Hilltop Holdings Inc. HTH

PlainsCapital Bank delivered strong results with $51 million in pretax income and a 1.3% return on average assets. The net interest margin expanded to 3.42%, driven by a modest decline in deposit costs and balance sheet shifts. The bank maintained an efficiency ratio of 55% and saw stable deposit balances quarter-over-quarter, with core deposits increasing year-over-year. Management plans to continue investing in the bank's momentum, leveraging the healthy Texas economy and active recruiting to support organic loan growth.

PrimeLending reported a $2 million pretax loss, facing significant headwinds from an elevated interest rate environment, higher property taxes, increased insurance costs, and tight inventory levels. These factors led to muted industry volumes and a 6 bps year-over-year decline in mortgage gain on sale margins to 217 bps. In response, PrimeLending successfully lowered its fixed costs by approximately $10 million annualized compared to Q2 2025, focusing on productivity and operational improvements until long-term rates decline.

HilltopSecurities generated $12 million in pretax income on $124 million net revenue, achieving a 10% pretax margin. The segment saw a 13% increase in net revenue year-over-year, primarily driven by strong performance in wealth management and structured finance, which experienced a 73% increase in net revenue. Public Finance Services continued to produce healthy top-line results, and Fixed Income Services saw a 10% increase in net revenue, benefiting from increased sales and trading in municipal and taxable products.

Hilltop maintained strong capital levels with a common equity Tier 1 capital ratio of 18.3%. The company returned $58.6 million to stockholders in Q2, comprising $11.6 million in dividends and $47 million in share repurchases. The Board declared a 10% increase in the quarterly cash dividend to $0.22 per share and authorized a $75 million increase to the stock repurchase program, bringing the total authorization to $200 million for 2026. Management prioritizes organic growth, followed by capital returns, while retaining ample resources for M&A.

The allowance for credit losses declined by $4 million to $85 million, with a $1 million provision release driven by improved economic conditions and a decline in nonperforming assets. Net charge-offs were $3.2 million, or 16 basis points of average loans. While classified and special mention loans increased due to one large single-family credit, nonperforming asset levels have consistently declined over the last 12 months. The ACL coverage at the bank ended Q2 at 103 basis points, including mortgage warehouse lending.

Net interest income increased by $5 million or 5% year-over-year to $116 million, primarily due to lower interest-bearing deposit costs and a shift in balance sheet composition from cash to loans. The net interest margin improved by 8 basis points quarter-over-quarter to 3.21%. Management expects NIM to moderate at current levels, potentially declining modestly in the second half of 2026, with net interest income remaining relatively stable, assuming one rate increase in December 2026.

Average total deposits were $10.4 billion, a $263 million decline year-over-year, but stable quarter-over-quarter at $10.5 billion on an ending balance basis. This included a $300 million movement of HilltopSecurities sweep deposits into the bank. Interest-bearing deposit costs declined to 237 basis points, with a 75% interest-bearing deposit beta during the down rate cycle. Management expects customer deposits to resume growth in the second half of the year, balancing long-term customer relationships with managing NII amidst increasing deposit competition.