Hilltop Holdings Inc. Announces Financial Results for First Quarter 2022

DALLAS–(BUSINESS WIRE)–Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter of 2022. Hilltop produced income to common stockholders of $22.3 million, or $0.28 per diluted share, for the first quarter of 2022, compared to $120.3 million, or $1.46 per diluted share, for the first quarter of 2021. Hilltop’s financial results for the first quarter of 2022 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income as well as declines in net revenues within the broker-dealer segment’s structured finance and fixed income services business lines.

Rising interest rates and inflationary pressures materially impacted our financial results during the first quarter of 2022. Additional headwinds during 2022 are expected to include tight housing inventories on mortgage volumes, a return to normalized credit losses and declining deposit balances. The COVID-19 pandemic may also continue to adversely impact financial markets and overall economic conditions. The extent of the impact of these expected headwinds and the pandemic on our operational and financial performance for the remainder of 2022 remains uncertain.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on May 27, 2022, to all common stockholders of record as of the close of business on May 13, 2022. During the three months ended March 31, 2022, there were no stock repurchases.

Jeremy B. Ford, President and CEO of Hilltop, said “Our results in the first quarter were driven primarily by the strength and stability of PlainsCapital Bank, which generated growth in its core loan portfolio while experiencing improvement in its asset quality. PrimeLending and HilltopSecurities, both primarily fee-based businesses, were pressured by the sharp rise in interest rates, lower housing inventories and lower trading volumes. Additionally, total noninterest expenses at Hilltop declined during the period as our team remains focused on expense management. Overall, we are adapting to the new mortgage and interest rate environments and believe we have the team and business model in place to drive improvement.”

First Quarter 2022 Highlights for Hilltop:

The provision for credit losses was $0.1 million during the first quarter of 2022, compared to a reversal of credit losses of $18.6 million in the fourth quarter of 2021;
- The provision for credit losses during the first quarter of 2022 primarily reflected a slower U.S. economic outlook since the prior quarter, significantly offset by decreases in specific reserves and positive risk rating grade migration.
For the first 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 $143.0 million, compared to $310.2 million in the first quarter of 2021, a 53.9% decrease;
- Mortgage loan origination production volume was $3.8 billion during the first quarter of 2022, compared to $6.2 billion in the first quarter of 2021;
- Net gains from mortgage loans sold to third parties decreased to 321 basis points during the first quarter of 2022, compared to 362 basis points in the fourth quarter of 2021.
Hilltop’s consolidated annualized return on average assets and return on average equity for the first quarter of 2022 were 0.53% and 3.60%, respectively, compared to 2.90% and 20.58%, respectively, for the first quarter of 2021;
Hilltop’s book value per common share decreased to $31.02 at March 31, 2022, compared to $31.95 at December 31, 2021;
- Decline in book value per common share during the first quarter of 2022 impacted by the significant increase of approximately $120 million in pre-tax net unrealized losses within our available for sale investment portfolio related to increases in market interest rates since purchase;
- Certain agency-issued securities were transferred from the available-for-sale to held-to-maturity portfolio on March 31, 2022 with pre-tax unrealized losses of approximately $74 million as of the date of transfer.
Hilltop’s total assets were $18.4 billion and $18.7 billion at March 31, 2022 and December 31, 2021, respectively;
Loans¹, net of allowance for credit losses, increased to $7.2 billion at March 31, 2022 compared to $7.1 billion at December 31, 2021;
Non-performing loans were $44.3 million, or 0.47% of total loans, at March 31, 2022, compared to $51.1 million, or 0.52% of total loans, at December 31, 2021;
Loans held for sale decreased by 12.5% from December 31, 2021 to $1.6 billion at March 31, 2022;
Total deposits were $12.7 billion and $12.8 billion at March 31, 2022 and December 31, 2021, respectively;
Hilltop maintained strong capital levels² with a Tier 1 Leverage Ratio³ of 12.46% and a Common Equity Tier 1 Capital Ratio of 21.27% at March 31, 2022;
Hilltop’s consolidated net interest margin⁴decreased to 2.36% for the first quarter of 2022, compared to 2.44% in the fourth quarter of 2021;
- Includes previously deferred interest income of $1.6 million during the first quarter of 2022 related to PPP loan-related origination fees, compared to $7.5 million in the first quarter of 2021.
For the first quarter of 2022, noninterest income was $216.4 million, compared to $417.6 million in the first quarter of 2021, a 48.2% decrease;
For the first quarter 2022, noninterest expense was $286.4 million, compared to $366.7 million in the first quarter of 2021, a 21.9% decrease; and
Hilltop’s effective tax rate was 19.4% during the first quarter of 2022, compared to 23.4% during the same period in 2021.
- The effective tax rate for the first quarter of 2022 was lower than the applicable statutory rate primarily due to the discrete impact of restricted stock vesting during the quarter.

