# Hilltop Holdings Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Hilltop Holdings Inc.](/companies/hth.md) (CIK 1265131)
- Form: 10-Q
- Filed: 2024-08-02
- Accepted by EDGAR: Aug 2, 2024, 20:16 ET
- Period: 2024-06-30
- Accession: 0001558370-24-010724
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1265131/000155837024010724/hth-20240630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1265131/000155837024010724/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $6.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $15.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $20.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $48.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.31 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.31 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 65,086,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 65,149,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$364.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $4.4m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $22.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $19.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-06-30 | $15.62bn | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $13.46bn | us-gaap:Liabilities |
| Short-term borrowings | at 2024-06-30 | $897.6m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-06-30 | $2.13bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 219,040 characters.

*The following discussion should be read in conjunction with the consolidated historical financial statements and notes appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the financial information set forth in the tables herein.*

*Unless the context otherwise indicates, all references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, to the “Company,” “we,” “us,” “our” or “ours” or similar words are to Hilltop Holdings Inc. and its direct and indirect wholly owned subsidiaries, references to “Hilltop” refer solely to Hilltop Holdings Inc., references to “PCC” refer to PlainsCapital Corporation (a wholly owned subsidiary of Hilltop), references to “Securities Holdings” refer to Hilltop Securities Holdings LLC (a wholly owned subsidiary of Hilltop), references to “Hilltop Securities” refer to Hilltop Securities Inc. (a wholly owned subsidiary of Securities Holdings), references to “Momentum Independent Network” refer to Momentum Independent Network Inc. (a wholly owned subsidiary of Securities Holdings), Hilltop Securities and Momentum Independent Network are collectively referred to as the “Hilltop Broker-Dealers”, references to the “Bank” refer to PlainsCapital Bank (a wholly owned subsidiary of PCC), references to “FNB” refer to First National Bank, references to “SWS” refer to the former SWS Group, Inc., references to “PrimeLending” refer to PrimeLending, a PlainsCapital Company (a wholly owned subsidiary of the Bank) and its subsidiaries as a whole.*

### FORWARD-LOOKING STATEMENTS

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included in this Quarterly Report that address results or developments that we expect or anticipate will or may occur in the future, and statements that are preceded by, followed by or include, words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “might,” “plan,” “probable,” “projects,” “seeks,” “should,” “target,” “view” or “would” or the negative of these words and phrases or similar words or phrases, including such things as our business strategy, our financial condition, our revenue, our liquidity and sources of funding, market trends, operations and business, taxes, the impact of natural disasters or public health emergencies, information technology expenses, cybersecurity incidents, 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, 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, expected future benchmark rates, anticipated investment yields, our expectations regarding accretion of discount on loans in future periods, the collectability of loans, and the outcome of litigation are forward-looking statements.

These forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If an event occurs, our business, business plan, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Certain factors that could cause actual results to differ include, among others:

- the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs;
- effectiveness of our data security controls in the face of cyber attacks and any legal, reputational and financial risks following a cybersecurity incident;
- changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil;
- changes in the interest rate environment;
- risks associated with concentration in real estate related loans;
- the effects of our indebtedness on our ability to manage our business successfully, including the restrictions imposed by the indenture governing our indebtedness;
- disruptions to the economy and financial services industry, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments;
- cost and availability of capital;
- changes in state and federal laws, regulations or policies affecting one or more of our business segments, including changes in regulatory fees, deposit insurance premiums, capital requirements and the Dodd-Frank Wall Street Reform and Consumer Protection Act;
- changes in key management;
- 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-based non-bank lenders and government agencies;
- legal and regulatory proceedings;
- risks associated with merger and acquisition integration; and
- our ability to use excess capital in an effective manner.

For a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differ materially from those anticipated in these forward-looking statements, see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), which was filed with the Securities and Exchange Commission (“SEC”) on February 14, 2024, this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other filings we have made with the SEC. We caution that the foregoing list of factors is not exhaustive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. All subsequent written and oral forward-looking statements concerning our business attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this Quarterly Report except to the extent required by federal securities laws.

### OVERVIEW

We are a financial holding company registered under the Bank Holding Company Act of 1956. Our primary line of business is to provide business and consumer banking services from offices located throughout Texas through the Bank. We also provide an array of financial products and services through our broker-dealer and mortgage origination segments. The following includes additional details regarding the financial products and services provided by each of our primary business units.

*PCC*. PCC is a financial holding company that provides, through its subsidiaries, traditional banking and wealth, investment and treasury management services primarily in Texas and residential mortgage loans throughout the United States.

*Securities Holdings.* Securities Holdings is a holding company that provides, through its subsidiaries, investment banking and other related financial services, including municipal advisory, sales, trading and underwriting of taxable and tax-exempt fixed income securities, clearing, securities lending, structured finance and retail brokerage services throughout the United States.

The following historical consolidated data for the periods indicated has been derived from our historical consolidated financial statements included elsewhere in this Quarterly Report (dollars and shares in thousands, except per share data).

