Hilltop Holdings Inc. Announces Financial Results for Fourth Quarter and Full Year 2022

DALLAS–(BUSINESS WIRE)–Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the fourth quarter and full year 2022. Hilltop produced income to common stockholders of $25.6 million, or $0.39 per diluted share, for the fourth quarter of 2022, compared to $62.2 million, or $0.78 per diluted share, for the fourth quarter of 2021. Income to common stockholders for the full year 2022 was $113.1 million, or $1.60 per diluted share, compared to $374.5 million, or $4.61 per diluted share, for the full year 2021. Hilltop’s financial results for the fourth quarter and full year of 2022 included significant decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income, while the banking segment recorded a provision for credit losses as opposed to a reversal of credit losses in respective prior year periods.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, a 7% increase from the prior quarter, payable on February 24, 2023, to all common stockholders of record as of the close of business on February 10, 2023. Additionally, the Hilltop Board of Directors authorized, subject to regulatory approvals or non-objections, a new stock repurchase program through January 2024, under which Hilltop may repurchase, in the aggregate, up to $75.0 million of its outstanding common stock. During 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.

Headwinds during 2022, including the impact of tight housing inventories on mortgage volumes, declining deposit balances, rapid increases in market interest rates and a declining economic forecast, are expected to continue to have an adverse impact on our operating results during 2023. The impacts of such headwinds in 2023 remain uncertain and will depend on developments outside of our control, including, among others, 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, the Russian-Ukraine conflict and its impact on supply chains, and the impact of the pandemic.

Jeremy B. Ford, President and CEO of Hilltop, said “Although we experienced a challenging operating environment in 2022, Hilltop still generated consolidated profitability and finished the year a more resilient company. The abrupt market shifts in the mortgage and fixed income businesses had a negative impact across our company, particularly at PrimeLending and HilltopSecurities, while PlainsCapital Bank delivered across all of its key priorities, including prudent loan growth, sound credit quality and efficiency. I am proud of our teams’ accomplishments during the year, as they continued to deliver high-quality products and services for our clients, while also making tough, yet prudent, expense decisions to right-size our franchise.

“Additionally, our focus on maintaining a strong balance sheet with significant capital and liquidity has positioned Hilltop for long-term success regardless of interest rate and economic volatility. Finally, I am very pleased that Hilltop returned a record amount of capital to stockholders during 2022, primarily through our successful tender offer share repurchase completed in May.”

Fourth Quarter 2022 Highlights for Hilltop:

The provision for credit losses was $3.6 million during the fourth quarter of 2022, compared to a reversal of credit losses of $0.8 million in the third quarter of 2022 and a reversal of credit losses of $18.6 million in the fourth quarter of 2021;
- The provision for credit losses during the fourth quarter of 2022 reflected a deteriorating U.S. economic outlook since the prior quarter.
For the fourth 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 $71.1 million, compared to $192.0 million in the fourth quarter of 2021, a 63.0% decrease;
- Mortgage loan origination production volume was $2.0 billion during the fourth quarter of 2022, compared to $5.0 billion in the fourth quarter of 2021;
- Net gains from mortgage loans sold to third parties decreased to 211 basis points during the fourth quarter of 2022, compared to 227 basis points in the third quarter of 2022.
Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the fourth quarter of 2022 were 0.63% and 4.99%, respectively, compared to 1.41% and 9.93%, respectively, for the fourth quarter of 2021;
Hilltop’s book value per common share increased to $31.62 at December 31, 2022, compared to $31.46 at September 30, 2022;
Hilltop’s total assets were $16.3 billion and $16.6 billion at December 31, 2022 and September 30, 2022, respectively;
Loans¹, net of allowance for credit losses, were $7.6 billion and $7.4 billion at December 31, 2022 and September 30, 2022;
Non-performing loans were $30.3 million, or 0.33% of total loans, at December 31, 2022, compared to $34.6 million, or 0.39% of total loans, at September 30, 2022;
Loans held for sale decreased by 2.1% from September 30, 2022 to $1.0 billion at December 31, 2022;
Total deposits were $11.3 billion and $11.4 billion at December 31, 2022 and September 30, 2022, respectively;
Hilltop maintained strong capital levels² with a Tier 1 Leverage Ratio³ of 11.47% and a Common Equity Tier 1 Capital Ratio of 18.22% at December 31, 2022;
Hilltop’s consolidated net interest margin⁴increased to 3.23% for the fourth quarter of 2022, compared to 3.19% in the third quarter of 2022;
For the fourth quarter of 2022, noninterest income was $169.8 million, compared to $284.8 million in the fourth quarter of 2021, a 40.4% decrease;
For the fourth quarter 2022, noninterest expense was $253.4 million, compared to $322.2 million in the fourth quarter of 2021, a 21.4% decrease; and
Hilltop’s effective tax rate was 26.6% during the fourth quarter of 2022, compared to 24.2% during the same period in 2021.
- The effective tax rate for the fourth quarter of 2022 was higher than the applicable statutory rate primarily due to the impact of non-deductible compensation expense and other permanent adjustments.

