Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2022 By: Hilltop Holdings Inc. via Business Wire July 21, 2022 at 16:45 PM EDT Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the second quarter of 2022. Hilltop produced income to common stockholders of $33.3 million, or $0.45 per diluted share, for the second quarter of 2022, compared to $99.1 million, or $1.21 per diluted share, for the second quarter of 2021. Hilltop’s financial results for the second quarter of 2022 reflect a significant decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income and an increase in the banking segment’s provision for credit losses due to a deteriorating U.S. economic outlook. Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on August 26, 2022, to all common stockholders of record as of the close of business on August 12, 2022. Additionally, during the second quarter of 2022, Hilltop paid $442.3 million to repurchase approximately 14.87 million shares of its common stock at a price of $29.75 per share pursuant to the tender offer completed in May 2022. These shares were returned to the pool of authorized but unissued shares of common stock. As a result of share repurchases during 2022, Hilltop has no further available share repurchase capacity associated with its previously authorized stock repurchase program. Identified headwinds during 2022, including tight housing inventories on mortgage volumes, declining deposit balances, increases in market interest rates, and uncertainties related to inflationary pressures on expenses, coupled with a declining economic forecast, rapid increases in the 10-year U.S. treasury bond yield and mortgage interest rates, and exposure to increasing funding costs during the first half of 2022 have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2022. The COVID-19 pandemic may also continue to adversely impact financial markets and overall economic conditions. The extent of the impact of the pandemic on our operational and financial performance for the remainder of 2022 remains uncertain. Jeremy B. Ford, President and CEO of Hilltop, said, “Our second quarter results demonstrate again the value of the Hilltop business model, despite a challenging economic environment. PlainsCapital Bank performed well with another quarter of solid loan growth and healthy credit metrics across the loan portfolio. Additionally, the Bank realized net interest margin expansion as it prudently manages deposit costs and captures the benefits of the rising rate environment. PrimeLending and HilltopSecurities experienced a continuation of the challenging market faced in the first quarter with elevated and volatile interest rates paired with lower demand for new home purchases. Importantly, both PrimeLending and HilltopSecurities were profitable during these challenging times as a result of strong expense discipline and experienced management teams. “We were also pleased to return meaningful capital to stockholders through a successful tender offer in May. This transaction demonstrates our conviction in the long-term strategy of Hilltop, as we bought back almost 19% of the outstanding shares while still retaining excess capital for future growth.” Second Quarter 2022 Highlights for Hilltop: The provision for credit losses was $5.3 million during the second quarter of 2022, compared to a provision for credit losses of $0.1 million in the first quarter of 2022 and a reversal of credit losses of $28.7 million in the second quarter of 2021; The provision for credit losses during the second quarter of 2022 primarily reflected an increase in the expected lifetime credit losses under CECL on collectively evaluated loans within the portfolio attributable to a deteriorating U.S. economic outlook since the prior quarter, partially offset by decreases in specific reserves and positive risk rating grade migration. For the second quarter of 2022, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $139.9 million, compared to $241.8 million in the second quarter of 2021, a 42.1% decrease; Mortgage loan origination production volume was $3.8 billion during the second quarter of 2022, compared to $5.9 billion in the second quarter of 2021; Net gains from mortgage loans sold to third parties decreased to 260 basis points during the second quarter of 2022, compared to 321 basis points in the first quarter of 2022. Hilltop’s consolidated annualized return on average assets and return on average equity for the second quarter of 2022 were 0.80% and 5.82%, respectively, compared to 2.29% and 16.42%, respectively, for the second quarter of 2021; Hilltop’s book value per common share increased to $31.43 at June 30, 2022, compared to $31.02 at March 31, 2022; Hilltop’s total assets were $16.7 billion and $18.4 billion at June 30, 2022 and March 31, 2022, respectively; Loans1, net of allowance for credit losses, increased to $7.4 billion at June 30, 2022 compared to $7.2 billion at March 31, 2022; Non-performing loans were $35.7 million, or 0.38% of total loans, at June 30, 2022, compared to $44.3 million, or 0.47% of total loans, at March 31, 2022; Loans held for sale decreased by 9.3% from March 31, 2022 to $1.5 billion at June 30, 2022; Total deposits were $11.9 billion and $12.7 billion at June 30, 2022 and March 31, 2022, respectively; Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 10.53% and a Common Equity Tier 1 Capital Ratio of 17.24% at June 30, 2022; Hilltop’s consolidated net interest margin4 increased to 2.75% for the second quarter of 2022, compared to 2.36% in the first quarter of 2022; Includes previously deferred interest income of $1.3 million during the second quarter of 2022 related to PPP loan-related origination fees, compared to $5.4 million in the second quarter of 2021. For the second quarter of 2022, noninterest income was $239.3 million, compared to $339.9 million in the second quarter of 2021, a 29.6% decrease; For the second quarter 2022, noninterest expense was $298.5 million, compared to $343.4 million in the second quarter of 2021, a 13.1% decrease; and Hilltop’s effective tax rate was 25.6% during the second quarter of 2022, compared to 23.5% during the same period in 2021. The effective tax rate for the second quarter of 2022 was higher than the applicable statutory rate primarily due to the impact of non-deductible compensation expense and other permanent adjustments. ________________________________________ 1 “Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $462.4 million and $506.2 million at June 30, 2022 and March 31, 2022, respectively. 2 Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period. 3 Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets. 4 Net interest margin is defined as net interest income divided by average interest-earning assets. Consolidated Financial and Other Information Consolidated Balance Sheets June 30, March 31, December 31, September 30, June 30, (in 000's) 2022 2022 2021 2021 2021 Cash and due from banks $ 1,783,554 $ 2,886,812 $ 2,823,138 $ 2,463,111 $ 1,372,818 Federal funds sold 381 383 385 406 387 Assets segregated for regulatory purposes 120,816 128,408 221,740 269,506 207,284 Securities purchased under agreements to resell 139,929 256,991 118,262 155,908 202,638 Securities: Trading, at fair value 593,273 471,763 647,998 609,813 682,483 Available for sale, at fair value, net 1,562,222 1,462,340 2,130,568 1,994,183 1,817,807 Held to maturity, at amortized cost, net 920,583 953,107 267,684 277,419 288,776 Equity, at fair value 197 225 250 221 193 3,076,275 2,887,435 3,046,500 2,881,636 2,789,259 Loans held for sale 1,491,579 1,643,994 1,878,190 2,108,878 2,885,458 Loans held for investment, net of unearned income 7,930,619 7,797,903 7,879,904 7,552,926 7,645,227 Allowance for credit losses (95,298 ) (91,185 ) (91,352 ) (109,512 ) (115,269 ) Loans held for investment, net 7,835,321 7,706,718 7,788,552 7,443,414 7,529,958 Broker-dealer and clearing organization receivables 1,049,830 1,610,352 1,672,946 1,419,652 1,403,447 Premises and equipment, net 195,361 198,906 204,438 210,026 212,402 Operating lease right-of-use assets 106,806 108,180 112,328 115,942 115,698 Mortgage servicing assets 121,688 100,475 86,990 110,931 124,497 Other assets 513,570 546,622 452,880 526,339 535,536 Goodwill 267,447 267,447 267,447 267,447 267,447 Other intangible assets, net 13,182 14,233 15,284 16,455 17,705 Total assets $ 16,715,739 $ 18,356,956 $ 18,689,080 $ 17,989,651 $ 17,664,534 Deposits: Noninterest-bearing $ 4,601,643 $ 4,694,592 $ 4,577,183 $ 4,433,148 $ 4,231,082 Interest-bearing 7,319,143 7,972,110 8,240,894 7,699,014 7,502,703 Total deposits 11,920,786 12,666,702 12,818,077 12,132,162 11,733,785 Broker-dealer and clearing organization payables 934,818 1,397,836 1,477,300 1,496,923 1,439,620 Short-term borrowings 822,649 835,054 