DALLAS — January 26, 2023 — 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 margin4 increased 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.
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.