| ​ ​ ​ Statement of Operations Data: | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 ​ ​ ​ | ​ ​ ​ ​ 2023 ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 ​ ​ ​ | ​ ​ ​ ​ 2023 ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- |
| Net interest income | ​ | $103,650 ​ | $118,266 ​ | $207,271 ​ | $239,971 ​ |
| Provision for credit losses | ​ | 10,934 ​ | ​ 14,836 ​ | ​ 8,063 ​ | ​ 17,167 ​ |
| Total noninterest income | ​ | 193,305 ​ | ​ 190,652 ​ | ​ 374,923 ​ | ​ 353,146 ​ |
| Total noninterest expense | ​ | 256,464 ​ | ​ 266,977 ​ | ​ 506,487 ​ | ​ 517,447 ​ |
| Income before income taxes | ​ | 29,557 ​ | 27,105 ​ | 67,644 ​ | 58,503 ​ |
| Income tax expense | ​ | 6,658 ​ | 7,167 ​ | 15,223 ​ | 10,797 ​ |
| Net income | ​ | ​ 22,899 ​ | 19,938 ​ | 52,421 ​ | 47,706 ​ |
| Less: Net income attributable to noncontrolling interest | ​ | 2,566 ​ | 1,805 ​ | 4,420 ​ | 3,773 ​ |
| Income attributable to Hilltop | ​ | $20,333 ​ | $18,133 ​ | $48,001 ​ | $43,933 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Per Share Data:** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Diluted earnings per common share | ​ | $0.31 ​ | $0.28 ​ | $0.74 ​ | $0.68 ​ |
| Diluted weighted average shares outstanding | ​ | ​ 65,086 ​ | ​ 65,054 ​ | ​ 65,149 ​ | ​ 64,993 ​ |
| Cash dividends declared per common share | ​ | $0.17 ​ | $0.16 ​ | $0.34 ​ | $0.32 ​ |
| Dividend payout ratio (1) | ​ | ​ 54.42% | ​ 57.37% | ​ 46.14% | ​ 47.32% |
| Book value per common share (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | $32.86 ​ | $31.71 ​ |
| Tangible book value per common share (2) (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | $28.63 ​ | $27.45 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| ​ | ​ | **​** ​ | **​** ​ | **June 30,** ​ | **December 31,** ​ |
| ​ | ​ | **​** **​** | **​** ​ | **2024** | **2023** ​ |
| **Balance Sheet Data:** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Total assets | ​ | ​ ​ ​ | ​ ​ ​ | $15,620,490 ​ | $16,466,996 ​ |
| Cash and due from banks | ​ | ​ ​ ​ | ​ ​ ​ | 798,300 ​ | ​ 1,858,700 ​ |
| Securities | ​ | ​ ​ ​ | ​ ​ ​ | 2,932,201 ​ | ​ 2,836,584 ​ |
| Loans held for sale | ​ | ​ ​ ​ | ​ ​ ​ | 1,264,437 ​ | ​ 943,846 ​ |
| Loans held for investment, net of unearned income | ​ | ​ ​ ​ | ​ ​ ​ | 8,173,520 ​ | ​ 8,079,745 ​ |
| Allowance for credit losses | ​ | ​ ​ ​ | ​ ​ ​ | (115,082) ​ | ​ (111,413) ​ |
| Total deposits | ​ | ​ ​ ​ | ​ ​ ​ | 10,373,856 ​ | ​ 11,063,192 ​ |
| Notes payable | ​ | ​ ​ ​ | ​ ​ ​ | 347,402 ​ | ​ 347,145 ​ |
| Total stockholders' equity | ​ | ​ ​ ​ | ​ ​ ​ | 2,162,611 ​ | ​ 2,150,329 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Capital Ratios:** | **​** | **​** **​** **​** | **​** **​** **​** | **​** **​** **​** | **​** **​** **​** |
| Common equity to assets ratio | ​ | ​ ​ ​ | ​ ​ ​ | 13.66% | 12.89% |
| Tangible common equity to tangible assets (2) | ​ | ​ ​ ​ | ​ ​ ​ | 12.12% | 11.41% |

(1) Dividend payout ratio is defined as cash dividends declared per common share divided by basic earnings per common share.

(2) For a reconciliation to the nearest GAAP measure, see “—Reconciliation and Management’s Explanation of Non-GAAP Financial Measures.”

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

- The banking segment contributed $32.8 million and $83.2 million of income before income taxes during the three and six months ended June 30, 2024;
- The broker-dealer segment contributed $7.2 million and $26.1 million of income before income taxes during the three and six months ended June 30, 2024; and
- The mortgage origination segment contributed $1.4 million of income before income taxes and incurred $15.1 million of losses before income taxes during the three and six months ended June 30, 2024.

During the six months ended June 30, 2024, we declared and paid total common dividends of $22.2 million.

On July 25, 2024, our board of directors declared a quarterly cash dividend of $0.17 per common share, payable on August 30, 2024 to all common stockholders of record as of the close of business on August 16, 2024.

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 six months ended June 30, 2024, we paid $19.9 million to repurchase an aggregate of 640,042 shares of our common stock at an average price of $31.01 per share pursuant to the stock repurchase program.

### Reconciliation and Management’s Explanation of Non-GAAP Financial Measures

We present certain measures in our selected financial data that are not measures of financial performance recognized by accounting principles generally accepted in the United States (“GAAP”). “Tangible book value per common share” is defined as our total stockholders’ equity reduced by goodwill and other intangible assets, divided by total common shares outstanding. “Tangible common equity to tangible assets” is defined as our total stockholders’ equity reduced by goodwill and other intangible assets, divided by total assets reduced by goodwill and other intangible assets. These measures are important to investors interested in changes from period to period in tangible common equity per share exclusive of changes in intangible assets. For companies such as ours that have engaged in business combinations, purchase accounting can result in the recording of significant amounts of goodwill and other intangible assets related to those transactions. You should not view this disclosure as a substitute for results determined in accordance with GAAP, and our disclosure is not necessarily comparable to that of other companies that use non-GAAP measures. The following table reconciles these non-GAAP financial measures to the most comparable GAAP financial measures, “book value per common share” and “equity to total assets” (dollars in thousands, except per share data).

| ​ ​ ​ | ​ ​ | ​ ​ ​ June 30, 2024 | ​ ​ ​ ​ 2023 ​ |
| --- | --- | ---: | ---: |
| Book value per common share | ​ | $32.86 ​ | $31.71 ​ |
| Effect of goodwill and intangible assets per share | ​ | ​ (4.23) ​ | ​ (4.26) ​ |
| Tangible book value per common share | ​ | $28.63 ​ | $27.45 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| ​ | ​ | **June 30,** ​ | **December 31,** ​ |
| ​ | ​ | **2024** | **2023** ​ |
| Hilltop stockholders’ equity | ​ | $2,134,469 ​ | $2,122,967 ​ |
| Less: goodwill and intangible assets, net | ​ | ​ 274,876 ​ | ​ 275,904 ​ |
| Tangible common equity | ​ | $1,859,593 ​ | $1,847,063 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Total assets | ​ | $15,620,490 ​ | $16,466,996 ​ |
| Less: goodwill and intangible assets, net | ​ | ​ 274,876 ​ | ​ 275,904 ​ |
| Tangible assets | ​ | $15,345,614 ​ | $16,191,092 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Equity to assets | ​ | 13.66% | 12.89% |
| Tangible common equity to tangible assets | ​ | 12.12% | 11.41% |

### Recent Developments

### Economic Environment

The impacts of economic headwinds that began in 2022, and have continued into 2024, remain uncertain and will depend 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, exposure to increasing funding costs, inflationary pressures associated with compensation, occupancy and software costs and labor market conditions, and international armed conflicts and their impact on supply chains.

