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 Third Quarter 2023 By: Hilltop Holdings Inc. via Business Wire October 19, 2023 at 16:45 PM EDT Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the third quarter of 2023. Hilltop produced income to common stockholders of $37.0 million, or $0.57 per diluted share, for the third quarter of 2023, compared to $32.1 million, or $0.50 per diluted share, for the third quarter of 2022. Hilltop’s financial results for the third quarter of 2023 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income, a decline in the net interest income within the banking segment, and increases in net revenues within certain of the broker-dealer segment’s business lines. Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, payable on November 28, 2023, to all common stockholders of record as of the close of business on November 13, 2023. Headwinds that began in 2022, and continued through the first nine months of 2023, including the impact of tight housing inventories on mortgage volumes, declining deposit balances, rapid increases in market interest rates and a volatile economic forecast have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2023. The impacts of such headwinds during the remainder of 2023 remain uncertain and will depend on developments outside of our control, including, among others, the timing and significance of further changes in U.S. treasury yields and mortgage interest rates, exposure to increasing funding costs, inflationary pressures associated with compensation, occupancy and software costs and labor market conditions, international armed conflicts and their impact on supply chains, and disruptions to the economy and the U.S. banking system caused by high-profile bank failures during early 2023. Jeremy B. Ford, President and CEO of Hilltop, said “Hilltop’s operating results for the third quarter reflect a general continuation in market pressures experienced in the first half of the year. While PlainsCapital Bank produced strong financial results for the quarter with a 1.20% return on average assets, the competitive environment around deposits resulted in further pressure on the bank’s net interest margin. HilltopSecurities generated robust financial results as the wealth management and structured finance businesses produced strong net revenues, which more than offset challenging market conditions for the public finance and fixed income capital markets businesses. PrimeLending’s results continued to be impacted by the housing market’s lack of inventory, consumer affordability challenges and a stubbornly compressed gain-on-sale margin. “As we progress into the final quarter of the year, we will continue to prudently manage our balance sheet, closely monitor our expenses and serve our valued clients.” Third Quarter 2023 Highlights for Hilltop: The reversal of credit losses was $40 thousand during the third quarter of 2023, compared to a provision for credit losses of $14.8 million in the second quarter of 2023 and a reversal of credit losses of $0.8 million in the third quarter of 2022; The slight reversal of credit losses during the third quarter of 2023 reflected improvements to the U.S. economic outlook and decreases in specific reserves within our broker dealer segment, offset by increases in specific reserves and net portfolio changes within the banking segment. For the third quarter of 2023, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $88.7 million, compared to $98.0 million in the third quarter of 2022, a 9.4% decrease; Mortgage loan origination production volume was $2.2 billion during the third quarter of 2023, compared to $3.0 billion in the third quarter of 2022; Net gains from mortgage loans sold to third parties decreased to 199 basis points during the third quarter of 2023, compared to 207 basis points in the second quarter of 2023. Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the third quarter of 2023 were 0.94% and 7.11%, respectively, compared to 0.79% and 6.26%, respectively, for the third quarter of 2022; Hilltop’s book value per common share increased to $31.91 at September 30, 2023, compared to $31.71 at June 30, 2023; Hilltop’s total assets were $16.4 billion and $17.1 billion at September 30, 2023 and June 30, 2023, respectively; Loans1, net of allowance for credit losses, were $7.7 billion and $7.9 billion at September 30, 2023 and June 30, 2023, respectively; Non-performing loans were $31.5 million, or 0.34% of total loans, at September 30, 2023, compared to $39.0 million, or 0.40% of total loans, at June 30, 2023; Loans held for sale decreased by 20.6% from June 30, 2023 to $1.1 billion at September 30, 2023; Total deposits were $11.1 billion and $11.2 billion at September 30, 2023 and June 30, 2023, respectively; Total estimated uninsured deposits were $4.4 billion, or approximately 40% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $276.3 million, were $4.2 billion, or approximately 37% of total deposits at September 30, 2023. Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 11.92% and a Common Equity Tier 1 Capital Ratio of 18.60% at September 30, 2023; Hilltop’s consolidated net interest margin4 decreased to 3.02% for the third quarter of 2023, compared to 3.03% in the second quarter of 2023; For the third quarter of 2023, noninterest income was $196.8 million, compared to $207.0 million in the third quarter of 2022, a 4.9% decrease; For the third quarter 2023, noninterest expense was $260.0 million, compared to $288.7 million in the third quarter of 2022, a 9.9% decrease; and Hilltop’s effective tax rate was 25.2% during the third quarter of 2023, compared to 21.8% during the same period in 2022. The effective tax rate for the third quarter 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 $357.1 million and $358.5 million at September 30, 2023 and June 30, 2023, 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 September 30, June 30, March 31, December 31, September 30, (in 000's) 2023 2023 2023 2022 2022 Cash and due from banks $ 1,513,747 $ 1,584,709 $ 1,764,081 $ 1,579,512 $ 1,777,584 Federal funds sold 3,650 650 743 650 663 Assets segregated for regulatory purposes 47,491 50,711 36,199 67,737 109,358 Securities purchased under agreements to resell 123,719 143,982 144,201 118,070 145,365 Securities: Trading, at fair value 578,901 696,649 692,908 755,032 641,864 Available for sale, at fair value, net (1) 1,456,238 1,526,869 1,641,571 1,658,766 1,584,724 Held to maturity, at amortized cost, net (1) 825,079 847,437 862,280 875,532 889,452 Equity, at fair value 264 258 231 200 209 2,860,482 3,071,213 3,196,990 3,289,530 3,116,249 Loans held for sale 1,058,806 1,333,044 1,040,138 982,616 1,003,605 Loans held for investment, net of unearned income 8,204,052 8,354,122 8,192,846 8,092,673 7,944,246 Allowance for credit losses (110,822 ) (109,306 ) (97,354 ) (95,442 ) (91,783 ) Loans held for investment, net 8,093,230 8,244,816 8,095,492 7,997,231 7,852,463 Broker-dealer and clearing organization receivables 1,460,352 1,474,177 1,560,246 1,038,055 1,255,052 Premises and equipment, net 172,097 176,574 180,132 184,950 191,423 Operating lease right-of-use assets 93,057 97,979 100,122 102,443 103,099 Mortgage servicing assets 104,951 95,101 103,314 100,825 156,539 Other assets 588,751 588,166 529,438 518,899 624,235 Goodwill 267,447 267,447 267,447 267,447 267,447 Other intangible assets, net 9,078 9,772 10,544 11,317 12,209 Total assets $ 16,396,858 $ 17,138,341 $ 17,029,087 $ 16,259,282 $ 16,615,291 Deposits: Noninterest-bearing $ 3,200,247 $ 3,451,438 $ 3,807,878 $ 3,968,862 $ 4,546,816 Interest-bearing 7,902,850 7,712,739 7,289,269 7,346,887 6,805,198 Total