Hilltop Holdings Inc.

Previous wording

Consolidated income before income taxes during the three and nine months ended September 30, 2024 included the following contributions from our reportable business segments.

Current wording

Consolidated income before income taxes during the three months ended March 31, 2025 included the following contributions from our reportable business segments.

Previous wording

During the nine months ended September 30, 2024, we declared and paid total common dividends of $33.2 million.

Current wording

During the three months ended March 31, 2025, we declared and paid total common dividends of $11.6 million.

Previous wording

On October 24, 2024, our board of directors declared a quarterly cash dividend of $0.17 per common share, payable on November 22, 2024 to all common stockholders of record as of the close of business on November 8, 2024.

Current wording

On April 24, 2025, our board of directors declared a quarterly cash dividend of $0.18 per common share, payable on May 22, 2025 to all common stockholders of record as of the close of business on May 8, 2025.

Previous wording

In January 2024, our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation. During the nine months ended September 30, 2024, we paid $19.9 million to repurchase an aggregate of 640,042 shares of our common stock at an average price of $31.04 per share pursuant to the stock repurchase program.

Current wording

In January 2025, our board of directors authorized a new stock repurchase program through January 2026, pursuant to which we are authorized to repurchase, in the aggregate, up to $100.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation. During the three months ended March 31, 2025, we paid $33.3 million to repurchase an aggregate of 1,046,540 shares of our common stock at an average price of $31.80 per share pursuant to the stock repurchase program.

Previous wording

The extent of the impacts of uncertain economic conditions on our financial performance that began in 2022, and have continued into 2024, will depend in part on developments outside of our control including, among others, the timing and significance of further changes in U.S. Treasury yields and mortgage interest rates, changes in funding costs, inflationary pressures, and international armed conflicts and their impact on supply chains.

Current wording

The extent of the impact of uncertain economic conditions on our financial performance during the remainder of 2025, will depend in part on developments outside of our control including, among others, the timing and significance of further changes in U.S. Treasury yields and mortgage interest rates, changes in funding costs, inflationary pressures, changes in the political environment, the impact of tariffs and reciprocal tariffs, and international armed conflicts and their impact on supply chains.

Previous wording

As discussed in more detail within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K, events in early 2023 relating to the failures of certain banking entities caused general uncertainty and concern regarding the liquidity adequacy of the banking sector as a whole. In light of these events, we have continued our efforts to monitor deposit flows and balance sheet trends to ensure that our liquidity needs and financial flexibility are maintained. During 2023, we increased interest-bearing deposit rates to address rising market interest rates and intense competition for liquidity to combat deposit outflows. Throughout 2023 and into the third quarter of 2024, we experienced net interest margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Deposit costs remained elevated through the third quarter of 2024; however, the interest paid on our deposits increased at a slower pace during the second and third quarters of 2024 as we reduced higher cost brokered deposits and our interest-bearing deposits yield flattened and market expectations for a decrease in the Federal Reserve funds emerged. Additionally, at September 30, 2024, we continued to access core deposits from our Hilltop Securities Federal Deposit Insurance Corporation (“FDIC”) insured sweep program, while the Bank was not utilizing any of its Federal Home Loan Bank (“FHLB”) borrowing capacity.

Current wording

Historically, high-profile banking failures periodically increase market uncertainty and concerns associated with banking sector liquidity positions, increase regulatory scrutiny and underscore the importance of maintaining access to diverse sources of funding. In light of these events, we have continued our efforts to monitor deposit flows and balance sheet trends to ensure that our liquidity needs and financial flexibility are maintained. During 2024, we increased interest-bearing deposit rates to address rising market interest rates and intense competition for liquidity to combat deposit outflows. Throughout 2024, we experienced net interest margin compression reflecting deposit repricing activity and demand deposit migration into interest-bearing accounts. Despite deposits costs remaining elevated during the first quarter of 2025, our cost of deposits decreased during the three months ended March 31, 2025, compared to the same period of 2024, as we took actions to reduce the interest paid on our interest-bearing deposits. Additionally, at March 31, 2025, we continued to access core deposits from our Hilltop Securities Federal Deposit Insurance Corporation (“FDIC”) insured sweep program, while the Bank was not utilizing any of its Federal Home Loan Bank (“FHLB”) borrowing capacity.

Previous wording

Market conditions and external factors may unpredictably impact the competitive landscape for deposits such as those experienced during the first quarter of 2023. Additionally, throughout 2023 and into the third quarter of 2024, the market interest rate environment increased competition for liquidity and the premium at which liquidity was available to meet funding needs. While funding costs will continue to be influenced by various factors, including competitive pressures and broader economic conditions, with the recent 50-basis point decrease in the target range for the federal funds rate in September 2024 and the possibility of additional rate cuts in 2024, we anticipate that our cost of deposits will begin to trend modestly downward. An unexpected influx of withdrawals of deposits could adversely impact our ability to rely on organic deposits to primarily fund our operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawals of deposits or to fund continuing operations. These sources may include proceeds from FHLB advances, sales of investment securities and loans, federal fund lines of credit with correspondent banks, securities sold under agreements to repurchase, brokered time deposits, borrowings from the Federal Reserve and borrowings under lines of credit with other financial institutions. Refer to the discussions in the “Segment Results – Banking Segment” and “Liquidity and Capital Resources – Banking Segment” sections that follow for more details regarding the Bank’s deposits, available liquidity and borrowing capacity at September 30, 2024.

