Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter of 2024. Hilltop produced income to common stockholders of $27.7 million, or $0.42 per diluted share, for the first quarter of 2024, compared to $25.8 million, or $0.40 per diluted share, for the first quarter of 2023. Hilltop’s financial results for the first quarter of 2024 included a decline in net interest income, partially offset by a reversal of credit losses due to an improved economic outlook within the banking segment, an increase in net revenues within certain of the broker-dealer segment’s business lines, and a decline in other mortgage production income, partially offset by an increase in net gains from sale of loans within the mortgage origination segment.
Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.17 per common share payable on May 24, 2024, to all common stockholders of record as of the close of business on May 10, 2024. Additionally, during the first quarter of 2024, Hilltop paid $9.9 million to repurchase an aggregate of 320,042 shares of its common stock at an average price of $31.04 per share pursuant to the 2024 stock repurchase program. These shares were returned to the pool of authorized but unissued shares of common stock.
The impacts of economic headwinds that began in 2022, and continued into 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, “Hilltop’s operating results for the first quarter of 2024 reflect a general continuation in market trends that were experienced throughout 2023. The elevated interest rate environment continues to impact our net interest margin primarily through increased borrowing costs. Additionally, a lack of housing inventory and pressured home buying affordability limited mortgage origination volumes. Despite these pressures, Hilltop’s robust liquidity position allowed for a return of high-cost deposits.
“During the quarter, PlainsCapital Bank produced an annualized return on average assets of 1.20% highlighting the steady earnings power of the franchise. HilltopSecurities delivered a pre-tax margin of 16% on net revenues of $117 million, primarily due to strong results from the structured finance and wealth management business lines. As previously mentioned, PrimeLending’s results remain challenged due to elevated mortgage rates and suboptimal housing inventory across the country. From a consolidated perspective, we will continue to protect our strong balance sheet position and aim to produce results that improve our tangible book value per share over time.”
First Quarter 2024 Highlights for Hilltop:
The reversal of credit losses was $2.9 million during the first quarter of 2024, compared to a provision for credit losses of $1.3 million in the fourth quarter of 2023 and a provision for credit losses of $2.3 million in the first quarter of 2023;
The reversal of credit losses during the first quarter of 2024 reflected a release in the allowance related to improvements to the U.S. economic outlook since the prior quarter, partially offset by increases in specific reserves within the banking segment.
For the first quarter of 2024, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within the mortgage origination segment was $66.6 million, compared to $68.7 million in the first quarter of 2023, a 3.1% decrease;
Mortgage loan origination production volume was $1.7 billion during the first quarter of 2024, compared to $1.7 billion in the first quarter of 2023;
Net gains from mortgage loans sold to third parties increased to 221 basis points during the first quarter of 2024, compared to 189 basis points in the fourth quarter of 2023.
Hilltop’s consolidated annualized return on average assets and return on average stockholders’ equity for the first quarter of 2024 were 0.74% and 5.23%, respectively, compared to 0.69% and 5.12%, respectively, for the first quarter of 2023;
Hilltop’s book value per common share increased to $32.66 at March 31, 2024, compared to $32.58 at December 31, 2023;
Hilltop’s total assets were $16.2 billion and $16.5 billion at March 31, 2024 and December 31, 2023, respectively;
Loans1, net of allowance for credit losses, were $7.6 billion at each of March 31, 2024 and December 31, 2023, respectively;
Non-accrual loans were $64.7 million, or 0.73% of total loans, at March 31, 2024, compared to $68.3 million, or 0.76% of total loans, at December 31, 2023;
Non-accrual loans at March 31, 2024 included a single non-owner occupied commercial real estate credit relationship within our hotel/motel portfolio industry subsector that was reclassified since the prior period from loans held for investment to loans held for sale.
Loans held for sale decreased by 10.8% from December 31, 2023 to $0.8 billion at March 31, 2024;
Total deposits were $10.9 billion and $11.1 billion at March 31, 2024 and December 31, 2023, respectively;
Total estimated uninsured deposits were $4.8 billion, or approximately 44% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $360.5 million, were $4.5 billion, or approximately 41% of total deposits, at March 31, 2024.
Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 12.49% and a Common Equity Tier 1 Capital Ratio of 19.73% at March 31, 2024;
Hilltop’s consolidated net interest margin4 decreased to 2.85% for the first quarter of 2024, compared to 2.96% in the fourth quarter of 2023;
For the first quarter of 2024, noninterest income was $181.6 million, compared to $162.5 million in the first quarter of 2023, an 11.8% increase;
For the first quarter of 2024, noninterest expense was $250.0 million, compared to $250.5 million in the first quarter of 2023, a 0.2% decrease; and
Hilltop’s effective tax rate was 22.5% during the first quarter of 2024, compared to 11.6% during the same period in 2023.
The effective tax rate for the first quarter of 2024 was higher than the applicable statutory rate primarily due to the impact of nondeductible expenses, nondeductible compensation expense and other permanent adjustments, partially offset by the discrete impact of restricted stock vesting during the quarter and investments in tax-exempt instruments.
_____________________________
1
“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $332.6 million and $344.1 million at March 31, 2024 and December 31, 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
March 31,
December 31,
September 30,
June 30,
March 31,
(in 000’s)
2024
2023
2023
2023
2023
Cash and due from banks
$
1,710,066
$
1,858,700
$
1,513,747
$
1,584,709
$
1,764,081
Federal funds sold
650
650
3,650
650
743
Assets segregated for regulatory purposes
70,717
57,395
47,491
50,711
36,199
Securities purchased under agreements to resell
91,608
80,011
123,719
143,982
144,201
Securities:
Trading, at fair value
657,700
515,991
578,901
696,649
692,908
Available for sale, at fair value, net (1)
1,480,555
1,507,595
1,456,238
1,526,869
1,641,571
Held to maturity, at amortized cost, net (1)
790,550
812,677
825,079
847,437
862,280
Equity, at fair value
315
321
264
258
231
2,929,120
2,836,584
2,860,482
3,071,213
3,196,990
Loans held for sale
842,324
943,846
1,058,806
1,333,044
1,040,138
Loans held for investment, net of unearned income
8,062,693
8,079,745
8,204,052
8,354,122
8,192,846
Allowance for credit losses
(104,231
)
(111,413
)
(110,822
)
(109,306
)
(97,354
)
Loans held for investment, net
7,958,462
7,968,332
8,093,230
8,244,816
8,095,492
Broker-dealer and clearing organization receivables
1,473,561
1,573,931
1,460,352
1,474,177
1,560,246
Premises and equipment, net
165,557
168,856
172,097
176,574
180,132
Operating lease right-of-use assets
95,343
88,580
93,057
97,979
100,122
Mortgage servicing assets
95,591
96,662
104,951
95,101
103,314
Other assets
501,244
517,545
588,751
588,166
529,438
Goodwill
267,447
267,447
267,447
267,447
267,447
Other intangible assets, net
7,943
8,457
9,078
9,772
10,544
Total assets
$
16,209,633
$
16,466,996
$
16,396,858
$
17,138,341
$
17,029,087
Deposits:
Noninterest-bearing
$
3,028,543
$
3,007,101
$
3,200,247
$
3,451,438
$
3,807,878
Interest-bearing
7,855,553
8,056,091
7,902,850
7,712,739
7,289,269
Total deposits
10,884,096
11,063,192
11,103,097
11,164,177
11,097,147
Broker-dealer and clearing organization payables
1,436,462
1,430,734
1,368,064
1,306,646
1,383,317
Short-term borrowings
892,574
900,038
882,999
1,628,637
1,572,794
Securities sold, not yet purchased, at fair value
60,562
34,872
51,527
74,761
51,497
Notes payable
347,273
347,145
347,020
364,531
376,410
Operating lease liabilities
114,518
109,002
114,334
119,999
122,878
Other liabilities
314,718
431,684
422,955
389,336
341,246
Total liabilities
14,050,203
14,316,667
14,289,996
15,048,087
14,945,289
Common stock
653
652
652
651
650
Additional paid-in capital
1,049,831
1,054,662
1,052,867
1,050,191
1,044,774
Accumulated other comprehensive loss
(119,606
)
(121,505
)
(145,083
)
(131,718
)
(125,461
)
Retained earnings
1,201,013
1,189,222
1,171,250
1,144,624
1,136,901
Deferred compensation employee stock trust, net
115
228
340
450
446
Employee stock trust
(142
)
(292
)
(446
)
(599
)
(599
)
Total Hilltop stockholders’ equity
2,131,864
2,122,967
2,079,580
2,063,599
2,056,711
Noncontrolling interests
27,566
27,362
27,282
26,655
27,087
Total stockholders’ equity
2,159,430
2,150,329
2,106,862
2,090,254
2,083,798
Total liabilities & stockholders’ equity
$
16,209,633
$
16,466,996
$
16,396,858
$
17,138,341
$
17,029,087
_____________________________
(1)
At March 31, 2024, the amortized cost of the available for sale securities portfolio was $1,594,167, while the fair value of the held to maturity securities portfolio was $702,843.
