DALLAS–(BUSINESS WIRE)–Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the fourth quarter and full year 2023. Hilltop produced income to common stockholders of $28.7 million, or $0.44 per diluted share, for the fourth quarter of 2023, compared to $25.6 million, or $0.39 per diluted share, for the fourth quarter of 2022. Income to common stockholders for the full year 2023 was $109.6 million, or $1.69 per diluted share, compared to $113.1 million, or $1.60 per diluted share, for the full year 2022. Hilltop’s financial results for the fourth quarter and full year 2023 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income, a decline in the net interest income within the banking segment, and increases in net revenues within certain of the broker-dealer segment’s business lines.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.17 per common share, a 6% increase from the prior quarter, payable on February 28, 2024, to all common stockholders of record as of the close of business on February 12, 2024. Additionally, the Hilltop Board of Directors authorized, subject to regulatory approvals or non-objections, a new stock repurchase program through January 2025, under which Hilltop may repurchase, in the aggregate, up to $75.0 million of its outstanding common stock. During 2023, Hilltop paid $5.1 million to repurchase an aggregate of 164,604 shares of its common stock at an average price of $30.95 per share pursuant to the 2023 stock repurchase program, which is inclusive of repurchases during the fourth quarter of 2023. These shares were returned to the pool of authorized but unissued shares of common stock.

Headwinds that began in 2022, and continued through 2023, including the impact of tight housing inventories on mortgage volumes, declining deposit balances, rapid increases in market interest rates and a volatile economic forecast have had an adverse impact on our operating results during 2023. The impacts of such headwinds during 2024 remain uncertain and will depend on developments outside of our control, including, among others, the 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, and international armed conflicts and their impact on supply chains.

Jeremy B. Ford, President and CEO of Hilltop, said, “2023 presented a challenging operating environment for Hilltop. Despite the turmoil created by bank failures in the first quarter of 2023, the prudent management of operations at our lines of business and sound stewardship of our balance sheet allowed us to continue to support our clients with exceptional service and end a volatile year with strong capital and liquidity.

“At PlainsCapital Bank, we delivered profitable results in the face of steep competition for deposits and muted loan demand from borrowers. PrimeLending continued to experience a difficult mortgage market as tight inventories and elevated mortgage rates challenged affordability for consumers and production volume. HilltopSecurities offset down markets for our Public Finance and Fixed Income business lines by generating exceptional results from our Structured Finance and Wealth Management platforms. The results at the broker-dealer reflect the value in our diversified offerings at HilltopSecurities.

“As we move into 2024, we will continue to proactively manage costs in this tight operating environment and focus on our conservative, long-term strategy to further build on Hilltop’s franchise value.”

Fourth Quarter 2023 Highlights for Hilltop:

The provision for credit losses was $1.3 million during the fourth quarter of 2023, compared to a reversal of credit losses of $40 thousand in the third quarter of 2023 and a provision for credit losses of $3.6 million in the fourth quarter of 2022;
- The provision for credit losses during the fourth quarter of 2023 reflected a slight build in the allowance related to increases in specific reserves and net portfolio changes, partially offset by improvements to the U.S. economic outlook since the prior quarter within the banking segment.