deposits 11,103,097 11,164,177 11,097,147 11,315,749 11,352,014 Broker-dealer and clearing organization payables 1,368,064 1,306,646 1,383,317 966,470 1,176,156 Short-term borrowings 882,999 1,628,637 1,572,794 970,056 942,309 Securities sold, not yet purchased, at fair value 51,527 74,761 51,497 53,023 99,515 Notes payable 347,020 364,531 376,410 346,654 390,354 Operating lease liabilities 114,334 119,999 122,878 126,759 120,635 Other liabilities 422,955 389,336 341,246 417,042 475,425 Total liabilities 14,289,996 15,048,087 14,945,289 14,195,753 14,556,408 Common stock 652 651 650 647 646 Additional paid-in capital 1,052,867 1,050,191 1,044,774 1,046,331 1,043,605 Accumulated other comprehensive loss (145,083 ) (131,718 ) (125,461 ) (133,531 ) (119,864 ) Retained earnings 1,171,250 1,144,624 1,136,901 1,123,636 1,107,586 Deferred compensation employee stock trust, net 340 450 446 481 479 Employee stock trust (446 ) (599 ) (599 ) (640 ) (641 ) Total Hilltop stockholders' equity 2,079,580 2,063,599 2,056,711 2,036,924 2,031,811 Noncontrolling interests 27,282 26,655 27,087 26,605 27,072 Total stockholders' equity 2,106,862 2,090,254 2,083,798 2,063,529 2,058,883 Total liabilities & stockholders' equity $ 16,396,858 $ 17,138,341 $ 17,029,087 $ 16,259,282 $ 16,615,291 _____________________________ (1) At September 30, 2023, the amortized cost of the available for sale securities portfolio was $1,606,340, while the fair value of the held to maturity securities portfolio was $703,366. Three Months Ended Consolidated Income Statements September 30, June 30, March 31, December 31, September 30, (in 000's, except per share data) 2023 2023 2023 2022 2022 Interest income: Loans, including fees $ 142,402 $ 138,397 $ 123,379 $ 117,906 $ 109,165 Securities borrowed 17,683 18,515 17,068 14,162 10,938 Securities: Taxable 27,166 26,719 25,602 23,293 19,642 Tax-exempt 2,464 2,566 3,188 3,002 2,451 Other 27,040 27,229 22,190 21,611 14,276 Total interest income 216,755 213,426 191,427 179,974 156,472 Interest expense: Deposits 64,290 54,726 35,824 28,238 12,525 Securities loaned 16,169 16,413 15,346 13,179 9,407 Short-term borrowings 14,212 17,706 12,444 10,278 5,550 Notes payable 4,026 3,973 3,853 3,988 3,907 Other 2,408 2,342 2,255 849 1,597 Total interest expense 101,105 95,160 69,722 56,532 32,986 Net interest income 115,650 118,266 121,705 123,442 123,486 Provision for (reversal of) credit losses (40 ) 14,836 2,331 3,638 (780 ) Net interest income after provision for (reversal of) credit losses 115,690 103,430 119,374 119,804 124,266 Noninterest income: Net gains from sale of loans and other mortgage production income 47,262 48,535 39,966 35,949 57,998 Mortgage loan origination fees 41,478 41,440 28,777 35,198 39,960 Securities commissions and fees 28,044 29,606 31,223 33,143 34,076 Investment and securities advisory fees and commissions 39,662 32,037 26,848 30,661 35,031 Other 40,403 39,034 35,680 34,833 39,910 Total noninterest income 196,849 190,652 162,494 169,784 206,975 Noninterest expense: Employees' compensation and benefits 173,195 176,908 167,817 167,892 200,450 Occupancy and equipment, net 21,912 23,025 22,865 23,077 25,041 Professional services 12,639 12,594 10,697 11,555 10,631 Other 52,271 54,450 49,091 50,844 52,616 Total noninterest expense 260,017 266,977 250,470 253,368 288,738 Income before income taxes 52,522 27,105 31,398 36,220 42,503 Income tax expense 13,211 7,167 3,630 9,642 9,249 Net income 39,311 19,938 27,768 26,578 33,254 Less: Net income attributable to noncontrolling interest 2,269 1,805 1,968 1,022 1,186 Income attributable to Hilltop $ 37,042 $ 18,133 $ 25,800 $ 25,556 $ 32,068 Earnings per common share: Basic $ 0.57 $ 0.28 $ 0.40 $ 0.40 $ 0.50 Diluted $ 0.57 $ 0.28 $ 0.40 $ 0.39 $ 0.50 Cash dividends declared per common share $ 0.16 $ 0.16 $ 0.16 $ 0.15 $ 0.15 Weighted average shares outstanding: Basic 65,106 65,025 64,901 64,602 64,552 Diluted 65,108 65,054 64,954 64,779 64,669 Three Months Ended September 30, 2023 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 99,047 $ 12,215 $ (5,482 ) $ (3,175 ) $ 13,045 $ 115,650 Provision for (reversal of) credit losses 675 (715 ) — — — (40 ) Noninterest income 11,668 106,488 88,747 3,159 (13,213 ) 196,849 Noninterest expense 56,887 97,865 91,505 13,937 (177 ) 260,017 Income (loss) before taxes $ 53,153 $ 21,553 $ (8,240 ) $ (13,953 ) $ 9 $ 52,522 Nine Months Ended September 30, 2023 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 304,804 $ 39,279 $ (15,590 ) $ (9,976 ) $ 37,105 $ 355,622 Provision for (reversal of) credit losses 17,175 (48 ) — — — 17,127 Noninterest income 34,046 297,164 247,655 8,944 (37,815 ) 549,994 Noninterest expense 170,450 283,063 278,918 45,750 (717 ) 777,464 Income (loss) before taxes $ 151,225 $ 53,428 $ (46,853 ) $ (46,782 ) $ 7 $ 111,025 Three Months Ended September 30, June 30, March 31, December 31, September 30, Selected Financial Data 2023 2023 2023 2022 2022 Hilltop Consolidated: Return on average stockholders' equity 7.11 % 3.53 % 5.12 % 4.99 % 6.26 % Return on average assets 0.94 % 0.47 % 0.69 % 0.63 % 0.79 % Net interest margin (1) 3.02 % 3.03 % 3.28 % 3.23 % 3.19 % Net interest margin (taxable equivalent) (2): As reported 3.04 % 3.03 % 3.28 % 3.24 % 3.20 % Impact of purchase accounting 7 bps 9 bps 6 bps 7 bps 8 bps Book value per common share ($) 31.91 31.71 31.63 31.49 31.46 Shares outstanding, end of period (000's) 65,170 65,071 65,023 64,685 64,591 Dividend payout ratio (3) 28.12 % 57.37 % 40.25 % 37.92 % 30.19 % Banking Segment: Net interest margin (1) 3.08 % 3.11 % 3.40 % 3.42 % 3.42 % Net interest margin (taxable equivalent) (2): As reported 3.09 % 3.11 % 3.41 % 3.43 % 3.43 % Impact of purchase accounting 8 bps 11 bps 7 bps 8 bps 10 bps Accretion of discount on loans ($000's) 2,226 3,334 1,870 2,173 2,858 Net recoveries (charge-offs) ($000's) 1,556 (2,884 ) (419 ) 21 (2,735 ) Return on average assets 1.20 % 0.89 % 1.44 % 1.31 % 1.41 % Fee income ratio 10.5 % 10.0 % 9.6 % 9.8 % 9.9 % Efficiency ratio 51.4 % 51.2 % 48.4 % 48.9 % 48.9 % Employees' compensation and benefits ($000's) 30,641 30,603 32,681 34,526 35,934 Broker-Dealer Segment: Net revenue ($000's) (4) 118,703 113,241 104,498 106,919 114,184 Employees' compensation and benefits ($000's) 69,930 65,290 62,429 60,552 70,274 Variable compensation expense ($000's) 39,929 34,798 30,821 32,042 42,567 Compensation as a % of net revenue 58.9 % 57.7 % 59.7 % 56.6 % 61.5 % Pre-tax margin (5) 18.2 % 16.3 % 12.8 % 18.5 % 15.3 % Mortgage Origination Segment: Mortgage loan originations - volume ($000's): Home purchases 2,091,444 2,301,007 1,607,330 1,895,731 2,832,136 Refinancings 152,257 150,643 125,423 147,511 211,075 Total mortgage loan originations - volume 2,243,701 2,451,650 1,732,753 2,043,242 3,043,211 Mortgage loan sales - volume ($000's) 2,395,357 2,115,706 1,661,521 2,038,990 3,419,950 Net gains from mortgage loan sales (basis points): Loans sold to third parties 199 207 193 211 227 Impact of loans retained by banking segment (1 ) (6 ) (7 ) (19 ) (9 ) As reported 198 201 186 192 218 Mortgage servicing rights asset ($000's) (6) 104,951 95,101 103,314 100,825 156,539 Employees' compensation and benefits ($000's) 64,016 70,982 62,355 64,940 86,079 Variable compensation expense ($000's) 33,070 36,249 25,573 26,724 44,312 ________________________________ (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 $0.6 million, $0.1 million, $0.1 million, $0.3 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. September 30, June 30, March 31, December 31, September 30, Capital Ratios 2023 2023 2023 2022 2022 Tier 1 capital (to average assets): PlainsCapital 10.62 % 10.28 % 10.69 % 10.26 % 10.29 % Hilltop 