Hilltop : Q4 2022 Earnings Presentation

Hilltop Holdings Inc.

Q4 2022 Earnings Presentation

January 27, 2023

Preface

Corporate Headquarters

6565 Hillcrest Ave

Dallas, TX 75205

Phone: [phone]

www.hilltop-holdings.com

Additional Information

Please Contact:

Erik Yohe

Phone: [phone]

Email: [e-mail]

FORWARD-LOOKING STATEMENTS

This presentation and statements made by representatives of Hilltop Holdings Inc. ("Hilltop" or the "Company") during the course of this presentation include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our outlook, our business strategy, our financial condition, our efforts to make strategic acquisitions, our revenue, our liquidity and sources of funding, market trends, operations and business, taxes, the impact of natural disasters or public health emergencies, such as the current coronavirus ("COVID-19") global pandemic, information technology expenses, capital levels, mortgage servicing rights ("MSR") assets, stock repurchases, dividend payments, expectations concerning mortgage loan origination volume, servicer advances and interest rate compression, expected levels of refinancing as a percentage of total loan origination volume, projected losses on mortgage loans originated, total expenses, anticipated changes in our revenue, earnings, or taxes, the effects of government regulation applicable to our operations, the appropriateness of, and changes in, our allowance for credit losses and provision for (reversal of) credit losses, future benchmark rates and economic growth, anticipated investment yields, expected accretion of discount on loans in future periods, the collectability of loans, cybersecurity incidents, the outcome of litigation, and our other plans, objectives, strategies, expectations and intentions and other statements that are not statements of historical fact, and may be identified by words such as "anticipates," "believes," "building", "could," "estimates," "expects," "forecasts," "goal," "guidance", "intends," "may," "might," "outlook", "plan," "probable," "projects," "seeks," "should," "target," "view" or "would" or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: (i) the credit risks of lending activities, including our ability to estimate credit losses and increases to the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs;

1. effectiveness of our data security controls in the face of cyber attacks; (iii) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (iv) changes in the interest rate environment; (v) risks associated with our concentration in real estate related loans; ; (vi) the effects of our indebtedness on our ability to manage our business successfully, including the restrictions imposed by the indenture governing our indebtedness; (vii) changes in state and federal laws, regulations or policies affecting one or more of our business segments, including responses to the COVID-19 pandemic, changes in regulatory fees, deposit insurance premiums, capital requirements and the Dodd-Frank Wall Street Reform and Consumer Protection Act; (viii) cost and availability of capital; (ix) changes in key management; (x) competition in our banking, broker-dealer and mortgage origination segments from other banks and financial institutions, as well as investment banking and financial advisory firms, mortgage bankers, asset-basednon-bank lenders and government agencies; (xi) legal and regulatory proceedings; (xii) risks associated with merger and acquisition integration; and (xiii) our ability to use excess capital in an effective manner. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and other reports, that we have filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement.

The information contained herein is preliminary and based on Company data available at the time of the earnings presentation. It speaks only as of the particular date or dates included in the accompanying slides. Hilltop Holdings does not undertake an obligation to, and disclaims any duty to, update any of the information herein.

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Investor Highlights - Q4 2022

Net Income

$25.6MM

EPS - Diluted		ROAA		ROAE
$0..390		0.8.63%%		4.99%
		5.76%

• PlainsCapital Bank generated $58.0 million in pre-tax income during Q4 2022 relative to $68.4 million in Q4 2021. The decline was driven by a $22.4 million increase in provision expense to $3.9 million, partially offset by flat expenses and $12.1 million of net interest income growth
• Average bank loans HFI1 increased from Q3 2022 by $101 million, or 1%, as 1-4 Family Retained Mortgages and growth in our core C&I portfolio more than offset lower National Warehouse Lending balances during the period
• Average bank deposits decreased from Q3 2022 by $270 million, or 2%, as a result of both normal end of the year withdrawal activity from public funds and customers moving deposit balances into higher yielding assets as interest rates have continued to increase
• Bank net interest margin of 3.42% remained flat from Q3 2022 as income from higher yielding assets was offset by rising interest costs on deposits and other borrowings
• PrimeLending incurred a $25.6 million pre-tax loss during Q4 2022, a decrease in pre-tax income of $56.9 million from Q4 2021
• Mortgage origination volume in Q4 2022 was $2.0 billion, a decline of 59% from Q4 2021
• Gain-on-saleof loans to third parties declined by 151 basis points from Q4 2021 to 211 basis points for Q4 2022 as interest rates increased, volumes have declined, and pricing has remained very competitive
• Noninterest expenses at PrimeLending declined by $64.6 million, or 41%, from Q4 2021. Decreases in variable compensation were $46.5 million of this decrease, and other expenses declined as aggressive actions have been made to resize the organization towards a smaller overall mortgage market