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. Further, during the second quarter of 2023, we bolstered our liquidity position by increasing brokered deposits at the Bank by approximately $390 million, which have subsequently matured during the first and second quarters of 2024. During the second quarter of 2024, our deposit funding costs began to stabilize as higher cost brokered deposits were fully returned and our interest-bearing deposits yield flattened. Additionally, at June 30, 2024, we continued to access core deposits from our Hilltop Securities Federal Deposit Insurance Corporation (“FDIC”) insured sweep program, while the Bank is not utilizing any of its Federal Home Loan Bank (“FHLB”) borrowing capacity.

Market conditions and external factors may unpredictably impact the competitive landscape for deposits such as those experienced during the first quarter of 2023. Additionally, the current market interest rate environment has increased competition for liquidity and the premium at which liquidity is available to meet funding needs. 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 June 30, 2024.

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 challenge for deposits that persisted through 2023, to continue during the remainder of 2024.

### Asset Valuation

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, at each reporting date between annual impairment tests, we consider potential indicators of impairment including the condition of the economy and financial services industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit; performance of our stock and other relevant events.

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, despite improved performance in the second quarter of 2024, have continued into the first half of 2024 due to conditions and challenges discussed in detail within the discussion of segment results that follow.

To the extent future operating performance of our reporting segments remain challenged and below forecasted projections during 2024, significant assumptions such as expected future cash flows or the risk-adjusted discount rate used to estimate fair value are adversely impacted, or upon the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform impairment tests on our goodwill and other intangible assets, an impairment charge may be recorded for that period. In the event that we conclude that all or a portion of our goodwill and other intangible assets are impaired, a non-cash charge for the respective amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital.

### Outlook

Our balance sheet, operating results and certain metrics during 2023 and the first half of 2024 reflected economic headwinds that remain uncertain, and will depend 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 headwinds, coupled with exposure to increasing funding costs, inflationary pressures associated with compensation, occupancy and software costs and labor market conditions, 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.

### Factors Affecting Results of Operations

As a financial institution providing products and services through our banking, broker-dealer and mortgage origination segments, we are directly affected by general economic and market conditions, many of which are beyond our control and unpredictable. A key factor impacting our results of operations is changes in the level of interest rates in addition to twists in the shape of the yield curve with the magnitude and direction of the impact varying across the different lines of business. Other factors impacting our results of operations include, but are not limited to, fluctuations in volume and price levels of securities, inflation, political events, investor confidence, investor participation levels, legal, regulatory, and compliance requirements and competition. All of these factors have the potential to impact our financial position, operating results and liquidity. In addition, the recent economic and political environment has led to legislative and regulatory initiatives, both enacted and proposed, that could substantially change the regulation of the financial services industry and may significantly impact us.

### Segment Information

The Company has two primary business units, PCC (banking and mortgage origination) and Securities Holdings (broker-dealer). Under GAAP, the Company’s units are comprised of three reportable business segments organized primarily by the core products offered to the segments’ respective customers: banking, broker-dealer and mortgage origination. Consistent with our historical segment operating results, we anticipate that future revenues will be driven primarily from the banking segment, with the remainder being generated by our broker-dealer and mortgage origination segments. Operating results for the mortgage origination segment have historically been more volatile than operating results for the banking and broker-dealer segments.

The banking segment includes the operations of the Bank. The banking segment primarily provides business and consumer banking services from offices located throughout Texas and generates revenue from its portfolio of earning assets. The Bank’s results of operations are primarily dependent on net interest income. The Bank also derives revenue from other sources, including service charges on customer deposit accounts and trust fees.

The broker-dealer segment includes the operations of Securities Holdings, which operates through its wholly owned subsidiaries Hilltop Securities, Momentum Independent Network and Hilltop Securities Asset Management, LLC. The broker-dealer segment generates a majority of its revenues from fees and commissions earned from investment advisory and securities brokerage services. Hilltop Securities is a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority (“FINRA”) and a member of the New York Stock Exchange (“NYSE”). Momentum Independent Network is an introducing broker-dealer that is also registered with the SEC and FINRA. Hilltop Securities, Momentum Independent Network and Hilltop Securities Asset Management, LLC are registered investment advisers under the Investment Advisers Act of 1940.

The mortgage origination segment includes the operations of PrimeLending, which offers a variety of loan products and generates revenue predominantly from fees charged on the origination and servicing of loans and from selling these loans in the secondary market.

Corporate includes certain activities not allocated to specific business segments. These activities include holding company financing and investing activities, merchant banking investment opportunities, and management and administrative services to support the overall operations of the Company.

The eliminations of intercompany transactions are included in “All Other and Eliminations.” Additional information concerning our reportable business segments is presented in Note 21, “Segment and Related Information”, in the notes to our consolidated financial statements.