11.92 % 11.47 % 11.82 % 11.47 % 11.41 % Common equity Tier 1 capital (to risk-weighted assets): PlainsCapital 15.31 % 14.48 % 14.97 % 14.98 % 14.68 % Hilltop 18.60 % 17.61 % 17.99 % 18.23 % 17.45 % Tier 1 capital (to risk-weighted assets): PlainsCapital 15.31 % 14.48 % 14.97 % 14.98 % 14.68 % Hilltop 18.60 % 17.61 % 17.99 % 18.23 % 17.45 % Total capital (to risk-weighted assets): PlainsCapital 16.45 % 15.56 % 15.94 % 15.91 % 15.54 % Hilltop 21.54 % 20.41 % 20.75 % 20.98 % 20.07 % September 30, June 30, March 31, December 31, September 30, Non-Performing Assets Portfolio Data 2023 2023 2023 2022 2022 Loans accounted for on a non-accrual basis ($000's): Commercial real estate 7,339 3,552 1,973 4,269 4,735 Commercial and industrial 10,190 21,442 10,807 9,095 12,078 Construction and land development 760 593 199 198 1 1-4 family residential 13,202 13,360 14,387 15,941 16,968 Consumer 7 9 12 14 16 Broker-dealer — — — — — 31,498 38,956 27,378 29,517 33,798 Troubled debt restructurings included in accruing loans held for investment ($000's) (1) — — — 803 825 Non-performing loans ($000's) (1) 31,498 38,956 27,378 30,320 34,623 Non-performing loans as a % of total loans ($000's) (1) 0.34 % 0.40 % 0.30 % 0.33 % 0.39 % Other real estate owned ($000's) 5,386 3,481 3,202 2,325 1,637 Other repossessed assets ($000's) — — — — — Non-performing assets ($000's) (1) 36,884 42,437 30,580 32,645 36,260 Non-performing assets as a % of total assets ($000's) (1) 0.22 % 0.25 % 0.18 % 0.20 % 0.22 % Loans past due 90 days or more and still accruing ($000's) (2) 106,346 130,036 114,523 92,099 96,532 _____________________________ (1) Effective January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02 which eliminated the recognition and measurement guidance on troubled debt restructurings for creditors. Therefore, we no longer present troubled debt restructurings as a component of non-performing loans and assets. (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 September 30, 2023 2022 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 $ 1,075,518 $ 15,649 5.82 % $ 1,166,265 $ 14,414 4.94 % Loans held for investment, gross (2) 7,972,604 126,753 6.31 % 7,911,833 94,751 4.75 % Investment securities - taxable 2,690,977 27,166 4.04 % 2,883,412 19,642 2.72 % Investment securities - non-taxable (3) 315,294 3,069 3.89 % 312,312 2,817 3.61 % Federal funds sold and securities purchased under agreements to resell 142,324 2,313 6.45 % 137,728 1,309 3.77 % Interest-bearing deposits in other financial institutions 1,550,991 20,320 5.20 % 1,780,220 9,542 2.13 % Securities borrowed 1,371,625 17,683 5.04 % 1,116,837 10,938 3.83 % Other 69,827 4,407 25.04 % 56,331 3,425 24.12 % Interest-earning assets, gross (3) 15,189,160 217,360 5.68 % 15,364,938 156,838 4.05 % Allowance for credit losses (110,398 ) (95,083 ) Interest-earning assets, net 15,078,762 15,269,855 Noninterest-earning assets 1,448,834 1,399,228 Total assets $ 16,527,596 $ 16,669,083 Liabilities and Stockholders' Equity Interest-bearing liabilities Interest-bearing deposits $ 7,893,384 $ 64,290 3.23 % $ 7,136,779 $ 12,525 0.70 % Securities loaned 1,303,883 16,169 4.92 % 980,530 9,407 3.81 % Notes payable and other borrowings 1,527,371 20,646 5.36 % 1,262,985 11,054 3.47 % Total interest-bearing liabilities 10,724,638 101,105 3.74 % 9,380,294 32,986 1.40 % Noninterest-bearing liabilities Noninterest-bearing deposits 3,347,752 4,543,067 Other liabilities 362,133 685,843 Total liabilities 14,434,523 14,609,204 Stockholders’ equity 2,066,564 2,032,717 Noncontrolling interest 26,509 27,162 Total liabilities and stockholders' equity $ 16,527,596 $ 16,669,083 Net interest income (3) $ 116,255 $ 123,852 Net interest spread (3) 1.94 % 2.65 % Net interest margin (3) 3.04 % 3.20 % ________________________________ (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 rate for the periods presented. The adjustment to interest income was $0.6 million and $0.4 million for the three months ended September 30, 2023 and 2022, respectively. Conference Call Information Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, October 20, 2023. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third quarter 2023 financial results. Interested parties can access the conference call by dialing 1-888-259-6580 (North America) and then using the access code 31393751. 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 September 30, 2023, Hilltop employed approximately 3,900 people and operated approximately 336 locations in 48 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,” “position,” “probable,” “progressing,” “projects,” “prudent,” “seeks,” “should,” “target,” “view,” “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 and any legal, reputational and financial risks following a cybersecurity incident; (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) risks associated with concentration in real estate related loans and (vi) disruptions to the economy and the U.S. banking system caused by bank failures during early 2023, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments. 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/20231019863942/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 Third Quarter 2023 By: Hilltop Holdings Inc. via Business Wire October 19, 2023 at 16:45 PM EDT Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the third quarter of 2023. Hilltop produced income to common stockholders of $37.0 million, or $0.57 per diluted share, for the third quarter of 2023, compared to $32.1 million, or $0.50 per diluted share, for the third quarter of 2022. Hilltop’s financial results for the third quarter of 2023 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income, a decline in the net interest income within the banking segment, and increases in net revenues within certain of the broker-dealer segment’s business lines. Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, payable on November 28, 2023, to all common stockholders of record as of the close of business on November 13, 2023. Headwinds that began in 2022, and continued through the first nine months of 2023, including the impact of tight housing inventories on mortgage volumes, declining deposit balances, rapid increases in market interest rates and a volatile economic forecast have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2023. The impacts of such headwinds during the remainder of 2023 remain uncertain and will depend on developments outside of our control, including, among others, the timing and significance of further changes in U.S. treasury yields and mortgage interest rates, exposure to increasing funding costs, inflationary pressures associated with compensation, occupancy and software costs and labor market conditions, international armed conflicts and their impact on supply chains, and disruptions to the economy and the U.S. banking system caused by high-profile bank failures during early 2023. Jeremy B. Ford, President and CEO of Hilltop, said “Hilltop’s operating results for the third quarter reflect a general continuation in market pressures experienced in the first half of the year. While PlainsCapital Bank produced strong financial results for the quarter with a 1.20% return on average assets, the competitive environment around deposits resulted in further pressure on the bank’s net interest margin. HilltopSecurities generated robust financial results as the wealth management and structured finance businesses produced strong net revenues, which more than offset challenging market conditions for the public finance and fixed income capital markets businesses. PrimeLending’s results continued to be impacted by the housing market’s lack of