Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2022

Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the second quarter of 2022. Hilltop produced income to common stockholders of $33.3 million, or $0.45 per diluted share, for the second quarter of 2022, compared to $99.1 million, or $1.21 per diluted share, for the second quarter of 2021. Hilltop’s financial results for the second quarter of 2022 reflect a significant decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income and an increase in the banking segment’s provision for credit losses due to a deteriorating U.S. economic outlook.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on August 26, 2022, to all common stockholders of record as of the close of business on August 12, 2022. Additionally, during the second quarter of 2022, Hilltop paid $442.3 million to repurchase approximately 14.87 million shares of its common stock at a price of $29.75 per share pursuant to the tender offer completed in May 2022. These shares were returned to the pool of authorized but unissued shares of common stock. As a result of share repurchases during 2022, Hilltop has no further available share repurchase capacity associated with its previously authorized stock repurchase program.

Identified headwinds during 2022, including tight housing inventories on mortgage volumes, declining deposit balances, increases in market interest rates, and uncertainties related to inflationary pressures on expenses, coupled with a declining economic forecast, rapid increases in the 10-year U.S. treasury bond yield and mortgage interest rates, and exposure to increasing funding costs during the first half of 2022 have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2022. The COVID-19 pandemic may also continue to adversely impact financial markets and overall economic conditions. The extent of the impact of the pandemic on our operational and financial performance for the remainder of 2022 remains uncertain.

Jeremy B. Ford, President and CEO of Hilltop, said, “Our second quarter results demonstrate again the value of the Hilltop business model, despite a challenging economic environment. PlainsCapital Bank performed well with another quarter of solid loan growth and healthy credit metrics across the loan portfolio. Additionally, the Bank realized net interest margin expansion as it prudently manages deposit costs and captures the benefits of the rising rate environment. PrimeLending and HilltopSecurities experienced a continuation of the challenging market faced in the first quarter with elevated and volatile interest rates paired with lower demand for new home purchases. Importantly, both PrimeLending and HilltopSecurities were profitable during these challenging times as a result of strong expense discipline and experienced management teams.

“We were also pleased to return meaningful capital to stockholders through a successful tender offer in May. This transaction demonstrates our conviction in the long-term strategy of Hilltop, as we bought back almost 19% of the outstanding shares while still retaining excess capital for future growth.”

Second Quarter 2022 Highlights for Hilltop:

• The provision for credit losses was $5.3 million during the second quarter of 2022, compared to a provision for credit losses of $0.1 million in the first quarter of 2022 and a reversal of credit losses of $28.7 million in the second quarter of 2021;
  • The provision for credit losses during the second quarter of 2022 primarily reflected an increase in the expected lifetime credit losses under CECL on collectively evaluated loans within the portfolio attributable to a deteriorating U.S. economic outlook since the prior quarter, partially offset by decreases in specific reserves and positive risk rating grade migration.
• For the second quarter of 2022, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $139.9 million, compared to $241.8 million in the second quarter of 2021, a 42.1% decrease;
  • Mortgage loan origination production volume was $3.8 billion during the second quarter of 2022, compared to $5.9 billion in the second quarter of 2021;
  • Net gains from mortgage loans sold to third parties decreased to 260 basis points during the second quarter of 2022, compared to 321 basis points in the first quarter of 2022.
• Hilltop’s consolidated annualized return on average assets and return on average equity for the second quarter of 2022 were 0.80% and 5.82%, respectively, compared to 2.29% and 16.42%, respectively, for the second quarter of 2021;
• Hilltop’s book value per common share increased to $31.43 at June 30, 2022, compared to $31.02 at March 31, 2022;
• Hilltop’s total assets were $16.7 billion and $18.4 billion at June 30, 2022 and March 31, 2022, respectively;
• Loans¹, net of allowance for credit losses, increased to $7.4 billion at June 30, 2022 compared to $7.2 billion at March 31, 2022;
• Non-performing loans were $35.7 million, or 0.38% of total loans, at June 30, 2022, compared to $44.3 million, or 0.47% of total loans, at March 31, 2022;
• Loans held for sale decreased by 9.3% from March 31, 2022 to $1.5 billion at June 30, 2022;
• Total deposits were $11.9 billion and $12.7 billion at June 30, 2022 and March 31, 2022, respectively;
• Hilltop maintained strong capital levels² with a Tier 1 Leverage Ratio³ of 10.53% and a Common Equity Tier 1 Capital Ratio of 17.24% at June 30, 2022;
• Hilltop’s consolidated net interest margin⁴ increased to 2.75% for the second quarter of 2022, compared to 2.36% in the first quarter of 2022;
  • Includes previously deferred interest income of $1.3 million during the second quarter of 2022 related to PPP loan-related origination fees, compared to $5.4 million in the second quarter of 2021.
• For the second quarter of 2022, noninterest income was $239.3 million, compared to $339.9 million in the second quarter of 2021, a 29.6% decrease;
• For the second quarter 2022, noninterest expense was $298.5 million, compared to $343.4 million in the second quarter of 2021, a 13.1% decrease; and
• Hilltop’s effective tax rate was 25.6% during the second quarter of 2022, compared to 23.5% during the same period in 2021.
  • The effective tax rate for the second quarter of 2022 was higher than the applicable statutory rate primarily due to the impact of non-deductible compensation expense and other permanent adjustments.

Conference Call Information

Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, July 22, 2022. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second quarter 2022 financial results. Interested parties can access the conference call by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 416063. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop-holdings.com).

About Hilltop

Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank’s wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings’ broker-dealer subsidiaries, Hilltop Securities Inc. and Momentum Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At June 30, 2022, Hilltop employed approximately 4,650 people and operated approximately 385 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and Hilltopsecurities.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “continue,” “could,” “drive,” “estimates,” “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “projects,” “seeks,” “should,” “target,” “view,” “well-tuned,” “will” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: (i) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (ii) effectiveness of our data security controls in the face of cyber attacks; (iii) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (iv) changes in the interest rate environment; (v) the COVID-19 pandemic and the response of governmental authorities to the pandemic and disruptions in global or national supply chains, which have had, and may continue to have, an adverse impact on the global economy and our business operations and performance; (vi) transitions away from the London Interbank Offered Rate; and (vii) risks associated with concentration in real estate related loans. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement.

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Investor Relations Contact:
Erik Yohe
214-525-4634
eyohe@hilltop-holdings.com