Hilltop Holdings(US:HTH)2025-07-25 20:31PART I — FINANCIAL INFORMATION This section provides the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements The company's financial statements for H1 2025 show increased net income driven by credit loss reversal and higher net interest income, despite a decrease in total assets Consolidated Balance Sheets Total assets decreased to $15.36 billion by June 30, 2025, primarily due to reduced cash, while stockholders' equity remained stable Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | Total Assets | $15,362,273 | $16,268,129 | | Cash and due from banks | $982,488 | $2,298,977 | | Securities | $2,860,741 | $2,659,661 | | Loans held for investment, net | $7,963,243 | $7,849,435 | | Total Liabilities | $13,135,428 | $14,049,817 | | Total deposits | $10,391,557 | $11,065,322 | | Notes payable | $148,475 | $347,667 | | Total Stockholders' Equity | $2,226,845 | $2,218,312 | Consolidated Statements of Operations Net income significantly increased in Q2 and H1 2025, driven by a credit loss reversal and higher net interest income Quarterly Performance Summary (in thousands, except per share data) | Metric | Q2 2025 (USD) | Q2 2024 (USD) | | :--- | :--- | :--- | | Net Interest Income | $110,674 | $103,650 | | Provision for (reversal of) credit losses | $(7,340) | $10,934 | | Total Noninterest Income | $192,634 | $193,305 | | Total Noninterest Expense | $261,176 | $256,464 | | Income attributable to Hilltop | $36,073 | $20,333 | | Diluted EPS | $0.57 | $0.31 | Six-Month Performance Summary (in thousands, except per share data) | Metric | H1 2025 (USD) | H1 2024 (USD) | | :--- | :--- | :--- | | Net Interest Income | $215,791 | $207,271 | | Provision for (reversal of) credit losses | $1,998 | $8,063 | | Total Noninterest Income | $405,974 | $374,923 | | Total Noninterest Expense | $512,649 | $506,487 | | Income attributable to Hilltop | $78,189 | $48,001 | | Diluted EPS | $1.22 | $0.74 | Consolidated Statements of Cash Flows Net cash decreased by $1.34 billion in H1 2025, primarily due to cash used in operating and financing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(228,761) | $(364,459) | | Net cash provided by (used in) investing activities | $(97,516) | $29,497 | | Net cash used in financing activities | $(1,014,017) | $(726,787) | | Net change in cash, cash equivalents and restricted cash | $(1,340,294) | $(1,061,749) | Notes to Consolidated Financial Statements Notes detail accounting policies, financial instruments, and key events including a merchant bank gain and debt redemptions - The company's business is conducted through two primary units: PlainsCapital Corporation (PCC) for banking and mortgage services, and Hilltop Securities Holdings LLC for broker-dealer and investment banking services21 - A preliminary pre-tax gain of $27.1 million ($21.0 million net of tax) was recognized in H1 2025 from the sale of the company's interest in Moser Holdings, LLC, a merchant bank investment68 - The company redeemed all of its outstanding $150 million Senior Notes in January 2025 and all of its $50 million 5.75% Subordinated Notes due 2030 in May 2025152153 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights strong H1 2025 performance driven by a merchant bank gain and credit loss reversal, alongside capital strength and market challenges - The company's board authorized a new stock repurchase program of up to $100.0 million in January 2025, which was later increased to $135.0 million in July 2025. During the first six months of 2025, the company repurchased 2.2 million shares for $68.2 million258 - Management notes that while funding costs remain elevated, the cost of deposits decreased in H1 2025 compared to H1 2024 as actions were taken to reduce interest paid on interest-bearing deposits269 - The company is evaluating potential loss exposures from the central Texas flooding that occurred in July 2025, which could impact the banking and mortgage origination segments277 Consolidated Operating Results Consolidated net income significantly increased in Q2 and H1 2025, driven by credit loss reversal and improved net interest margin Key Performance Indicators | Ratio | Q2 2025 (%) | Q2 2024 (%) | H1 2025 (%) | H1 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Return on average stockholders' equity | 6.62% | 3.84% | 7.21% | 4.54% | | Return on average assets | 0.98% | 0.59% | 1.05% | 0.67% | | Net interest margin (taxable equivalent) | 3.04% | 2.92% | 2.95% | 2.89% | Segment Results Banking segment income rose significantly due to credit loss reversal, while other segments showed mixed results