859,444 747,040 915,919 Securities sold, not yet purchased, at fair value 135,968 97,629 96,586 113,064 132,950 Notes payable 389,722 395,479 387,904 395,804 396,653 Operating lease liabilities 124,406 125,919 130,960 134,296 134,019 Junior subordinated debentures — — — — 67,012 Other liabilities 329,987 347,742 369,606 468,020 348,200 Total liabilities 14,658,336 15,866,361 16,139,877 15,487,309 15,168,158 Common stock 646 794 790 790 812 Additional paid-in capital 1,039,261 1,275,649 1,274,446 1,270,272 1,302,439 Accumulated other comprehensive income (loss) (95,279 ) (80,565 ) (10,219 ) 367 7,093 Retained earnings 1,085,208 1,267,415 1,257,014 1,204,307 1,159,304 Deferred compensation employee stock trust, net 695 744 752 751 754 Employee stock trust (954 ) (104 ) (115 ) (116 ) (121 ) Total Hilltop stockholders' equity 2,029,577 2,463,933 2,522,668 2,476,371 2,470,281 Noncontrolling interests 27,826 26,662 26,535 25,971 26,095 Total stockholders' equity 2,057,403 2,490,595 2,549,203 2,502,342 2,496,376 Total liabilities & stockholders' equity $ 16,715,739 $ 18,356,956 $ 18,689,080 $ 17,989,651 $ 17,664,534 Three Months Ended Consolidated Income Statements June 30, March 31, December 31, September 30, June 30, (in 000's, except per share data) 2022 2022 2021 2021 2021 Interest income: Loans, including fees $ 98,728 $ 90,408 $ 96,104 $ 99,769 $ 104,162 Securities borrowed 10,498 8,817 8,524 8,585 15,586 Securities: Taxable 17,288 15,581 13,916 12,341 11,125 Tax-exempt 2,141 2,419 2,639 2,687 2,338 Other 6,478 2,312 1,872 1,796 1,607 Total interest income 135,133 119,537 123,055 125,178 134,818 Interest expense: Deposits 5,456 4,193 4,404 5,303 6,176 Securities loaned 8,512 7,472 6,624 6,519 12,345 Short-term borrowings 3,020 2,045 2,279 2,400 2,374 Notes payable 3,809 4,437 5,871 5,465 5,253 Junior subordinated debentures — — — 419 577 Other 2,280 1,399 (417 ) (18 ) 177 Total interest expense 23,077 19,546 18,761 20,088 26,902 Net interest income 112,056 99,991 104,294 105,090 107,916 Provision for (reversal of) credit losses 5,336 115 (18,565 ) (5,819 ) (28,720 ) Net interest income after provision for (reversal of) credit losses 106,720 99,876 122,859 110,909 136,636 Noninterest income: Net gains from sale of loans and other mortgage production income 97,543 110,894 156,103 203,152 199,625 Mortgage loan origination fees 42,378 32,062 35,930 38,780 42,146 Securities commissions and fees 34,757 37,146 32,801 34,412 38,300 Investment and securities advisory fees and commissions 32,002 29,705 42,834 49,646 32,268 Other 32,593 6,621 17,178 41,955 27,560 Total noninterest income 239,273 216,428 284,846 367,945 339,899 Noninterest expense: Employees' compensation and benefits 205,327 200,019 229,717 258,679 248,486 Occupancy and equipment, net 24,231 24,766 25,741 25,428 25,004 Professional services 16,246 10,063 9,904 14,542 16,239 Other 52,739 51,502 56,832 56,525 53,639 Total noninterest expense 298,543 286,350 322,194 355,174 343,368 Income before income taxes 47,450 29,954 85,511 123,680 133,167 Income tax expense 12,127 5,815 20,715 28,257 31,234 Net income 35,323 24,139 64,796 95,423 101,933 Less: Net income attributable to noncontrolling interest 2,063 1,889 2,611 2,517 2,873 Income attributable to Hilltop $ 33,260 $ 22,250 $ 62,185 $ 92,906 $ 99,060 Earnings per common share: Basic $ 0.45 $ 0.28 $ 0.79 $ 1.16 $ 1.21 Diluted $ 0.45 $ 0.28 $ 0.78 $ 1.15 $ 1.21 Cash dividends declared per common share $ 0.15 $ 0.15 $ 0.12 $ 0.12 $ 0.12 Weighted average shares outstanding: Basic 73,693 79,114 78,933 80,109 81,663 Diluted 73,838 79,356 79,427 80,542 82,199 Three Months Ended June 30, 2022 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 101,259 $ 12,578 $ (1,291 ) $ (3,190 ) $ 2,700 $ 112,056 Provision for (reversal of) credit losses 5,025 311 — — — 5,336 Noninterest income 12,467 87,651 140,082 2,080 (3,007 ) 239,273 Noninterest expense 57,331 90,817 133,169 17,561 (335 ) 298,543 Income (loss) before taxes $ 51,370 $ 9,101 $ 5,622 $ (18,671 ) $ 28 $ 47,450 Six Months Ended June 30, 2022 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 193,329 $ 24,096 $ (3,127 ) $ (6,580 ) $ 4,329 $ 212,047 Provision for (reversal of) credit losses 4,975 476 — — — 5,451 Noninterest income 25,237 148,341 283,276 3,846 (4,999 ) 455,701 Noninterest expense 115,761 171,464 268,027 30,354 (713 ) 584,893 Income (loss) before taxes $ 97,830 $ 497 $ 12,122 $ (33,088 ) $ 43 $ 77,404 Three Months Ended June 30, March 31, December 31, September 30, June 30, Selected Financial Data 2022 2022 2021 2021 2021 Hilltop Consolidated: Return on average stockholders' equity 5.82% 3.60% 9.93% 14.96% 16.42% Return on average assets 0.80% 0.53% 1.41% 2.13% 2.29% Net interest margin (1) 2.75% 2.36% 2.44% 2.53% 2.62% Net interest margin (taxable equivalent) (2): As reported 2.76% 2.37% 2.45% 2.54% 2.63% Impact of purchase accounting 8 bps 7 bps 12 bps 9 bps 16 bps Book value per common share ($) 31.43 31.02 31.95 31.36 30.44 Shares outstanding, end of period (000's) 64,576 79,439 78,965 78,959 81,153 Dividend payout ratio (3) 33.33% 53.57% 15.19% 10.34% 9.92% Banking Segment: Net interest margin (1) 2.97% 2.65% 2.81% 2.99% 3.19% Net interest margin (taxable equivalent) (2): As reported 2.98% 2.65% 2.82% 3.00% 3.20% Impact of purchase accounting 10 bps 8 bps 15 bps 11 bps 20 bps Accretion of discount on loans ($000's) 3,011 2,510 4,716 3,221 6,001 Net recoveries (charge-offs) ($000's) (1,223) (282) 405 62 (510) Return on average assets 1.09% 0.98% 1.44% 1.36% 1.91% Fee income ratio 11.0% 12.2% 10.8% 10.5% 8.9% Efficiency ratio 50.4% 55.7% 54.2% 48.8% 49.7% Employees' compensation and benefits ($000's) 33,554 33,517 34,415 31,500 33,369 Broker-Dealer Segment: Net revenue ($000's) (4) 100,229 72,209 94,569 126,570 94,145 Employees' compensation and benefits ($000's) 64,494 55,825 65,301 82,429 62,289 Variable compensation expense ($000's) 37,471 26,625 35,939 53,505 34,409 Compensation as a % of net revenue 64.3% 77.3% 69.1% 65.1% 66.2% Pre-tax margin (5) 9.1% (11.9)% 1.8% 13.8% 7.3% Mortgage Origination Segment: Mortgage loan originations - volume ($000's): Home purchases 3,342,103 2,753,031 3,559,137 3,948,420 4,018,922 Refinancings 467,117 1,011,452 1,430,369 1,646,208 1,881,121 Total mortgage loan originations - volume 3,809,220 3,764,483 4,989,506 5,594,628 5,900,043 Mortgage loan sales - volume ($000's) 3,872,935 3,868,596 4,988,538 6,195,559 5,524,226 Net gains from mortgage loan sales (basis points): Loans sold to third parties 260 321 362 359 376 Impact of loans retained by banking segment (7) (9) (15) (13) (12) As reported 253 312 347 346 364 Mortgage servicing rights asset ($000's) (6) 121,688 100,475 86,990 110,931 124,497 Employees' compensation and benefits ($000's) 100,206 102,748 121,758 134,814 145,401 Variable compensation expense ($000's) 56,525 56,243 73,208 88,153 97,081 ____________________________________________ (1) Net interest margin is defined as net interest income divided by average interest-earning assets. (2) Net interest margin (taxable equivalent), a non-GAAP measure, is defined as taxable equivalent net interest income divided by average interest-earning assets. Taxable equivalent adjustments are based on the applicable 21% federal income tax rate for all periods presented. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. The taxable equivalent adjustments to interest income for Hilltop (consolidated) were $0.4 million, $0.5 million, $0.5 million, $0.6 million, and $0.4 million, respectively, for the periods presented and for the banking segment were $0.2 million for each of the periods presented. (3) Dividend payout ratio is defined as cash dividends declared per common share divided by basic earnings per common share. (4) Net revenue is defined as the sum of total broker-dealer net interest income and total broker-dealer noninterest income. (5) Pre-tax margin is defined as income before income taxes divided by net revenue. (6) Reported on a consolidated basis and therefore does not include mortgage servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation. June 30, March 31, December 31, September 30, June 30, Capital Ratios 2022 2022 2021 2021 2021 Tier 1 capital (to average assets): PlainsCapital 9.67 % 9.74 % 10.20 % 10.02 % 10.22 % Hilltop 10.53 % 12.46 % 12.58 % 12.64 % 12.87 % Common equity Tier 1 capital (to risk-weighted assets): PlainsCapital 14.65 % 15.37 % 16.00 % 15.40 % 15.00 % Hilltop 17.24 % 21.27 % 21.22 % 21.28 % 20.22 % Tier 1 capital (to risk-weighted assets): PlainsCapital 14.65 % 15.37 % 16.00 % 15.40 % 15.00 % Hilltop 17.24 % 21.27 % 21.22 % 21.28 % 20.82 % Total capital (to risk-weighted assets): PlainsCapital 15.55 % 16.18 % 16.77 % 16.32 % 15.95 % Hilltop 19.90 % 23.85 % 23.75 % 24.00 % 23.48 % June 30, March 31, December 31, September 30, June 