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¹	“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $431.0 million and $402.0 million at December 31, 2022 and September 30, 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	December 31,			September 30,			June 30,			March 31,			December 31,
(in 000’s)	2022			2022			2022			2022			2021
Cash and due from banks	$	1,579,512		$	1,777,584		$	1,783,554		$	2,886,812		$	2,823,138
Federal funds sold		650			663			381			383			385
Assets segregated for regulatory purposes		67,737			109,358			120,816			128,408			221,740
Securities purchased under agreements to resell		118,070			145,365			139,929			256,991			118,262
Securities:
Trading, at fair value		755,032			641,864			593,273			471,763			647,998
Available for sale, at fair value, net		1,658,766			1,584,724			1,562,222			1,462,340			2,130,568
Held to maturity, at amortized cost, net		875,532			889,452			920,583			953,107			267,684
Equity, at fair value		200			209			197			225			250
		3,289,530			3,116,249			3,076,275			2,887,435			3,046,500
Loans held for sale		982,616			1,003,605			1,491,579			1,643,994			1,878,190
Loans held for investment, net of unearned income		8,092,673			7,944,246			7,930,619			7,797,903			7,879,904
Allowance for credit losses		(95,442	)		(91,783	)		(95,298	)		(91,185	)		(91,352	)
Loans held for investment, net		7,997,231			7,852,463			7,835,321			7,706,718			7,788,552

Broker-dealer and clearing organization receivables		1,038,055			1,255,052			1,049,830			1,610,352			1,672,946
Premises and equipment, net		184,950			191,423			195,361			198,906			204,438
Operating lease right-of-use assets		102,443			103,099			106,806			108,180			112,328
Mortgage servicing assets		100,825			156,539			121,688			100,475			86,990
Other assets		527,469			624,235			513,570			546,622			452,880
Goodwill		267,447			267,447			267,447			267,447			267,447
Other intangible assets, net		11,317			12,209			13,182			14,233			15,284
Total assets	$	16,267,852		$	16,615,291		$	16,715,739		$	18,356,956		$	18,689,080

Deposits:
Noninterest-bearing	$	3,968,862		$	4,546,816		$	4,601,643		$	4,694,592		$	4,577,183
Interest-bearing		7,346,887			6,805,198			7,319,143			7,972,110			8,240,894
Total deposits		11,315,749			11,352,014			11,920,786			12,666,702			12,818,077
Broker-dealer and clearing organization payables		966,470			1,176,156			934,818			1,397,836			1,477,300
Short-term borrowings		970,056			942,309			822,649			835,054			859,444
Securities sold, not yet purchased, at fair value		53,023			99,515			135,968			97,629			96,586
Notes payable		346,654			390,354			389,722			395,479			387,904
Operating lease liabilities		126,759			120,635			124,406			125,919			130,960
Other liabilities		417,042			475,425			329,987			347,742			369,606
Total liabilities		14,195,753			14,556,408			14,658,336			15,866,361			16,139,877