For the fourth 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 $69.2 million, compared to $71.1 million in the fourth quarter of 2022, a 2.7% decrease;
- Mortgage loan origination production volume was $1.8 billion during the fourth quarter of 2023, compared to $2.0 billion in the fourth quarter of 2022;
- Net gains from mortgage loans sold to third parties decreased to 189 basis points during the fourth quarter of 2023, compared to 199 basis points in the third quarter of 2023.
Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the fourth quarter of 2023 were 0.75% and 5.46%, respectively, compared to 0.63% and 4.99%, respectively, for the fourth quarter of 2022;
Hilltop’s book value per common share increased to $32.58 at December 31, 2023, compared to $31.91 at September 30, 2023;
Hilltop’s total assets were $16.5 billion and $16.4 billion at December 31, 2023 and September 30, 2023, respectively;
Loans¹, net of allowance for credit losses, were $7.6 billion and $7.7 billion at December 31, 2023 and September 30, 2023, respectively;
Non-performing loans were $68.3 million, or 0.76% of total loans, at December 31, 2023, compared to $31.5 million, or 0.34% of total loans, at September 30, 2023;
- Non-performing loans during the fourth quarter of 2023 increased from the prior period primarily due to the addition of a single non-owner occupied commercial real estate credit relationship within our hotel/motel portfolio industry subsector of $33.3 million.
Loans held for sale decreased by 10.9% from September 30, 2023 to $0.9 billion at December 31, 2023;
Total deposits were $11.1 billion at each of December 31, 2023 and September 30, 2023;
- Total estimated uninsured deposits were $4.7 billion, or approximately 42% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $315.7 million, were $4.4 billion, or approximately 40% of total deposits, at December 31, 2023.
Hilltop maintained strong capital levels² with a Tier 1 Leverage Ratio³ of 12.23% and a Common Equity Tier 1 Capital Ratio of 19.31% at December 31, 2023;
Hilltop’s consolidated net interest margin⁴decreased to 2.96% for the fourth quarter of 2023, compared to 3.02% in the third quarter of 2023;
For the fourth quarter of 2023, noninterest income was $179.0 million, compared to $169.8 million in the fourth quarter of 2022, a 5.4% increase;
For the fourth quarter 2023, noninterest expense was $250.8 million, compared to $253.4 million in the fourth quarter of 2022, a 1.0% decrease; and
Hilltop’s effective tax rate was 18.7% during the fourth quarter of 2023, compared to 26.6% during the same period in 2022.
- The effective tax rate for the fourth quarter of 2023 was lower than the applicable statutory rate primarily due to investments in tax-exempt instruments and changes in accumulated tax reserves, partially offset by the impact of nondeductible expenses, 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 $344.1 million and $357.1 million at December 31, 2023 and September 30, 2023, 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 through December 31, 2024.
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)	2023			2023			2023			2023			2022
Cash and due from banks	$	1,858,700		$	1,513,747		$	1,584,709		$	1,764,081		$	1,579,512
Federal funds sold		650			3,650			650			743			650
Assets segregated for regulatory purposes		57,395			47,491			50,711			36,199			67,737
Securities purchased under agreements to resell		80,011			123,719			143,982			144,201			118,070
Securities:
Trading, at fair value		515,991			578,901			696,649			692,908			755,032
Available for sale, at fair value, net ⁽¹⁾		1,507,595			1,456,238			1,526,869			1,641,571			1,658,766
Held to maturity, at amortized cost, net ⁽¹⁾		812,677			825,079			847,437			862,280			875,532
Equity, at fair value		321			264			258			231			200
		2,836,584			2,860,482			3,071,213			3,196,990			3,289,530
Loans held for sale		943,846			1,058,806			1,333,044			1,040,138			982,616
Loans held for investment, net of unearned income		8,079,745			8,204,052			8,354,122			8,192,846			8,092,673
Allowance for credit losses		(111,413	)		(110,822	)		(109,306	)		(97,354	)		(95,442	)
Loans held for investment, net		7,968,332			8,093,230			8,244,816			8,095,492			7,997,231

Broker-dealer and clearing organization receivables		1,573,931			1,460,352			1,474,177			1,560,246			1,038,055
Premises and equipment, net		168,856			172,097			176,574			180,132			184,950
Operating lease right-of-use assets		88,580			93,057			97,979			100,122			102,443
Mortgage servicing assets		96,662			104,951			95,101			103,314			100,825
Other assets		517,545			588,751			588,166			529,438			518,899
Goodwill		267,447			267,447			267,447			267,447			267,447
Other intangible assets, net		8,457			9,078			9,772			10,544			11,317
Total assets	$	16,466,996		$	16,396,858		$	17,138,341		$	17,029,087		$	16,259,282