30, Non-Performing Assets Portfolio Data 2022 2022 2021 2021 2021 Loans accounted for on a non-accrual basis ($000's) (1): Commercial real estate 4,947 6,153 6,601 5,705 7,211 Commercial and industrial 13,315 18,486 22,478 29,808 33,033 Construction and land development 1 1 2 366 474 1-4 family residential 16,542 18,723 21,123 25,255 27,100 Consumer 19 21 23 24 26 Broker-dealer — — — — — 34,824 43,384 50,227 61,158 67,844 Troubled debt restructurings included in accruing loans held for investment ($000's) 857 890 922 1,038 1,139 Non-performing loans ($000's) 35,681 44,274 51,149 62,196 68,983 Non-performing loans as a % of total loans 0.38 % 0.47 % 0.52 % 0.64 % 0.66 % Other real estate owned ($000's) 1,516 2,175 2,833 21,605 21,078 Other repossessed assets ($000's) — — — — — Non-performing assets ($000's) 37,197 46,449 53,982 83,801 90,061 Non-performing assets as a % of total assets 0.22 % 0.25 % 0.29 % 0.47 % 0.51 % Loans past due 90 days or more and still accruing ($000's) (2): 82,410 87,489 60,775 175,734 245,828 _____________________________________ (1) Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications through January 1, 2022. The Bank’s COVID-19 payment deferral programs since the second quarter of 2020 allowed for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. For the periods presented, the Bank’s actions through December 31, 2021 included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $4 million, $17 million and $76 million as of December 31, 2021, September 30, 2021 and June 30, 2021, respectively. (2) Loans past due 90 days or more and still accruing were primarily comprised of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending. Three Months Ended June 30, 2022 2021 Average Interest Annualized Average Interest Annualized Outstanding Earned Yield or Outstanding Earned Yield or Net Interest Margin (Taxable Equivalent) Details (1) Balance or Paid Rate Balance or Paid Rate Assets Interest-earning assets Loans held for sale $ 1,375,395 $ 14,302 4.16 % $ 2,450,897 $ 17,128 2.80 % Loans held for investment, gross (2) 7,838,090 84,426 4.32 % 7,725,906 87,034 4.48 % Investment securities - taxable 2,779,458 17,288 2.49 % 2,443,486 11,106 1.82 % Investment securities - non-taxable (3) 250,303 2,557 4.09 % 320,685 2,731 3.41 % Federal funds sold and securities purchased under agreements to resell 193,851 481 1.00 % 159,400 — 0.00 % Interest-bearing deposits in other financial institutions 2,602,154 4,984 0.77 % 1,861,861 628 0.14 % Securities borrowed 1,273,368 10,498 3.26 % 1,490,097 15,586 4.14 % Other 53,962 1,013 7.53 % 49,579 994 8.04 % Interest-earning assets, gross (3) 16,366,581 135,549 3.32 % 16,501,911 135,207 3.26 % Allowance for credit losses (91,619 ) (144,105 ) Interest-earning assets, net 16,274,962 16,357,806 Noninterest-earning assets 1,516,266 1,475,422 Total assets $ 17,791,228 $ 17,833,228 Liabilities and Stockholders' Equity Interest-bearing liabilities Interest-bearing deposits $ 7,768,772 $ 5,456 0.28 % $ 7,740,066 $ 6,176 0.32 % Securities loaned 1,114,923 8,512 3.06 % 1,411,961 12,345 3.51 % Notes payable and other borrowings 1,303,678 9,109 2.80 % 1,271,609 8,381 2.64 % Total interest-bearing liabilities 10,187,373 23,077 0.91 % 10,423,636 26,902 1.03 % Noninterest-bearing liabilities Noninterest-bearing deposits 4,552,424 4,090,425 Other liabilities 731,635 872,916 Total liabilities 15,471,432 15,386,977 Stockholders’ equity 2,292,816 2,420,436 Noncontrolling interest 26,980 25,815 Total liabilities and stockholders' equity $ 17,791,228 $ 17,833,228 Net interest income (3) $ 112,472 $ 108,305 Net interest spread (3) 2.41 % 2.23 % Net interest margin (3) 2.76 % 2.63 % _______________________________________ (1) Information presented on a consolidated basis. (2) Average balance includes non-accrual loans. (3) Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rates for the periods presented. The adjustment to interest income was $0.4 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively. Conference Call Information Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, July 22, 2022. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second quarter 2022 financial results. Interested parties can access the conference call by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 416063. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop-holdings.com). About Hilltop Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank’s wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings’ broker-dealer subsidiaries, Hilltop Securities Inc. and Momentum Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At June 30, 2022, Hilltop employed approximately 4,650 people and operated approximately 385 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and Hilltopsecurities.com. FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “continue,” “could,” “drive,” “estimates,��� “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “projects,” “seeks,” “should,” “target,” “view,” “well-tuned,” “will” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: (i) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (ii) effectiveness of our data security controls in the face of cyber attacks; (iii) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (iv) changes in the interest rate environment; (v) the COVID-19 pandemic and the response of governmental authorities to the pandemic and disruptions in global or national supply chains, which have had, and may continue to have, an adverse impact on the global economy and our business operations and performance; (vi) transitions away from the London Interbank Offered Rate; and (vii) risks associated with concentration in real estate related loans. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement. View source version on businesswire.com: https://www.businesswire.com/news/home/20220721005882/en/Contacts Investor Relations Contact: Erik Yohe 214-525-4634 eyohe@hilltop-holdings.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2022 By: Hilltop Holdings Inc. via Business Wire July 21, 2022 at 16:45 PM EDT Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the second quarter of 2022. Hilltop produced income to common stockholders of $33.3 million, or $0.45 per diluted share, for the second quarter of 2022, compared to $99.1 million, or $1.21 per diluted share, for the second quarter of 2021. Hilltop’s financial results for the second quarter of 2022 reflect a significant decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income and an increase in the banking segment’s provision for credit losses due to a deteriorating U.S. economic outlook. Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on August 26, 2022, to all common stockholders of record as of the close of business on August 12, 2022. Additionally, during the second quarter of 2022, Hilltop paid $442.3 million to repurchase approximately 14.87 million shares of its common stock at a price of $29.75 per share pursuant to the tender offer completed in May 2022. These shares were returned to the pool of authorized but unissued shares of common stock. As a result of share repurchases during 2022, Hilltop has no further available share repurchase capacity associated with its previously authorized stock repurchase program. Identified headwinds during 2022, including tight housing inventories on mortgage volumes, declining deposit balances, increases in market interest rates, and uncertainties related to inflationary pressures on expenses, coupled with a declining economic forecast, rapid increases in the 10-year U.S. treasury bond yield and mortgage interest rates, and exposure to increasing funding costs during the first half of 2022 have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2022. The COVID-19 pandemic may also continue to adversely impact financial markets and overall economic conditions. The extent of the impact of the pandemic on our operational and financial performance for the remainder of 2022 remains uncertain. Jeremy B. Ford, President and CEO of Hilltop, said, “Our second quarter results demonstrate again the value of the Hilltop business model, despite a challenging economic environment. PlainsCapital Bank performed well with another quarter of solid loan growth and healthy credit metrics across the loan portfolio. Additionally, the Bank realized net interest margin expansion as it prudently manages deposit costs and captures the benefits of the rising rate environment. PrimeLending and HilltopSecurities experienced a continuation of the challenging market faced in the first quarter with elevated and volatile interest rates paired with lower demand for new home purchases. Importantly, both PrimeLending and HilltopSecurities were profitable during these challenging times as a result of strong expense discipline and