Hilltop Holdings Inc. (HTH): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/HTH

Headline

Field	Value
Ticker	HTH
Company	Hilltop Holdings Inc.
Current price	$39.65/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	financials
Return on equity needed	10.2%
Return on equity now	7.6%
ROE gap	+2.6pp
Price-to-book	1.08x

Solve inputs: computed at a 9.7% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.1pp.

How unusual the bet is: within-range

Reference	Value
vs own history	+0.77σ
cohort percentile (of 163 peers)	21
sustained it ~10 years at this level	75%
implied end-window share	0%

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	1.35x	3	expensive
Earnings	0.93x	2	justifies
Relative	0.43x	3	justifies
Growth	0.96x	1	justifies

Families that justify the price: Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=9)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	—	—	no	—
Bank Fair Value (P/TBV)	—	$17.54	2.26x	yes	TBVPS $31.60 × 0.55x (ROE (TTM) 7.5% / CoE 9.3%, g=4.9% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 1.07% allowance/loans → ×0.93, NPL 0.68% → ×0.99)
Relative Valuation	Relative	$29.10	1.36x	yes	P/E 10x (static sector reference · 2026-04), scenarios: 8.4x / 10.0x / 11.6x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$29.45	1.35x	yes	BV/sh $36.21, ROE (TTM) 7.5%, ke 9.3%
Two-Stage Excess Return	Asset	$26.47	1.50x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$41.24	0.96x	yes	Rev $0.4B, growth 7% (input: historical growth; tapered), Terminal P/S: 4.4x / 5.2x / 6.1x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$92.40	0.43x	yes	EPS $2.64, growth 35% (input: historical EPS growth), PEG=0.42 (Undervalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	—	—	no	—
Graham Number	Asset	$46.38	0.85x	yes	√(22.5 × EPS $2.64 × BVPS $36.21) — Graham's conservative floor
EV/EBITDA Relative	Relative	—	—	no	—
FCF Yield	Earnings	—	—	no	—
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$85.18	0.47x	yes	EPS $2.64 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	—	—	no	—
PEG Fair Value	Relative	$99.00	0.40x	yes	EPS $2.64 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$28.54	1.39x	yes	EPS $2.64 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Share count CAGR (buyback)	-7.1%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

• Hilltop is a diversified Texas financial holding company, combining PlainsCapital Bank, the PrimeLending mortgage business, and the HilltopSecurities broker-dealer, so its results are a blend of net interest income, mortgage gains, and fee revenue rather than a single bank engine.
• The clearest risk is profitability: it earned a return on equity of about 7.1% in the first quarter, below its cost of equity, with PrimeLending posting a pretax loss as the mortgage market stays pressured by rate lock-in.
• Watch the capital return, which is the real story: with a common equity Tier 1 ratio of 19.1% and the share count shrinking about 7% a year, the company is buying back stock aggressively below where the market values a normal-return bank.

Bull Case

What the standard valuation lenses understate about Hilltop is the diversification that smooths its earnings across cycles. A pure bank lives and dies on net interest margin; Hilltop runs three businesses that lean against each other. When the bank is strong, it carries the group: PlainsCapital posted pretax income of $47 million in the first quarter on a net interest margin of 3.38%, with year-over-year growth in both core loans and core deposits. When mortgage struggles, fee businesses help fill the gap: HilltopSecurities grew pretax income 60% year over year to $15 million on strong fixed-income sales. The broker-dealer's role, in the company's own words, is "as a financial intermediary in customer transactions", a fee stream that does not depend on the rate environment the way lending does.

The capital position is the part the price seems to ignore, and it is exceptional for a bank this size. Common equity Tier 1 sits at 19.1%, far above regulatory minimums, which means the balance sheet carries a thick cushion and a large store of excess capital that management is actively returning. In the first quarter alone the company paid $11.8 million in dividends and repurchased $47.5 million of stock, and the share count has fallen about 7% a year. Buying back stock at roughly tangible book value, with tangible book value per share at $31.97, retires shares cheaply and lifts per-share book value for everyone who stays.

