loss of $9.9 million during the quarter. The quarter-over-quarter decline in operating results was primarily driven by a reduction in origination lock volumes during the fourth quarter. Notably, prime lending did experience an increase of $438 million in origination volume compared with fourth quarter of 2023. Gain on sale of loans sold to third parties increased by two basis points when compared to the third quarter. However, prime lending experienced a continued downward trend in mortgage origination fees and other related income, which decreased by five basis points quarter over quarter. While management at prime lending has prudently trimmed fixed expenses by 14% when compared to the fourth quarter of 2023, We believe the challenging mortgage market will continue to negatively weigh on Prime Lending's operating results in the seasonally slower first quarter of 2025. In the fourth quarter, Hilltop Securities generated pre-tax income of $20 million on net revenues of $125 million for a pre-tax margin of 16%. Speaking to the business lines at Hilltop Securities, Public finance services produced a 32% increase in net revenues on strong offering volumes amidst a record year of industry issuance of $508 billion of total volume. Structured finance net revenues increased by $9 million from the fourth quarter of 2023. This year-over-year growth was primarily driven by improved secondary margins in the TBA business despite the volatile mortgage market. In wealth management, net revenues increased by $2 million compared to the last year's fourth quarter as an increase in retail and clearing fees and interest revenue more than offset a modest decline in sweep revenue from the firm's FDIC sweep program. Finally, the fixed income business remains pressured. due to challenging market conditions and the business unit realized a decline in net revenues of $10 million when compared to the fourth quarter of 2023. Overall, Hilltop Securities delivered strong results in the fourth quarter as the public finance, structured finance, and wealth management business lines closed out the year with positive quarterly and annual results. The broker-dealer delivered a healthy pre-tax margin for the fourth quarter and for the full year, on increased revenues for both time periods. The firm continues to show an ability to provide diversified income streams across varying rate environments. Moving to slide four. Hilltop maintains strong capital levels with a common equity tier one capital ratio of 21%. Additionally, our tangible book value per share increased from year end 2023 by $1.14. to $29.49. During the period, we returned $11 million to stockholders through dividends. Thank you. I will now turn the presentation over to Will to discuss our financials in more detail.