experienced management teams. “We were also pleased to return meaningful capital to stockholders through a successful tender offer in May. This transaction demonstrates our conviction in the long-term strategy of Hilltop, as we bought back almost 19% of the outstanding shares while still retaining excess capital for future growth.” Second Quarter 2022 Highlights for Hilltop: The provision for credit losses was $5.3 million during the second quarter of 2022, compared to a provision for credit losses of $0.1 million in the first quarter of 2022 and a reversal of credit losses of $28.7 million in the second quarter of 2021; The provision for credit losses during the second quarter of 2022 primarily reflected an increase in the expected lifetime credit losses under CECL on collectively evaluated loans within the portfolio attributable to a deteriorating U.S. economic outlook since the prior quarter, partially offset by decreases in specific reserves and positive risk rating grade migration. For the second quarter of 2022, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $139.9 million, compared to $241.8 million in the second quarter of 2021, a 42.1% decrease; Mortgage loan origination production volume was $3.8 billion during the second quarter of 2022, compared to $5.9 billion in the second quarter of 2021; Net gains from mortgage loans sold to third parties decreased to 260 basis points during the second quarter of 2022, compared to 321 basis points in the first quarter of 2022. Hilltop’s consolidated annualized return on average assets and return on average equity for the second quarter of 2022 were 0.80% and 5.82%, respectively, compared to 2.29% and 16.42%, respectively, for the second quarter of 2021; Hilltop’s book value per common share increased to $31.43 at June 30, 2022, compared to $31.02 at March 31, 2022; Hilltop’s total assets were $16.7 billion and $18.4 billion at June 30, 2022 and March 31, 2022, respectively; Loans1, net of allowance for credit losses, increased to $7.4 billion at June 30, 2022 compared to $7.2 billion at March 31, 2022; Non-performing loans were $35.7 million, or 0.38% of total loans, at June 30, 2022, compared to $44.3 million, or 0.47% of total loans, at March 31, 2022; Loans held for sale decreased by 9.3% from March 31, 2022 to $1.5 billion at June 30, 2022; Total deposits were $11.9 billion and $12.7 billion at June 30, 2022 and March 31, 2022, respectively; Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 10.53% and a Common Equity Tier 1 Capital Ratio of 17.24% at June 30, 2022; Hilltop’s consolidated net interest margin4 increased to 2.75% for the second quarter of 2022, compared to 2.36% in the first quarter of 2022; Includes previously deferred interest income of $1.3 million during the second quarter of 2022 related to PPP loan-related origination fees, compared to $5.4 million in the second quarter of 2021. For the second quarter of 2022, noninterest income was $239.3 million, compared to $339.9 million in the second quarter of 2021, a 29.6% decrease; For the second quarter 2022, noninterest expense was $298.5 million, compared to $343.4 million in the second quarter of 2021, a 13.1% decrease; and Hilltop’s effective tax rate was 25.6% during the second quarter of 2022, compared to 23.5% during the same period in 2021. The effective tax rate for the second quarter of 2022 was higher than the applicable statutory rate primarily due to the impact of non-deductible compensation expense and other permanent adjustments. ________________________________________ 1 “Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $462.4 million and $506.2 million at June 30, 2022 and March 31, 2022, respectively. 2 Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period. 3 Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets. 4 Net interest margin is defined as net interest income divided by average interest-earning assets. Consolidated Financial and Other Information Consolidated Balance Sheets June 30, March 31, December 31, September 30, June 30, (in 000's) 2022 2022 2021 2021 2021 Cash and due from banks $ 1,783,554 $ 2,886,812 $ 2,823,138 $ 2,463,111 $ 1,372,818 Federal funds sold 381 383 385 406 387 Assets segregated for regulatory purposes 120,816 128,408 221,740 269,506 207,284 Securities purchased under agreements to resell 139,929 256,991 118,262 155,908 202,638 Securities: Trading, at fair value 593,273 471,763 647,998 609,813 682,483 Available for sale, at fair value, net 1,562,222 1,462,340 2,130,568 1,994,183 1,817,807 Held to maturity, at amortized cost, net 920,583 953,107 267,684 277,419 288,776 Equity, at fair value 197 225 250 221 193 3,076,275 2,887,435 3,046,500 2,881,636 2,789,259 Loans held for sale 1,491,579 1,643,994 1,878,190 2,108,878 2,885,458 Loans held for investment, net of unearned income 7,930,619 7,797,903 7,879,904 7,552,926 7,645,227 Allowance for credit losses (95,298 ) (91,185 ) (91,352 ) (109,512 ) (115,269 ) Loans held for investment, net 7,835,321 7,706,718 7,788,552 7,443,414 7,529,958 Broker-dealer and clearing organization receivables 1,049,830 1,610,352 1,672,946 1,419,652 1,403,447 Premises and equipment, net 195,361 198,906 204,438 210,026 212,402 Operating lease right-of-use assets 106,806 108,180 112,328 115,942 115,698 Mortgage servicing assets 121,688 100,475 86,990 110,931 124,497 Other assets 513,570 546,622 452,880 526,339 535,536 Goodwill 267,447 267,447 267,447 267,447 267,447 Other intangible assets, net 13,182 14,233 15,284 16,455 17,705 Total assets $ 16,715,739 $ 18,356,956 $ 18,689,080 $ 17,989,651 $ 17,664,534 Deposits: Noninterest-bearing $ 4,601,643 $ 4,694,592 $ 4,577,183 $ 4,433,148 $ 4,231,082 Interest-bearing 7,319,143 7,972,110 8,240,894 7,699,014 7,502,703 Total deposits 11,920,786 12,666,702 12,818,077 12,132,162 11,733,785 Broker-dealer and clearing organization payables 934,818 1,397,836 1,477,300 1,496,923 1,439,620 Short-term borrowings 822,649 835,054 859,444 747,040 915,919 Securities sold, not yet purchased, at fair value 135,968 97,629 96,586 113,064 132,950 Notes payable 389,722 395,479 387,904 395,804 396,653 Operating lease liabilities 124,406 125,919 130,960 134,296 134,019 Junior subordinated debentures — — — — 67,012 Other liabilities 329,987 347,742 369,606 468,020 348,200 Total liabilities 14,658,336 15,866,361 16,139,877 15,487,309 15,168,158 Common stock 646 794 790 790 812 Additional paid-in capital 1,039,261 1,275,649 1,274,446 1,270,272 1,302,439 Accumulated other comprehensive income (loss) (95,279 ) (80,565 ) (10,219 ) 367 7,093 Retained earnings 1,085,208 1,267,415 1,257,014 1,204,307 1,159,304 Deferred compensation employee stock trust, net 695 744 752 751 754 Employee stock trust (954 ) (104 ) (115 ) (116 ) (121 ) Total Hilltop stockholders' equity 2,029,577 2,463,933 2,522,668 2,476,371 2,470,281 Noncontrolling interests 27,826 26,662 26,535 25,971 26,095 Total stockholders' equity 2,057,403 2,490,595 2,549,203 2,502,342 2,496,376 Total liabilities & stockholders' equity $ 16,715,739 $ 18,356,956 $ 18,689,080 $ 17,989,651 $ 17,664,534 Three Months Ended Consolidated Income Statements June 30, March 31, December 31, September 30, June 30, (in 000's, except per share data) 2022 2022 2021 2021 2021 Interest income: Loans, including fees $ 98,728 $ 90,408 $ 96,104 $ 99,769 $ 104,162 Securities borrowed 10,498 8,817 8,524 8,585 15,586 Securities: Taxable 17,288 15,581 13,916 12,341 11,125 Tax-exempt 2,141 2,419 2,639 2,687 2,338 Other 6,478 2,312 1,872 1,796 1,607 Total interest income 135,133 119,537 123,055 125,178 134,818 Interest expense: Deposits 5,456 4,193 4,404 5,303 6,176 Securities loaned 8,512 7,472 6,624 6,519 12,345 Short-term borrowings 3,020 2,045 2,279 2,400 2,374 Notes payable 3,809 4,437 5,871 5,465 5,253 Junior subordinated debentures — — — 419 577 Other 2,280 1,399 (417 ) (18 ) 177 Total interest expense 23,077 19,546 18,761 20,088 26,902 Net interest income 112,056 99,991 104,294 105,090 107,916 Provision for (reversal of) credit losses 5,336 115 (18,565 ) (5,819 ) (28,720 ) Net interest income after provision for (reversal of) credit losses 106,720 99,876 122,859 110,909 136,636 Noninterest income: Net gains from sale of loans and other mortgage production income 97,543 110,894 156,103 203,152 199,625 Mortgage loan origination fees 42,378 32,062 35,930 38,780 42,146 Securities commissions and fees 34,757 37,146 32,801 34,412 38,300 Investment and securities advisory fees and commissions 32,002 29,705 42,834 49,646 32,268 Other 32,593 6,621 17,178 41,955 27,560 Total noninterest income 239,273 216,428 284,846 367,945 339,899 Noninterest expense: Employees' compensation and benefits 205,327 200,019 229,717 258,679 248,486 Occupancy and equipment, net 24,231 24,766 25,741 25,428 25,004 Professional services 16,246 10,063 9,904 14,542 16,239 