¹		“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $506.2 million and $733.0 million at March 31, 2022 and December 31, 2021, respectively.
Read moreHow Manufacturing Businesses Are Being Affected by the Robot Revolution 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	March 31,			December 31,			September 30,			June 30,			March 31,
(in 000’s)	2022			2021			2021			2021			2021
Cash and due from banks	$	2,886,812		$	2,823,138		$	2,463,111		$	1,372,818		$	1,564,489
Federal funds sold		383			385			406			387			396
Assets segregated for regulatory purposes		128,408			221,740			269,506			207,284			273,393
Securities purchased under agreements to resell		256,991			118,262			155,908			202,638			106,342
Securities:
Trading, at fair value		471,763			647,998			609,813			682,483			528,712
Available for sale, at fair value, net		1,462,340			2,130,568			1,994,183			1,817,807			1,715,406
Held to maturity, at amortized cost, net		953,107			267,684			277,419			288,776			300,088
Equity, at fair value		225			250			221			193			189
		2,887,435			3,046,500			2,881,636			2,789,259			2,544,395
Loans held for sale		1,643,994			1,878,190			2,108,878			2,885,458			2,538,986
Loans held for investment, net of unearned income		7,797,903			7,879,904			7,552,926			7,645,227			7,810,657
Allowance for credit losses		(91,185	)		(91,352	)		(109,512	)		(115,269	)		(144,499	)
Loans held for investment, net		7,706,718			7,788,552			7,443,414			7,529,958			7,666,158

Broker-dealer and clearing organization receivables		1,610,352			1,672,946			1,419,652			1,403,447			1,596,817
Premises and equipment, net		198,906			204,438			210,026			212,402			213,304
Operating lease right-of-use assets		108,180			112,328			115,942			115,698			101,055
Mortgage servicing assets		100,475			86,990			110,931			124,497			142,125
Other assets		546,622			452,880			526,339			535,536			648,895
Goodwill		267,447			267,447			267,447			267,447			267,447
Other intangible assets, net		14,233			15,284			16,455			17,705			19,035
Total assets	$	18,356,956		$	18,689,080		$	17,989,651		$	17,664,534		$	17,682,837

Deposits:
Noninterest-bearing	$	4,694,592		$	4,577,183		$	4,433,148		$	4,231,082		$	4,031,181
Interest-bearing		7,972,110			8,240,894			7,699,014			7,502,703			7,701,598
Total deposits		12,666,702			12,818,077			12,132,162			11,733,785			11,732,779
Broker-dealer and clearing organization payables		1,397,836			1,477,300			1,496,923			1,439,620			1,546,227
Short-term borrowings		835,054			859,444			747,040			915,919			676,652
Securities sold, not yet purchased, at fair value		97,629			96,586			113,064			132,950			97,055
Notes payable		395,479			387,904			395,804			396,653			401,713
Operating lease liabilities		125,919			130,960			134,296			134,019			120,339
Junior subordinated debentures		—			—			—			67,012			67,012
Other liabilities		347,742			369,606			468,020			348,200			595,045
Total liabilities		15,866,361			16,139,877			15,487,309			15,168,158			15,236,822

Common stock		794			790			790			812			823
Additional paid-in capital		1,275,649			1,274,446			1,270,272			1,302,439			1,319,518
Accumulated other comprehensive income (loss)		(80,565	)		(10,219	)		367			7,093			3,486
Retained earnings		1,267,415			1,257,014			1,204,307			1,159,304			1,094,727
Deferred compensation employee stock trust, net		744			752			751			754			752
Employee stock trust		(104	)		(115	)		(116	)		(121	)		(121	)
Total Hilltop stockholders’ equity		2,463,933			2,522,668			2,476,371			2,470,281			2,419,185
Noncontrolling interests		26,662			26,535			25,971			26,095			26,830
Total stockholders’ equity		2,490,595			2,549,203			2,502,342			2,496,376			2,446,015
Total liabilities & stockholders’ equity	$	18,356,956		$	18,689,080		$	17,989,651		$	17,664,534		$	17,682,837