Deposits:
Noninterest-bearing	$	3,007,101		$	3,200,247		$	3,451,438		$	3,807,878		$	3,968,862
Interest-bearing		8,056,091			7,902,850			7,712,739			7,289,269			7,346,887
Total deposits		11,063,192			11,103,097			11,164,177			11,097,147			11,315,749
Broker-dealer and clearing organization payables		1,430,734			1,368,064			1,306,646			1,383,317			966,470
Short-term borrowings		900,038			882,999			1,628,637			1,572,794			970,056
Securities sold, not yet purchased, at fair value		34,872			51,527			74,761			51,497			53,023
Notes payable		347,145			347,020			364,531			376,410			346,654
Operating lease liabilities		109,002			114,334			119,999			122,878			126,759
Other liabilities		431,684			422,955			389,336			341,246			417,042
Total liabilities		14,316,667			14,289,996			15,048,087			14,945,289			14,195,753

Common stock		652			652			651			650			647
Additional paid-in capital		1,054,662			1,052,867			1,050,191			1,044,774			1,046,331
Accumulated other comprehensive loss		(121,505	)		(145,083	)		(131,718	)		(125,461	)		(133,531	)
Retained earnings		1,189,222			1,171,250			1,144,624			1,136,901			1,123,636
Deferred compensation employee stock trust, net		228			340			450			446			481
Employee stock trust		(292	)		(446	)		(599	)		(599	)		(640	)
Total Hilltop stockholders’ equity		2,122,967			2,079,580			2,063,599			2,056,711			2,036,924
Noncontrolling interests		27,362			27,282			26,655			27,087			26,605
Total stockholders’ equity		2,150,329			2,106,862			2,090,254			2,083,798			2,063,529
Total liabilities & stockholders’ equity	$	16,466,996		$	16,396,858		$	17,138,341		$	17,029,087		$	16,259,282

_______________________________
(1)	At December 31, 2023, the amortized cost of the available for sale securities portfolio was $1,621,747, while the fair value of the held to maturity securities portfolio was $731,858.



	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)	2023		2023			2022		2023		2022
Interest income:
Loans, including fees	$	138,096	$	142,402		$	117,906	$	542,274	$	416,207
Securities borrowed		18,659		17,683			14,162		71,924		44,414
Securities:
Taxable		28,763		27,166			23,293		108,250		75,805
Tax-exempt		2,545		2,464			3,002		10,763		10,013
Other		28,704		27,040			21,611		105,164		44,677
Total interest income		216,767		216,755			179,974		838,375		591,116

Interest expense:
Deposits		68,339		64,290			28,238		223,179		50,412
Securities loaned		17,247		16,169			13,179		65,175		38,570
Short-term borrowings		13,495		14,212			10,278		57,857		20,893
Notes payable		3,596		4,026			3,988		15,448		16,141
Other		2,864		2,408			849		9,869		6,125
Total interest expense		105,541		101,105			56,532		371,528		132,141

Net interest income		111,226		115,650			123,442		466,847		458,975
Provision for (reversal of) credit losses		1,265		(40	)		3,638		18,392		8,309
Net interest income after provision for (reversal of) credit losses		109,961		115,690			119,804		448,455		450,666

Noninterest income:
Net gains from sale of loans and other mortgage production income		36,387		47,262			35,949		172,150		302,384
Mortgage loan origination fees		32,844		41,478			35,198		144,539		149,598
Securities commissions and fees		33,002		28,044			33,143		121,875		139,122
Investment and securities advisory fees and commissions		35,780		39,662			30,661		134,327		127,399
Other		40,965		40,403			34,833		156,082		113,957
Total noninterest income		178,978		196,849			169,784		728,973		832,460

Noninterest expense:
Employees’ compensation and benefits		160,390		173,195			167,892		678,310		773,688
Occupancy and equipment, net		21,524		21,912			23,077		89,326		97,115
Professional services		13,170		12,639			11,555		49,100		48,495
Other		55,761		52,271			50,844		211,573		207,701
Total noninterest expense		250,845		260,017			253,368		1,028,309		1,126,999

Income before income taxes		38,094		52,522			36,220		149,119		156,127
Income tax expense		7,132		13,211			9,642		31,140		36,833
Net income		30,962		39,311			26,578		117,979		119,294
Less: Net income attributable to noncontrolling interest		2,291		2,269			1,022		8,333		6,160
Income attributable to Hilltop	$	28,671	$	37,042		$	25,556	$	109,646	$	113,134