• HilltopSecurities generated a pre-tax income of $19.8 million during Q4 2022, an increase of $18.1 million from Q4 2021
• Improvements in the fixed income market and higher revenues from sweep deposits in Wealth Management helped to offset slower public finance and mortgage markets during the period
• Total non-interest expenses at HilltopSecurities declined by $5.6 million, or 6%, compared to Q4 2021. Decreases in variable compensation were $3.9 million of this decrease, and other expenses declined as the business has continued to identify areas to increase efficiency and productivity

Notes:

(1) Average Bank Loans HFI reflect consolidated loans held for investment excluding margin loans from the broker-dealer business.

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Capital Highlights - Q4 2022

• During 2022, HTH returned $485.3 million of capital to shareholders
• • $43.0 million in dividends and $442.3 million in share repurchases (~19% of 12/31/21 shares outstanding)
  • • There were no shares repurchased in Q4 2022
• The HTH Board of Directors has authorized a new $75 million stock repurchase program through January 2024
• • Hilltop also increased its quarterly cash dividend by 7% to $0.16 per share

Capital Management and Tangible Book Value Growth

$40.00				21.28%	21.22%	21.27%
		19.63%	20.22%
	18.97%
							18.22%
						17.24%	17.45%
$35.00
						$0.15	$0.15	$0.15	$0.15

20.00%

$30.00

$0.09

$25.00

$24.77

$20.00

$15.00

$10.00

$5.00

$-

$0.12

$25.93

$0.12

$26.93

$0.12

$27.77

$0.12

$28.37	$27.47	$27.08	$27.13	$27.31

TBVPS1

i4%

Versus 12/31/21

h5%

CAGR

Since

12/31/20

-20.00%

Q4 2020		Q1 2021	Q2 2021	Q3 2021	Q4 2021		Q1 2022	Q2 2022	Q3 2022	Q4 2022
		Tangible Book Value Per Share (Tangible Common Equity / Shares Outstanding)1 2		Common Equity Tier 1 risk based ratio 2		Dividends per share

Notes:

1. Tangible common equity and tangible book value per common share (TBVPS) are non-GAAP financial measures. For a reconciliation of tangible common equity and tangible book value per share to the nearest GAAP measure, see the appendix.
2. At period end.

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Hilltop Holdings - Q4 Financial Summary

$ in Millions, except EPS
Income Statement and Key Metrics	Q4 2022	Q3 2022	QoQ%	Q4 2021	YoY%
Net interest income	$123.4	$123.5	(0%)	$104.3	18%
Noninterest income	169.8	207.0	(18%)	284.8	(40%)
Noninterest expenses	253.4	288.7	(12%)	322.2	(21%)
Efficiency ratio	86.4%	87.4%		82.8%
1	39.9	41.7	(4%)	66.9	(40%)
Pre-provision net revenue
Net charge offs (recoveries)	($0.0)	$2.7		($0.4)
Net ACL build (release)	3.6	(3.5)		(18.2)
Provision for (reversal of) credit losses	3.6	(0.8)	NR	(18.6)	NR
Income before income taxes	36.2	42.5	(15%)	85.5	(58%)
Net income	26.6	33.3	(20%)	64.8	(59%)
Minority interest	1.0	1.2	(14%)	2.6	(61%)
Income attributable to Hilltop	$25.6	$32.1	(20%)	$62.2	(59%)
Return on average assets	0.63%	0.79%		1.41%
Return on average equity	4.99%	6.26%		9.93%
EPS - Diluted	$0.39	$0.50	(20%)	$0.78	(49%)
EOP Shares outstanding (in thousands)	64,685	64,591	0%	78,965	(18%)
Average assets	$16,718	$16,669	0%	$18,255	(8%)
EOP Assets	16,268	16,615	(2%)	18,689	(13%)
EOP Loans HFI, net	7,997	7,852	2%	7,789	3%
EOP Deposits	11,316	11,352	(0%)	12,818	(12%)

Notes:

1. Pre-provisionnet revenue is calculated as the sum of net interest income and noninterest income less noninterest expense (except provision for loan losses).

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