Other 52,739 51,502 56,832 56,525 53,639 Total noninterest expense 298,543 286,350 322,194 355,174 343,368 Income before income taxes 47,450 29,954 85,511 123,680 133,167 Income tax expense 12,127 5,815 20,715 28,257 31,234 Net income 35,323 24,139 64,796 95,423 101,933 Less: Net income attributable to noncontrolling interest 2,063 1,889 2,611 2,517 2,873 Income attributable to Hilltop $ 33,260 $ 22,250 $ 62,185 $ 92,906 $ 99,060 Earnings per common share: Basic $ 0.45 $ 0.28 $ 0.79 $ 1.16 $ 1.21 Diluted $ 0.45 $ 0.28 $ 0.78 $ 1.15 $ 1.21 Cash dividends declared per common share $ 0.15 $ 0.15 $ 0.12 $ 0.12 $ 0.12 Weighted average shares outstanding: Basic 73,693 79,114 78,933 80,109 81,663 Diluted 73,838 79,356 79,427 80,542 82,199 Three Months Ended June 30, 2022 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 101,259 $ 12,578 $ (1,291 ) $ (3,190 ) $ 2,700 $ 112,056 Provision for (reversal of) credit losses 5,025 311 — — — 5,336 Noninterest income 12,467 87,651 140,082 2,080 (3,007 ) 239,273 Noninterest expense 57,331 90,817 133,169 17,561 (335 ) 298,543 Income (loss) before taxes $ 51,370 $ 9,101 $ 5,622 $ (18,671 ) $ 28 $ 47,450 Six Months Ended June 30, 2022 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 193,329 $ 24,096 $ (3,127 ) $ (6,580 ) $ 4,329 $ 212,047 Provision for (reversal of) credit losses 4,975 476 — — — 5,451 Noninterest income 25,237 148,341 283,276 3,846 (4,999 ) 455,701 Noninterest expense 115,761 171,464 268,027 30,354 (713 ) 584,893 Income (loss) before taxes $ 97,830 $ 497 $ 12,122 $ (33,088 ) $ 43 $ 77,404 Three Months Ended June 30, March 31, December 31, September 30, June 30, Selected Financial Data 2022 2022 2021 2021 2021 Hilltop Consolidated: Return on average stockholders' equity 5.82% 3.60% 9.93% 14.96% 16.42% Return on average assets 0.80% 0.53% 1.41% 2.13% 2.29% Net interest margin (1) 2.75% 2.36% 2.44% 2.53% 2.62% Net interest margin (taxable equivalent) (2): As reported 2.76% 2.37% 2.45% 2.54% 2.63% Impact of purchase accounting 8 bps 7 bps 12 bps 9 bps 16 bps Book value per common share ($) 31.43 31.02 31.95 31.36 30.44 Shares outstanding, end of period (000's) 64,576 79,439 78,965 78,959 81,153 Dividend payout ratio (3) 33.33% 53.57% 15.19% 10.34% 9.92% Banking Segment: Net interest margin (1) 2.97% 2.65% 2.81% 2.99% 3.19% Net interest margin (taxable equivalent) (2): As reported 2.98% 2.65% 2.82% 3.00% 3.20% Impact of purchase accounting 10 bps 8 bps 15 bps 11 bps 20 bps Accretion of discount on loans ($000's) 3,011 2,510 4,716 3,221 6,001 Net recoveries (charge-offs) ($000's) (1,223) (282) 405 62 (510) Return on average assets 1.09% 0.98% 1.44% 1.36% 1.91% Fee income ratio 11.0% 12.2% 10.8% 10.5% 8.9% Efficiency ratio 50.4% 55.7% 54.2% 48.8% 49.7% Employees' compensation and benefits ($000's) 33,554 33,517 34,415 31,500 33,369 Broker-Dealer Segment: Net revenue ($000's) (4) 100,229 72,209 94,569 126,570 94,145 Employees' compensation and benefits ($000's) 64,494 55,825 65,301 82,429 62,289 Variable compensation expense ($000's) 37,471 26,625 35,939 53,505 34,409 Compensation as a % of net revenue 64.3% 77.3% 69.1% 65.1% 66.2% Pre-tax margin (5) 9.1% (11.9)% 1.8% 13.8% 7.3% Mortgage Origination Segment: Mortgage loan originations - volume ($000's): Home purchases 3,342,103 2,753,031 3,559,137 3,948,420 4,018,922 Refinancings 467,117 1,011,452 1,430,369 1,646,208 1,881,121 Total mortgage loan originations - volume 3,809,220 3,764,483 4,989,506 5,594,628 5,900,043 Mortgage loan sales - volume ($000's) 3,872,935 3,868,596 4,988,538 6,195,559 5,524,226 Net gains from mortgage loan sales (basis points): Loans sold to third parties 260 321 362 359 376 Impact of loans retained by banking segment (7) (9) (15) (13) (12) As reported 253 312 347 346 364 Mortgage servicing rights asset ($000's) (6) 121,688 100,475 86,990 110,931 124,497 Employees' compensation and benefits ($000's) 100,206 102,748 121,758 134,814 145,401 Variable compensation expense ($000's) 56,525 56,243 73,208 88,153 97,081 ____________________________________________ (1) Net interest margin is defined as net interest income divided by average interest-earning assets. (2) Net interest margin (taxable equivalent), a non-GAAP measure, is defined as taxable equivalent net interest income divided by average interest-earning assets. Taxable equivalent adjustments are based on the applicable 21% federal income tax rate for all periods presented. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. The taxable equivalent adjustments to interest income for Hilltop (consolidated) were $0.4 million, $0.5 million, $0.5 million, $0.6 million, and $0.4 million, respectively, for the periods presented and for the banking segment were $0.2 million for each of the periods presented. (3) Dividend payout ratio is defined as cash dividends declared per common share divided by basic earnings per common share. (4) Net revenue is defined as the sum of total broker-dealer net interest income and total broker-dealer noninterest income. (5) Pre-tax margin is defined as income before income taxes divided by net revenue. (6) Reported on a consolidated basis and therefore does not include mortgage servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation. June 30, March 31, December 31, September 30, June 30, Capital Ratios 2022 2022 2021 2021 2021 Tier 1 capital (to average assets): PlainsCapital 9.67 % 9.74 % 10.20 % 10.02 % 10.22 % Hilltop 10.53 % 12.46 % 12.58 % 12.64 % 12.87 % Common equity Tier 1 capital (to risk-weighted assets): PlainsCapital 14.65 % 15.37 % 16.00 % 15.40 % 15.00 % Hilltop 17.24 % 21.27 % 21.22 % 21.28 % 20.22 % Tier 1 capital (to risk-weighted assets): PlainsCapital 14.65 % 15.37 % 16.00 % 15.40 % 15.00 % Hilltop 17.24 % 21.27 % 21.22 % 21.28 % 20.82 % Total capital (to risk-weighted assets): PlainsCapital 15.55 % 16.18 % 16.77 % 16.32 % 15.95 % Hilltop 19.90 % 23.85 % 23.75 % 24.00 % 23.48 % June 30, March 31, December 31, September 30, June 30, Non-Performing Assets Portfolio Data 2022 2022 2021 2021 2021 Loans accounted for on a non-accrual basis ($000's) (1): Commercial real estate 4,947 6,153 6,601 5,705 7,211 Commercial and industrial 13,315 18,486 22,478 29,808 33,033 Construction and land development 1 1 2 366 474 1-4 family residential 16,542 18,723 21,123 25,255 27,100 Consumer 19 21 23 24 26 Broker-dealer — — — — — 34,824 43,384 50,227 61,158 67,844 Troubled debt restructurings included in accruing loans held for investment ($000's) 857 890 922 1,038 1,139 Non-performing loans ($000's) 35,681 44,274 51,149 62,196 68,983 Non-performing loans as a % of total loans 0.38 % 0.47 % 0.52 % 0.64 % 0.66 % Other real estate owned ($000's) 1,516 2,175 2,833 21,605 21,078 Other repossessed assets ($000's) — — — — — Non-performing assets ($000's) 37,197 46,449 53,982 83,801 90,061 Non-performing assets as a % of total assets 0.22 % 0.25 % 0.29 % 0.47 % 0.51 % Loans past due 90 days or more and still accruing ($000's) (2): 82,410 87,489 60,775 175,734 245,828 _____________________________________ (1) Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications through January 1, 2022. The Bank’s COVID-19 payment deferral programs since the second quarter of 2020 allowed for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. For the periods presented, the Bank’s actions through December 31, 2021 included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $4 million, $17 million and $76 million as of December 31, 2021, September 30, 2021 and June 30, 2021, respectively. (2) Loans past due 90 days or more and still accruing were primarily comprised of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending. Three Months Ended June 30, 2022 2021 Average Interest Annualized Average Interest Annualized Outstanding Earned Yield or Outstanding Earned Yield or Net Interest Margin (Taxable Equivalent) Details (1) Balance or Paid Rate Balance or Paid Rate Assets Interest-earning assets Loans held for sale $ 1,375,395 $ 14,302 4.16 % $ 2,450,897 $ 17,128 2.80 % Loans held for investment, gross (2) 7,838,090 84,426 4.32 % 7,725,906 87,034 4.48 % Investment securities - taxable 2,779,458 17,288 2.49 % 2,443,486 11,106 1.82 % Investment securities - non-taxable (3) 250,303 2,557 4.09 % 320,685 2,731 3.41 % Federal funds sold and securities purchased under agreements to resell 193,851 481 1.00 % 159,400 — 0.00 % Interest-bearing deposits in other financial institutions 2,602,154 4,984 0.77 % 1,861,861 628 0.14 % Securities borrowed 1,273,368 10,498 3.26 % 1,490,097 15,586 4.14 % Other 53,962 1,013 7.53 % 49,579 994 8.04 % Interest-earning assets, gross (3) 16,366,581 135,549 3.32 % 16,501,911 135,207 3.26 % Allowance for credit losses (91,619 ) (144,105 ) Interest-earning assets, net 16,274,962 16,357,806 Noninterest-earning assets 1,516,266 1,475,422 Total assets $ 17,791,228 $ 17,833,228 Liabilities and Stockholders' Equity Interest-bearing liabilities Interest-bearing deposits $ 7,768,772 $ 5,456 0.28 % $ 7,740,066 $ 6,176 0.32 % Securities loaned 1,114,923 8,512 3.06 % 1,411,961 12,345 3.51 % Notes payable and other borrowings 1,303,678 9,109 2.80 % 1,271,609 8,381 2.64 % Total interest-bearing liabilities 10,187,373 23,077 0.91 % 10,423,636 26,902 1.03 % Noninterest-bearing liabilities Noninterest-bearing deposits 4,552,424 4,090,425 Other liabilities 731,635 872,916 Total liabilities 15,471,432 15,386,977 Stockholders’ equity 2,292,816 2,420,436 Noncontrolling interest 26,980 25,815 Total liabilities and stockholders' equity $ 17,791,228 $ 17,833,228 Net interest income (3) $ 112,472 $ 108,305 Net interest spread (3) 2.41 % 2.23 % Net interest margin (3) 2.76 % 2.63 % _______________________________________ (1) Information presented on a consolidated basis. (2) Average balance includes non-accrual loans. (3) Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rates for the periods presented. The adjustment to interest income was $0.4 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively. Conference Call Information Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, July 22, 2022. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second quarter 2022 financial results. Interested parties can access the conference call by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 416063. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop-holdings.com). About Hilltop Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank’s wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings’ broker-dealer subsidiaries, Hilltop Securities Inc. and Momentum Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At June 30, 2022, Hilltop employed approximately 4,650 people and operated approximately 385 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and Hilltopsecurities.com. FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “continue,” “could,” “drive,” “estimates,��� “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “projects,” “seeks,” “should,” “target,” “view,” “well-tuned,” “will” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: (i) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (ii) effectiveness of our data security controls in the face of cyber attacks; (iii) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (iv) changes in the interest rate environment; (v) the COVID-19 pandemic and the response of governmental authorities to the pandemic and disruptions in global or national supply chains, which have had, and may continue to have, an adverse impact on the global economy and our business operations and performance; (vi) transitions away from the London Interbank Offered Rate; and (vii) risks associated with concentration in real estate related loans. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement. View source version on businesswire.com: https://www.businesswire.com/news/home/20220721005882/en/Contacts Investor Relations Contact: Erik Yohe 214-525-4634 eyohe@hilltop-holdings.com
Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the second quarter of 2022. Hilltop produced income to common stockholders of $33.3 million, or $0.45 per diluted share, for the second quarter of 2022, compared to $99.1 million, or $1.21 per diluted share, for the second quarter of 2021. Hilltop’s financial results for the second quarter of 2022 reflect a significant decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income and an increase in the banking segment’s provision for credit losses due to a deteriorating U.S. economic outlook. Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on August 26, 2022, to all common stockholders of record as of the close of business on August 12, 2022. Additionally, during the second quarter of 2022, Hilltop paid $442.3 million to repurchase approximately 14.87 million shares of its common stock at a price of $29.75 per share pursuant to the tender offer completed in May 2022. These shares were returned to the pool of authorized but unissued shares of common stock. As a result of share repurchases during 2022, Hilltop has no further available share repurchase capacity associated with its previously authorized stock repurchase program. Identified headwinds during 2022, including tight housing inventories on mortgage volumes, declining deposit balances, increases in market interest rates, and uncertainties related to inflationary pressures on expenses, coupled with a declining economic forecast, rapid increases in the 10-year U.S. treasury bond yield and mortgage interest rates, and exposure to increasing funding costs during the first half of 2022 have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2022. The COVID-19 pandemic may also continue to adversely impact financial markets and overall economic conditions. The extent of the impact of the pandemic on our operational and financial performance for the remainder of 2022 remains uncertain. Jeremy B. Ford, President and CEO of Hilltop, said, “Our second quarter results demonstrate again the value of the Hilltop business model, despite a challenging economic environment. PlainsCapital Bank performed well with another quarter of solid loan growth and healthy credit metrics across the loan portfolio. Additionally, the Bank realized net interest margin expansion as it prudently manages deposit costs and captures the benefits of the rising rate environment. PrimeLending and HilltopSecurities experienced a continuation of the challenging market faced in the first quarter with elevated and volatile interest rates paired with lower demand for new home purchases. Importantly, both PrimeLending and HilltopSecurities were profitable during these challenging times as a result of strong expense discipline and experienced management teams. “We were also pleased to return meaningful capital to stockholders through a successful tender offer in May. This transaction demonstrates our conviction in the long-term strategy of Hilltop, as we bought back almost 19% of the outstanding shares while still retaining excess capital for future growth.” Second Quarter 2022 Highlights for Hilltop: The provision for credit losses was $5.3 million during the second quarter of 2022, compared to a provision for credit losses of $0.1 million in the first quarter of 2022 and a reversal of credit losses of $28.7 million in the second quarter of 2021; The provision for credit losses during the second quarter of 2022 primarily reflected an increase in the expected lifetime credit losses under CECL on collectively evaluated loans within the portfolio attributable to a deteriorating U.S. economic outlook since the prior quarter, partially offset by decreases in specific reserves and positive risk rating grade migration. For the second quarter of 2022, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $139.9 million, compared to $241.8 million in the second quarter of 2021, a 42.1% decrease; Mortgage loan origination production volume was $3.8 billion during the second quarter of 2022, compared to $5.9 billion in the second quarter of 2021; Net gains from mortgage loans sold to third parties decreased to 260 basis points during the second quarter of 2022, compared to 321 basis points in the first quarter of 2022. Hilltop’s consolidated annualized return on average assets and return on average equity for the second quarter of 2022 were 0.80% and 5.82%, respectively, compared to 2.29% and 16.42%, respectively, for the second quarter of 2021; Hilltop’s book value per common share increased to $31.43 at June 30, 2022, compared to $31.02 at March 31, 2022; Hilltop’s total assets were $16.7 billion and $18.4 billion at June 30, 2022 and March 31, 2022, respectively; Loans1, net of allowance for credit losses, increased to $7.4 billion at June 30, 2022 compared to $7.2 billion at March 31, 2022; Non-performing loans were $35.7 million, or 0.38% of total loans, at June 30, 2022, compared to $44.3 million, or 0.47% of total loans, at March 31, 2022; Loans held for sale decreased by 9.3% from March 31, 2022 to $1.5 billion at June 30, 2022; Total deposits were $11.9 billion and $12.7 billion at June 30, 2022 and March 31, 2022, respectively; Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 10.53% and a Common Equity Tier 1 Capital Ratio of 17.24% at June 30, 2022; Hilltop’s consolidated net interest margin4 increased to 2.75% for the second quarter of 2022, compared to 2.36% in the first quarter of 2022; Includes previously deferred interest income of $1.3 million during the second quarter of 2022 related to PPP loan-related origination fees, compared to $5.4 million in the second quarter of 2021. For the second quarter of 2022, noninterest income was $239.3 million, compared to $339.9 million in the second quarter of 2021, a 29.6% decrease; For the second quarter 2022, noninterest expense was $298.5 million, compared to $343.4 million in the second quarter of 2021, a 13.1% decrease; and Hilltop’s effective tax rate was 25.6% during the second quarter of 2022, compared to 23.5% during the same period in 2021. The effective tax rate for the second quarter of 2022 was higher than the applicable statutory rate primarily due to the impact of non-deductible compensation expense and other permanent adjustments. ________________________________________ 1 “Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $462.4 million and $506.2 million at June 30, 2022 and March 31, 2022, respectively. 