	Three Months Ended
Consolidated Income Statements	March 31,		December 31,			September 30,			June 30,			March 31,
(in 000’s, except per share data)	2022		2021			2021			2021			2021
Interest income:
Loans, including fees	$	90,408	$	96,104		$	99,769		$	104,162		$	104,277
Securities borrowed		8,817		8,524			8,585			15,586			28,972
Securities:
Taxable		15,581		13,916			12,341			11,125			10,251
Tax-exempt		2,419		2,639			2,687			2,338			2,102
Other		2,312		1,872			1,796			1,607			1,321
Total interest income		119,537		123,055			125,178			134,818			146,923

Interest expense:
Deposits		4,193		4,404			5,303			6,176			7,741
Securities loaned		7,472		6,624			6,519			12,345			25,486
Short-term borrowings		2,045		2,279			2,400			2,374			2,013
Notes payable		4,437		5,871			5,465			5,253			4,797
Junior subordinated debentures		—		—			419			577			562
Other		1,399		(417	)		(18	)		177			642
Total interest expense		19,546		18,761			20,088			26,902			41,241

Net interest income		99,991		104,294			105,090			107,916			105,682
Provision for (reversal of) credit losses		115		(18,565	)		(5,819	)		(28,720	)		(5,109	)
Net interest income after provision for (reversal of) credit losses		99,876		122,859			110,909			136,636			110,791

Noninterest income:
Net gains from sale of loans and other mortgage production income		110,894		156,103			203,152			199,625			267,080
Mortgage loan origination fees		32,062		35,930			38,780			42,146			43,155
Securities commissions and fees		37,146		32,801			34,412			38,300			38,314
Investment and securities advisory fees and commissions		29,705		42,834			49,646			32,268			27,695
Other		6,621		17,178			41,955			27,560			41,341
Total noninterest income		216,428		284,846			367,945			339,899			417,585

Noninterest expense:
Employees’ compensation and benefits		200,019		229,717			258,679			248,486			270,353
Occupancy and equipment, net		24,766		25,741			25,428			25,004			24,429
Professional services		10,063		9,904			14,542			16,239			13,585
Other		51,502		56,832			56,525			53,639			58,295
Total noninterest expense		286,350		322,194			355,174			343,368			366,662

Income before income taxes		29,954		85,511			123,680			133,167			161,714
Income tax expense		5,815		20,715			28,257			31,234			37,770
Net income		24,139		64,796			95,423			101,933			123,944
Less: Net income attributable to noncontrolling interest		1,889		2,611			2,517			2,873			3,599
Income attributable to Hilltop	$	22,250	$	62,185		$	92,906		$	99,060		$	120,345

Earnings per common share:
Basic	$	0.28	$	0.79		$	1.16		$	1.21		$	1.46
Diluted	$	0.28	$	0.78		$	1.15		$	1.21		$	1.46

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

Weighted average shares outstanding:
Basic		79,114		78,933			80,109			81,663			82,169
Diluted		79,356		79,427			80,542			82,199			82,657


	Three Months Ended March 31, 2022
Segment Results							Mortgage						All Other and			Hilltop
(in 000’s)	Banking			Broker-Dealer			Origination			Corporate			Eliminations			Consolidated
Net interest income (expense)	$	92,070		$	11,518		$	(1,835	)	$	(3,389	)	$	1,627		$	99,991
Provision for (reversal of) credit losses		(50	)		165			—			—			—			115
Noninterest income		12,771			60,691			143,195			1,766			(1,995	)		216,428
Noninterest expense		58,430			80,647			134,859			12,793			(379	)		286,350
Income (loss) before taxes	$	46,461		$	(8,603	)	$	6,501		$	(14,416	)	$	11		$	29,954