The following table presents certain information about the results of our reportable business segments (in thousands). This table serves as a basis for the discussion and analysis in the segment operating results sections that follow.

| ​ ​ ​ Net interest income (expense): | ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 ​ ​ | ​ ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ Variance 2024 vs 2023 Amount ​ ​ | ​ ​ ​ | ​ Percent ​ | ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 ​ ​ | ​ ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ Variance 2024 vs 2023 Amount ​ ​ | ​ ​ ​ | ​ Percent ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: | --- | --- | --- | --- | --- | --- | --- | ---: |
| Banking | ​ | $92,458 | ​ | $100,986 | ​ | $(8,528) | ​ | (8) | ​ | $184,064 | ​ | $205,756 | ​ | $(21,692) | ​ | (11) |
| Broker-Dealer | ​ | ​ 12,218 | ​ | ​ 13,201 | ​ | ​ (983) | ​ | (7) | ​ | ​ 24,486 | ​ | ​ 27,064 | ​ | ​ (2,578) | ​ | (10) |
| Mortgage Origination | ​ | ​ (4,571) | ​ | ​ (5,901) | ​ | ​ 1,330 | ​ | 23 | ​ | ​ (8,823) | ​ | ​ (10,109) | ​ | ​ 1,286 | ​ | 13 |
| Corporate | ​ | ​ (3,153) | ​ | ​ (3,479) | ​ | ​ 326 | ​ | 9 | ​ | ​ (6,255) | ​ | ​ (6,801) | ​ | ​ 546 | ​ | 8 |
| All Other and Eliminations (1) | ​ | ​ 6,698 | ​ | ​ 13,459 | ​ | ​ (6,761) | ​ | (50) | ​ | ​ 13,799 | ​ | ​ 24,061 | ​ | ​ (10,262) | ​ | (43) |
| Hilltop Consolidated | ​ | $103,650 | ​ | $118,266 | ​ | $(14,616) | ​ | (12) | ​ | $207,271 | ​ | $239,971 | ​ | $(32,700) | ​ | (14) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Provision for (reversal of) credit losses: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Banking | ​ | $10,950 | ​ | $14,900 | ​ | $(3,950) | ​ | (27) | ​ | $8,097 | ​ | $16,500 | ​ | $(8,403) | ​ | (51) |
| Broker-Dealer | ​ | ​ (16) | ​ | ​ (64) | ​ | ​ 48 | ​ | 75 | ​ | ​ (34) | ​ | ​ 667 | ​ | ​ (701) | ​ | (105) |
| Mortgage Origination | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | — | ​ | ​ — | ​ | ​ — | ​ | ​ - | ​ | — |
| Corporate | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | — | ​ | ​ — | ​ | ​ — | ​ | ​ - | ​ | — |
| All Other and Eliminations | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | — | ​ | ​ — | ​ | ​ — | ​ | ​ - | ​ | — |
| Hilltop Consolidated | ​ | $10,934 | ​ | $14,836 | ​ | $(3,902) | ​ | (26) | ​ | $8,063 | ​ | $17,167 | ​ | $(9,104) | ​ | (53) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Noninterest income: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Banking | ​ | $9,255 | ​ | $11,189 | ​ | $(1,934) | ​ | (17) | ​ | $21,158 | ​ | $22,379 | ​ | $(1,221) | ​ | (5) |
| Broker-Dealer | ​ | ​ 92,053 | ​ | ​ 100,040 | ​ | ​ (7,987) | ​ | (8) | ​ | ​ 196,631 | ​ | ​ 190,675 | ​ | ​ 5,956 | ​ | 3 |
| Mortgage Origination | ​ | ​ 92,867 | ​ | ​ 90,079 | ​ | ​ 2,788 | ​ | 3 | ​ | ​ 159,567 | ​ | ​ 158,909 | ​ | ​ 658 | ​ | 0 |
| Corporate | ​ | ​ 6,001 | ​ | ​ 3,081 | ​ | ​ 2,920 | ​ | 95 | ​ | ​ 11,785 | ​ | ​ 5,786 | ​ | ​ 5,999 | ​ | 104 |
| All Other and Eliminations (1) | ​ | ​ (6,871) | ​ | ​ (13,737) | ​ | ​ 6,866 | ​ | 50 | ​ | ​ (14,218) | ​ | ​ (24,603) | ​ | ​ 10,385 | ​ | 42 |
| Hilltop Consolidated | ​ | $193,305 | ​ | $190,652 | ​ | $2,653 | ​ | 1 | ​ | $374,923 | ​ | $353,146 | ​ | $21,777 | ​ | 6 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Noninterest expense: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Banking | ​ | $57,950 | ​ | $57,436 | ​ | $514 | ​ | 1 | ​ | $113,970 | ​ | $113,563 | ​ | $407 | ​ | 0 |
| Broker-Dealer | ​ | ​ 97,062 | ​ | ​ 94,853 | ​ | ​ 2,209 | ​ | 2 | ​ | ​ 195,008 | ​ | ​ 185,198 | ​ | ​ 9,810 | ​ | 5 |
| Mortgage Origination | ​ | ​ 86,946 | ​ | ​ 98,660 | ​ | ​ (11,714) | ​ | (12) | ​ | ​ 165,843 | ​ | ​ 187,413 | ​ | ​ (21,570) | ​ | (12) |
| Corporate | ​ | ​ 14,716 | ​ | ​ 16,301 | ​ | ​ (1,585) | ​ | (10) | ​ | ​ 32,101 | ​ | ​ 31,814 | ​ | ​ 287 | ​ | 1 |
| All Other and Eliminations | ​ | ​ (210) | ​ | ​ (273) | ​ | ​ 63 | ​ | 23 | ​ | ​ (435) | ​ | ​ (541) | ​ | ​ 106 | ​ | 20 |
| Hilltop Consolidated | ​ | $256,464 | ​ | $266,977 | ​ | $(10,513) | ​ | (4) | ​ | $506,487 | ​ | $517,447 | ​ | $(10,960) | ​ | (2) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Income (loss) before taxes: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Banking | ​ | $32,813 | ​ | $39,839 | ​ | $(7,026) | ​ | (18) | ​ | $83,155 | ​ | $98,072 | ​ | $(14,917) | ​ | (15) |
| Broker-Dealer | ​ | ​ 7,225 | ​ | ​ 18,452 | ​ | ​ (11,227) | ​ | (61) | ​ | ​ 26,143 | ​ | ​ 31,874 | ​ | ​ (5,731) | ​ | (18) |
| Mortgage Origination | ​ | ​ 1,350 | ​ | ​ (14,482) | ​ | ​ 15,832 | ​ | 109 | ​ | ​ (15,099) | ​ | ​ (38,613) | ​ | ​ 23,514 | ​ | 61 |
| Corporate | ​ | ​ (11,868) | ​ | ​ (16,699) | ​ | ​ 4,831 | ​ | 29 | ​ | ​ (26,571) | ​ | ​ (32,829) | ​ | ​ 6,258 | ​ | 19 |
| All Other and Eliminations | ​ | ​ 37 | ​ | ​ (5) | ​ | ​ 42 | ​ | 840 | ​ | ​ 16 | ​ | ​ (1) | ​ | ​ 17 | ​ | 1,700 |
| Hilltop Consolidated | ​ | $29,557 | ​ | $27,105 | ​ | $2,452 | ​ | 9 | ​ | $67,644 | ​ | $58,503 | ​ | $9,141 | ​ | 16 |

(1) All other and eliminations amounts during each period include FDIC sweep program revenues and expenses earned on broker-dealer segment deposits placed with the banking segment that are eliminated in consolidation.