inventory, consumer affordability challenges and a stubbornly compressed gain-on-sale margin. “As we progress into the final quarter of the year, we will continue to prudently manage our balance sheet, closely monitor our expenses and serve our valued clients.” Third Quarter 2023 Highlights for Hilltop: The reversal of credit losses was $40 thousand during the third quarter of 2023, compared to a provision for credit losses of $14.8 million in the second quarter of 2023 and a reversal of credit losses of $0.8 million in the third quarter of 2022; The slight reversal of credit losses during the third quarter of 2023 reflected improvements to the U.S. economic outlook and decreases in specific reserves within our broker dealer segment, offset by increases in specific reserves and net portfolio changes within the banking segment. For the third quarter of 2023, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $88.7 million, compared to $98.0 million in the third quarter of 2022, a 9.4% decrease; Mortgage loan origination production volume was $2.2 billion during the third quarter of 2023, compared to $3.0 billion in the third quarter of 2022; Net gains from mortgage loans sold to third parties decreased to 199 basis points during the third quarter of 2023, compared to 207 basis points in the second quarter of 2023. Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the third quarter of 2023 were 0.94% and 7.11%, respectively, compared to 0.79% and 6.26%, respectively, for the third quarter of 2022; Hilltop’s book value per common share increased to $31.91 at September 30, 2023, compared to $31.71 at June 30, 2023; Hilltop’s total assets were $16.4 billion and $17.1 billion at September 30, 2023 and June 30, 2023, respectively; Loans1, net of allowance for credit losses, were $7.7 billion and $7.9 billion at September 30, 2023 and June 30, 2023, respectively; Non-performing loans were $31.5 million, or 0.34% of total loans, at September 30, 2023, compared to $39.0 million, or 0.40% of total loans, at June 30, 2023; Loans held for sale decreased by 20.6% from June 30, 2023 to $1.1 billion at September 30, 2023; Total deposits were $11.1 billion and $11.2 billion at September 30, 2023 and June 30, 2023, respectively; Total estimated uninsured deposits were $4.4 billion, or approximately 40% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $276.3 million, were $4.2 billion, or approximately 37% of total deposits at September 30, 2023. Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 11.92% and a Common Equity Tier 1 Capital Ratio of 18.60% at September 30, 2023; Hilltop’s consolidated net interest margin4 decreased to 3.02% for the third quarter of 2023, compared to 3.03% in the second quarter of 2023; For the third quarter of 2023, noninterest income was $196.8 million, compared to $207.0 million in the third quarter of 2022, a 4.9% decrease; For the third quarter 2023, noninterest expense was $260.0 million, compared to $288.7 million in the third quarter of 2022, a 9.9% decrease; and Hilltop’s effective tax rate was 25.2% during the third quarter of 2023, compared to 21.8% during the same period in 2022. The effective tax rate for the third quarter 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 $357.1 million and $358.5 million at September 30, 2023 and June 30, 2023, 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 September 30, June 30, March 31, December 31, September 30, (in 000's) 2023 2023 2023 2022 2022 Cash and due from banks $ 1,513,747 $ 1,584,709 $ 1,764,081 $ 1,579,512 $ 1,777,584 Federal funds sold 3,650 650 743 650 663 Assets segregated for regulatory purposes 47,491 50,711 36,199 67,737 109,358 Securities purchased under agreements to resell 123,719 143,982 144,201 118,070 145,365 Securities: Trading, at fair value 578,901 696,649 692,908 755,032 641,864 Available for sale, at fair value, net (1) 1,456,238 1,526,869 1,641,571 1,658,766 1,584,724 Held to maturity, at amortized cost, net (1) 825,079 847,437 862,280 875,532 889,452 Equity, at fair value 264 258 231 200 209 2,860,482 3,071,213 3,196,990 3,289,530 3,116,249 Loans held for sale 1,058,806 1,333,044 1,040,138 982,616 1,003,605 Loans held for investment, net of unearned income 8,204,052 8,354,122 8,192,846 8,092,673 7,944,246 Allowance for credit losses (110,822 ) (109,306 ) (97,354 ) (95,442 ) (91,783 ) Loans held for investment, net 8,093,230 8,244,816 8,095,492 7,997,231 7,852,463 Broker-dealer and clearing organization receivables 1,460,352 1,474,177 1,560,246 1,038,055 1,255,052 Premises and equipment, net 172,097 176,574 180,132 184,950 191,423 Operating lease right-of-use assets 93,057 97,979 100,122 102,443 103,099 Mortgage servicing assets 104,951 95,101 103,314 100,825 156,539 Other assets 588,751 588,166 529,438 518,899 624,235 Goodwill 267,447 267,447 267,447 267,447 267,447 Other intangible assets, net 9,078 9,772 10,544 11,317 12,209 Total assets $ 16,396,858 $ 17,138,341 $ 17,029,087 $ 16,259,282 $ 16,615,291 Deposits: Noninterest-bearing $ 3,200,247 $ 3,451,438 $ 3,807,878 $ 3,968,862 $ 4,546,816 Interest-bearing 7,902,850 7,712,739 7,289,269 7,346,887 6,805,198 Total deposits 11,103,097 11,164,177 11,097,147 11,315,749 11,352,014 Broker-dealer and clearing organization payables 1,368,064 1,306,646 1,383,317 966,470 1,176,156 Short-term borrowings 882,999 1,628,637 1,572,794 970,056 942,309 Securities sold, not yet purchased, at fair value 51,527 74,761 51,497 53,023 99,515 Notes payable 347,020 364,531 376,410 346,654 390,354 Operating lease liabilities 114,334 119,999 122,878 126,759 120,635 Other liabilities 422,955 389,336 341,246 417,042 475,425 Total liabilities 14,289,996 15,048,087 14,945,289 14,195,753 14,556,408 Common stock 652 651 650 647 646 Additional paid-in capital 1,052,867 1,050,191 1,044,774 1,046,331 1,043,605 Accumulated other comprehensive loss (145,083 ) (131,718 ) (125,461 ) (133,531 ) (119,864 ) Retained earnings 1,171,250 1,144,624 1,136,901 1,123,636 1,107,586 Deferred compensation employee stock trust, net 340 450 446 481 479 Employee stock trust (446 ) (599 ) (599 ) (640 ) (641 ) Total Hilltop stockholders' equity 2,079,580 2,063,599 2,056,711 2,036,924 2,031,811 Noncontrolling interests 27,282 26,655 27,087 26,605 27,072 Total stockholders' equity 2,106,862 2,090,254 2,083,798 2,063,529 2,058,883 Total liabilities & stockholders' equity $ 16,396,858 $ 17,138,341 $ 17,029,087 $ 16,259,282 $ 16,615,291 _____________________________ (1) At September 30, 2023, the amortized cost of the available for sale securities portfolio was $1,606,340, while the fair value of the held to maturity securities portfolio was $703,366. Three Months Ended Consolidated Income Statements September 30, June 30, March 31, December 31, September 30, (in 000's, except per share data) 2023 2023 2023 2022 2022 Interest income: Loans, including fees $ 142,402 $ 138,397 $ 123,379 $ 117,906 $ 109,165 Securities borrowed 17,683 18,515 17,068 14,162 10,938 Securities: Taxable 27,166 26,719 25,602 23,293 19,642 Tax-exempt 2,464 2,566 3,188 3,002 2,451 Other 27,040 27,229 22,190 21,611 14,276 Total interest income 216,755 213,426 191,427 179,974 156,472 Interest expense: Deposits 64,290 54,726 35,824 28,238 12,525 Securities loaned 16,169 16,413 15,346 13,179 9,407 Short-term borrowings 14,212 17,706 12,444 10,278 5,550 Notes payable 4,026 3,973 3,853 3,988 3,907 Other 2,408 2,342 2,255 849 1,597 Total interest expense 101,105 95,160 69,722 56,532 32,986 Net interest income 115,650 118,266 121,705 123,442 123,486 Provision for (reversal of) credit losses (40 ) 14,836 2,331 3,638 (780 ) Net interest income after provision for (reversal of) credit losses 115,690 103,430 119,374 119,804 