2 Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period. 3 Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets. 4 Net interest margin is defined as net interest income divided by average interest-earning assets. Consolidated Financial and Other Information Consolidated Balance Sheets June 30, March 31, December 31, September 30, June 30, (in 000's) 2022 2022 2021 2021 2021 Cash and due from banks $ 1,783,554 $ 2,886,812 $ 2,823,138 $ 2,463,111 $ 1,372,818 Federal funds sold 381 383 385 406 387 Assets segregated for regulatory purposes 120,816 128,408 221,740 269,506 207,284 Securities purchased under agreements to resell 139,929 256,991 118,262 155,908 202,638 Securities: Trading, at fair value 593,273 471,763 647,998 609,813 682,483 Available for sale, at fair value, net 1,562,222 1,462,340 2,130,568 1,994,183 1,817,807 Held to maturity, at amortized cost, net 920,583 953,107 267,684 277,419 288,776 Equity, at fair value 197 225 250 221 193 3,076,275 2,887,435 3,046,500 2,881,636 2,789,259 Loans held for sale 1,491,579 1,643,994 1,878,190 2,108,878 2,885,458 Loans held for investment, net of unearned income 7,930,619 7,797,903 7,879,904 7,552,926 7,645,227 Allowance for credit losses (95,298 ) (91,185 ) (91,352 ) (109,512 ) (115,269 ) Loans held for investment, net 7,835,321 7,706,718 7,788,552 7,443,414 7,529,958 Broker-dealer and clearing organization receivables 1,049,830 1,610,352 1,672,946 1,419,652 1,403,447 Premises and equipment, net 195,361 198,906 204,438 210,026 212,402 Operating lease right-of-use assets 106,806 108,180 112,328 115,942 115,698 Mortgage servicing assets 121,688 100,475 86,990 110,931 124,497 Other assets 513,570 546,622 452,880 526,339 535,536 Goodwill 267,447 267,447 267,447 267,447 267,447 Other intangible assets, net 13,182 14,233 15,284 16,455 17,705 Total assets $ 16,715,739 $ 18,356,956 $ 18,689,080 $ 17,989,651 $ 17,664,534 Deposits: Noninterest-bearing $ 4,601,643 $ 4,694,592 $ 4,577,183 $ 4,433,148 $ 4,231,082 Interest-bearing 7,319,143 7,972,110 8,240,894 7,699,014 7,502,703 Total deposits 11,920,786 12,666,702 12,818,077 12,132,162 11,733,785 Broker-dealer and clearing organization payables 934,818 1,397,836 1,477,300 1,496,923 1,439,620 Short-term borrowings 822,649 835,054 859,444 747,040 915,919 Securities sold, not yet purchased, at fair value 135,968 97,629 96,586 113,064 132,950 Notes payable 389,722 395,479 387,904 395,804 396,653 Operating lease liabilities 124,406 125,919 130,960 134,296 134,019 Junior subordinated debentures — — — — 67,012 Other liabilities 329,987 347,742 369,606 468,020 348,200 Total liabilities 14,658,336 15,866,361 16,139,877 15,487,309 15,168,158 Common stock 646 794 790 790 812 Additional paid-in capital 1,039,261 1,275,649 1,274,446 1,270,272 1,302,439 Accumulated other comprehensive income (loss) (95,279 ) (80,565 ) (10,219 ) 367 7,093 Retained earnings 1,085,208 1,267,415 1,257,014 1,204,307 1,159,304 Deferred compensation employee stock trust, net 695 744 752 751 754 Employee stock trust (954 ) (104 ) (115 ) (116 ) (121 ) Total Hilltop stockholders' equity 2,029,577 2,463,933 2,522,668 2,476,371 2,470,281 Noncontrolling interests 27,826 26,662 26,535 25,971 26,095 Total stockholders' equity 2,057,403 2,490,595 2,549,203 2,502,342 2,496,376 Total liabilities & stockholders' equity $ 16,715,739 $ 18,356,956 $ 18,689,080 $ 17,989,651 $ 17,664,534 Three Months Ended Consolidated Income Statements June 30, March 31, December 31, September 30, June 30, (in 000's, except per share data) 2022 2022 2021 2021 2021 Interest income: Loans, including fees $ 98,728 $ 90,408 $ 96,104 $ 99,769 $ 104,162 Securities borrowed 10,498 8,817 8,524 8,585 15,586 Securities: Taxable 17,288 15,581 13,916 12,341 11,125 Tax-exempt 2,141 2,419 2,639 2,687 2,338 Other 6,478 2,312 1,872 1,796 1,607 Total interest income 135,133 119,537 123,055 125,178 134,818 Interest expense: Deposits 5,456 4,193 4,404 5,303 6,176 Securities loaned 8,512 7,472 6,624 6,519 12,345 Short-term borrowings 3,020 2,045 2,279 2,400 2,374 Notes payable 3,809 4,437 5,871 5,465 5,253 Junior subordinated debentures — — — 419 577 Other 2,280 1,399 (417 ) (18 ) 177 Total interest expense 23,077 19,546 18,761 20,088 26,902 Net interest income 112,056 99,991 104,294 105,090 107,916 Provision for (reversal of) credit losses 5,336 115 (18,565 ) (5,819 ) (28,720 ) Net interest income after provision for (reversal of) credit losses 106,720 99,876 122,859 110,909 136,636 Noninterest income: Net gains from sale of loans and other mortgage production income 97,543 110,894 156,103 203,152 199,625 Mortgage loan origination fees 42,378 32,062 35,930 38,780 42,146 Securities commissions and fees 34,757 37,146 32,801 34,412 38,300 Investment and securities advisory fees and commissions 32,002 29,705 42,834 49,646 32,268 Other 32,593 6,621 17,178 41,955 27,560 Total noninterest income 239,273 216,428 284,846 367,945 339,899 Noninterest expense: Employees' compensation and benefits 205,327 200,019 229,717 258,679 248,486 Occupancy and equipment, net 24,231 24,766 25,741 25,428 25,004 Professional services 16,246 10,063 9,904 14,542 16,239 Other 52,739 51,502 56,832 56,525 53,639 Total noninterest expense 298,543 286,350 322,194 355,174 343,368 Income before income taxes 47,450 29,954 85,511 123,680 133,167 Income tax expense 12,127 5,815 20,715 28,257 31,234 Net income 35,323 24,139 64,796 95,423 101,933 Less: Net income attributable to noncontrolling interest 2,063 1,889 2,611 2,517 2,873 Income attributable to Hilltop $ 33,260 $ 22,250 $ 62,185 $ 92,906 $ 99,060 Earnings per common share: Basic $ 0.45 $ 0.28 $ 0.79 $ 1.16 $ 1.21 Diluted $ 0.45 $ 0.28 $ 0.78 $ 1.15 $ 1.21 Cash dividends declared per common share $ 0.15 $ 0.15 $ 0.12 $ 0.12 $ 0.12 Weighted average shares outstanding: Basic 73,693 79,114 78,933 80,109 81,663 Diluted 73,838 79,356 79,427 80,542 82,199 Three Months Ended June 30, 2022 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 101,259 $ 12,578 $ (1,291 ) $ (3,190 ) $ 2,700 $ 112,056 Provision for (reversal of) credit losses 5,025 311 — — — 5,336 Noninterest income 12,467 87,651 140,082 2,080 (3,007 ) 239,273 Noninterest expense 57,331 90,817 133,169 17,561 (335 ) 298,543 Income (loss) before taxes $ 51,370 $ 9,101 $ 5,622 $ (18,671 ) $ 28 $ 47,450 Six Months Ended June 30, 2022 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 193,329 $ 24,096 $ (3,127 ) $ (6,580 ) $ 4,329 $ 212,047 Provision for (reversal of) credit losses 4,975 476 — — — 5,451 Noninterest income 25,237 148,341 283,276 3,846 (4,999 ) 455,701 Noninterest expense 115,761 171,464 268,027 30,354 (713 ) 584,893 Income (loss) before taxes $ 97,830 $ 497 $ 12,122 $ (33,088 ) $ 43 $ 77,404 Three Months Ended June 30, March 31, December 31, September 30, June 30, Selected Financial Data 2022 2022 2021 2021 2021 Hilltop Consolidated: Return on average stockholders' equity 5.82% 3.60% 9.93% 14.96% 16.42% Return on average assets 0.80% 0.53% 1.41% 2.13% 2.29% Net interest margin (1) 2.75% 2.36% 2.44% 2.53% 2.62% Net interest margin (taxable equivalent) (2): As reported 2.76% 2.37% 2.45% 2.54% 2.63% Impact of purchase accounting 8 bps 7 bps 12 bps 9 bps 16 bps Book value per common share ($) 31.43 31.02 31.95 31.36 30.44 Shares outstanding, end of period (000's) 64,576 79,439 78,965 78,959 81,153 Dividend payout ratio (3) 33.33% 53.57% 15.19% 10.34% 9.92% Banking Segment: Net interest margin (1) 2.97% 2.65% 2.81% 2.99% 3.19% Net interest margin (taxable equivalent) (2): As reported 2.98% 2.65% 2.82% 3.00% 3.20% Impact of purchase accounting 10 bps 8 bps 15 bps 11 bps 20 bps Accretion of discount on loans ($000's) 3,011 2,510 4,716 3,221 6,001 Net recoveries (charge-offs) ($000's) (1,223) (282) 405 62 (510) Return on average assets 1.09% 0.98% 1.44% 1.36% 1.91% Fee income ratio 11.0% 12.2% 10.8% 10.5% 8.9% Efficiency ratio 50.4% 55.7% 54.2% 48.8% 49.7% Employees' compensation and benefits ($000's) 33,554 33,517 34,415 31,500 33,369 Broker-Dealer Segment: Net revenue ($000's) (4) 100,229 72,209 94,569 126,570 94,145 Employees' compensation and benefits ($000's) 64,494 55,825 65,301 82,429 62,289 Variable