Current wording

While funding costs will continue to be influenced by various factors, including competitive pressures, broader economic conditions, future changes in the target range for the federal funds rate, our customers’ appetite for higher yields on deposits, and our overall liquidity profile, we anticipate that our cost of deposits will continue to trend modestly downward. An unexpected influx of withdrawals of deposits could adversely impact our ability to rely on organic deposits to primarily fund our operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawals of deposits or to fund continuing operations. These sources may include proceeds from FHLB advances, sales of investment securities and loans, federal fund lines of credit with correspondent banks, securities sold under agreements to repurchase, brokered time deposits, borrowings from the Federal Reserve and borrowings under lines of credit with other financial institutions. Refer to the discussions in the “Segment Results – Banking Segment” and “Liquidity and Capital Resources – Banking Segment” sections that follow for more details regarding the Bank’s deposits, available liquidity and borrowing capacity at March 31, 2025.

Previous wording

We expect uncertainties discussed above, the impact of interest rate movements on the shape and inversions of the yield curve and challenge for deposits that persisted through 2023 and during the first three quarters of 2024, to continue during the remainder of 2024.

Current wording

We expect uncertainties related to economic headwinds discussed above, the impact of interest rate movements on the shape and inversions of the yield curve and the increased cost and challenge for deposits that persisted through 2024, to continue during 2025.

Previous wording

Given the potential impacts as a result of the operating performance of our reporting segments and overall economic conditions, actual results may differ materially from our current estimates as the scope of such impacts evolves or if the duration of business disruptions is longer than currently anticipated. We continue to monitor developments regarding overall economic conditions, market capitalization, and any other triggering events or circumstances that may indicate an impairment in the future. Specifically, the mortgage origination segment experienced operating losses during 2023, which have continued at a lesser extent into the first nine months of 2024 due to conditions and challenges discussed in detail within the discussion of segment results that follow.

Current wording

Given the potential impacts of the operating performance of our reporting segments and overall economic conditions, actual results may differ materially from our current estimates as the scope of such impacts evolves or if the duration of business disruptions are longer than currently anticipated. We continue to monitor developments regarding overall economic conditions, market capitalization, and any other triggering events or circumstances that may indicate an impairment in the future.

Previous wording

Our balance sheet, operating results and certain metrics during 2023 and the first nine months of 2024 reflected economic conditions that remain uncertain, and will depend in part on several developments outside of our control including, among others, the timing and significance of further changes in U.S. Treasury yields and mortgage interest rates, and a volatile economic forecast. As noted within our 2023 Form 10-K, these conditions, coupled with exposure to changes in funding costs, inflationary pressures, and international armed conflicts and their impact on supply chains within our business segments during 2023 have had, and are expected to continue to have, an adverse impact on our operating results during 2024.

Current wording

Our balance sheet, operating results and certain metrics during 2025 reflected economic conditions that remain uncertain, and will depend in part on several developments outside of our control including, among others, changes in the political environment, the impact of tariffs and reciprocal tariffs, the timing and significance of further changes in U.S. treasury yields and mortgage interest rates and a volatile economic forecast. As noted within our 2024 Form 10-K, these economic conditions, coupled with exposure to changes in funding costs, inflationary pressures, and international armed conflicts and their impact on supply chains within our business segments during 2024 have had, and are expected to continue to have, an adverse impact on our operating results during the remainder of 2025.

Previous wording

In addition, we consider regulatory capital ratios to be key measures that are used by us, as well as banking regulators, investors and analysts, to assess our regulatory capital position and to compare our regulatory capital to that of other financial services companies. We monitor our capital strength in terms of both leverage ratio and risk-based capital ratios based on capital requirements administered by the federal banking agencies. The risk-based capital ratios are minimum supervisory ratios generally applicable to banking organizations, but banking organizations are widely expected to operate with capital positions well above the minimum ratios. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a material effect on our financial condition or results of operations.

Current wording

In addition, we consider regulatory capital ratios to be key measures that are used by us, as well as banking regulators, investors and analysts, to assess our regulatory capital position and to compare our regulatory capital to that of other financial services companies. We monitor our capital strength in terms of both leverage ratio and risk-based capital ratios based on capital requirements administered by the federal banking agencies. The risk-based capital ratios are minimum supervisory ratios generally applicable to banking organizations, but banking organizations are widely expected to operate with capital positions well above the minimum ratios. Failure to meet minimum capital requirements

Previous wording

We generate revenue from net interest income and from noninterest income. Net interest income represents the difference between the income earned on our assets, including our loans and investment securities, and our cost of funds, including the interest paid on the deposits and borrowings that are used to support our assets. Net interest income is a significant contributor to our operating results. Fluctuations in interest rates, as well as the amounts and types of interest-earning assets and interest-bearing liabilities we hold, affect net interest income. The change in reportable business segment net interest income during the nine months ended September 30, 2024, compared with the same period in 2023, primarily reflected decreases within our banking and broker-dealer segments, partially offset by a decrease in net interest expense within our mortgage origination segment.