Earnings per common share:
Basic	$	0.44	$	0.57		$	0.40	$	1.69	$	1.61
Diluted	$	0.44	$	0.57		$	0.39	$	1.69	$	1.60

Cash dividends declared per common share	$	0.16	$	0.16		$	0.15	$	0.64	$	0.60

Weighted average shares outstanding:
Basic		65,136		65,106			64,602		65,043		70,434
Diluted		65,138		65,108			64,779		65,045		70,626


	Three Months Ended December 31, 2023
Segment Results						Mortgage						All Other and			Hilltop
(in 000’s)	Banking		Broker-Dealer			Origination			Corporate			Eliminations			Consolidated
Net interest income (expense)	$	93,133	$	13,615		$	(4,715	)	$	(2,985	)	$	12,178		$	111,226
Provision for (reversal of) credit losses		1,350		(85	)		—			—			—			1,265
Noninterest income		11,784		106,374			69,185			3,943			(12,308	)		178,978
Noninterest expense		55,784		99,960			80,367			14,881			(147	)		250,845
Income (loss) before taxes	$	47,783	$	20,114		$	(15,897	)	$	(13,923	)	$	17		$	38,094


	Year Ended December 31, 2023
Segment Results						Mortgage						All Other and			Hilltop
(in 000’s)	Banking		Broker-Dealer			Origination			Corporate			Eliminations			Consolidated
Net interest income (expense)	$	397,936	$	52,894		$	(20,305	)	$	(12,961	)	$	49,283		$	466,847
Provision for (reversal of) credit losses		18,525		(133	)		—			—			—			18,392
Noninterest income		45,830		403,538			316,840			12,887			(50,122	)		728,973
Noninterest expense		226,234		383,024			359,285			60,631			(865	)		1,028,309
Income (loss) before taxes	$	199,007	$	73,541		$	(62,750	)	$	(60,705	)	$	26		$	149,119


	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,			December 31,
Selected Financial Data	2023			2023			2022			2023			2022

Hilltop Consolidated:
Return on average stockholders’ equity		5.46	%		7.11	%		4.99	%		5.31	%		5.11	%
Return on average assets		0.75	%		0.94	%		0.63	%		0.71	%		0.69	%
Net interest margin ⁽¹⁾		2.96	%		3.02	%		3.23	%		3.07	%		2.87	%
Net interest margin (taxable equivalent) ⁽²⁾:
As reported		2.98	%		3.04	%		3.24	%		3.09	%		2.88	%
Impact of purchase accounting		4 bps			7 bps			7 bps			6 bps			7 bps
Book value per common share ($)		32.58			31.91			31.49			32.58			31.49
Shares outstanding, end of period (000’s)		65,153			65,170			64,685			65,153			64,685
Dividend payout ratio ⁽³⁾		36.35	%		28.12	%		37.92	%		37.97	%		37.36	%

Banking Segment:
Net interest margin ⁽¹⁾		2.94	%		3.08	%		3.42	%		3.13	%		3.11	%
Net interest margin (taxable equivalent)⁽²⁾:
As reported		2.95	%		3.09	%		3.43	%		3.14	%		3.11	%
Impact of purchase accounting		5 bps			8 bps			8 bps			7 bps			9 bps
Accretion of discount on loans ($000’s)		1,202			2,226			2,173			8,632			10,552
Net recoveries (charge-offs) ($000’s)		(674	)		1,556			21			(2,421	)		(4,219	)
Return on average assets		1.12	%		1.20	%		1.31	%		1.15	%		1.19	%
Fee income ratio		11.2	%		10.5	%		9.8	%		10.3	%		10.7	%
Efficiency ratio		53.2	%		51.4	%		48.9	%		51.0	%		50.8	%
Employees’ compensation and benefits ($000’s)		29,420			30,641			34,526			123,345			137,531