Common stock		647			646			646			794			790
Additional paid-in capital		1,046,331			1,043,605			1,039,261			1,275,649			1,274,446
Accumulated other comprehensive loss		(124,961	)		(119,864	)		(95,279	)		(80,565	)		(10,219	)
Retained earnings		1,123,636			1,107,586			1,085,208			1,267,415			1,257,014
Deferred compensation employee stock trust, net		481			479			695			744			752
Employee stock trust		(640	)		(641	)		(954	)		(104	)		(115	)
Total Hilltop stockholders’ equity		2,045,494			2,031,811			2,029,577			2,463,933			2,522,668
Noncontrolling interests		26,605			27,072			27,826			26,662			26,535
Total stockholders’ equity		2,072,099			2,058,883			2,057,403			2,490,595			2,549,203
Total liabilities & stockholders’ equity	$	16,267,852		$	16,615,291		$	16,715,739		$	18,356,956		$	18,689,080


	Three Months Ended								Year Ended
Consolidated Income Statements	December 31,		September 30,			December 31,			December 31,		December 31,
(in 000’s, except per share data)	2022		2022			2021			2022		2021
Interest income:
Loans, including fees	$	117,906	$	109,165		$	96,104		$	416,207	$	404,312
Securities borrowed		14,162		10,938			8,524			44,414		61,667
Securities:
Taxable		23,293		19,642			13,916			75,805		47,633
Tax-exempt		3,002		2,451			2,639			10,013		9,766
Other		21,611		14,276			1,872			44,677		6,595
Total interest income		179,974		156,472			123,055			591,116		529,973

Interest expense:
Deposits		28,238		12,525			4,404			50,412		23,624
Securities loaned		13,179		9,407			6,624			38,570		50,974
Short-term borrowings		10,278		5,550			2,279			20,893		9,065
Notes payable		3,988		3,907			5,871			16,141		21,386
Junior subordinated debentures		—		—			—			—		1,558
Other		849		1,597			(417	)		6,125		384
Total interest expense		56,532		32,986			18,761			132,141		106,991

Net interest income		123,442		123,486			104,294			458,975		422,982
Provision for (reversal of) credit losses		3,638		(780	)		(18,565	)		8,309		(58,213	)
Net interest income after provision for (reversal of) credit losses		119,804		124,266			122,859			450,666		481,195

Noninterest income:
Net gains from sale of loans and other mortgage production income		35,949		57,998			156,103			302,384		825,960
Mortgage loan origination fees		35,198		39,960			35,930			149,598		160,011
Securities commissions and fees		33,143		34,076			32,801			139,122		143,827
Investment and securities advisory fees and commissions		30,661		35,031			42,834			127,399		152,443
Other		34,833		39,910			17,178			113,957		128,034
Total noninterest income		169,784		206,975			284,846			832,460		1,410,275

Noninterest expense:
Employees’ compensation and benefits		167,892		200,450			229,717			773,688		1,007,235
Occupancy and equipment, net		23,077		25,041			25,741			97,115		100,602
Professional services		11,555		10,631			9,904			48,495		54,270
Other		50,844		52,616			56,832			207,701		225,291
Total noninterest expense		253,368		288,738			322,194			1,126,999		1,387,398

Income before income taxes		36,220		42,503			85,511			156,127		504,072
Income tax expense		9,642		9,249			20,715			36,833		117,976
Net income		26,578		33,254			64,796			119,294		386,096
Less: Net income attributable to noncontrolling interest		1,022		1,186			2,611			6,160		11,601
Income attributable to Hilltop	$	25,556	$	32,068		$	62,185		$	113,134	$	374,495

Earnings per common share:
Basic:	$	0.40	$	0.50		$	0.79		$	1.61	$	4.64
Diluted:	$	0.39	$	0.50		$	0.78		$	1.60	$	4.61