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

Hilltop Consolidated:
Return on average stockholders’ equity		3.60	%		9.93	%		14.96	%		16.42	%		20.58	%
Return on average assets		0.53	%		1.41	%		2.13	%		2.29	%		2.90	%
Net interest margin ⁽¹⁾		2.36	%		2.44	%		2.53	%		2.62	%		2.69	%
Net interest margin (taxable equivalent) ⁽²⁾:
As reported		2.37	%		2.45	%		2.54	%		2.63	%		2.69	%
Impact of purchase accounting		7 bps			12 bps			9 bps			16 bps			13 bps
Book value per common share ($)		31.02			31.95			31.36			30.44			29.41
Shares outstanding, end of period (000’s)		79,439			78,965			78,959			81,153			82,261
Dividend payout ratio ⁽³⁾		53.57	%		15.19	%		10.34	%		9.92	%		8.19	%

Banking Segment:
Net interest margin ⁽¹⁾		2.65	%		2.81	%		2.99	%		3.19	%		3.30	%
Net interest margin (taxable equivalent)⁽²⁾:
As reported		2.65	%		2.82	%		3.00	%		3.20	%		3.31	%
Impact of purchase accounting		8 bps			15 bps			11 bps			20 bps			17 bps
Accretion of discount on loans ($000’s)		2,510			4,716			3,221			6,001			4,851
Net recoveries (charge-offs) ($000’s)		(282	)		405			62			(510	)		564
Return on average assets		0.98	%		1.44	%		1.36	%		1.91	%		1.48	%
Fee income ratio		12.2	%		10.8	%		10.5	%		8.9	%		9.8	%
Efficiency ratio		55.7	%		54.2	%		48.8	%		49.7	%		48.4	%
Employees’ compensation and benefits ($000’s)		33,517			34,415			31,500			33,369			30,992

Broker-Dealer Segment:
Net revenue ($000’s) ⁽⁴⁾		72,209			94,569			126,570			94,145			109,137
Employees’ compensation and benefits ($000’s) ⁽⁵⁾		55,825			65,301			82,429			62,289			66,157
Variable compensation expense ($000’s)		26,625			35,939			53,505			34,409			37,412
Compensation as a % of net revenue ⁽⁵⁾		77.3	%		69.1	%		65.1	%		66.2	%		60.6	%
Pre-tax margin ⁽⁶⁾		(11.9	)%		1.8	%		13.8	%		7.3	%		16.2	%

Mortgage Origination Segment:
Mortgage loan originations – volume ($000’s):
Home purchases		2,753,031			3,559,137			3,948,420			4,018,922			2,902,710
Refinancings		1,011,452			1,430,369			1,646,208			1,881,121			3,281,395
Total mortgage loan originations – volume		3,764,483			4,989,506			5,594,628			5,900,043			6,184,105
Mortgage loan sales – volume ($000’s)		3,868,596			4,988,538			6,195,559			5,524,226			6,350,837
Net gains from mortgage loan sales (basis points):
Loans sold to third parties		321			362			359			376			398
Impact of loans retained by banking segment		(9	)		(15	)		(13	)		(12	)		(10	)
As reported		312			347			346			364			388
Mortgage servicing rights asset ($000’s) ⁽⁷⁾		100,475			86,990			110,931			124,497			142,125
Employees’ compensation and benefits ($000’s)		102,748			121,758			134,814			145,401			166,248
Variable compensation expense ($000’s)		56,243			73,208			88,153			97,081			115,486

(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 $0.5 million, $0.5 million, $0.6 million, $0.4 million, and $0.2 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.2 million, and $0.2 million, respectively, for 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)		Noted balances and ratios during all prior periods reflect certain reclassifications to conform to current period presentation.
(6)		Pre-tax margin is defined as income before income taxes divided by net revenue.
(7)		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.