Current wording

We generate revenue from net interest income and from noninterest income. Net interest income represents the difference between the income earned on our assets, including our loans and investment securities, and our cost of funds, including the interest paid on the deposits and borrowings that are used to support our assets. Net interest income is a significant contributor to our operating results. Fluctuations in interest rates, as well as the amounts and types of interest-earning assets and interest-bearing liabilities we hold, affect net interest income. The change in reportable business segment net interest income during the three months ended March 31, 2025, compared with the same period in 2024, primarily reflected increases within our mortgage origination and corporate segments, partially offset by a slight decrease within our banking segment.

Previous wording

In the aggregate, we experienced an increase in noninterest income during the nine months ended September 30, 2024, compared to the same period in 2023, as noted in the segment results table previously presented, primarily due to an increase in gains from investment and securities advisory fees and commissions within our broker-dealer segment, an increase in net gains from sale of loans within our mortgage loan origination segment and an increase in pre-tax gains associated with the sale of merchant bank equity investments within corporate, partially offset by decreases of mortgage loan origination fees and other mortgage production income within our mortgage origination segment.

Current wording

In the aggregate, we experienced an increase in noninterest income during the three months ended March 31, 2025, compared to the same period in 2024, as noted in the segment results table previously presented, primarily due to an increase in pre-tax gains associated with merchant bank equity investment activity within corporate, increases in investment and securities advisory fees and commissions and securities commissions and fees, offset by decreases in trading gains earned from trading activities within our broker-dealer segment.

Previous wording

Certain items included in net income for the three and nine months ended September 30, 2024 and 2023 resulted from purchase accounting associated with the merger of PlainsCapital Corporation with and into a wholly owned subsidiary of Hilltop on November 30, 2012, the FDIC-assisted transaction whereby the Bank acquired certain assets and assumed certain liabilities of FNB, the acquisition of SWS Group, Inc. in a stock and cash transaction, and the acquisition of The Bank of River Oaks in an all-cash transaction (collectively, the “Bank Transactions”). Income before income taxes during the three months ended September 30, 2024 and 2023 included net accretion on earning assets and liabilities of $0.7 million and $2.5 million, respectively, and amortization of identifiable intangibles of $0.4 million and $0.7 million, respectively, related to the Bank Transactions. During the nine months ended September 30, 2024 and 2023, income before income taxes included net accretion on earning assets and liabilities of $4.0 million and $7.6 million, respectively, and amortization of identifiable intangible of $1.5 million and $2.2 million, respectively, related to the Bank transactions.

Current wording

Certain items included in net income for the three months ended March 31, 2025 and 2024 resulted from purchase accounting associated with the merger of PlainsCapital Corporation with and into a wholly owned subsidiary of Hilltop on November 30, 2012, the FDIC-assisted transaction whereby the Bank acquired certain assets and assumed certain liabilities of FNB, the acquisition of SWS Group, Inc. in a stock and cash transaction, and the acquisition of The Bank of River Oaks in an all-cash transaction (collectively, the “Bank Transactions”). Income before income taxes during the three months ended March 31, 2025 and 2024 included net accretion on earning assets and liabilities of $1.1 million and $1.4 million, respectively, and amortization of identifiable intangibles of $0.3 million and $0.5 million, respectively, related to the Bank Transactions.

Previous wording

activity was primarily related to the accretion of discount of loans which totaled $0.7 million and $2.2 million during the three months ended September 30, 2024 and 2023, respectively, and $4.0 million and $7.4 million during the nine months ended September 30, 2024 and 2023, respectively, associated with the Bank Transactions.

Current wording

During the three months ended March 31, 2025 and 2024, purchase accounting contributed 4 and 4 basis points, respectively, to our consolidated taxable equivalent net interest margin of 2.86% and 2.87%, respectively. The purchase accounting activity was primarily related to the accretion of discount of loans which totaled $1.1 million and $1.3 million during the three months ended March 31, 2025 and 2024, respectively, associated with the Bank Transactions.

Previous wording

The tables below provide additional details regarding our consolidated net interest income (dollars in thousands).

Current wording

The table below provides additional details regarding our consolidated net interest income (dollars in thousands).

Previous wording

On a consolidated basis, the change in net interest income during the three and nine months ended September 30, 2024, compared with the same periods in 2023, was primarily due to increased costs of deposits from rate increases and the shift from noninterest-bearing deposits into interest-bearing products during the year-over-year period, and increased net yields on loans held for investment within the banking segment for the nine months ended September 30, 2024. Refer to the discussion in the “Banking Segment” section that follows for more details on the changes in net interest income, including the component changes in the volume of average interest-earning assets and interest-bearing liabilities and changes in the rates earned or paid on those items.

Current wording

On a consolidated basis, the change in net interest income during the three months ended March 31, 2025, compared with the same period in 2024, was primarily due to decreased loans held for investment yield from rate decreases and decreased costs of deposits from rate decreases offset by increased cost of deposits from the continued shift from noninterest-bearing deposits into interest-bearing products during the quarter-over-quarter period. Refer to the discussion in the “Banking Segment” section that follows for more details on the changes in net interest income, including the component changes in the volume of average interest-earning assets and interest-bearing liabilities and changes in the rates earned or paid on those items.