124,266 Noninterest income: Net gains from sale of loans and other mortgage production income 47,262 48,535 39,966 35,949 57,998 Mortgage loan origination fees 41,478 41,440 28,777 35,198 39,960 Securities commissions and fees 28,044 29,606 31,223 33,143 34,076 Investment and securities advisory fees and commissions 39,662 32,037 26,848 30,661 35,031 Other 40,403 39,034 35,680 34,833 39,910 Total noninterest income 196,849 190,652 162,494 169,784 206,975 Noninterest expense: Employees' compensation and benefits 173,195 176,908 167,817 167,892 200,450 Occupancy and equipment, net 21,912 23,025 22,865 23,077 25,041 Professional services 12,639 12,594 10,697 11,555 10,631 Other 52,271 54,450 49,091 50,844 52,616 Total noninterest expense 260,017 266,977 250,470 253,368 288,738 Income before income taxes 52,522 27,105 31,398 36,220 42,503 Income tax expense 13,211 7,167 3,630 9,642 9,249 Net income 39,311 19,938 27,768 26,578 33,254 Less: Net income attributable to noncontrolling interest 2,269 1,805 1,968 1,022 1,186 Income attributable to Hilltop $ 37,042 $ 18,133 $ 25,800 $ 25,556 $ 32,068 Earnings per common share: Basic $ 0.57 $ 0.28 $ 0.40 $ 0.40 $ 0.50 Diluted $ 0.57 $ 0.28 $ 0.40 $ 0.39 $ 0.50 Cash dividends declared per common share $ 0.16 $ 0.16 $ 0.16 $ 0.15 $ 0.15 Weighted average shares outstanding: Basic 65,106 65,025 64,901 64,602 64,552 Diluted 65,108 65,054 64,954 64,779 64,669 Three Months Ended September 30, 2023 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 99,047 $ 12,215 $ (5,482 ) $ (3,175 ) $ 13,045 $ 115,650 Provision for (reversal of) credit losses 675 (715 ) — — — (40 ) Noninterest income 11,668 106,488 88,747 3,159 (13,213 ) 196,849 Noninterest expense 56,887 97,865 91,505 13,937 (177 ) 260,017 Income (loss) before taxes $ 53,153 $ 21,553 $ (8,240 ) $ (13,953 ) $ 9 $ 52,522 Nine Months Ended September 30, 2023 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 304,804 $ 39,279 $ (15,590 ) $ (9,976 ) $ 37,105 $ 355,622 Provision for (reversal of) credit losses 17,175 (48 ) — — — 17,127 Noninterest income 34,046 297,164 247,655 8,944 (37,815 ) 549,994 Noninterest expense 170,450 283,063 278,918 45,750 (717 ) 777,464 Income (loss) before taxes $ 151,225 $ 53,428 $ (46,853 ) $ (46,782 ) $ 7 $ 111,025 Three Months Ended September 30, June 30, March 31, December 31, September 30, Selected Financial Data 2023 2023 2023 2022 2022 Hilltop Consolidated: Return on average stockholders' equity 7.11 % 3.53 % 5.12 % 4.99 % 6.26 % Return on average assets 0.94 % 0.47 % 0.69 % 0.63 % 0.79 % Net interest margin (1) 3.02 % 3.03 % 3.28 % 3.23 % 3.19 % Net interest margin (taxable equivalent) (2): As reported 3.04 % 3.03 % 3.28 % 3.24 % 3.20 % Impact of purchase accounting 7 bps 9 bps 6 bps 7 bps 8 bps Book value per common share ($) 31.91 31.71 31.63 31.49 31.46 Shares outstanding, end of period (000's) 65,170 65,071 65,023 64,685 64,591 Dividend payout ratio (3) 28.12 % 57.37 % 40.25 % 37.92 % 30.19 % Banking Segment: Net interest margin (1) 3.08 % 3.11 % 3.40 % 3.42 % 3.42 % Net interest margin (taxable equivalent) (2): As reported 3.09 % 3.11 % 3.41 % 3.43 % 3.43 % Impact of purchase accounting 8 bps 11 bps 7 bps 8 bps 10 bps Accretion of discount on loans ($000's) 2,226 3,334 1,870 2,173 2,858 Net recoveries (charge-offs) ($000's) 1,556 (2,884 ) (419 ) 21 (2,735 ) Return on average assets 1.20 % 0.89 % 1.44 % 1.31 % 1.41 % Fee income ratio 10.5 % 10.0 % 9.6 % 9.8 % 9.9 % Efficiency ratio 51.4 % 51.2 % 48.4 % 48.9 % 48.9 % Employees' compensation and benefits ($000's) 30,641 30,603 32,681 34,526 35,934 Broker-Dealer Segment: Net revenue ($000's) (4) 118,703 113,241 104,498 106,919 114,184 Employees' compensation and benefits ($000's) 69,930 65,290 62,429 60,552 70,274 Variable compensation expense ($000's) 39,929 34,798 30,821 32,042 42,567 Compensation as a % of net revenue 58.9 % 57.7 % 59.7 % 56.6 % 61.5 % Pre-tax margin (5) 18.2 % 16.3 % 12.8 % 18.5 % 15.3 % Mortgage Origination Segment: Mortgage loan originations - volume ($000's): Home purchases 2,091,444 2,301,007 1,607,330 1,895,731 2,832,136 Refinancings 152,257 150,643 125,423 147,511 211,075 Total mortgage loan originations - volume 2,243,701 2,451,650 1,732,753 2,043,242 3,043,211 Mortgage loan sales - volume ($000's) 2,395,357 2,115,706 1,661,521 2,038,990 3,419,950 Net gains from mortgage loan sales (basis points): Loans sold to third parties 199 207 193 211 227 Impact of loans retained by banking segment (1 ) (6 ) (7 ) (19 ) (9 ) As reported 198 201 186 192 218 Mortgage servicing rights asset ($000's) (6) 104,951 95,101 103,314 100,825 156,539 Employees' compensation and benefits ($000's) 64,016 70,982 62,355 64,940 86,079 Variable compensation expense ($000's) 33,070 36,249 25,573 26,724 44,312 ________________________________ (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 $0.6 million, $0.1 million, $0.1 million, $0.3 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. September 30, June 30, March 31, December 31, September 30, Capital Ratios 2023 2023 2023 2022 2022 Tier 1 capital (to average assets): PlainsCapital 10.62 % 10.28 % 10.69 % 10.26 % 10.29 % Hilltop 11.92 % 11.47 % 11.82 % 11.47 % 11.41 % Common equity Tier 1 capital (to risk-weighted assets): PlainsCapital 15.31 % 14.48 % 14.97 % 14.98 % 14.68 % Hilltop 18.60 % 17.61 % 17.99 % 18.23 % 17.45 % Tier 1 capital (to risk-weighted assets): PlainsCapital 15.31 % 14.48 % 14.97 % 14.98 % 14.68 % Hilltop 18.60 % 17.61 % 17.99 % 18.23 % 17.45 % Total capital (to risk-weighted assets): PlainsCapital 16.45 % 15.56 % 15.94 % 15.91 % 15.54 % Hilltop 21.54 % 20.41 % 20.75 % 20.98 % 20.07 % September 30, June 30, March 31, December 31, September 30, Non-Performing Assets Portfolio Data 2023 2023 2023 2022 2022 Loans accounted for on a non-accrual basis ($000's): Commercial real estate 7,339 3,552 1,973 4,269 4,735 Commercial and industrial 10,190 21,442 10,807 9,095 12,078 Construction and land development 760 593 199 198 1 1-4 family residential 13,202 13,360 14,387 15,941 16,968 Consumer 7 9 12 14 16 Broker-dealer — — — — — 31,498 38,956 27,378 29,517 33,798 Troubled debt restructurings included in accruing loans held for investment ($000's) (1) — — — 803 825 Non-performing loans ($000's) (1) 31,498 38,956 27,378 30,320 34,623 Non-performing loans as a % of total loans ($000's) (1) 0.34 % 0.40 % 0.30 % 0.33 % 0.39 % Other real estate owned ($000's) 5,386 3,481 3,202 2,325 1,637 Other repossessed assets ($000's) — — — — — Non-performing assets ($000's) (1) 36,884 42,437 30,580 32,645 36,260 Non-performing assets as a % of total assets ($000's) (1) 0.22 % 0.25 % 0.18 % 0.20 % 0.22 % Loans past due 90 days or more and still accruing ($000's) (2) 106,346 130,036 114,523 92,099 96,532 _____________________________ (1) Effective January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02 which eliminated the recognition and measurement guidance on troubled debt restructurings for creditors. Therefore, we no longer present troubled debt restructurings as a component of non-performing loans and assets. (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 September 30, 2023 2022 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 $ 1,075,518 $ 15,649 5.82 % $ 1,166,265 $ 14,414 4.94 % Loans held for investment, gross (2) 7,972,604 126,753 6.31 % 7,911,833 94,751 4.75 % Investment securities - taxable 2,690,977 27,166 4.04 % 2,883,412 19,642 2.72 % Investment securities - non-taxable (3) 315,294 3,069 3.89 % 312,312 2,817 3.61 % Federal funds sold and securities purchased under agreements to resell 142,324 2,313 6.45 % 137,728 1,309 3.77 % Interest-bearing deposits in other financial institutions 1,550,991 20,320 5.20 % 1,780,220 