Three Months Ended
Consolidated Income Statements
March 31,
December 31,
September 30,
June 30,
March 31,
(in 000’s, except per share data)
2024
2023
2023
2023
2023
Interest income:
Loans, including fees
$
134,331
$
138,096
$
142,402
$
138,397
$
123,379
Securities borrowed
20,561
18,659
17,683
18,515
17,068
Securities:
Taxable
26,241
28,763
27,166
26,719
25,602
Tax-exempt
2,415
2,545
2,464
2,566
3,188
Other
26,066
28,704
27,040
27,229
22,190
Total interest income
209,614
216,767
216,755
213,426
191,427
Interest expense:
Deposits
69,144
68,339
64,290
54,726
35,824
Securities loaned
19,039
17,247
16,169
16,413
15,346
Short-term borrowings
11,588
13,495
14,212
17,706
12,444
Notes payable
3,590
3,596
4,026
3,973
3,853
Other
2,632
2,864
2,408
2,342
2,255
Total interest expense
105,993
105,541
101,105
95,160
69,722
Net interest income
103,621
111,226
115,650
118,266
121,705
Provision for (reversal of) credit losses
(2,871
)
1,265
(40
)
14,836
2,331
Net interest income after provision for (reversal of) credit losses
106,492
109,961
115,690
103,430
119,374
Noninterest income:
Net gains from sale of loans and other mortgage production income
40,197
36,387
47,262
48,535
39,966
Mortgage loan origination fees
26,438
32,844
41,478
41,440
28,777
Securities commissions and fees
35,557
33,002
28,044
29,606
31,223
Investment and securities advisory fees and commissions
30,226
35,780
39,662
32,037
26,848
Other
49,200
40,965
40,403
39,034
35,680
Total noninterest income
181,618
178,978
196,849
190,652
162,494
Noninterest expense:
Employees’ compensation and benefits
165,830
160,390
173,195
176,908
167,817
Occupancy and equipment, net
21,912
21,524
21,912
23,025
22,865
Professional services
9,731
13,170
12,639
12,594
10,697
Other
52,550
55,761
52,271
54,450
49,091
Total noninterest expense
250,023
250,845
260,017
266,977
250,470
Income before income taxes
38,087
38,094
52,522
27,105
31,398
Income tax expense
8,565
7,132
13,211
7,167
3,630
Net income
29,522
30,962
39,311
19,938
27,768
Less: Net income attributable to noncontrolling interest
1,854
2,291
2,269
1,805
1,968
Income attributable to Hilltop
$
27,668
$
28,671
$
37,042
$
18,133
$
25,800
Earnings per common share:
Basic
$
0.42
$
0.44
$
0.57
$
0.28
$
0.40
Diluted
$
0.42
$
0.44
$
0.57
$
0.28
$
0.40
Cash dividends declared per common share
$
0.17
$
0.16
$
0.16
$
0.16
$
0.16
Weighted average shares outstanding:
Basic
65,200
65,136
65,106
65,025
64,901
Diluted
65,214
65,138
65,108
65,054
64,954
Three Months Ended March 31, 2024
Segment Results
Mortgage
All Other and
Hilltop
(in 000’s)
Banking
Broker-Dealer
Origination
Corporate
Eliminations
Consolidated
Net interest income (expense)
$
91,606
$
12,269
$
(4,252
)
$
(3,103
)
$
7,101
$
103,621
Provision for (reversal of) credit losses
(2,853
)
(18
)
—
—
—
(2,871
)
Noninterest income
11,903
104,578
66,700
5,785
(7,348
)
181,618
Noninterest expense
56,020
97,947
78,898
17,384
(226