The setup is a self-help story that does not require a great economy. If mortgage merely stops being a drag, group return on equity climbs without the bank or the broker-dealer doing anything new. The bull case is a well-capitalized, deeply discounted financial whose management is using its excess capital to shrink the share count while it waits for the mortgage cycle to turn, with the bank and securities businesses already pulling their weight.

Bear Case

The bear case is easiest to read in how the valuation methods disagree, and the disagreement points at one number: return on equity. A bank is worth the return it earns on its capital, and at today's price near tangible book the market is assuming Hilltop sustains a return on equity around 10%. It recently earned about 7.1%. That gap is the whole argument. The conservative methods, which price the bank on what it actually earns rather than what it might earn, land below the price; only the methods that credit a recovery toward a normal return reach it. When a return on equity sits below the cost of equity, a bank arguably should trade below book, not at it, and the price is betting the profitability gap closes.

The piece dragging the return down is structural and not quickly fixed. PrimeLending posted a pretax loss of about $2 million, with profitability pressured by affordability and the rate lock-in that keeps existing homeowners from refinancing or moving. Mortgage origination is exposed to long-term interest-rate volatility, and the company describes managing strategies "in response to changes in interest rates" across its earning assets and funding. As long as rates stay high and the housing market stays frozen, the mortgage segment is a recurring weight on the group return, and the bear case is that the recovery toward a 10% return on equity the price assumes simply does not arrive on the timeline the market expects.

Competition is the slower pressure on the same return. The bank competes for deposits against money funds and securities that "may offer more attractive rates than insured depository institutions are willing to pay", and for loans on rate, fees, and service. That competition caps how far net interest margin can expand. The capital return is real and supportive, but a financial that earns below its cost of equity is, by definition, not creating value on the capital it retains, only on the capital it gives back. The bear case is that the buyback is the best thing about the story precisely because the operating return is not yet good enough.

Valuation

A bank is valued on the return it earns on its capital, so the lens here is price-to-book, not an operating multiple. At today's price near one times tangible book value of $31.97 per share, the market is assuming Hilltop sustains a return on equity of about 10%, against the roughly 7.1% it recently earned. Read those figures as a direction rather than a precise solve, but the structure of the bet is plain: the price requires the group return to climb back toward a normal level, and the gap between 10% assumed and 7.1% earned is the distance the buyer is underwriting.

The methods disagree in the way that gap implies. The peer-multiple lens and the earnings-power lens, which price the company on its current return, sit at or below the price; the asset-value lens reads it as somewhat full because trading at book is rich for a sub-cost-of-equity return. The growth-DCF lens, which credits a recovery, lands near the price. The composite reads as value or asset-supported rather than a growth bet, which fits: the price is supported by the demonstrated capital and the recovery case, not by an expectation of rapid growth. The relative-multiple lens in particular lands well below the price, a sign the market is not paying a premium versus peers so much as pricing a return rebound.

For a financial, solvency is read as regulatory capital and payout capacity, not net debt or interest coverage. On that frame Hilltop is unusually strong: a common equity Tier 1 ratio of 19.1% is a deep cushion, and the company is converting that excess capital into shareholder returns, $11.8 million of dividends and $47.5 million of buybacks in the quarter. The downside is bounded by that capital and by the tangible book the price sits near. The valuation does not rest on leverage; it rests on whether the operating return on that capital recovers toward what the price assumes, and the mortgage cycle is the largest single factor in whether it does.

Catalysts

The mortgage cycle is the catalyst that moves the group return the most. PrimeLending's pretax loss of about $2 million reflects affordability pressure and rate lock-in, so any easing in long-term rates that revives origination and refinancing volume would lift the segment from a drag toward a contributor, pulling the consolidated return on equity up toward the level the price assumes. The quarterly read on mortgage volumes and gain-on-sale margins is the clearest near-term signal for whether the recovery thesis is on track.

