Hilltop Q2 Earnings Call Highlights

Hilltop (NYSE:HTH) reported second-quarter 2026 net income attributable to common stockholders of $36.5 million, or $0.63 per diluted share, as growth at its banking and broker-dealer operations offset continued pressure in mortgage banking.

Return on average assets was 1.0% and return on average equity was 6.9% for the quarter. President and CEO Jeremy Ford said PlainsCapital Bank generated $51 million in pretax income, while HilltopSecurities produced $12 million. PrimeLending posted a $2 million pretax loss amid a difficult mortgage market.

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PlainsCapital Bank's net interest margin expanded to 3.42% during the second quarter, according to Ford, while the bank delivered a 1.3% return on average assets. The bank's efficiency ratio was 55%, unchanged from the first quarter of 2026 and the second quarter of 2025.

CFO Will Furr said consolidated net interest income totaled $116 million, including $800,000 of purchase accounting accretion. Net interest income rose 5% from a year earlier, supported by lower interest-bearing deposit costs and a shift in the balance sheet from cash into loans held for investment.

On a consolidated basis, net interest margin increased 8 basis points from the first quarter to 3.21%. Furr said Hilltop's current economic outlook assumes one rate increase in December 2026. Under that scenario, the company expects net interest margin to remain around current levels but potentially decline modestly in the second half, while net interest income remains relatively stable in coming quarters.

Period-end loans held for investment rose by $239 million from the first quarter. The increase included $114 million in commercial real estate lending, $54 million in commercial and industrial lending, $45 million in broker-dealer-related loans and $28 million of seasonal mortgage warehouse lending growth.

Hilltop increased its full-year forecast for average loan growth to a range of 5% to 7%, excluding mortgage warehouse lending and mortgages retained from PrimeLending. During the question-and-answer session, Furr said new loan production yields were in a range of roughly 6.5% to 7%, depending on asset class and individual transaction, despite intense competition in the company's markets.

Average total deposits were approximately $10.4 billion, down $263 million from the prior-year quarter. Ending deposits were stable from the first quarter at $10.5 billion, including a $300 million movement of HilltopSecurities sweep deposits into the bank. Excluding that movement, Furr attributed deposit declines to seasonal tax payments, public-fund distributions and flows from large commercial and industrial customers. The company expects customer deposits to begin growing again in the second half.

Interest-bearing deposit costs declined to 2.37%, and Furr said PlainsCapital achieved a 75% interest-bearing deposit beta during the down-rate cycle. However, he said rising competition could lead to higher offered rates and more exception pricing.

Hilltop recorded a $1 million net reversal of provision for credit losses in the quarter. Its allowance for credit losses declined by $4 million to $85 million.

The company recorded approximately $3.2 million of net charge-offs, equivalent to 16 basis points of average loans. It also increased specific reserves by $1.9 million, primarily related to deterioration in one loan. Classified and special mention loans increased in the period, largely because of a large single-family credit that deteriorated, Furr said.

Still, management said overall credit quality remained sound, while nonperforming asset levels have declined consistently over the past 12 months. The bank's allowance for credit losses coverage ended the quarter at 103 basis points, including mortgage warehouse lending.

HilltopSecurities reported net revenue of $124 million and a 10% pretax margin. Net revenue increased 13% from the second quarter of 2025, while pretax income rose by $6 million year over year.

Structured Finance net revenue increased 73% from a year earlier, driven by robust buy-side demand for call-protected collateral. Fixed Income services reported a 10% increase in net revenue as municipal and taxable sales and trading revenue improved. Wealth Management also grew, helped by advisory and transaction fees in the retail business.

Public Finance generated $30 million in net revenue, a modest decline from the prior-year quarter. Ford said industry issuance volumes were strong in the first half and are expected to remain elevated during the second half.

Furr said Hilltop's broker-dealer revenue outlook calls for a range of negative 3% to positive 1%. He cited the potential effects of rate movements on sweep fees, public-finance debt issuance and the shape of the yield curve on Fixed Income services. Management said it remained constructive on Public Finance, Fixed Income, Wealth Management and Structured Finance, while acknowledging that capital-markets revenues can fluctuate with market conditions, liquidity and production volumes.