	March 31,			December 31,			September 30,			June 30,			March 31,
Capital Ratios	2022			2021			2021			2021			2021
Tier 1 capital (to average assets):
PlainsCapital		9.74	%		10.20	%		10.02	%		10.22	%		10.50	%
Hilltop		12.46	%		12.58	%		12.64	%		12.87	%		13.01	%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		15.37	%		16.00	%		15.40	%		15.00	%		14.74	%
Hilltop		21.27	%		21.22	%		21.28	%		20.22	%		19.63	%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		15.37	%		16.00	%		15.40	%		15.00	%		14.74	%
Hilltop		21.27	%		21.22	%		21.28	%		20.82	%		20.22	%
Total capital (to risk-weighted assets):
PlainsCapital		16.18	%		16.77	%		16.32	%		15.95	%		15.64	%
Hilltop		23.85	%		23.75	%		24.00	%		23.48	%		22.96	%


	March 31,			December 31,			September 30,			June 30,			March 31,
Non-Performing Assets Portfolio Data	2022			2021			2021			2021			2021
Loans accounted for on a non-accrual basis ($000’s) ⁽¹⁾:
Commercial real estate		6,153			6,601			5,705			7,211			10,668
Commercial and industrial		18,486			22,478			29,808			33,033			36,144
Construction and land development		1			2			366			474			501
1-4 family residential		18,723			21,123			25,255			27,100			30,937
Consumer		21			23			24			26			26
Broker-dealer		—			—			—			—			—
		43,384			50,227			61,158			67,844			78,276
Troubled debt restructurings included in accruing loans held for investment ($000’s)		890			922			1,038			1,139			1,584
Non-performing loans ($000’s)		44,274			51,149			62,196			68,983			79,860

Non-performing loans as a % of total loans		0.47	%		0.52	%		0.64	%		0.66	%		0.77	%

Other real estate owned ($000’s)		2,175			2,833			21,605			21,078			19,899

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

Non-performing assets ($000’s)		46,449			53,982			83,801			90,061			99,759

Non-performing assets as a % of total assets		0.25	%		0.29	%		0.47	%		0.51	%		0.56	%

Loans past due 90 days or more and still accruing ($000’s) ⁽²⁾:		87,489			60,775			175,734			245,828			265,230

(1)		Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications through January 1, 2022. The Bank’s COVID-19 payment deferral 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. The Bank’s actions through 2021 included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $4 million, $17 million, $76 million, and $130 million as of December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively.
(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 March 31,
	2022							2021
	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	$	1,467,998		$	11,966	3.26	%	$	2,573,085		$	16,233	2.52	%
Loans held for investment, gross ⁽²⁾		7,839,047			78,442	4.06	%		7,645,883			88,044	4.62	%
Investment securities – taxable		2,768,849			15,581	2.25	%		2,267,709			10,233	1.80	%
Investment securities – non-taxable ⁽³⁾		324,084			2,888	3.56	%		284,001			2,280	3.21	%
Federal funds sold and securities purchased under agreements to resell		157,313			136	0.35	%		93,525			—	0.00	%
Interest-bearing deposits in other financial institutions		3,116,369			1,427	0.19	%		1,565,879			582	0.15	%
Securities borrowed		1,455,166			8,817	2.42	%		1,452,704			28,972	7.98	%
Other		54,602			750	5.57	%		49,916			762	6.18	%
Interest-earning assets, gross ⁽³⁾		17,183,428			120,007	2.83	%		15,932,702			147,106	3.70	%
Allowance for credit losses		(92,239	)						(149,397	)
Interest-earning assets, net		17,091,189							15,783,305
Noninterest-earning assets		1,401,584							1,559,039
Total assets	$	18,492,773						$	17,342,344

Liabilities and Stockholders’ Equity
Interest-bearing liabilities
Interest-bearing deposits	$	8,201,824		$	4,193	0.21	%	$	7,626,575		$	7,741	0.41	%
Securities loaned		1,371,816			7,472	2.21	%		1,355,945			25,486	7.62	%
Notes payable and other borrowings		1,249,222			7,881	2.56	%		1,130,068			8,014	2.85	%
Total interest-bearing liabilities		10,822,862			19,546	0.73	%		10,112,588			41,241	1.65	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		4,507,661							3,729,994
Other liabilities		631,790							1,101,972
Total liabilities		15,962,313							14,944,554
Stockholders’ equity		2,504,383							2,371,281
Noncontrolling interest		26,077							26,509
Total liabilities and stockholders’ equity	$	18,492,773						$	17,342,344

Net interest income ⁽³⁾				$	100,461						$	105,865
Net interest spread ⁽³⁾						2.10	%						2.05	%
Net interest margin ⁽³⁾						2.37	%						2.69	%

Contacts

Investor Relations Contact:

Erik Yohe

214-525-4634

eyohe@hilltop-holdings.com

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