Previous wording

The provision for (reversal of) credit losses is determined by management as the amount necessary to maintain the allowance for credit losses at the amount of expected credit losses inherent within the loans held for investment portfolio. The amount of expense and the corresponding level of allowance for credit losses for loans are based on our evaluation of the collectability of the loan portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors. During the three months ended June 30, 2024, the provision for credit losses reflected a build in the allowance related to specific reserves and loan portfolio changes within the banking segment since the prior quarter, slightly offset by improvements to the U.S. economic outlook, while during the three months ended September 30, 2024, the reversal of credit losses was primarily driven by net charge-offs and loan

Current wording

The provision for (reversal of) credit losses is determined by management as the amount necessary to maintain the allowance for credit losses at the amount of expected credit losses inherent within the loans held for investment portfolio. The amount of expense and the corresponding level of allowance for credit losses for loans are based on our evaluation of the collectability of the loan portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors. Substantially all of our consolidated provision for (reversal of) credit losses is related to the banking segment. During the three months ended March 31, 2025, the provision for credit losses was primarily driven by a build in the allowance related to loan portfolio changes and specific reserves, including

Previous wording

portfolio changes, including a change in the macroeconomic outlook scenario utilized, associated with collectively evaluated loans, partially offset by a build in the allowance related to specific reserves within the banking segment since the prior quarter. The provision for credit losses during the nine months ended September 30, 2024 reflected a build in the allowance related to specific reserves and loan portfolio changes within the banking segment since the prior period, partially offset by the change in the macroeconomic outlook scenario utilized. Refer to the discussion under the heading “Financial Condition – Allowance for Credit Losses on Loans” for more details regarding the significant assumptions and estimates involved in estimating credit losses.

Current wording

changes in loan mix and risk rating grade migration, partially offset by net charge-offs and changes in the U.S. economic outlook associated with collectively evaluated loans within the banking segment since the prior quarter. Refer to the discussion under the heading “Financial Condition – Allowance for Credit Losses on Loans” for more details regarding the significant assumptions and estimates involved in estimating credit losses.

Previous wording

Noninterest income increased during the three months ended September 30, 2024, compared with the same period in 2023, primarily due to net increases within the broker-dealer segment’s structured finance and fixed income services business lines, partially offset by a decline within the broker-dealer segment’s wealth management business line and a decline in mortgage loan origination fees within our mortgage origination segment. Noninterest income increased during the nine months ended September 30, 2024, compared with the same period in 2023, primarily due to net increases within the broker-dealer segment’s structured finance and public finance services business lines, an increase in pre-tax gains associated with the sale of merchant bank equity investments within corporate, and increases in mortgage loan gains from sale of loans within our mortgage origination segment, partially offset by declines in mortgage loan origination fees and other related income within the mortgage origination segment and by declines within the broker-dealer segment’s fixed income services and wealth management business lines.

Current wording

Noninterest income increased during the three months ended March 31, 2025, compared with the same period in 2024, primarily due to a preliminary pre-tax gain of $30.5 million being recorded in the first quarter of 2025 associated with the sale of operations by a merchant bank equity investment, while other changes between periods included net decreases within the broker-dealer segment’s structured finance and fixed income services business lines, partially offset by net increases within the broker-dealer segment’s public finance and wealth management business lines, and increases in net gains from sale of loans and other mortgage production income within our mortgage loan origination segment, partially offset by a decrease of mortgage loan origination fees within our mortgage origination segment.

Previous wording

Noninterest expense increased during the three months ended September 30, 2024, compared with the same period in 2023, primarily due to increases in both variable and non-variable compensation and other segment operating costs within our broker-dealer segment, partially offset by decreases in both variable and non-variable compensation and other segment costs within our mortgage origination segment associated with decreased mortgage loan originations. Noninterest expense decreased during the nine months ended September 30, 2024, compared with the same period in 2023, primarily due to changes noted above within our mortgage origination segment, partially offset by increases in both variable and non-variable compensation and other segment operating costs within our broker-dealer segment. We have experienced an increase in certain noninterest expenses during 2024 and 2023, compared with respective prior periods, including compensation, occupancy, and software costs, due to inflationary pressures. We expect such inflationary headwinds to continue and result in higher fixed costs during the remainder of 2024.

Current wording

Noninterest expense increased during the three months ended March 31, 2025, compared with the same period in 2024, primarily due to an increase in employees’ compensation and benefits within corporate, a net increase within our broker-dealer segment associated with increases in other segment operating costs, partially offset by a decrease in variable compensation, a net decrease within our mortgage origination segment driven by decreases in non-variable compensation and other segment costs, partially offset by an increase in variable compensation associated with increased mortgage loan originations. We have experienced an increase in certain noninterest expenses during 2025 and 2024, compared with respective prior periods, including compensation, occupancy, and software costs, due to inflationary pressures. We expect such inflationary headwinds to continue and result in higher fixed costs during the remainder of 2025.