Broker-Dealer Segment:
Net revenue ($000’s) ⁽⁴⁾		119,989			118,703			106,919			456,432			393,540
Employees’ compensation and benefits ($000’s)		68,746			69,930			60,552			266,395			251,145
Variable compensation expense ($000’s)		39,435			39,929			32,042			144,984			138,705
Compensation as a % of net revenue		57.3	%		58.9	%		56.6	%		58.4	%		63.8	%
Pre-tax margin ⁽⁵⁾		16.8	%		18.2	%		18.5	%		16.1	%		9.6	%

Mortgage Origination Segment:
Mortgage loan originations – volume ($000’s):
Home purchases		1,698,009			2,091,444			1,895,731			7,701,758			10,823,002
Refinancings		117,018			152,257			147,511			541,373			1,837,154
Total mortgage loan originations – volume		1,815,027			2,243,701			2,043,242			8,243,131			12,660,156
Mortgage loan sales – volume ($000’s)		1,874,001			2,395,357			2,038,990			8,046,585			13,200,471
Net gains from mortgage loan sales (basis points):
Loans sold to third parties		189			199			211			198			263
Impact of loans retained by banking segment		0			(1	)		(19	)		(4	)		(11	)
As reported		189			198			192			194			252
Mortgage servicing rights asset ($000’s) ⁽⁶⁾		96,662			104,951			100,825			96,662			100,825
Employees’ compensation and benefits ($000’s)		53,766			64,016			64,940			251,119			353,973
Variable compensation expense ($000’s)		24,085			33,070			26,724			118,977			183,804

_________________________________
(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 $0.6 million, $0.6 million, $0.3 million, $2.7 million and $1.6 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.7 million and $0.8 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	2023			2023			2023			2023			2022
Tier 1 capital (to average assets):
PlainsCapital		10.55	%		10.62	%		10.28	%		10.69	%		10.26	%
Hilltop		12.23	%		11.92	%		11.47	%		11.82	%		11.47	%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		15.43	%		15.31	%		14.48	%		14.97	%		14.98	%
Hilltop		19.31	%		18.60	%		17.61	%		17.99	%		18.23	%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		15.43	%		15.31	%		14.48	%		14.97	%		14.98	%
Hilltop		19.31	%		18.60	%		17.61	%		17.99	%		18.23	%
Total capital (to risk-weighted assets):
PlainsCapital		16.57	%		16.45	%		15.56	%		15.94	%		15.91	%
Hilltop		22.33	%		21.54	%		20.41	%		20.75	%		20.98	%


	December 31,			September 30,			June 30,			March 31,			December 31,
Non-Performing Assets Portfolio Data	2023			2023			2023			2023			2022
Loans accounted for on a non-accrual basis ($000’s):
Commercial real estate:
Non-owner occupied		36,440			2,375			2,456			1,038			1,250
Owner occupied		5,098			4,964			1,096			935			3,019
Commercial and industrial		9,502			10,190			21,442			10,807			9,095
Construction and land development		3,480			760			593			199			198
1-4 family residential		13,801			13,202			13,360			14,387			15,941
Consumer		6			7			9			12			14
Broker-dealer		—			—			—			—			—
		68,327			31,498			38,956			27,378			29,517
Troubled debt restructurings included in accruing loans held for investment ($000’s) ⁽¹⁾		—			—			—			—			803
Non-performing loans ($000’s) ⁽¹⁾		68,327			31,498			38,956			27,378			30,320

Non-performing loans as a % of total loans ($000’s) ⁽¹⁾		0.76	%		0.34	%		0.40	%		0.30	%		0.33	%

Other real estate owned ($000’s)		5,095			5,386			3,481			3,202			2,325

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

Non-performing assets ($000’s) ⁽¹⁾		73,422			36,884			42,437			30,580			32,645

Non-performing assets as a % of total assets ($000’s) ⁽¹⁾		0.45	%		0.22	%		0.25	%		0.18	%		0.20	%

Loans past due 90 days or more and still accruing ($000’s) ⁽²⁾		115,090			106,346			130,036			114,523			92,099

Contacts

Investor Relations Contact:

Erik Yohe

214-525-4634

[email protected]

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Business Wire

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Business Wire 25 January 2024

13 minutes read

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