### Key Performance Indicators

We utilize several key indicators of financial condition and operating performance to evaluate the various aspects of our business. In addition to traditional financial metrics, such as revenue and growth trends, we monitor several other financial measures and non-financial operating metrics to help us evaluate growth trends, measure the adequacy of our capital based on regulatory reporting requirements, measure the effectiveness of our operations and assess operational efficiencies. These indicators change from time to time as the opportunities and challenges in our businesses change.

Specifically, performance ratios and asset quality ratios are typically used for measuring the performance of banking and financial institutions. We consider return on average stockholders’ equity, return on average assets and net interest margin to be important supplemental measures of operating performance that are commonly used by securities analysts, investors and other parties interested in the banking and financial industry. The net recoveries (charge-offs) to average loans outstanding ratio is also considered a key measure for our banking segment as it indicates the performance of our loan portfolio.

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.

### How We Generate Revenue

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 six months ended June 30, 2024, compared with the same period in 2023, primarily reflected a decrease within our banking segment from increased cost of deposits due to the intense competition for liquidity as customers seek higher yields on deposits.

The other component of our revenue is noninterest income, which is primarily comprised of the following:

(i) *Income from broker-dealer operations.* Through Securities Holdings, we provide investment banking and other related financial services that generated $123.1 million and $109.2 million in securities commissions and fees and investment and securities advisory fees and commissions, respectively, and $56.3 million and $57.0 million in gains from derivative and trading portfolio activities (included within other noninterest income), respectively, during the six months ended June 30, 2024 and 2023.

(ii) *Income from mortgage operations.* Through PrimeLending, we generate noninterest income by originating and selling mortgage loans. During the six months ended June 30, 2024 and 2023, we generated $159.5 million and $158.7 million, respectively, in net gains from sale of loans, other mortgage production income (including income associated with retained mortgage servicing rights), and mortgage loan origination fees.

In the aggregate, we experienced an increase in noninterest income during the six months ended June 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 other mortgage production income and mortgage loan origination fees within our mortgage origination segment.

We also incur noninterest expenses in the operation of our businesses. Our businesses engage in labor intensive activities and, consequently, employees’ compensation and benefits represent the majority of our noninterest expenses.

### Consolidated Operating Results

Income applicable to common stockholders during the three months ended June 30, 2024 was $20.3 million, or $0.31 per diluted share, compared with $18.1 million, or $0.28 per diluted share, during the three months ended June 30, 2023. Income applicable to common stockholders during the six months ended June 30, 2024 was $48.0 million, or $0.74 per diluted share, compared to $43.9 million, or $0.68 per diluted share, during six months ended June 30, 2023.

Hilltop’s financial results for the three months ended June 30, 2024, compared with the same period in 2023, included a decline in net interest income, partially offset by changes in the provision for credit losses within the banking segment, a decrease in net revenues within all of the broker-dealer segment’s business lines except public finance services, and a decline in noninterest expense within the mortgage origination segment. During the six months ended June 30, 2024, compared with the same period in 2023, Hilltop’s financial results included changes consistent with those noted above within our banking and mortgage origination segments, and an increase in net revenues within certain of the broker-dealer segment’s business lines.

Certain items included in net income for the three and six months ended June 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 June 30, 2024 and 2023 included net accretion on earning assets and liabilities of $2.0 million and $3.2 million, respectively, and amortization of identifiable intangibles of $0.5 million and $0.8 million, respectively, related to the Bank Transactions. During the six months ended June 30, 2024 and 2023, income before income taxes included net accretion on earning assets and liabilities of $3.4 million and $5.1 million, respectively, and amortization of identifiable intangible of $1.0 million and $1.6 million, respectively, related to the Bank transactions.

The information shown in the table below includes certain key performance indicators on a consolidated basis.

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ ​ | ​ ​ ​ 2023 |
| --- | --- | ---: | ---: | --- | ---: | --- | ---: |
| Return on average stockholders' equity (1) | ​ | 3.84% | 3.53% | ​ | 4.54% | ​ | 4.32% |
| Return on average assets (2) | ​ | 0.59% | 0.47% | ​ | 0.67% | ​ | 0.58% |
| Net interest margin (3) (4) | ​ | 2.90% | 3.03% | ​ | 2.88% | ​ | 3.15% |
| Leverage ratio (5) (end of period) | ​ | ​ ​ | ​ ​ | ​ | 12.87% | ​ | 11.47% |
| Common equity Tier 1 risk-based capital ratio (6) (end of period) | ​ | ​ ​ | ​ ​ | ​ | 19.45% | ​ | 17.63% |

(1) Return on average stockholders’ equity is defined as consolidated income attributable to Hilltop divided by average total Hilltop stockholders’ equity.

(2) Return on average assets is defined as consolidated net income before noncontrolling interest divided by average assets.

(3) Net interest margin is defined as net interest income divided by average interest-earning assets. We consider net interest margin as a key indicator of profitability, as it represents interest earned on our interest-earning assets compared to interest incurred.

(4) The securities financing operations within our broker-dealer segment had the effect of lowering both the net interest margin and taxable equivalent net interest margin by 25 basis points and 25 basis points during the three months ended June 30, 2024 and 2023, respectively, and 26 basis points and 27 basis points during the six months ended June 30, 2024 and 2023, respectively.

(5) The leverage ratio is a regulatory capital ratio and is defined as Tier 1 risk-based capital divided by average consolidated assets.