)
250,023
Income (loss) before taxes
$
50,342
$
18,918
$
(16,450
)
$
(14,702
)
$
(21
)
$
38,087
Three Months Ended
March 31,
December 31,
September 30,
June 30,
March 31,
Selected Financial Data
2024
2023
2023
2023
2023
Hilltop Consolidated:
Return on average stockholders’ equity
5.23
%
5.46
%
7.11
%
3.53
%
5.12
%
Return on average assets
0.74
%
0.75
%
0.94
%
0.47
%
0.69
%
Net interest margin (1)
2.85
%
2.96
%
3.02
%
3.03
%
3.28
%
Net interest margin (taxable equivalent) (2):
As reported
2.87
%
2.98
%
3.04
%
3.03
%
3.28
%
Impact of purchase accounting
4 bps
4 bps
7 bps
9 bps
6 bps
Book value per common share ($)
32.66
32.58
31.91
31.71
31.63
Shares outstanding, end of period (000’s)
65,267
65,153
65,170
65,071
65,023
Dividend payout ratio (3)
40.06
%
36.35
%
28.12
%
57.37
%
40.25
%
Banking Segment:
Net interest margin (1)
3.00
%
2.94
%
3.08
%
3.11
%
3.40
%
Net interest margin (taxable equivalent) (2):
As reported
3.00
%
2.95
%
3.09
%
3.11
%
3.41
%
Impact of purchase accounting
5 bps
5 bps
8 bps
11 bps
7 bps
Accretion of discount on loans ($000’s)
1,299
1,202
2,226
3,334
1,870
Net recoveries (charge-offs) ($000’s)
(4,311
)
(674
)
1,556
(2,884
)
(419
)
Return on average assets
1.20
%
1.12
%
1.20
%
0.89
%
1.44
%
Fee income ratio
11.5
%
11.2
%
10.5
%
10.0
%
9.6
%
Efficiency ratio
54.1
%
53.2
%
51.4
%
51.2
%
48.4
%
Employees’ compensation and benefits ($000’s)
32,389
29,420
30,641
30,603
32,681
Broker-Dealer Segment:
Net revenue ($000’s) (4)
116,847
119,989
118,703
113,241
104,498
Employees’ compensation and benefits ($000’s)
69,457
68,746
69,930
65,290
62,429
Variable compensation expense ($000’s)
35,274
39,435
39,929
34,798
30,821
Compensation as a % of net revenue
59.4
%
57.3
%
58.9
%
57.7
%
59.7
%
Pre-tax margin (5)
16.2
%
16.8
%
18.2
%
16.3
%
12.8
%
Mortgage Origination Segment:
Mortgage loan originations – volume ($000’s):
Home purchases
1,548,941
1,698,009
2,091,444
2,301,007
1,607,330
Refinancings
127,545
117,018
152,257
150,643
125,423
Total mortgage loan originations – volume
1,676,486
1,815,027
2,243,701
2,451,650
1,732,753
Mortgage loan sales – volume ($000’s)
1,749,857
1,874,001
2,395,357
2,115,706
1,661,521
Net gains from mortgage loan sales (basis points):
Loans sold to third parties
221
189
199
207
193
Impact of loans retained by banking segment
(5
)
0
(1
)
(6
)
(7
)
As reported
216
189
198
201
186
Mortgage servicing rights asset ($000’s) (6)
95,591
96,662
104,951
95,101
103,314
Employees’ compensation and benefits ($000’s)
52,694
53,766
64,016
70,982
62,355
Variable compensation expense ($000’s)
22,188
24,085
33,070
36,249
25,573
_____________________________
(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, $0.6 million, $0.1 million and $0.1 million, respectively, for the periods presented and for the banking segment were $0.1 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)
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.