compensation expense ($000's) 37,471 26,625 35,939 53,505 34,409 Compensation as a % of net revenue 64.3% 77.3% 69.1% 65.1% 66.2% Pre-tax margin (5) 9.1% (11.9)% 1.8% 13.8% 7.3% Mortgage Origination Segment: Mortgage loan originations - volume ($000's): Home purchases 3,342,103 2,753,031 3,559,137 3,948,420 4,018,922 Refinancings 467,117 1,011,452 1,430,369 1,646,208 1,881,121 Total mortgage loan originations - volume 3,809,220 3,764,483 4,989,506 5,594,628 5,900,043 Mortgage loan sales - volume ($000's) 3,872,935 3,868,596 4,988,538 6,195,559 5,524,226 Net gains from mortgage loan sales (basis points): Loans sold to third parties 260 321 362 359 376 Impact of loans retained by banking segment (7) (9) (15) (13) (12) As reported 253 312 347 346 364 Mortgage servicing rights asset ($000's) (6) 121,688 100,475 86,990 110,931 124,497 Employees' compensation and benefits ($000's) 100,206 102,748 121,758 134,814 145,401 Variable compensation expense ($000's) 56,525 56,243 73,208 88,153 97,081 ____________________________________________ (1) Net interest margin is defined as net interest income divided by average interest-earning assets. (2) Net interest margin (taxable equivalent), a non-GAAP measure, is defined as taxable equivalent net interest income divided by average interest-earning assets. Taxable equivalent adjustments are based on the applicable 21% federal income tax rate for all periods presented. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. The taxable equivalent adjustments to interest income for Hilltop (consolidated) were $0.4 million, $0.5 million, $0.5 million, $0.6 million, and $0.4 million, respectively, for the periods presented and for the banking segment were $0.2 million for each of the periods presented. (3) Dividend payout ratio is defined as cash dividends declared per common share divided by basic earnings per common share. (4) Net revenue is defined as the sum of total broker-dealer net interest income and total broker-dealer noninterest income. (5) Pre-tax margin is defined as income before income taxes divided by net revenue. (6) Reported on a consolidated basis and therefore does not include mortgage servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation. June 30, March 31, December 31, September 30, June 30, Capital Ratios 2022 2022 2021 2021 2021 Tier 1 capital (to average assets): PlainsCapital 9.67 % 9.74 % 10.20 % 10.02 % 10.22 % Hilltop 10.53 % 12.46 % 12.58 % 12.64 % 12.87 % Common equity Tier 1 capital (to risk-weighted assets): PlainsCapital 14.65 % 15.37 % 16.00 % 15.40 % 15.00 % Hilltop 17.24 % 21.27 % 21.22 % 21.28 % 20.22 % Tier 1 capital (to risk-weighted assets): PlainsCapital 14.65 % 15.37 % 16.00 % 15.40 % 15.00 % Hilltop 17.24 % 21.27 % 21.22 % 21.28 % 20.82 % Total capital (to risk-weighted assets): PlainsCapital 15.55 % 16.18 % 16.77 % 16.32 % 15.95 % Hilltop 19.90 % 23.85 % 23.75 % 24.00 % 23.48 % June 30, March 31, December 31, September 30, June 30, Non-Performing Assets Portfolio Data 2022 2022 2021 2021 2021 Loans accounted for on a non-accrual basis ($000's) (1): Commercial real estate 4,947 6,153 6,601 5,705 7,211 Commercial and industrial 13,315 18,486 22,478 29,808 33,033 Construction and land development 1 1 2 366 474 1-4 family residential 16,542 18,723 21,123 25,255 27,100 Consumer 19 21 23 24 26 Broker-dealer — — — — — 34,824 43,384 50,227 61,158 67,844 Troubled debt restructurings included in accruing loans held for investment ($000's) 857 890 922 1,038 1,139 Non-performing loans ($000's) 35,681 44,274 51,149 62,196 68,983 Non-performing loans as a % of total loans 0.38 % 0.47 % 0.52 % 0.64 % 0.66 % Other real estate owned ($000's) 1,516 2,175 2,833 21,605 21,078 Other repossessed assets ($000's) — — — — — Non-performing assets ($000's) 37,197 46,449 53,982 83,801 90,061 Non-performing assets as a % of total assets 0.22 % 0.25 % 0.29 % 0.47 % 0.51 % Loans past due 90 days or more and still accruing ($000's) (2): 82,410 87,489 60,775 175,734 245,828 _____________________________________ (1) Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications through January 1, 2022. The Bank’s COVID-19 payment deferral programs since the second quarter of 2020 allowed for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. For the periods presented, the Bank’s actions through December 31, 2021 included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $4 million, $17 million and $76 million as of December 31, 2021, September 30, 2021 and June 30, 2021, respectively. (2) Loans past due 90 days or more and still accruing were primarily comprised of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending. Three Months Ended June 30, 2022 2021 Average Interest Annualized Average Interest Annualized Outstanding Earned Yield or Outstanding Earned Yield or Net Interest Margin (Taxable Equivalent) Details (1) Balance or Paid Rate Balance or Paid Rate Assets Interest-earning assets Loans held for sale $ 1,375,395 $ 14,302 4.16 % $ 2,450,897 $ 17,128 2.80 % Loans held for investment, gross (2) 7,838,090 84,426 4.32 % 7,725,906 87,034 4.48 % Investment securities - taxable 2,779,458 17,288 2.49 % 2,443,486 11,106 1.82 % Investment securities - non-taxable (3) 250,303 2,557 4.09 % 320,685 2,731 3.41 % Federal funds sold and securities purchased under agreements to resell 193,851 481 1.00 % 159,400 — 0.00 % Interest-bearing deposits in other financial institutions 2,602,154 4,984 0.77 % 1,861,861 628 0.14 % Securities borrowed 1,273,368 10,498 3.26 % 1,490,097 15,586 4.14 % Other 53,962 1,013 7.53 % 49,579 994 8.04 % Interest-earning assets, gross (3) 16,366,581 135,549 3.32 % 16,501,911 135,207 3.26 % Allowance for credit losses (91,619 ) (144,105 ) Interest-earning assets, net 16,274,962 16,357,806 Noninterest-earning assets 1,516,266 1,475,422 Total assets $ 17,791,228 $ 17,833,228 Liabilities and Stockholders' Equity Interest-bearing liabilities Interest-bearing deposits $ 7,768,772 $ 5,456 0.28 % $ 7,740,066 $ 6,176 0.32 % Securities loaned 1,114,923 8,512 3.06 % 1,411,961 12,345 3.51 % Notes payable and other borrowings 1,303,678 9,109 2.80 % 1,271,609 8,381 2.64 % Total interest-bearing liabilities 10,187,373 23,077 0.91 % 10,423,636 26,902 1.03 % Noninterest-bearing liabilities Noninterest-bearing deposits 4,552,424 4,090,425 Other liabilities 731,635 872,916 Total liabilities 15,471,432 15,386,977 Stockholders’ equity 2,292,816 2,420,436 Noncontrolling interest 26,980 25,815 Total liabilities and stockholders' equity $ 17,791,228 $ 17,833,228 Net interest income (3) $ 112,472 $ 108,305 Net interest spread (3) 2.41 % 2.23 % Net interest margin (3) 2.76 % 2.63 % _______________________________________ (1) Information presented on a consolidated basis. (2) Average balance includes non-accrual loans. (3) Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rates for the periods presented. The adjustment to interest income was $0.4 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively. Conference Call Information Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, July 22, 2022. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second quarter 2022 financial results. Interested parties can access the conference call by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 416063. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop-holdings.com). About Hilltop Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank’s wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings’ broker-dealer subsidiaries, Hilltop Securities Inc. and Momentum Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At June 30, 2022, Hilltop employed approximately 4,650 people and operated approximately 385 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and Hilltopsecurities.com. FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “continue,” “could,” “drive,” “estimates,��� “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “projects,” “seeks,” “should,” “target,” “view,” “well-tuned,” “will” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: (i) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (ii) effectiveness of our data security controls in the face of cyber attacks; (iii) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (iv) changes in the interest rate environment; (v) the COVID-19 pandemic and the response of governmental authorities to the pandemic and disruptions in global or national supply chains, which have had, and may continue to have, an adverse impact on the global economy and our business operations and performance; (vi) transitions away from the London Interbank Offered Rate; and (vii) risks associated with concentration in real estate related loans. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement. View source version on businesswire.com: https://www.businesswire.com/news/home/20220721005882/en/