Hilltop Holdings(HTH) - 2021 Q4 - Annual Report

Interest Rate Risk Management - The banking segment's net interest income is significantly influenced by interest rate changes, with a positive GAP indicating that net interest income would generally rise if rates increase [694]. - The banking segment employs various risk management techniques, including interest rate shock analysis and simulation analysis, to mitigate interest rate risk [692]. - Interest rate risk in the broker-dealer segment is managed by setting limits on the size and duration of positions and monitoring the length of time securities can be held [703]. - Interest rate risk management strategies include executing forward commitments to sell mortgage-backed securities (MBS) to mitigate earnings volatility [709]. - The company has established policies to manage exposure to interest rate changes within acceptable limits [711]. Impact of Interest Rate Changes - As of December 31, 2021, a 300 basis point increase in interest rates is projected to increase net interest income by $116,716 thousand (32.90%) and economic value of equity by $525,978 thousand (29.27%) [699]. - A 300 basis point increase in interest rates would result in a $128,097 thousand (33.43%) increase in net interest income [716]. - The estimated impact of a 200 basis point increase in interest rates would yield an $83,367 thousand (21.76%) increase in net interest income [716]. - The company’s consolidated earnings are significantly dependent on net interest income, influenced by interest rate changes [714]. Asset and Liability Management - Total interest sensitive assets amount to $14,122,153 thousand, while total interest sensitive liabilities are $8,258,335 thousand, resulting in an interest sensitivity gap of $5,863,818 thousand [695]. - The cumulative interest sensitivity gap shows that 41.52% of total interest sensitive assets are covered by the cumulative gap [695]. - The banking segment's asset sensitivity is largely due to loans that adjust daily or monthly to the Wall Street Journal Prime rate [694]. - Projected changes in net interest income are impacted by heightened cash balances, which represent a significant portion of the Bank's asset sensitivity [699]. - The broker-dealer segment's funding sources include customer cash balances and bank borrowings, which expose it to interest rate risk [702]. Mortgage Segment Exposure - The mortgage origination segment is significantly exposed to interest rate risk, affecting mortgage-related assets and commitments [708]. - The average holding period for mortgage loans from funding to sale is approximately 30 days, impacting interest rate risk management [709]. - The company has expanded its residential mortgage servicing operations, increasing the portfolio of retained mortgage servicing rights (MSR) [710].