Previous wording

Effective income tax rates during the three months ended September 30, 2024 and 2023 were 22.5% and 25.2%, respectively, and for the nine months ended September 30, 2024 and 2023 were 22.5% and 21.6%, respectively. The effective tax rate during the three months ended September 30, 2023 was higher than the applicable statutory rate primarily due to the impact of non-deductible compensation expense and other permanent adjustments. During the nine months ended September 30, 2023, the effective tax rate differed from the applicable statutory rate primarily due to the impacts of excess tax benefits on share-based payment awards, investments in tax-exempt instruments and changes in accumulated tax reserves, partially offset by nondeductible expenses and the booking of additional taxes from a recent change in the source of funding for an acquired non-qualified, deferred compensation plan. During the three and nine months ended September 30, 2024, the effective tax rate was higher than the applicable statutory rate primarily due to the impact of nondeductible expenses, nondeductible compensation expense and other permanent adjustments, partially offset by the discrete impact of restricted stock vesting during the quarter and investments in tax-exempt instruments.

Current wording

Effective income tax rates during the three months ended March 31, 2025 and 2024 were 22.7% and 22.5%, respectively. During the three months ended March 31, 2025, the effective tax rate was higher than the applicable statutory rate primarily due to the impact of nondeductible expenses, nondeductible compensation expense and other permanent adjustments, partially offset by investments in tax-exempt instruments. The effective tax rate during the three months ended March 31, 2024, was higher than the applicable statutory rate primarily due to the impact of nondeductible expenses, nondeductible compensation expense and other permanent adjustments, partially offset by the discrete impact of restricted stock vesting during the quarter and investments in tax-exempt instruments.

Previous wording

The decreases in income before income taxes during the three and nine months ended September 30, 2024, compared with the same periods in 2023, were primarily due to declines in net interest income and noninterest income, partially offset by the changes in the provision for credit losses. Changes to net interest income related to the component changes

Current wording

The decrease in income before income taxes during the three months ended March 31, 2025, compared with the same period in 2024, was primarily due to a significant increase in the provision for credit losses and declines in net interest income and noninterest income, partially offset by lower noninterest expenses. The decrease in noninterest expense was driven by the settlement and receipt of funds during the first quarter of 2025 that reimbursed the Bank for legal fees previously incurred. Changes to net interest income related to the component changes in the volume of average interest-earning assets and interest-bearing liabilities and changes in the rates earned or paid on those items are discussed in more detail below.

Previous wording

During the three months ended September 30, 2024 and 2023, purchase accounting contributed 3 and 8 basis points, respectively, to the banking segment’s taxable equivalent net interest margin of 3.06% and 3.09%, respectively. During the nine months ended September 30, 2024 and 2023, purchase accounting contributed 4 and 9 basis points, respectively, to the banking segment’s taxable equivalent net interest margin of 3.06% and 3.20%, respectively. These purchase accounting items are primarily related to accretion of discount of loans associated with the Bank Transactions presented in the Consolidated Operating Results section.

Current wording

During the three months ended March 31, 2025 and 2024, purchase accounting contributed 3 and 5 basis points, respectively, to the banking segment’s taxable equivalent net interest margin of 2.97% and 3.00%, respectively. These purchase accounting items are primarily related to accretion of discount of loans associated with the Bank Transactions presented in the Consolidated Operating Results section.

Previous wording

The tables below provide additional details regarding our banking segment’s net interest income (dollars in thousands).

Current wording

The table below provides additional details regarding our banking segment’s net interest income (dollars in thousands).

Previous wording

The decreases in net interest income, as noted in the table above, were primarily driven by the increased funding costs on our deposit products from rate increases in 2023 and the migration from non-interest-bearing deposits into interest-bearing products during the year over year period, partially offset by increased earnings on interest-earning assets, primarily loan yields. The average rate paid on interest-bearing liabilities increased 50 basis points from 3.38% for the nine months ended September 30, 2023 to 3.88% for the nine months ended September 30, 2024, while the average yield

Current wording

The slight decrease in net interest income, as noted in the table above, was driven by decreased earnings on interest-earning assets, primarily loan yields and investment securities, significantly offset by the decreased funding costs on our deposit products from rate decreases. The average rate paid on interest-bearing liabilities decreased 67 basis points from 3.90% for the three months ended March 31, 2024 to 3.23% for the three months ended March 31, 2025, while the average yield on interest-earning assets decreased 38 basis points from 5.58% for the three months ended March 31, 2024 to 5.20% for the three months ended March 31, 2025.

Previous wording

Our portfolio includes loans that periodically reprice or mature prior to the end of an amortized term. The extent and timing of this impact on interest income will ultimately be driven by the timing, magnitude and frequency of interest rate and yield curve movements, as well as changes in market conditions and timing of management strategies. At September 30, 2024, approximately $599 million of our floating rate loans held for investment remained at or below their applicable rate floor, exclusive of our mortgage warehouse lending program, of which approximately 66% are not scheduled to reprice for more than one year based upon agreed-upon terms. If interest rates were to continue to fall, the impact on our interest income for certain variable-rate loans would be limited by these rate floors. If interest rates rise, yields on the portion of our loan portfolio that remain at applicable rate floors would rise more slowly than increases in market interest rates, unless such loans are refinanced or repaid. Competition for loan growth could also continue to put pressure on new loan origination rates.