Cash dividends declared per common share	$	0.15	$	0.15		$	0.12		$	0.60	$	0.48

Weighted average shares outstanding:
Basic		64,602		64,552			78,933			70,434		80,708
Diluted		64,779		64,669			79,427			70,626		81,173


	Three Months Ended December 31, 2022
Segment Results						Mortgage						All Other and			Hilltop
(in 000’s)	Banking		Broker-Dealer			Origination			Corporate			Eliminations			Consolidated
Net interest income (expense)	$	109,335	$	14,116		$	(4,464	)	$	(3,279	)	$	7,734		$	123,442
Provision for (reversal of) credit losses		3,925		(287	)		—			—			—			3,638
Noninterest income		11,869		92,803			71,439			1,870			(8,197	)		169,784
Noninterest expense		59,269		87,406			92,532			14,642			(481	)		253,368
Income (loss) before taxes	$	58,010	$	19,800		$	(25,557	)	$	(16,051	)	$	18		$	36,220


	Year Ended December 31, 2022
Segment Results					Mortgage						All Other and			Hilltop
(in 000’s)	Banking		Broker-Dealer		Origination			Corporate			Eliminations			Consolidated
Net interest income (expense)	$	413,603	$	51,597	$	(10,529	)	$	(13,135	)	$	17,439		$	458,975
Provision for (reversal of) credit losses		8,250		59		—			—			—			8,309
Noninterest income		49,307		341,943		452,915			7,525			(19,230	)		832,460
Noninterest expense		235,190		355,713		478,904			59,030			(1,838	)		1,126,999
Income (loss) before taxes	$	219,470	$	37,768	$	(36,518	)	$	(64,640	)	$	47		$	156,127


	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,			December 31,
Selected Financial Data	2022			2022			2021			2022			2021

Hilltop Consolidated:
Return on average stockholders’ equity		4.99	%		6.26	%		9.93	%		5.11	%		15.38	%
Return on average assets		0.63	%		0.79	%		1.41	%		0.69	%		2.17	%
Net interest margin ⁽¹⁾		3.23	%		3.19	%		2.44	%		2.87	%		2.57	%
Net interest margin (taxable equivalent) ⁽²⁾:
As reported		3.24	%		3.20	%		2.45	%		2.88	%		2.58	%
Impact of purchase accounting		7 bps			8 bps			12 bps			7 bps			12 bps
Book value per common share ($)		31.62			31.46			31.95			31.62			31.95
Shares outstanding, end of period (000’s)		64,685			64,591			78,965			64,685			78,965
Dividend payout ratio ⁽³⁾		37.92	%		30.19	%		15.19	%		37.36	%		10.34	%

Banking Segment:
Net interest margin ⁽¹⁾		3.42	%		3.42	%		2.81	%		3.11	%		3.07	%
Net interest margin (taxable equivalent)⁽²⁾:
As reported		3.43	%		3.43	%		2.82	%		3.11	%		3.08	%
Impact of purchase accounting		8 bps			10 bps			15 bps			9 bps			16 bps
Accretion of discount on loans ($000’s)		2,173			2,858			4,716			10,552			18,789
Net recoveries (charge-offs) ($000’s)		21			(2,735	)		405			(4,219	)		521
Return on average assets		1.31	%		1.41	%		1.44	%		1.19	%		1.55	%
Fee income ratio		9.8	%		9.9	%		10.8	%		10.7	%		10.0	%
Efficiency ratio		48.9	%		48.9	%		54.2	%		50.8	%		50.3	%
Employees’ compensation and benefits ($000’s)		34,526			35,934			34,415			137,531			130,276

Broker-Dealer Segment:
Net revenue ($000’s) ⁽⁴⁾		106,919			114,184			94,569			393,540			424,421
Employees’ compensation and benefits ($000’s)		60,552			70,274			65,301			251,145			276,176
Variable compensation expense ($000’s)		32,042			42,567			35,939			138,705			161,264
Compensation as a % of net revenue		56.6	%		61.5	%		69.1	%		63.8	%		65.1	%
Pre-tax margin ⁽⁵⁾		18.5	%		15.3	%		1.8	%		9.6	%		10.3	%