The capital-return pace is the other live catalyst, and it is within management's control. With common equity Tier 1 at 19.1%, the company has ample room to keep repurchasing stock; the size of buybacks in coming quarters is a direct statement of how cheap management thinks the shares are relative to tangible book. Strength at PlainsCapital, where net interest margin reached 3.38% with core loan and deposit growth, and at HilltopSecurities, where pretax income rose 60% year over year, are the offsets to watch, since their continued momentum is what lets the group return recover even while mortgage stays soft.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• BPOP (POPULAR, INC.)
• FY2025 10-K: …growth, and the qualitative reserve release recorded in 2024 due to the implementation of a new CRE non-owner occupied model; partially offset by lower NCOs and improvements in credit quality at the consumer portfolios. ● Non-interest income amounted to $166.3 million for the quarter ended December 31, 2025, compared…
• FY2025 10-K: …companies, institutional lenders, and other financial and non-financia l institutions and entities. Credit unions generally provide basic consume r financial services and collectively represent a significant portion of the market with a lower cost structure and fewer regulatory constraints. While our main competition…
• TRMK (Trustmark Corporation)
• FY2025 10-K: State Deposit Market Share Alabama 1.87 % Florida 0.17 % Mississippi 12.17 % Tennessee 0.30 % Texas 0.04 % Services provided by the Wealth Management Segment face competition from many national, regional and local financial institutions. Companies that offer broad services similar to those provided by Trustmark, such…
• FY2025 10-K: 8.5 % (1) Revenue is defined as net interest income plus noninterest income (loss). For additional information regarding the general development of Trustmark's business, see Part II. Item 6. - Selected Financial Data and Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations of…
• WAFD (WAFD, INC.)
• FY2025 10-K: …$16,000,000 recorded on LBC loans acquired, as well as adjustments resulting from qualitative considerations such as prolonged and intensified borrower sensitivity to high interest rates and operating costs due to inflationary pressures. For the year ended September 30, 2025 , net charge-offs were $11,783,000 ,…
• FY2025 10-K: …Statements and Supplementary Data" of this report. Loans receivable: Loans receivable, net of related contra accounts, decreased $827,736,000 , or 4.0% , to $20,088,618,000 at September 30, 2025 , from $20,916,354,000 one year earlier. The balance change reflects originations of $3,956,199,000 , a decrease to…
• CFR (Cullen/Frost Bankers, Inc.)
• FY2025 10-K: …Operations" in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 17 - Operating Segments in the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report. Competition There is significant…
• FY2025 10-K: …things. 51 Table of Contents Results of Segment Operations We are managed under a matrix organizational structure whereby our two primary operating segments, Banking and Frost Wealth Advisors, overlap a regional reporting structure. A third operating segment, Non-Banks, is for the most part the parent holding…
• FNB (FNB CORP/PA/)
• FY2025 10-K: …employment status and income; • Residential mortgages consist of conventional and jumbo mortgage loans, including construction loans, for 1-4 family properties where the primary default risk driver is the borrower's employment status and income; • Indirect installment is comprised of loans originated by approved…
• FY2025 10-K: Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. We compete for loans, deposits and financial services business with a large number of bank and non-bank financial institutions and other lenders engaged in the business of extending credit, including financial…
• FSUN (FIRSTSUN CAPITAL BANCORP)
• FY2025 10-K: …and improving profitability through centralized efficiencies. We maintain a high-degree of scalability to control costs in the event of a downturn in our mortgage business. Our mortgage loan office leases are primarily shorter-term in nature and the majority of our mortgage-related compensation is in the form of…
• FY2025 10-K: …reported in this segment. Corporate represents miscellaneous other expenses of a corporate nature as well as revenue and expenses not directly assigned or allocated to the Banking or Mortgage Operations segments. The majority of executive management's time is spent managing operating segments; related costs have been…
• UCB (UNITED COMMUNITY BANKS INC)
• FY2025 10-K: …deposits and capital to fund anticipated loan growth; • maintain adequate common equity and regulatory capital while managing the liquidity and capital requirements associated with growth, especially organic growth and cash-funded acquisitions; • hire and retain adequate bankers, management personnel and systems to…
• FY2025 10-K: …of operations and financial condition. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on our business, financial condition and results of…
• BANC (BANC OF CALIFORNIA, INC.)
• FY2025 10-K: …offer a broader range of financial services than our operations. Our most direct competition for loans comes from larger regional and national banks, diversified finance companies, venture debt funds, and community banks that target the same customers as we do. In recent years, competition has increased from…
• FY2025 10-K: …counterparty or client. 31 Strong competition within our market areas may limit our growth and profitability. Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 FY2026 results, April 2026 · company FY2025 10-K