Current wording

Our portfolio includes loans that periodically reprice or mature prior to the end of an amortized term. The extent and timing of this impact on interest income will ultimately be driven by the timing, magnitude and frequency of interest rate and yield curve movements, as well as changes in market conditions and timing of management strategies. At March 31, 2025, approximately $675 million of our floating rate loans held for investment remained at or below their applicable rate floor, exclusive of our mortgage warehouse lending program, of which approximately 49% are not scheduled to reprice for more than one year based upon agreed-upon terms. If interest rates were to continue to fall, the impact on our interest income for certain variable-rate loans would be limited by these rate floors. If interest rates rise, yields on the portion of our loan portfolio that remain at applicable rate floors would rise more slowly than increases in market interest rates, unless such loans are refinanced or repaid. Competition for loan growth could also continue to put pressure on new loan origination rates.

Previous wording

Additionally, within our banking segment, the composition of the deposit base and ultimate cost of funds on deposits and net interest income are affected by the level of market interest rates, the interest rates and products offered by competitors, the volatility of equity markets and other factors. Deposit products and pricing structures relative to the market are regularly evaluated to maintain competitiveness over time. As discussed above, our cost of deposits increased during the three and nine months ended September 30, 2024, compared to the same periods of 2023. While we expect such costs during 2024 to continue to be driven by various factors, including competitive pressures and broader economic conditions, with the recent 50-basis point decrease in the target range of the federal funds rate in September 2024 and the possibility of additional rate cuts in 2024, we anticipate that our cost of deposits will begin to trend modestly downward. The Bank’s deposit base primarily includes a combination of commercial, wealth and public funds deposits, without a high level of industry concentration. At September 30, 2024, total estimated uninsured deposits were $5.3 billion, or approximately 49% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $312.3 million, were $5.0 billion, or approximately 46% of total deposits.

Current wording

Additionally, within our banking segment, the composition of the deposit base and ultimate cost of funds on deposits and net interest income are affected by the level of market interest rates, the interest rates and products offered by competitors, the volatility of equity markets and other factors. Deposit products and pricing structures relative to the market are regularly evaluated to maintain competitiveness over time. As discussed above, our cost of deposits decreased during the three months ended March 31, 2025, compared to the same period of 2024. While we expect such costs during the remainder of 2025 to continue to be driven by various factors, including, but not limited to future changes in the target range for the federal funds rate, our customers’ appetite for higher yields on deposits, and our overall liquidity profile, we anticipate that our cost of deposits will continue to trend modestly downward. The Bank’s deposit base primarily includes a combination of commercial, wealth and public funds deposits, without a high level of industry concentration. At March 31, 2025, total estimated uninsured deposits were $5.6 billion, or approximately 52% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $371.5 million and internal accounts of $485.8 million, were $4.8 billion, or approximately 44% of total deposits.

Previous wording

The banking segment retained approximately $7.3 million and $8.8 million in mortgage loans originated by the mortgage origination segment during the three months ended September 30, 2024 and 2023, respectively, and $79.2 million and $135.2 million in mortgage loans originated by the mortgage origination segment during the nine months ended September 30, 2024 and 2023, respectively. These loans are purchased by the banking segment at par. For origination services provided, the banking segment reimburses the mortgage origination segment for direct origination costs associated with these mortgage loans, in addition to payment of a correspondent fee. The correspondent fees are eliminated in consolidation. The determination of mortgage loan retention levels by the banking segment will be impacted by, among other things, an ongoing review of the prevailing mortgage rates, balance sheet positioning at Hilltop and the banking segment’s outlook for commercial loan growth.

Current wording

The banking segment retained approximately $62.5 million and $32.3 million in mortgage loans originated by the mortgage origination segment during the three months ended March 31, 2025 and 2024, respectively. These loans are purchased by the banking segment at par. For origination services provided, the banking segment reimburses the mortgage origination segment for direct origination costs associated with these mortgage loans, in addition to payment of a correspondent fee. The correspondent fees are eliminated in consolidation. The determination of mortgage loan retention levels by the banking segment will be impacted by, among other things, an ongoing review of the prevailing mortgage rates, balance sheet positioning at Hilltop and the banking segment’s outlook for commercial loan growth.

Previous wording

$2.5 million and $6.5 million, respectively. The change in the allowance for credit losses during the three and nine months ended September 30, 2024 was also impacted by net charge-offs of $2.9 million and $7.3 million, respectively. During the three months ended September 30, 2023, the banking segment’s provision for credit losses reflected increases in specific reserves and net portfolio changes since the prior period, while the provision for credit losses during the nine months ended September 30, 2023, reflected a significant build in the allowance related to loan portfolio changes since December 31, 2022 and a deteriorating outlook for commercial real estate markets. The net impact to the allowance of changes associated with collectively evaluated loans during the three and nine months ended September 30, 2023 included a reversal of credit losses of $0.3 million, compared to a provision for credit losses of $14.2 million, respectively, while individually evaluated loans included a provision for credit losses of $0.9 million and $3.0 million, respectively. The change in the allowance for credit losses during the three and nine months ended September 30, 2023 were also impacted by net recoveries of $1.6 million and net charge-offs of $1.7 million, respectively. The changes in the allowance for credit losses during the noted periods also reflected other factors including, but not limited to, loan growth, loan mix and changes in risk grades and qualitative factors from the prior quarter. Refer to the discussion in the “Financial Condition – Allowance for Credit Losses on Loans” section that follows for more details regarding the significant assumptions and estimates involved in estimating credit losses.