(6) The common equity Tier 1 risk-based capital ratio is a regulatory capital ratio and is defined as common equity Tier 1 risk-based capital divided by risk weighted assets. Common equity includes common equity Tier 1 capital (common stockholders’ equity and certain minority interests in the equity capital accounts of consolidated subsidiaries, but excluding goodwill and various intangible assets) and additional Tier 1 capital (certain qualifying minority interests not included in common equity Tier 1 capital, certain preferred stock and related surplus, and certain subordinated debt).

We present net interest margin and net interest income below on a taxable-equivalent basis. Net interest margin (taxable equivalent), a non-GAAP measure, is defined as taxable equivalent net interest income divided by average interest-earning assets. Taxable equivalent adjustments are based on the applicable corporate federal income tax rate of 21% for all periods presented. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.

During the three months ended June 30, 2024 and 2023, purchase accounting contributed 6 and 9 basis points, respectively, to our consolidated taxable equivalent net interest margin of 2.92% and 3.03%, respectively. During the six months ended June 30, 2024 and 2023, purchase accounting contributed 5 and 7 basis points, respectively, to our consolidated taxable equivalent net interest margin of 2.89% and 3.15%, respectively. The purchase accounting activity was primarily related to the accretion of discount of loans which totaled $1.9 million and $3.3 million during the three months ended June 30, 2024 and 2023, respectively, and $3.2 million and $5.2 million during the six months ended June 30, 2024 and 2023, respectively, associated with the Bank Transactions.

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

| ​ ​ ​ ​ ​ ​ Assets Interest-earning assets | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ | ​ ​ 2023 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- |
| Loans held for sale | ​ | $934,445 | ​ | $13,494 |  | 5.78% | $1,043,526 | ​ | $14,125 |  | 5.41% |
| Loans held for investment, gross (1) | ​ | ​ 7,892,879 | ​ | ​ 125,133 |  | 6.36% | ​ 8,033,095 | ​ | ​ 124,272 |  | 6.21% |
| Investment securities - taxable | ​ | 2,612,049 | ​ | 25,284 |  | 3.87% | 2,776,375 | ​ | 26,719 |  | 3.85% |
| Investment securities - non-taxable (2) | ​ | 321,928 | ​ | 2,965 |  | 3.68% | 412,609 | ​ | 2,410 |  | 2.34% |
| Federal funds sold and securities purchased under agreements to resell | ​ | 105,520 | ​ | 1,944 |  | 7.39% | 123,219 | ​ | 2,190 |  | 7.13% |
| Interest-bearing deposits in other financial institutions | ​ | 1,057,783 | ​ | 13,572 |  | 5.15% | 1,711,945 | ​ | 21,273 |  | 4.98% |
| Securities borrowed | ​ | ​ 1,358,425 | ​ | ​ 20,306 | ​ | 5.91% | ​ 1,477,502 | ​ | ​ 18,515 | ​ | 4.96% |
| Other | ​ | 39,758 | ​ | 5,016 |  | 50.60% | 82,608 | ​ | 3,766 |  | 18.29% |
| Interest-earning assets, gross (2) | ​ | 14,322,787 | ​ | 207,714 |  | 5.82% | 15,660,879 | ​ | 213,270 |  | 5.46% |
| Allowance for credit losses | ​ | (104,551) | ​ | ​ ​ | ​ | ​ ​ | (97,387) | ​ | ​ ​ | ​ | ​ ​ |
| Interest-earning assets, net | ​ | 14,218,236 | ​ | ​ ​ | ​ | ​ ​ | 15,563,492 | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-earning assets | ​ | 1,332,959 | ​ | ​ ​ | ​ | ​ ​ | 1,355,997 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $15,551,195 | ​ | ​ ​ | ​ | ​ ​ | $16,919,489 | ​ | ​ ​ | ​ | ​ ​ |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and Stockholders' Equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing deposits | ​ | $7,617,862 | ​ | $68,095 |  | 3.59% | $7,736,582 | ​ | $54,726 |  | 2.84% |
| Securities loaned | ​ | ​ 1,338,825 | ​ | ​ 18,669 | ​ | 5.59% | ​ 1,373,435 | ​ | ​ 16,413 | ​ | 4.79% |
| Notes payable and other borrowings | ​ | 1,253,394 | ​ | 16,729 |  | 5.35% | 1,861,063 | ​ | 24,021 |  | 5.18% |
| Total interest-bearing liabilities | ​ | 10,210,081 | ​ | 103,493 |  | 4.07% | 10,971,080 | ​ | 95,160 |  | 3.48% |
| Noninterest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-bearing deposits | ​ | 2,814,179 | ​ | ​ ​ | ​ | ​ ​ | 3,540,643 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | 377,516 | ​ | ​ ​ | ​ | ​ ​ | 320,706 | ​ | ​ ​ | ​ | ​ ​ |
| Total liabilities | ​ | 13,401,776 | ​ | ​ ​ | ​ | ​ ​ | 14,832,429 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders’ equity | ​ | 2,122,144 | ​ | ​ ​ | ​ | ​ ​ | 2,060,677 | ​ | ​ ​ | ​ | ​ ​ |
| Noncontrolling interest | ​ | 27,275 | ​ | ​ ​ | ​ | ​ ​ | 26,383 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $15,551,195 | ​ | ​ ​ | ​ | ​ ​ | $16,919,489 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Net interest income (2)** | ​ | ​ ​ | ​ | $104,221 | ​ | ​ ​ | ​ ​ | ​ | $118,110 | ​ | ​ ​ |
| **Net interest spread (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 1.75% | ​ ​ | ​ | ​ ​ |  | 1.98% |
| **Net interest margin (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 2.92% | ​ ​ | ​ | ​ ​ |  | 3.03% |