March 31,
December 31,
September 30,
June 30,
March 31,
Capital Ratios
2024
2023
2023
2023
2023
Tier 1 capital (to average assets):
PlainsCapital
11.00
%
10.55
%
10.62
%
10.28
%
10.69
%
Hilltop
12.49
%
12.23
%
11.92
%
11.47
%
11.82
%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital
15.87
%
15.44
%
15.31
%
14.48
%
14.97
%
Hilltop
19.73
%
19.32
%
18.60
%
17.61
%
17.99
%
Tier 1 capital (to risk-weighted assets):
PlainsCapital
15.87
%
15.44
%
15.31
%
14.48
%
14.97
%
Hilltop
19.73
%
19.32
%
18.60
%
17.61
%
17.99
%
Total capital (to risk-weighted assets):
PlainsCapital
17.06
%
16.58
%
16.45
%
15.56
%
15.94
%
Hilltop
22.79
%
22.34
%
21.54
%
20.41
%
20.75
%
March 31,
December 31,
September 30,
June 30,
March 31,
Non-Performing Assets Portfolio Data
2024
2023
2023
2023
2023
Loans accounted for on a non-accrual basis ($000’s):
Commercial real estate:
Non-owner occupied
$
34,661
$
36,440
$
2,375
$
2,456
$
1,038
Owner occupied
4,846
5,098
4,964
1,096
935
Commercial and industrial
12,165
9,502
10,190
21,442
10,807
Construction and land development
698
3,480
760
593
199
1-4 family residential
12,363
13,801
13,202
13,360
14,387
Consumer
3
6
7
9
12
Broker-dealer
—
—
—
—
—
Non-accrual loans ($000’s)
$
64,736
$
68,327
$
31,498
$
38,956
$
27,378
Non-accrual loans as a % of total loans ($000’s)
0.73
%
0.76
%
0.34
%
0.40
%
0.30
%
Other real estate owned ($000’s)
5,254
5,095
5,386
3,481
3,202
Other repossessed assets ($000’s)
472
—
—
—
—
Non-performing assets ($000’s)
70,462
73,422
36,884
42,437
30,580
Non-performing assets as a % of total assets ($000’s)
0.43
%
0.45
%
0.22
%
0.25
%
0.18
%
Loans past due 90 days or more and still accruing ($000’s) (1)
112,799
115,090
106,346
130,036
114,523
_____________________________
(1)
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,
2024
2023
Average
Interest
Annualized
Average
Interest
Annualized
Net Interest Margin (Taxable Equivalent) Details (1)
Outstanding
Earned
Yield or
Outstanding
Earned
Yield or
Balance
or Paid
Rate
Balance
or Paid
Rate
Assets
Interest-earning assets
Loans held for sale
$
802,098
$
11,655
5.81
%
$
815,393
$
10,724
5.26
%
Loans held for investment, gross (2)
7,835,647
122,676
6.28
%
7,894,668
112,655
5.79
%
Investment securities – taxable
2,619,081
26,241
4.01
%
2,813,734
25,602
3.64
%
Investment securities – non-taxable (3)
293,420
2,992
4.08
%
412,543
3,286
3.19
%
Federal funds sold and securities purchased under agreements to resell
94,108
1,631
6.95
%
163,601
2,368
5.87
%
Interest-bearing deposits in other financial institutions
1,458,784
19,245
5.29
%
1,480,323
16,116
4.42
%
Securities borrowed
1,442,870
20,561
5.64
%
1,419,797
17,068
4.81
%
Other
39,885
5,190
52.19
%
63,219
3,706
23.77
%
Interest-earning assets, gross (3)
14,585,893
210,191
5.78
%
15,063,278
191,525
5.16
%
Allowance for credit losses
(110,583
)
(97,060
)
Interest-earning assets, net
14,475,310
14,966,218
Noninterest-earning assets
1,522,337
1,336,908
Total assets
$
15,997,647
$
16,303,126
Liabilities and Stockholders’ Equity
Interest-bearing liabilities
Interest-bearing deposits
$
7,748,633
$
69,144
3.58
%
$
7,239,556
$
35,824
2.01
%
Securities loaned
1,401,975
19,039
5.45
%
1,323,857
15,346
4.70
%
Notes payable and other borrowings
1,327,889
17,810
5.38
%
1,490,075
18,552
5.05
%
Total interest-bearing liabilities
10,478,497
105,993
4.06
%
10,053,488
69,722
2.81
%
Noninterest-bearing liabilities
Noninterest-bearing deposits
2,951,357
3,789,757
Other liabilities
420,355
390,107
Total liabilities
13,850,209
14,233,352
Stockholders’ equity
2,120,494
2,043,157
Noncontrolling interest
26,944
26,617
Total liabilities and stockholders’ equity
$
15,997,647
$
16,303,126
Net interest income (3)
$
104,198
$
121,803
Net interest spread (3)
1.72
%
2.35
%
Net interest margin (3)
2.87
%
3.28
%
_____________________________
(1)
Information presented on a consolidated basis.
(2)
Average balance includes non-accrual loans.
(3)
Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rate for the periods presented. The adjustment to interest income was $0.6 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.
Conference Call Information
Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, April 19, 2024. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review first quarter 2024 financial results. Interested parties can access the conference call by dialing 800-579-2543 (North America) or 785-424-1789 (International) and then using the conference ID HH1Q24. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop.com).