9,542 2.13 % Securities borrowed 1,371,625 17,683 5.04 % 1,116,837 10,938 3.83 % Other 69,827 4,407 25.04 % 56,331 3,425 24.12 % Interest-earning assets, gross (3) 15,189,160 217,360 5.68 % 15,364,938 156,838 4.05 % Allowance for credit losses (110,398 ) (95,083 ) Interest-earning assets, net 15,078,762 15,269,855 Noninterest-earning assets 1,448,834 1,399,228 Total assets $ 16,527,596 $ 16,669,083 Liabilities and Stockholders' Equity Interest-bearing liabilities Interest-bearing deposits $ 7,893,384 $ 64,290 3.23 % $ 7,136,779 $ 12,525 0.70 % Securities loaned 1,303,883 16,169 4.92 % 980,530 9,407 3.81 % Notes payable and other borrowings 1,527,371 20,646 5.36 % 1,262,985 11,054 3.47 % Total interest-bearing liabilities 10,724,638 101,105 3.74 % 9,380,294 32,986 1.40 % Noninterest-bearing liabilities Noninterest-bearing deposits 3,347,752 4,543,067 Other liabilities 362,133 685,843 Total liabilities 14,434,523 14,609,204 Stockholders’ equity 2,066,564 2,032,717 Noncontrolling interest 26,509 27,162 Total liabilities and stockholders' equity $ 16,527,596 $ 16,669,083 Net interest income (3) $ 116,255 $ 123,852 Net interest spread (3) 1.94 % 2.65 % Net interest margin (3) 3.04 % 3.20 % ________________________________ (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 rate for the periods presented. The adjustment to interest income was $0.6 million and $0.4 million for the three months ended September 30, 2023 and 2022, respectively. Conference Call Information Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, October 20, 2023. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third quarter 2023 financial results. Interested parties can access the conference call by dialing 1-888-259-6580 (North America) and then using the access code 31393751. 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 September 30, 2023, Hilltop employed approximately 3,900 people and operated approximately 336 locations in 48 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,” “position,” “probable,” “progressing,” “projects,” “prudent,” “seeks,” “should,” “target,” “view,” “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 and any legal, reputational and financial risks following a cybersecurity incident; (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) risks associated with concentration in real estate related loans and (vi) disruptions to the economy and the U.S. banking system caused by bank failures during early 2023, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments. 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/20231019863942/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 third quarter of 2023. Hilltop produced income to common stockholders of $37.0 million, or $0.57 per diluted share, for the third quarter of 2023, compared to $32.1 million, or $0.50 per diluted share, for the third quarter of 2022. Hilltop’s financial results for the third quarter of 2023 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income, a decline in the net interest income within the banking segment, and increases in net revenues within certain of the broker-dealer segment’s business lines. Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, payable on November 28, 2023, to all common stockholders of record as of the close of business on November 13, 2023. Headwinds that began in 2022, and continued through the first nine months of 2023, including the impact of tight housing inventories on mortgage volumes, declining deposit balances, rapid increases in market interest rates and a volatile economic forecast have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2023. The impacts of such headwinds during the remainder of 2023 remain uncertain and will depend on developments outside of our control, including, among others, the timing and significance of further changes in U.S. treasury yields and mortgage interest rates, exposure to increasing funding costs, inflationary pressures associated with compensation, occupancy and software costs and labor market conditions, international armed conflicts and their impact on supply chains, and disruptions to the economy and the U.S. banking system caused by high-profile bank failures during early 2023. Jeremy B. Ford, President and CEO of Hilltop, said “Hilltop’s operating results for the third quarter reflect a general continuation in market pressures experienced in the first half of the year. While PlainsCapital Bank produced strong financial results for the quarter with a 1.20% return on average assets, the competitive environment around deposits resulted in further pressure on the bank’s net interest margin. HilltopSecurities generated robust financial results as the wealth management and structured finance businesses produced strong net revenues, which more than offset challenging market conditions for the public finance and fixed income capital markets businesses. PrimeLending’s results continued to be impacted by the housing market’s lack of inventory, consumer affordability challenges and a stubbornly compressed gain-on-sale margin. “As we progress into the final quarter of the year, we will continue to prudently manage our balance sheet, closely monitor our expenses and serve our valued clients.” Third Quarter 2023 Highlights for Hilltop: The reversal of credit losses was $40 thousand during the third quarter of 2023, compared to a provision for credit losses of $14.8 million in the second quarter of 2023 and a reversal of credit losses of $0.8 million in the third quarter of 2022; The slight reversal of credit losses during the third quarter of 2023 reflected improvements to the U.S. economic outlook and decreases in specific reserves within our broker dealer segment, offset by increases in specific reserves and net portfolio changes within the banking segment. For the third quarter of 2023, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $88.7 million, compared to $98.0 million in the third quarter of 2022, a 9.4% decrease; Mortgage loan origination production volume was $2.2 billion during the third quarter of 2023, compared to $3.0 billion in the third quarter of 2022; Net gains from mortgage loans sold to third parties decreased to 199 basis points during the third quarter of 2023, compared to 207 basis points in the second quarter of 2023. Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the third quarter of 2023 were 0.94% and 7.11%, respectively, compared to 0.79% and 6.26%, respectively, for the third quarter of 2022; Hilltop’s book value per common share increased to $31.91 at September 30, 2023, compared to $31.71 at June 30, 2023; Hilltop’s total assets were $16.4 billion and $17.1 billion at September 30, 2023 and June 30, 2023, respectively; Loans1, net of allowance for credit losses, were $7.7 billion and $7.9 billion at September 30, 2023 and June 30, 2023, respectively; Non-performing loans were $31.5 million, or 0.34% of total loans, at September 30, 2023, compared to $39.0 million, or 0.40% of total loans, at June 30, 2023; Loans held for sale decreased by 20.6% from June 30, 2023 to $1.1 billion at September 30, 2023; Total deposits were $11.1 billion and $11.2 billion at September 30, 2023 and June 30, 2023, respectively; Total estimated uninsured deposits were $4.4 billion, or approximately 40% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $276.3 million, were $4.2 billion, or approximately 37% of total deposits at September 30, 2023. Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 11.92% and a Common Equity Tier 1 Capital Ratio of 18.60% at September 30, 2023; Hilltop’s consolidated net interest margin4 decreased to 3.02% for the third quarter of 2023, compared to 3.03% in the second quarter of 2023; For the third quarter of 2023, noninterest income was $196.8 million, compared to $207.0 million in the third quarter of 2022, a 4.9% decrease; For the third quarter 2023, noninterest expense was $260.0 million, compared to $288.7 million in the third quarter of 2022, a 9.9% decrease; and Hilltop’s effective tax rate was 25.2% during the third quarter of 2023, compared to 21.8% during the same period in 2022. The effective tax rate for the third quarter 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 $357.1 million and $358.5 million at September 30, 2023 and June 30, 2023, 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 September 30, June 30, March 31, December 31, September 30, (in 000's) 2023 2023 2023 2022 2022 Cash and due from banks $ 1,513,747 $ 1,584,709 $ 1,764,081 $ 1,579,512 $ 1,777,584 Federal funds sold 3,650 650 743 650 663 Assets segregated for regulatory purposes 47,491 50,711 36,199 67,737 109,358 Securities purchased under agreements to resell 123,719 143,982 144,201 118,070 145,365 Securities: Trading, at fair value 578,901 696,649 692,908 755,032 641,864 Available for sale, at fair value, net (1) 1,456,238 1,526,869 1,641,571 1,658,766 1,584,724 Held to maturity, at amortized cost, net (1) 825,079 847,437 862,280 875,532 889,452 Equity, at fair value 264 258 231 200 209 2,860,482 3,071,213 3,196,990 3,289,530 3,116,249 Loans held for sale 1,058,806 1,333,044 1,040,138 982,616 1,003,605 Loans held for investment, net of unearned income 8,204,052 8,354,122 8,192,846 8,092,673 7,944,246 Allowance for credit losses (110,822 ) (109,306 ) (97,354 ) (95,442 ) (91,783 ) Loans held for investment, net 8,093,230 8,244,816 8,095,492 7,997,231 7,852,463 Broker-dealer and clearing organization receivables 1,460,352 1,474,177 1,560,246 1,038,055 1,255,052 Premises and equipment, net 172,097 176,574 180,132 184,950 191,423 Operating lease right-of-use assets 93,057 97,979 100,122 102,443 103,099 Mortgage servicing assets 104,951 95,101 103,314 100,825 156,539 Other assets 588,751 588,166 529,438 518,899 624,235 Goodwill 267,447 267,447 267,447 267,447 267,447 Other intangible assets, net 9,078 9,772 10,544 11,317 12,209 Total assets $ 16,396,858 $ 17,138,341 $ 17,029,087 $ 16,259,282 $ 16,615,291 Deposits: Noninterest-bearing $ 3,200,247 $ 3,451,438 $ 3,807,878 $ 3,968,862 $ 4,546,816 Interest-bearing 7,902,850 7,712,739 7,289,269 7,346,887 6,805,198 Total deposits 11,103,097 11,164,177 11,097,147 11,315,749 11,352,014 Broker-dealer and clearing organization payables 1,368,064 1,306,646 1,383,317 966,470 1,176,156 Short-term borrowings 882,999 1,628,637 1,572,794 970,056 942,309 Securities sold, not yet purchased, at fair value 51,527 74,761 51,497 53,023 99,515 Notes payable 347,020 364,531 376,410 346,654 390,354 Operating lease liabilities 114,334 119,999 122,878 126,759 120,635 Other liabilities 422,955 389,336 341,246 417,042 475,425 Total liabilities 14,289,996 15,048,087 14,945,289 14,195,753 14,556,408 Common stock 652 651 650 647 646 Additional paid-in capital 1,052,867 1,050,191 1,044,774 1,046,331 1,043,605 Accumulated other comprehensive loss (145,083 ) (131,718 ) (125,461 ) (133,531 ) (119,864 ) Retained earnings 1,171,250 1,144,624 1,136,901 1,123,636 1,107,586 Deferred compensation employee stock trust, net 340 450 446 481 479 Employee stock trust (446 ) (599 ) (599 ) (640 ) (641 ) Total Hilltop stockholders' equity 2,079,580 2,063,599 2,056,711 2,036,924 2,031,811 Noncontrolling interests 27,282 26,655 27,087 26,605 27,072 Total stockholders' equity 2,106,862 2,090,254 2,083,798 2,063,529 2,058,883 Total liabilities & stockholders' equity $ 16,396,858 $ 17,138,341 $ 17,029,087 $ 16,259,282 $ 16,615,291 _____________________________ (1) At September 30, 2023, the amortized cost of the available for sale securities portfolio was $1,606,340, while the fair value of the held to maturity securities portfolio was $703,366. Three Months Ended Consolidated Income Statements September 30, June 30, March 31, December 31, September 30, (in 000's, except per share data) 2023 2023 2023 2022 2022 Interest income: Loans, including fees $ 142,402 $ 138,397 $ 123,379 $ 117,906 $ 109,165 Securities borrowed 17,683 18,515 17,068 14,162 10,938 Securities: Taxable 27,166 26,719 25,602 23,293 19,642 Tax-exempt 2,464 2,566 3,188 3,002 2,451 Other 27,040 27,229 22,190 21,611 14,276 Total interest income 216,755 213,426 191,427 179,974 156,472 Interest expense: Deposits 64,290 54,726 35,824 28,238 12,525 Securities loaned 16,169 16,413 15,346 13,179 9,407 Short-term borrowings 14,212 17,706 12,444 10,278 5,550 Notes payable 4,026 3,973 3,853 3,988 3,907 Other 2,408 2,342 2,255 849 1,597 Total interest expense 101,105 95,160 69,722 56,532 32,986 Net interest income 115,650 118,266 121,705 123,442 123,486 Provision for (reversal of) credit losses (40 ) 14,836 2,331 3,638 (780 ) Net interest income after provision for (reversal of) credit losses 115,690 103,430 119,374 119,804 124,266 Noninterest income: Net gains from sale of loans and other mortgage production income 47,262 48,535 39,966 35,949 57,998 Mortgage loan origination fees 41,478 41,440 28,777 35,198 39,960 Securities commissions and fees 28,044 29,606 31,223 33,143 34,076 Investment and securities advisory fees and commissions 39,662 32,037 26,848 30,661 35,031 Other 40,403 39,034 35,680 34,833 39,910 Total noninterest income 196,849 190,652 162,494 169,784 206,975 Noninterest expense: Employees' compensation and benefits 173,195 176,908 167,817 167,892 200,450 Occupancy and equipment, net 21,912 23,025 22,865 23,077 25,041 Professional services 12,639 12,594 10,697 11,555 10,631 Other 52,271 54,450 49,091 50,844 52,616 Total noninterest expense 260,017 266,977 250,470 253,368 288,738 Income before income taxes 52,522 27,105 31,398 36,220 42,503 Income tax expense 13,211 7,167 3,630 9,642 9,249 Net income 39,311 19,938 27,768 26,578 33,254 Less: Net income attributable to noncontrolling interest 2,269 1,805 1,968 1,022 1,186 Income attributable to Hilltop $ 37,042 $ 18,133 $ 25,800 $ 25,556 $ 32,068 Earnings per common share: Basic $ 0.57 $ 0.28 $ 0.40 $ 0.40 $ 0.50 Diluted $ 0.57 $ 0.28 $ 0.40 $ 0.39 $ 0.50 Cash dividends declared per common share $ 0.16 $ 0.16 $ 0.16 $ 0.15 $ 0.15 Weighted average shares outstanding: Basic 65,106 65,025 64,901 64,602 64,552 Diluted 65,108 65,054 64,954 64,779 64,669 Three Months Ended September 30, 2023 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 99,047 $ 12,215 $ (5,482 ) $ (3,175 ) $ 13,045 $ 115,650 Provision for (reversal of) credit losses 675 (715 ) — — — (40 ) Noninterest income 11,668 106,488 88,747 3,159 (13,213 ) 196,849 Noninterest expense 56,887 97,865 91,505 13,937 (177 ) 260,017 Income (loss) before taxes $ 53,153 $ 21,553 $ (8,240 ) $ (13,953 ) $ 9 $ 52,522 Nine Months Ended September 30, 2023 Segment Results Mortgage All Other and Hilltop (in 000's) Banking Broker-Dealer Origination Corporate Eliminations Consolidated Net interest income (expense) $ 304,804 $ 39,279 $ (15,590 ) $ (9,976 ) $ 37,105 $ 355,622 Provision for (reversal of) credit losses 17,175 (48 ) — — — 17,127 Noninterest income 34,046 297,164 247,655 8,944 (37,815 ) 549,994 Noninterest expense 170,450 283,063 278,918 45,750 (717 ) 777,464 Income (loss) before taxes $ 151,225 $ 53,428 $ (46,853 ) $ (46,782 ) $ 7 $ 111,025 Three Months Ended September 30, June 30, March 31, December 31, September 30, Selected Financial Data 2023 2023 2023 2022 2022 Hilltop Consolidated: Return on average stockholders' equity 7.11 % 3.53 % 5.12 % 4.99 % 6.26 % Return on average assets 0.94 % 0.47 % 0.69 % 0.63 % 0.79 % Net interest margin (1) 3.02 % 3.03 % 3.28 % 3.23 % 3.19 % Net interest margin (taxable equivalent) (2): As reported 3.04 % 3.03 % 3.28 % 3.24 % 3.20 % Impact of purchase accounting 7 bps 9 bps 6 bps 7 bps 8 bps Book value per common share ($) 31.91 31.71 31.63 31.49 31.46 Shares outstanding, end of period (000's) 65,170 65,071 65,023 64,685 64,591 Dividend payout ratio (3) 28.12 % 57.37 % 40.25 % 37.92 % 30.19 % Banking Segment: Net interest margin (1) 3.08 % 3.11 % 3.40 % 3.42 % 3.42 % Net interest margin (taxable equivalent) (2): As reported 3.09 % 3.11 % 3.41 % 3.43 % 3.43 % Impact of purchase accounting 8 bps 11 bps 7 bps 8 bps 10 bps Accretion of discount on loans ($000's) 2,226 3,334 1,870 2,173 2,858 Net recoveries (charge-offs) ($000's) 1,556 (2,884 ) (419 ) 21 (2,735 ) Return on average assets 1.20 % 0.89 % 1.44 % 1.31 % 1.41 % Fee income ratio 10.5 % 10.0 % 9.6 % 9.8 % 9.9 % Efficiency ratio 51.4 % 51.2 % 48.4 % 48.9 % 48.9 % Employees' compensation and benefits ($000's) 30,641 30,603 32,681 34,526 35,934 Broker-Dealer Segment: Net revenue ($000's) (4) 118,703 113,241 104,498 106,919 114,184 Employees' compensation and benefits ($000's) 69,930 65,290 62,429 60,552 70,274 Variable compensation expense ($000's) 39,929 34,798 30,821 32,042 42,567 Compensation as a % of net revenue 58.9 % 57.7 % 59.7 % 56.6 % 61.5 % Pre-tax margin (5) 18.2 % 16.3 % 12.8 % 18.5 % 15.3 % Mortgage Origination Segment: Mortgage loan originations - volume ($000's): Home purchases 2,091,444 2,301,007 1,607,330 1,895,731 2,832,136 Refinancings 152,257 150,643 125,423 147,511 211,075 Total mortgage loan originations - volume 2,243,701 2,451,650 1,732,753 2,043,242 3,043,211 Mortgage loan sales - volume ($000's) 2,395,357 2,115,706 1,661,521 2,038,990 3,419,950 Net gains from mortgage loan sales (basis points): Loans sold to third parties 199 207 193 211 227 Impact of loans retained by banking segment (1 ) (6 ) (7 ) (19 ) (9 ) As reported 198 201 186 192 218 Mortgage servicing rights asset ($000's) (6) 104,951 95,101 103,314 100,825 156,539 Employees' compensation and benefits ($000's) 64,016 70,982 62,355 64,940 86,079 Variable compensation expense ($000's) 33,070 36,249 25,573 26,724 44,312 ________________________________ (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 $0.6 million, $0.1 million, $0.1 million, $0.3 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. September 30, June 30, March 31, December 31, September 30, Capital Ratios 2023 2023 2023 2022 2022 Tier 1 capital (to average assets): PlainsCapital 10.62 % 10.28 % 10.69 % 10.26 % 10.29 % Hilltop 11.92 % 11.47 % 11.82 % 11.47 % 11.41 % Common equity Tier 1 capital (to risk-weighted assets): PlainsCapital 15.31 % 14.48 % 14.97 % 14.98 % 14.68 % Hilltop 18.60 % 17.61 % 17.99 % 18.23 % 17.45 % Tier 1 capital (to risk-weighted assets): PlainsCapital 15.31 % 14.48 % 14.97 % 14.98 % 14.68 % Hilltop 18.60 % 17.61 % 17.99 % 18.23 % 17.45 % Total capital (to risk-weighted assets): PlainsCapital 16.45 % 15.56 % 15.94 % 15.91 % 15.54 % Hilltop 21.54 % 20.41 % 20.75 % 20.98 % 20.07 % September 30, June 30, March 31, December 31, September 30, Non-Performing Assets Portfolio Data 2023 2023 2023 2022 2022 Loans accounted for on a non-accrual basis ($000's): Commercial real estate 7,339 3,552 1,973 4,269 4,735 Commercial and industrial 10,190 21,442 10,807 9,095 12,078 Construction and land development 760 593 199 198 1 1-4 family residential 13,202 13,360 14,387 15,941 16,968 Consumer 7 9 12 14 16 Broker-dealer — — — — — 31,498 38,956 27,378 29,517 33,798 Troubled debt restructurings included in accruing loans held for investment ($000's) (1) — — — 803 825 Non-performing loans ($000's) (1) 31,498 38,956 27,378 30,320 34,623 Non-performing loans as a % of total loans ($000's) (1) 0.34 % 0.40 % 0.30 % 0.33 % 0.39 % Other real estate owned ($000's) 5,386 3,481 3,202 2,325 1,637 Other repossessed assets ($000's) — — — — — Non-performing assets ($000's) (1) 36,884 42,437 30,580 32,645 36,260 Non-performing assets as a % of total assets ($000's) (1) 0.22 % 0.25 % 0.18 % 0.20 % 0.22 % Loans past due 90 days or more and still accruing ($000's) (2) 106,346 130,036 114,523 92,099 96,532 _____________________________ (1) Effective January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02 which eliminated the recognition and measurement guidance on troubled debt restructurings for creditors. Therefore, we no longer present troubled debt restructurings as a component of non-performing loans and assets. (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 September 30, 2023 2022 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 $ 1,075,518 $ 15,649 5.82 % $ 1,166,265 $ 14,414 4.94 % Loans held for investment, gross (2) 7,972,604 126,753 6.31 % 7,911,833 94,751 4.75 % Investment securities - taxable 2,690,977 27,166 4.04 % 2,883,412 19,642 2.72 % Investment securities - non-taxable (3) 315,294 3,069 3.89 % 312,312 2,817 3.61 % Federal funds sold and securities purchased under agreements to resell 142,324 2,313 6.45 % 137,728 1,309 3.77 % Interest-bearing deposits in other financial institutions 1,550,991 20,320 5.20 % 1,780,220 9,542 2.13 % Securities borrowed 1,371,625 17,683 5.04 % 1,116,837 10,938 3.83 % Other 69,827 4,407 25.04 % 56,331 3,425 24.12 % Interest-earning assets, gross (3) 15,189,160 217,360 5.68 % 15,364,938 156,838 4.05 % Allowance for credit losses (110,398 ) (95,083 ) Interest-earning assets, net 15,078,762 15,269,855 Noninterest-earning assets 1,448,834 1,399,228 Total assets $ 16,527,596 $ 16,669,083 Liabilities and Stockholders' Equity Interest-bearing liabilities Interest-bearing deposits $ 7,893,384 $ 64,290 3.23 % $ 7,136,779 $ 12,525 0.70 % Securities loaned 1,303,883 16,169 4.92 % 980,530 9,407 3.81 % Notes payable and other borrowings 1,527,371 20,646 5.36 % 1,262,985 11,054 3.47 % Total interest-bearing liabilities 10,724,638 101,105 3.74 % 9,380,294 32,986 1.40 % Noninterest-bearing liabilities Noninterest-bearing deposits 3,347,752 4,543,067 Other liabilities 362,133 685,843 Total liabilities 14,434,523 14,609,204 Stockholders’ equity 2,066,564 2,032,717 Noncontrolling interest 26,509 27,162 Total liabilities and stockholders' equity $ 16,527,596 $ 16,669,083 Net interest income (3) $ 116,255 $ 123,852 Net interest spread (3) 1.94 % 2.65 % Net interest margin (3) 3.04 % 3.20 % ________________________________ (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 rate for the periods presented. The adjustment to interest income was $0.6 million and $0.4 million for the three months ended September 30, 2023 and 2022, respectively. Conference Call Information Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, October 20, 2023. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third quarter 2023 financial results. Interested parties can access the conference call by dialing 1-888-259-6580 (North America) and then using the access code 31393751. 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 September 30, 2023, Hilltop employed approximately 3,900 people and operated approximately 336 locations in 48 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,” “position,” “probable,” “progressing,” “projects,” “prudent,” “seeks,” “should,” “target,” “view,” “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 and any legal, reputational and financial risks following a cybersecurity incident; (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) risks associated with concentration in real estate related loans and (vi) disruptions to the economy and the U.S. banking system caused by bank failures during early 2023, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments. 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/20231019863942/en/