Hilltop Holdings (HTH)

Financial holding company Hilltop Holdings (NYSE:HTH) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 7.5% year on year to $330.2 million. Its GAAP profit of $0.74 per share was 46.5% above analysts’ consensus estimates.

Company Overview

Transformed from a residential communities business to a financial services powerhouse in 2007, Hilltop Holdings (NYSE:HTH) is a Texas-based financial holding company that provides banking, broker-dealer, and mortgage origination services.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Hilltop Holdings competes with regional and national financial institutions including Cullen/Frost Bankers (NYSE:CFR), Prosperity Bancshares (NYSE:PB), and Texas Capital Bancshares (NASDAQ:TCBI) in banking services. In broker-dealer services, it faces competition from firms like Raymond James Financial (NYSE:RJF) and Stifel Financial (NYSE:SF), while its mortgage business competes with Rocket Companies (NYSE:RKT) and loanDepot (NYSE:LDI).

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Hilltop Holdings’s demand was weak over the last five years as its revenue fell at a 8.2% annual rate. This wasn’t a great result and is a sign of poor business quality.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Hilltop Holdings’s annualized revenue growth of 2.2% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Hilltop Holdings reported year-on-year revenue growth of 7.5%, and its $330.2 million of revenue exceeded Wall Street’s estimates by 6.3%.

Net interest income made up 32.8% of the company’s total revenue during the last five years, meaning Hilltop Holdings is well diversified and has a variety of income streams driving its overall growth. Nevertheless, net interest income is critical to analyze for banks because they’re considered a higher-quality, more recurring revenue source by investors.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, Hilltop Holdings’s efficiency ratio has swelled by 1.3 percentage points, going from 49% to 52.8%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q3, Hilltop Holdings’s efficiency ratio was 51.7%, beating analysts’ expectations by 3,237.5 basis points (100 basis points = 1 percentage point). This result was 3.5 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Hilltop Holdings to become less profitable as it anticipates an efficiency ratio of 86.2%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Hilltop Holdings, its EPS and revenue declined by 9.8% and 8.2% annually over the last five years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Hilltop Holdings’s low margin of safety could leave its stock price susceptible to large downswings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Hilltop Holdings’s two-year annual EPS growth of 23.7% was fantastic and topped its 2.2% two-year revenue growth.

We can take a deeper look into Hilltop Holdings’s earnings quality to better understand the drivers of its performance. A two-year view shows that Hilltop Holdings has repurchased its stock, shrinking its share count by 4.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q3, Hilltop Holdings reported EPS of $0.74, up from $0.46 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Hilltop Holdings’s full-year EPS of $2.51 to shrink by 29.7%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Hilltop Holdings’s TBVPS grew at an excellent 8.7% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 13.6% annually over the last two years from $27.67 to $35.69 per share.

Over the next 12 months, Consensus estimates call for Hilltop Holdings’s TBVPS to shrink by 10% to $32.13, a sour projection.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Hilltop Holdings has averaged a Tier 1 capital ratio of 20.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Hilltop Holdings has averaged an ROE of 8.6%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

It was good to see Hilltop Holdings beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 1.2% to $32.82 immediately following the results.

Updated: December 4, 2025 at 11:29 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Hilltop Holdings.

We see the value of companies driving economic growth, but in the case of Hilltop Holdings, we’re out. First off, its revenue has declined over the last five years. And while its TBVPS growth was good over the last five years, the downside is its projected EPS for the next year is lacking. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Hilltop Holdings’s P/B ratio based on the next 12 months is 1x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $35.33 on the company (compared to the current share price of $34.83).