Hilltop Holdings(US:HTH)2022-10-24 20:16Financial Performance - Net interest income for the three months ended September 30, 2022, was $123.5 million, an increase from $105.1 million in the same period of 2021, representing a growth of 17.8%[243] - Total noninterest income for the nine months ended September 30, 2022, was $662.7 million, down from $1.1 billion in the same period of 2021, reflecting a decrease of 41.1%[243] - Net income attributable to Hilltop for the three months ended September 30, 2022, was $32.1 million, compared to $92.9 million in the same period of 2021, a decline of 65.5%[243] - The diluted earnings per common share for the three months ended September 30, 2022, was $0.50, compared to $1.15 in the same period of 2021, a decrease of 56.5%[243] - Return on average stockholders' equity decreased to 6.26% for the three months ended September 30, 2022, from 14.96% in the same period of 2021[285] - Return on average assets fell to 0.79% for the three months ended September 30, 2022, compared to 2.13% in the same period of 2021[286] Dividends and Share Repurchase - The company declared and paid total common dividends of $33.5 million during the nine months ended September 30, 2022[245] - A quarterly cash dividend of $0.15 per common share was declared on October 20, 2022, payable on November 25, 2022[245] - The company completed a tender offer repurchasing 14,868,469 shares at a price of $29.75 per share for a total of $442.3 million, funded with cash on hand[246] Assets and Equity - Total assets as of September 30, 2022, were $16.6 billion, a decrease from $18.7 billion as of December 31, 2021[243] - The common equity to assets ratio was 12.23% as of September 30, 2022, down from 13.50% in the previous year[243] - Book value per common share increased to $31.46 as of September 30, 2022, compared to $31.36 in 2021[248] - Tangible common equity decreased to $1,752.155 million from $2,239.937 million year-over-year[248] - Total assets decreased to $16,615.291 million from $18,689.080 million year-over-year[248] - Equity to assets ratio was 12.23% as of September 30, 2022, down from 13.50% in 2021[248] Credit Losses and Provisions - The allowance for credit losses was $91.8 million as of September 30, 2022, compared to $91.4 million as of December 31, 2021[243] - Provision for credit losses for the banking segment showed a significant reversal, with a provision of $(650,000) for the three months ended September 30, 2022, compared to $(5.8 million) in the same period of 2021[272] - The provision for (reversal of) credit losses during the three months ended September 30, 2022, was a reversal of $650,000, compared to a provision of $5,775,000 in the same period of 2021, reflecting a $5,125,000 improvement[297] - The provision for credit losses during the nine months ended September 30, 2022, was driven by a deteriorating U.S. economic outlook[429] Economic Outlook - The company anticipates continued adverse impacts on operating results due to rising interest rates and inflationary pressures into the first half of 2023[257] - The U.S. Real GDP growth rate for Q3 2022 was 1.3%, while the forecast for Q4 2022 is 0.4%[427] - The unemployment rate is projected to peak at 6.2% by Q4 2023, with a forecasted decline in real GDP of 1.6% during the same period[427] - The economic forecast as of September 30, 2022, indicates a mild recession beginning in Q2 2023, with real GDP expected to decline by 1.6% through Q4 2023[427] Interest Income and Margin - The net interest margin improved to 3.19% for the three months ended September 30, 2022, compared to 2.53% in the same period of 2021[285] - The consolidated taxable equivalent net interest margin for the three months ended September 30, 2022, was 3.20%, compared to 2.54% for the same period in 2021[290] - The average interest-earning assets for the three months ended September 30, 2022, were $15.36 billion, compared to $16.49 billion in 2021[293] - The net interest spread for the nine months ended September 30, 2022, was 2.38%, up from 2.19% in 2021[293] - The banking segment's net interest margin exceeds the consolidated net interest margin due to specific items not reflected in the consolidated calculation[295] Mortgage Origination and Sales - The mortgage origination segment reported losses of $23.1 million and $11.0 million before income taxes for the three and nine months ended September 30, 2022[248] - The company experienced a significant decrease in net gains from mortgage origination, with $380.8 million in 2022 compared to $793.9 million in 2021[282] - Mortgage loan origination volume decreased by 45.6% and 39.9% for the three and nine months ended September 30, 2022, compared to the same periods in 2021[358] - Net gains from mortgage loan sales dropped to $74.696 million for the three months ended September 30, 2022, down from $214.093 million in 2021, representing a decrease of $139.397 million[363] Noninterest Income and Expenses - Noninterest income decreased by 44% to $207.0 million for the three months ended September 30, 2022, compared to $367.9 million in the same period of 2021[278] - Noninterest expense decreased to $60,160,000 for the three months ended September 30, 2022, from $54,567,000 in 2021, driven by lower compensation costs in the mortgage origination segment[299] - Noninterest income in the banking segment increased during the three months ended September 30, 2022, primarily due to increased wealth management fee income and service charges on depositor accounts[324] - Noninterest income in the broker-dealer segment decreased by $15.3 million during the three months ended September 30, 2022, compared to the same period in 2021[328] Regulatory and Compliance - The loan review department assesses credit risk and compliance with loan policy, presenting results to management and the board of directors[420] - The bank's loan policy includes specific underwriting guidelines for various portfolio segments, ensuring compliance with permissible loan types[418] - The macroeconomic forecasts used to estimate credit losses are subject to significant judgment and uncertainty, impacting the allowance for credit losses[423] - The COVID-19 pandemic continues to affect economic conditions and borrower defaults, requiring careful estimation of its impact on credit losses[422]