| ​ ​ ​ ​ ​ ​ Assets Interest-earning assets | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ | ​ ​ 2023 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- |
| Loans held for sale | ​ | $868,271 | ​ | $25,149 |  | 5.79% | $930,090 | ​ | $24,849 |  | 5.34% |
| Loans held for investment, gross (1) | ​ | ​ 7,864,263 | ​ | ​ 247,809 |  | 6.39% | ​ 7,964,263 | ​ | ​ 236,927 |  | 6.03% |
| Investment securities - taxable | ​ | 2,615,565 | ​ | 51,520 |  | 3.94% | 2,794,951 | ​ | 52,321 |  | 3.74% |
| Investment securities - non-taxable (2) | ​ | 307,674 | ​ | 5,962 |  | 3.88% | 412,576 | ​ | 5,696 |  | 2.76% |
| Federal funds sold and securities purchased under agreements to resell | ​ | 99,814 | ​ | 3,575 |  | 7.18% | 143,298 | ​ | 4,558 |  | 6.41% |
| Interest-bearing deposits in other financial institutions | ​ | 1,258,284 | ​ | 32,817 |  | 5.23% | 1,596,774 | ​ | 37,388 |  | 4.72% |
| Securities borrowed | ​ | ​ 1,400,648 | ​ | ​ 40,867 | ​ | 5.77% | ​ 1,448,809 | ​ | ​ 35,583 | ​ | 4.88% |
| Other | ​ | 39,822 | ​ | 10,207 |  | 51.40% | 72,967 | ​ | 7,472 |  | 20.65% |
| Interest-earning assets, gross (2) | ​ | 14,454,341 | ​ | 417,906 |  | 5.80% | 15,363,728 | ​ | 404,794 |  | 5.31% |
| Allowance for credit losses | ​ | (107,567) | ​ | ​ ​ | ​ | ​ ​ | (97,224) | ​ | ​ ​ | ​ | ​ ​ |
| Interest-earning assets, net | ​ | 14,346,774 | ​ | ​ ​ | ​ | ​ ​ | 15,266,504 | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-earning assets | ​ | 1,427,647 | ​ | ​ ​ | ​ | ​ ​ | 1,346,506 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $15,774,421 | ​ | ​ ​ | ​ | ​ ​ | $16,613,010 | ​ | ​ ​ | ​ | ​ ​ |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and Stockholders' Equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing deposits | ​ | $7,683,247 | ​ | $137,239 |  | 3.58% | $7,489,442 | ​ | $90,550 |  | 2.44% |
| Securities loaned | ​ | ​ 1,370,400 | ​ | ​ 37,708 | ​ | 5.52% | ​ 1,348,783 | ​ | ​ 31,759 | ​ | 4.75% |
| Notes payable and other borrowings | ​ | 1,290,642 | ​ | 34,539 |  | 5.37% | 1,676,594 | ​ | 42,573 |  | 5.12% |
| Total interest-bearing liabilities | ​ | 10,344,289 | ​ | 209,486 |  | 4.06% | 10,514,819 | ​ | 164,882 |  | 3.16% |
| Noninterest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-bearing deposits | ​ | 2,882,768 | ​ | ​ ​ | ​ | ​ ​ | 3,664,512 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | 398,935 | ​ | ​ ​ | ​ | ​ ​ | 355,214 | ​ | ​ ​ | ​ | ​ ​ |
| Total liabilities | ​ | 13,625,992 | ​ | ​ ​ | ​ | ​ ​ | 14,534,545 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders’ equity | ​ | 2,121,319 | ​ | ​ ​ | ​ | ​ ​ | 2,051,966 | ​ | ​ ​ | ​ | ​ ​ |
| Noncontrolling interest | ​ | 27,110 | ​ | ​ ​ | ​ | ​ ​ | 26,499 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders' equity** | ​ | $15,774,421 | ​ | ​ ​ | ​ | ​ ​ | $16,613,010 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Net interest income (2)** | ​ | ​ ​ | ​ | $208,420 | ​ | ​ ​ | ​ ​ | ​ | $239,912 | ​ | ​ ​ |
| **Net interest spread (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 1.74% | ​ ​ | ​ | ​ ​ |  | 2.15% |
| **Net interest margin (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 2.89% | ​ ​ | ​ | ​ ​ |  | 3.15% |

55

(1) Average balance includes non-accrual loans.

(2) Presented on a taxable equivalent basis with annualized taxable equivalent adjustments based on the applicable corporate federal income tax rate of 21% for the periods presented. The adjustment to interest income was $0.6 million and $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and $1.2 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively.

The banking segment’s net interest margin exceeds our consolidated net interest margin shown above. Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our banking segment and reduces our consolidated net interest margin, such as the borrowing costs of Hilltop and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities, such as securities borrowed in the broker-dealer segment and securities loaned in the broker-dealer segment, including items related to securities financing operations that particularly decrease net interest margin. In addition, yields and costs on certain interest-earning assets, such as lines of credit extended to other operating segments by the banking segment, are eliminated from the consolidated financial statements.

On a consolidated basis, the change in net interest income during the three and six months ended June 30, 2024, compared with the same periods in 2023, was primarily due to increased costs of deposits, and increased net yields on loans held for investment within the banking segment and, for the six months ended June 30, 2024, due to increased average interest-bearing deposits within the banking segment. 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.

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 March 31, 2024, the reversal of credit losses reflected improvements to the U.S. economic outlook, while 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. 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.

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

Noninterest expense decreased during the three months ended June 30, 2024, compared with the same period in 2023, primarily due to decreases in both variable and non-variable compensation and other segment costs within our mortgage origination segment associated with decreased mortgage loan originations, partially offset by an increase in non-variable compensation and other segment operating costs within our broker-dealer segment. Noninterest expense decreased during the six months ended June 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 2024.

Effective income tax rates during the three months ended June 30, 2024 and 2023 were 22.5% and 26.4%, respectively, and for the six months ended June 30, 2024 and 2023 were 22.5% and 18.5%, respectively. The effective tax rate during the three months ended June 30, 2023 was higher than the applicable statutory rate primarily due to the booking of additional taxes from a change in the source of funding for an acquired nonqualified, deferred compensation plan. During the six months ended June 30, 2023, the effective tax rate was lower than 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 increase in taxes noted above. During the three and six months ended June 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.

### Segment Results

### Banking Segment

The following table presents certain information about the operating results of our banking segment (in thousands).