including a mortgage legal settlement Income (Loss) Before Taxes by Segment (in thousands) | Segment | Q2 2025 (USD) | Q2 2024 (USD) | H1 2025 (USD) | H1 2024 (USD) | | :--- | :--- | :--- | :--- | :--- | | Banking | $54,928 | $32,813 | $94,986 | $83,155 | | Broker-Dealer | $6,397 | $7,225 | $15,613 | $26,143 | | Mortgage Origination | $3,210 | $1,350 | $(5,072) | $(15,099) | | Corporate | $(15,079) | $(11,868) | $1,540 | $(26,571) | - The Mortgage Origination segment received $9.5 million from legal settlements in April 2025, which significantly contributed to its Q2 profitability368384 Financial Condition Total assets decreased to $15.4 billion, while the loan portfolio grew modestly and ACL decreased due to an improved macroeconomic outlook - The allowance for credit losses was determined using a single 'baseline' macroeconomic forecast from Moody's Analytics as of June 30, 2025, a shift from the more pessimistic 'S5' alternative scenario used previously440 - A sensitivity analysis shows that a downside 'S3' economic scenario would increase the ACL by approximately $66 million, while an upside 'S1' scenario would decrease it by about $12 million454455 - Total estimated uninsured deposits were $5.2 billion (50% of total deposits). Excluding collateralized and internal accounts, uninsured deposits were $4.5 billion (43% of total deposits)480 Liquidity and Capital Resources The company maintains strong liquidity and capital, with regulatory ratios well above thresholds despite cash decrease from debt redemptions Regulatory Capital Ratios (June 30, 2025) | Ratio | Hilltop (%) | PlainsCapital (%) | Minimum Requirement (incl. buffer) (%) | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 20.74% | 15.08% | 7.0% | | Tier 1 Capital | 20.74% | 15.08% | 8.5% | | Total Capital | 23.38% | 16.29% | 10.5% | | Tier 1 Leverage | 13.11% | 10.71% | 4.0% | - The Bank had available liquidity of $6.55 billion at June 30, 2025, primarily from FHLB capacity ($4.3 billion) and its available investment portfolio ($1.4 billion)505 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company primarily manages interest rate risk, with the banking segment being asset sensitive, while other segments face specific market exposures Banking Segment Interest Rate Sensitivity Analysis (June 30, 2025) | Change in Rates (bps) | Change in Net Interest Income (Amount in thousands) | Change in Net Interest Income (%) | Change in Economic Value of Equity (Amount in thousands) | Change in Economic Value of Equity (%) | | :--- | :--- | :--- | :--- | :--- | | +200 | $38,950 | 9.24% | $157,684 | 9.73% | | +100 | $20,120 | 4.77% | $94,001 | 5.80% | | -100 | $(19,436) | (4.61)% | $(155,396) | (9.59)% | - The mortgage origination segment's primary market exposure is interest rate risk impacting mortgage loans held for sale, interest rate lock commitments (IRLCs), and mortgage servicing rights (MSRs). This risk is managed through forward commitments to sell mortgage-backed securities544545 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal controls during Q2 2025 - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report553 - No changes in internal control over financial reporting occurred during the second fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls554 PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures relevant to the company's operations Item 1. Legal Proceedings The company is involved in various legal proceedings, including an ongoing investigative inquiry into PrimeLending's float down option - PrimeLending is cooperating with an ongoing investigative inquiry from the U.S. Attorney for the Western District of Virginia regarding its float down option, which has included grand jury subpoenas166 Item 1A. Risk Factors No material changes to the company's previously disclosed risk factors have occurred since the 2024 Form 10-K filing - No material changes to risk factors have occurred since the filing of the 2024 Form 10-K558 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1.16 million shares of common stock in Q2 2025 as part of an increased repurchase program Common Stock Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | 817,396 | $30.29 | | June 2025 | 340,000 | $29.80 | | Total | 1,157,396 | $30.14 | Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted, terminated, or modified by directors or officers in Q2 2025 - There were no adoptions, terminations, or modifications of Rule 10b5-1 trading arrangements by directors or executive officers during the three months ended June 30, 2025561 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and XBRL data