Current wording

The banking segment’s provision for (reversal of) credit losses has been subject to significant year-over-year and quarterly changes primarily attributable to the effects of changes in economic outlook, macroeconomic forecast assumptions and the resulting impact on reserves. During the three months ended March 31, 2025, the increase in the provision for credit losses was primarily driven by a build in the allowance related to loan portfolio changes and specific reserves, including changes in loan mix and risk rating grade migration, partially offset by net charge-offs and changes in the U.S. economic outlook associated with collectively evaluated loans within the banking segment since the prior quarter. The net impact to the allowance of changes associated with collectively and individually evaluated loans during the three months ended March 31, 2025 included a provision for credit losses of $7.7 million and $1.7 million, respectively. The change in the allowance for credit losses during the three months ended March 31, 2025 was also impacted by net charge-offs of $4.3 million. During the three months ended March 31, 2024, the reversal of credit losses reflected improvements to the U.S. economic outlook, offset by increases in specific reserves within the banking segment. The net impact to the allowance of changes associated with collectively evaluated loans during the three months ended March 31, 2024 included a reversal of credit losses of $7.0 million, while individually evaluated loans included a provision for credit losses of $4.1 million. The change in the allowance for credit losses during the three months ended March 31, 2024 was also impacted by net charge-offs of $4.3 million. The changes in the allowance for credit losses during the noted periods also reflected other factors including, but not limited to, loan growth, loan mix and changes in risk grades and qualitative factors from the prior quarter. Refer to the discussion in the “Financial Condition – Allowance for Credit Losses on Loans” section that follows for more details regarding the significant assumptions and estimates involved in estimating credit losses.

Previous wording

The banking segment’s noninterest income decreased during the three months ended September 30, 2024, compared to the same period in 2023, primarily due to a decrease in oil and gas management fees. The decrease in noninterest income during the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to valuation adjustments associated with the sale of a single loan from loans held for sale during the second quarter of 2024.

Current wording

The banking segment’s noninterest income decreased during the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease in oil and gas management fees.

Previous wording

The banking segment’s noninterest expense increased during the three months ended September 30, 2024, compared to the same period in 2023, primarily due to increases in employees’ compensation and benefits and occupancy and equipment expenses, partially offset by decreases in professional fees. The increase in noninterest expense during the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to one-time compensation expenses associated with Bank leadership changes, partially offset by decreases in professional fees.

Current wording

The banking segment’s noninterest expense decreased during the three months ended March 31, 2025, compared to the same period in 2024, primarily due to decreases in professional fees and occupancy and equipment expenses, partially offset by an increase in employees’ compensation and benefits. The decrease in professional fees was driven by the settlement and receipt of $6.5 million during the first quarter of 2025 that reimbursed the Bank for legal fees previously incurred.

Previous wording

The changes in net revenue and income before income taxes for the nine months ended September 30, 2024, compared with the same period in 2023, were primarily due to improved period-over-period results within our structured finance and public finance services business lines, partially offset by declines within our fixed income services and wealth management business lines. The increase in the structured finance business line’s net revenues was primarily due to an increase in unrealized gains from the U.S. Agency to-be-announced (“TBA”) business and commissions earned on commodities transactions. The increase in net revenues in the broker-dealer segment’s public finance services business line was primarily due to fees earned from managed assets and municipal advisory revenues. The wealth management business line’s net revenue decrease was driven by decreases in commissions earned from our FDIC sweep program on lower customer balances. These decreases were partially offset by improved advisory fees revenues generated from customer assets under management. The decrease in net revenues in the broker-dealer segment’s fixed income services business line was primarily due to declines in revenues from net interest income earned on inventory positions and

Current wording

The decreases in net revenue and income before income taxes for the three months ended March 31, 2025, compared with the same period in 2024, were primarily due to declines in period-over-period results within our structured finance and fixed income services business lines, partially offset by improved results within our public finance services and wealth management business lines. The decrease in the structured finance business line’s net revenues was primarily due to a decrease in unrealized gains from the U.S. Agency to-be-announced (“TBA”) business partially offset by commissions earned on commodities transactions. The decrease in fixed income services business line’s net revenues

Previous wording

The broker-dealer segment is subject to interest rate risk as a consequence of maintaining inventory positions, trading in interest rate sensitive financial instruments and maintaining a matched stock loan book. Changes in interest rates are likely to have a meaningful impact on our overall financial performance. Our broker-dealer segment has historically earned a significant portion of its revenues from advisory fees upon the successful completion of client transactions, which could be adversely impacted by interest rate volatility. Rapid or significant changes in interest rates could adversely affect the broker-dealer segment’s bond trading, sales, underwriting activities and other interest spread-sensitive activities described below. The broker-dealer segment also receives administrative fees for providing money market and FDIC investment alternatives to clients, which tend to be sensitive to short-term interest rates. In addition, the profitability of the broker-dealer segment depends, to an extent, on the spread between revenues earned on customer loans and excess customer cash balances, and the interest expense paid on customer cash balances, as well as the interest revenue earned on trading securities, net of financing costs. The broker-dealer segment is also exposed to interest rate risk through its structured finance business line, which is dependent on mortgage loan production that tends to be adversely impacted by increasing interest rates and resulting in valuation-related adjustments.