Mortgage Origination Segment:
Mortgage loan originations – volume ($000’s):
Home purchases		1,895,731			2,832,136			3,559,137			10,823,002			14,429,190
Refinancings		147,511			211,075			1,430,369			1,837,154			8,239,093
Total mortgage loan originations – volume		2,043,242			3,043,211			4,989,506			12,660,156			22,668,283
Mortgage loan sales – volume ($000’s)		2,038,990			3,419,950			4,988,538			13,200,471			23,059,160
Net gains from mortgage loan sales (basis points):
Loans sold to third parties		211			227			362			263			375
Impact of loans retained by banking segment		(19	)		(9	)		(15	)		(11	)		(13	)
As reported		192			218			347			252			362
Mortgage servicing rights asset ($000’s) ⁽⁶⁾		100,825			156,539			86,990			100,825			86,990
Employees’ compensation and benefits ($000’s)		64,940			86,079			121,758			353,973			568,221
Variable compensation expense ($000’s)		26,724			44,312			73,208			183,804			373,929

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(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 $0.3 million, $0.4 million, $0.5 million, $1.6 million and $1.7 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.


	December 31,			September 30,			June 30,			March 31,			December 31,
Capital Ratios	2022			2022			2022			2022			2021
Tier 1 capital (to average assets):
PlainsCapital		10.26	%		10.29	%		9.67	%		9.74	%		10.20	%
Hilltop		11.47	%		11.41	%		10.53	%		12.46	%		12.58	%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		14.97	%		14.68	%		14.65	%		15.37	%		16.00	%
Hilltop		18.22	%		17.45	%		17.24	%		21.27	%		21.22	%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		14.97	%		14.68	%		14.65	%		15.37	%		16.00	%
Hilltop		18.22	%		17.45	%		17.24	%		21.27	%		21.22	%
Total capital (to risk-weighted assets):
PlainsCapital		15.90	%		15.54	%		15.55	%		16.18	%		16.77	%
Hilltop		20.97	%		20.07	%		19.90	%		23.85	%		23.75	%


	December 31,			September 30,			June 30,			March 31,			December 31,
Non-Performing Assets Portfolio Data	2022			2022			2022			2022			2021
Loans accounted for on a non-accrual basis ($000’s) ⁽¹⁾:
Commercial real estate		4,269			4,735			4,947			6,153			6,601
Commercial and industrial		9,095			12,078			13,315			18,486			22,478
Construction and land development		1			1			1			1			2
1-4 family residential		16,138			16,968			16,542			18,723			21,123
Consumer		14			16			19			21			23
Broker-dealer		—			—			—			—			—
		29,517			33,798			34,824			43,384			50,227
Troubled debt restructurings included in accruing loans held for investment ($000’s)		803			825			857			890			922
Non-performing loans ($000’s)		30,320			34,623			35,681			44,274			51,149

Non-performing loans as a % of total loans		0.33	%		0.39	%		0.38	%		0.47	%		0.52	%

Other real estate owned ($000’s)		2,325			1,637			1,516			2,175			2,833

Other repossessed assets ($000’s)		—			—			—			—			—

Non-performing assets ($000’s)		32,645			36,260			37,197			46,449			53,982

Non-performing assets as a % of total assets		0.20	%		0.22	%		0.22	%		0.25	%		0.29	%

Loans past due 90 days or more and still accruing ($000’s) ⁽²⁾:		92,099			96,532			82,410			87,489			60,775

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(1)	Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications through January 1, 2022. The banking segment’s COVID-19 payment deferment 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 banking segment’s actions through December 31, 2021 included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $4 million as of December 31, 2021.
(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.

Contacts

Investor Relations Contact:

Erik Yohe

214-525-4634

[email protected]

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