Hilltop Holdings(US:HTH)2023-02-17 21:36Interest Rate Sensitivity - The banking segment's net interest income is significantly influenced by interest rate changes, with a positive GAP indicating potential increases in income as rates rise [606]. - As of December 31, 2022, the banking segment's total interest-sensitive assets amounted to $12.74 billion, while total interest-sensitive liabilities were $7.59 billion, resulting in an interest sensitivity gap of $5.15 billion [608]. - A 300 basis point increase in interest rates is projected to increase net interest income by $40.07 million, representing an 8.80% increase [610]. - The banking segment is currently asset sensitive, with a large percentage of loans adjusting to the Wall Street Journal Prime rate, which contributes to its overall sensitivity [607]. - The projected changes in net interest income are influenced by the heightened level of cash balances, which represent a significant portion of the bank's sensitivity [612]. Interest Rate Risk Management - The broker-dealer segment is exposed to market risk due to fluctuations in interest rates, market prices, and changes in credit ratings, impacting its role as a financial intermediary [614]. - Interest rate risk in the broker-dealer segment is managed by setting limits on the size and duration of positions, as well as monitoring the length of time securities can be held [616]. - The broker-dealer segment's funding sources include customer cash balances and bank borrowings, which expose it to interest rate risk from short-term rate movements [615]. - The company employs various derivative instruments to manage interest rate risk and hedge specific assets and liabilities [605]. Impact of Interest Rate Changes on Net Interest Income - The estimated impact of a 300 basis point increase in interest rates would result in a $99,932 thousand (17.56%) increase in net interest income [629]. - A 200 basis point increase in interest rates would lead to a $64,953 thousand (11.41%) increase in net interest income [629]. - A 100 basis point increase would result in a $33,327 thousand (5.86%) increase in net interest income [629]. - Conversely, a 50 basis point decrease in interest rates would decrease net interest income by $17,260 thousand (3.03%) [629]. - A 100 basis point decrease would lead to a $35,646 thousand (6.26%) decrease in net interest income [629]. - A 200 basis point decrease would result in a $75,696 thousand (13.30%) decrease in net interest income [629]. Mortgage Operations and Risk - The company has expanded its residential mortgage servicing operations, increasing its portfolio of retained mortgage servicing rights (MSR) [623]. - The mortgage origination segment is exposed to interest rate risk, which could materially affect the volume of mortgage loan originations [621]. - The company employs derivative financial instruments to mitigate market risk associated with MSR assets [623].