Current wording

The broker-dealer segment is subject to interest rate risk as a consequence of maintaining inventory positions, trading in interest rate sensitive financial instruments and maintaining a matched stock loan book. Changes in interest rates are likely to have a meaningful impact on our overall financial performance. Our broker-dealer segment has historically earned a significant portion of its revenues from advisory fees upon the successful completion of client transactions, which could be adversely impacted by interest rate volatility. Rapid or significant changes in interest rates could adversely affect the broker-dealer segment’s bond trading, sales, underwriting activities and other interest spread-sensitive activities. The broker-dealer segment also receives administrative fees for providing money market and FDIC investment alternatives to clients, which tend to be sensitive to short-term interest rates. In addition, the profitability of the broker-dealer segment depends, to an extent, on the spread between revenues earned on customer loans and excess customer cash balances, and the interest expense paid on customer cash balances, as well as the interest revenue earned on trading securities, net of financing costs. The broker-dealer segment is also exposed to interest rate risk through its structured finance business line, which is dependent on mortgage loan production that tends to be adversely impacted by increasing interest rates and resulting in valuation-related adjustments.

Previous wording

In the broker-dealer segment, interest is earned from securities lending activities, interest charged on customer margin loan balances and interest earned on investment securities used to support sales, underwriting and other customer activities. The decrease in net interest income during the nine months ended September 30, 2024, compared with the same period in 2023, was primarily due to the decrease in net interest income from the fixed income services business line due to decreases in net interest earned on inventory positions. Net interest income during the three months ended September 30, 2024, compared with the same period in 2023 remained relatively flat.

Current wording

In the broker-dealer segment, interest is earned from securities lending activities, interest charged on customer margin loan balances and interest earned on investment securities used to support sales, underwriting and other customer activities. The decrease in net interest income during the three months ended March 31, 2025, compared with the same period in 2024, was primarily due to the decrease in net interest income from the wealth management business line from margin loan and stock borrowing activities, partially offset by an increase in net interest earned on inventory positions within the fixed income services business line.

Previous wording

Noninterest income increased during the three and nine months ended September 30, 2024, compared with the same periods in 2023, due to increases in securities commissions and fees, investment and securities advisory fees and other income.

Current wording

Noninterest income decreased during the three months ended March 31, 2025, compared with the same period in 2024, due to a decrease in other income, partially offset by increases in securities commissions and fees and investment and securities advisory fees.

Previous wording

Securities commissions and fees increased during the three months ended September 30, 2024, compared with the same period in 2023, primarily due to an increase in commodities and insurance product sales commissions, partially offset by decreases in FDIC sweep revenues and net clearing revenues. Securities commissions and fees increased during the nine months ended September 30, 2024, compared with the same period in 2023 due to increases in both the broker-dealer segment’s structured finance and fixed income services business lines. The increase in the structured finance business line was primarily due to an increase in commissions earned on commodities transactions, and the increase in the fixed income services business line was primarily due to increased volumes. These increases were partially offset by declines in securities commissions and fees in the broker-dealer segment’s wealth management business line due to decreases in FDIC sweep revenues and net clearing revenues, as well as a decline in commissions earned on insurance product sales.

Current wording

Securities commissions and fees increased during the three months ended March 31, 2025, compared with the same period in 2024, primarily due to an increase in commodities product sales commissions and brokerage services fees.

Previous wording

Investment and securities advisory fees and commissions increased during the three and nine months ended September 30, 2024, compared with the same periods in 2023, primarily due to increases in fees earned from managed assets and municipal advisory transactions.

Current wording

Investment and securities advisory fees and commissions increased during the three months ended March 31, 2025, compared with the same period in 2024, primarily due to increases in fees earned from managed assets and municipal advisory transactions.

Previous wording

The increases in other noninterest income during the three and nine months ended September 30, 2024, compared with the same periods in 2023, were primarily due to increases in trading gains earned from structured finance trading activities and distributions received on investments, partially offset by decreases in trading gains earned from fixed

Current wording

The decrease in other noninterest income during the three months ended March 31, 2025, compared with the same period in 2024, was primarily due to decreases in trading gains earned from structured finance and fixed income services trading activities due to less favorable market conditions.

Previous wording

The increases in noninterest expense during the three and nine months ended September 30, 2024, compared with the same periods in 2023, were primarily due to increases in segment compensation and other segment operating costs, primarily quotation expenses.

Current wording

The increase in noninterest expense during the three months ended March 31, 2025, compared with the same period in 2024, was primarily due to an increase in other segment operating costs, primarily quotation expenses and professional services, partially offset by a decrease in variable compensation associated with the decrease in net revenue.