Hilltop Holdings Inc. Announces Financial Results for First Quarter 2023

DALLAS–(BUSINESS WIRE)– Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter 2023. Hilltop produced income to common stockholders of $25.8 million, or $0.40 per diluted share, for the first quarter of 2023, compared to $22.3 million, or $0.28 per diluted share, for the first quarter of 2022. Hilltop’s financial results for the first quarter of 2023 included significant decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income, increases in net revenues within certain of the broker-dealer segment’s business lines, and an increase in net interest income within the banking segment.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per common share, payable on May 25, 2023, to all common stockholders of record as of the close of business on May 10, 2023. Additionally, during the first quarter of 2023, Hilltop paid $4.5 million to repurchase an aggregate of 144,403 shares of its common stock at an average price of $31.15 per share pursuant to the 2023 stock repurchase program. These shares were returned to the pool of authorized but unissued shares of common stock.

Headwinds beginning in 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 have had, and 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 disruptions to the economy and the U.S. banking system caused by recent bank failures.

Jeremy B. Ford, President and CEO of Hilltop, said “In the face of heightened stress within the banking landscape, Hilltop’s prudent and long-term oriented management of our balance sheet provided our customers and stockholders with confidence given our excess capital levels and robust liquidity position. We will continue to prioritize the health and soundness of our balance sheet through this economic cycle. I want to thank our management teams across Hilltop for their judicious management of liquidity, capital and expenses leading up to this quarter.

“During the first quarter of 2023, PlainsCapital Bank benefited from an increase in interest income due to the higher interest rate environment, while actively managing the rising cost of deposits to maintain current net interest margin levels. PrimeLending continues to be negatively impacted by compression in its gain-on-sale margin and a decline in mortgage loan origination volume. Finally, HilltopSecurities’ net revenue growth was driven by higher interest rates on sweep deposit balances and an increase in trading gains within its structured finance and fixed income services business lines.”

First Quarter 2023 Highlights for Hilltop:

• The provision for credit losses was $2.3 million during the first quarter of 2023, compared to a provision for credit losses of $3.6 million in the fourth quarter of 2022 and a provision for credit losses of $0.1 million in the first quarter of 2022;
  • The provision for credit losses during the first quarter of 2023 reflected a build in the allowance related to loan portfolio changes since the prior quarter, offset by an updated economic outlook with a mild U.S. recession from fourth quarter of 2023 and recovery from the third quarter of 2024 compared to prior quarter’s U.S. recession assumption during the last three quarters of 2023.
• For the first 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 $68.7 million, compared to $143.0 million in the first quarter of 2022, a 51.9% decrease;
  • Mortgage loan origination production volume was $1.7 billion during the first quarter of 2023, compared to $3.8 billion in the first quarter of 2022;
  • Net gains from mortgage loans sold to third parties decreased to 193 basis points during the first quarter of 2023, compared to 211 basis points in the fourth quarter of 2022.
• Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the first quarter of 2023 were 0.69% and 5.12%, respectively, compared to 0.53% and 3.60%, respectively, for the first quarter of 2022;
• Hilltop’s book value per common share increased to $31.63 at March 31, 2023, compared to $31.49 at December 31, 2022;
• Hilltop’s total assets were $17.0 billion and $16.3 billion at March 31, 2023 and December 31, 2022, respectively;
• Loans¹, net of allowance for credit losses, were $7.7 billion and $7.6 billion at March 31, 2023 and December 31, 2022, respectively;
• Non-performing loans were $27.4 million, or 0.30% of total loans, at March 31, 2023, compared to $30.3 million, or 0.33% of total loans, at December 31, 2022;
• Loans held for sale increased by 5.9% from December 31, 2022 to $1.0 billion at March 31, 2023;
• Total deposits were $11.1 billion and $11.3 billion at March 31, 2023 and December 31, 2022, respectively;
• Hilltop maintained strong capital levels² with a Tier 1 Leverage Ratio³ of 11.82% and a Common Equity Tier 1 Capital Ratio of 17.99% at March 31, 2023;
• Hilltop’s consolidated net interest margin⁴ increased to 3.28% for the first quarter of 2023, compared to 3.23% in the fourth quarter of 2022;
• For the first quarter of 2023, noninterest income was $162.5 million, compared to $216.4 million in the first quarter of 2022, a 24.9% decrease;
• For the first quarter 2023, noninterest expense was $250.5 million, compared to $286.4 million in the first quarter of 2022, a 12.5% decrease; and
• Hilltop’s effective tax rate was 11.6% during the first quarter of 2023, compared to 19.4% during the same period in 2022.
  • The effective tax rate for the first quarter of 2023 was lower than the applicable statutory rate primarily due to the impacts of excess tax benefits on share-based payment awards, investments in tax-exempt instruments and changes in accumulated tax reserves, partially offset by nondeductible expenses.

Conference Call Information

Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, April 21, 2023. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review first quarter 2023 financial results. Interested parties can access the conference call by dialing 1-833-470-1428 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 485855. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop.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 March 31, 2023, Hilltop employed approximately 4,100 people and operated approximately 355 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and HilltopSecurities.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “continue,” “could,” “drive,” “estimates,” “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “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; (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 recent bank failures, 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.

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