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net interest income | ​ | $92,458 | ​ | $100,986 | ​ | $(8,528) | ​ | $184,064 | ​ | $205,756 | ​ | $(21,692) |
| Provision for (reversal of) credit losses | ​ | 10,950 | ​ | 14,900 | ​ | (3,950) | ​ | 8,097 | ​ | 16,500 | ​ | (8,403) |
| Noninterest income | ​ | 9,255 | ​ | 11,189 | ​ | (1,934) | ​ | 21,158 | ​ | 22,379 | ​ | (1,221) |
| Noninterest expense | ​ | ​ 57,950 | ​ | 57,436 | ​ | 514 | ​ | ​ 113,970 | ​ | 113,563 | ​ | 407 |
| Income before income taxes | ​ | $32,813 | ​ | $39,839 | ​ | $(7,026) | ​ | $83,155 | ​ | $98,072 | ​ | $(14,917) |

The decreases in income before income taxes during the three and six months ended June 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 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.

As discussed in more detail below, given the intense competition for liquidity and as customers seek higher yields on deposits, the banking segment’s cost of deposits increased during the first half of 2024. While we expect deposit costs during 2024 to continue to be driven by various factors, including continued intense competition for deposits, as well as economic and market area factors, our deposit funding costs began to stabilize during the second quarter of 2024, as higher cost brokered deposits were fully returned and our interest-bearing deposits yield flattened. The resulting net interest income spread compression has had, and is expected to continue to have, a negative impact on banking segment operating results.

The information shown in the table below includes certain key indicators of the performance and asset quality of our banking segment.

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ ​ ​ 2023 ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: |
| Efficiency ratio (1) |  | 56.97% | 51.20% | ​ | 55.54% | 49.78% |
| Return on average assets (2) |  | 0.81% | 0.89% | ​ | 1.00% | 1.16% |
| Net interest margin (3) | ​ | 3.10% | 3.11% | ​ | 3.05% | 3.25% |
| Net recoveries (charge-offs) to average loans outstanding (4) | ​ | (0.00)% | (0.15)% | ​ | (0.11)% | (0.09)% |

(1) Efficiency ratio is defined as noninterest expenses divided by the sum of total noninterest income and net interest income for the period. We consider the efficiency ratio to be a measure of the banking segment’s profitability.

(2) Return on average assets is defined as net income before noncontrolling interest divided by average assets.

(3) Net interest margin is defined as net interest income divided by average interest-earning assets. We consider net interest margin as a key indicator of profitability, as it represents interest earned on interest-earning assets compared to interest incurred.

(4) Net recoveries (charge-offs) to average loans outstanding is defined as the greater of recoveries or charge-offs during the reported period minus charge-offs or recoveries divided by average loans outstanding. We use the ratio to measure the credit performance of our loan portfolio.

The banking segment presents net interest margin and net interest income in the following discussion and table below on a taxable equivalent basis. Net interest margin (taxable equivalent), a non-GAAP measure, is defined as taxable equivalent net interest income divided by average interest-earning assets. Taxable equivalent adjustments are based on the applicable corporate federal income tax rate of 21% for all periods presented. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.

During the three months ended June 30, 2024 and 2023, purchase accounting contributed 7 and 11 basis points, respectively, to the banking segment’s taxable equivalent net interest margin of 3.10% and 3.11%, respectively. During the six months ended June 30, 2024 and 2023, purchase accounting contributed 6 and 9 basis points, respectively, to the banking segment’s taxable equivalent net interest margin of 3.05% and 3.25%, 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.

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

| ​ ​ ​ ​ ​ ​ Assets Interest-earning assets | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ | ​ ​ 2023 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- |
| Loans held for sale | ​ | $19,582 | ​ | $— | ​ | —% | $— | ​ | $— | ​ | —% |
| Loans held for investment, gross (1) | ​ | ​ 7,748,014 | ​ | ​ 117,945 |  | 6.11% | ​ 7,865,209 | ​ | ​ 114,872 |  | 5.86% |
| Subsidiary warehouse lines of credit | ​ | 891,298 | ​ | 17,951 |  | 7.97% | 957,526 | ​ | 19,151 |  | 7.91% |
| Investment securities - taxable | ​ | 2,100,822 | ​ | 17,798 |  | 3.39% | 2,348,194 | ​ | 18,437 |  | 3.14% |
| Investment securities - non-taxable (2) | ​ | 110,571 | ​ | 938 |  | 3.39% | 113,734 | ​ | 995 |  | 3.50% |
| Federal funds sold and securities purchased under agreements to resell | ​ | 65,499 | ​ | 921 |  | 5.64% | 15,582 | ​ | 214 |  | 5.51% |
| Interest-bearing deposits in other financial institutions | ​ | 1,000,888 | ​ | 13,572 |  | 5.44% | 1,673,527 | ​ | 21,273 |  | 5.10% |
| Other | ​ | 37,518 | ​ | 445 |  | 4.76% | 67,580 | ​ | 789 |  | 4.68% |
| Interest-earning assets, gross (2) | ​ | 11,974,192 | ​ | 169,570 |  | 5.68% | 13,041,352 | ​ | 175,731 |  | 5.40% |
| Allowance for credit losses | ​ | (104,454) | ​ | ​ ​ | ​ | ​ ​ | (96,385) | ​ | ​ ​ | ​ | ​ ​ |
| Interest-earning assets, net | ​ | 11,869,738 | ​ | ​ ​ | ​ | ​ ​ | 12,944,967 | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-earning assets | ​ | 797,140 | ​ | ​ ​ | ​ | ​ ​ | 832,940 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $12,666,878 | ​ | ​ ​ | ​ | ​ ​ | $13,777,907 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and Stockholders’ Equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing deposits | ​ | $7,520,394 | ​ | $73,493 |  | 3.92% | $7,614,826 | ​ | $66,389 |  | 3.50% |
| Notes payable and other borrowings | ​ | 417,951 | ​ | 3,473 |  | 3.33% | 790,514 | ​ | 8,170 |  | 4.15% |
| Total interest-bearing liabilities | ​ | 7,938,345 | ​ | 76,966 |  | 3.89% | 8,405,340 | ​ | 74,559 |  | 3.56% |
| Noninterest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-bearing deposits | ​ | 2,993,763 | ​ | ​ ​ | ​ | ​ ​ | 3,665,643 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | 149,510 | ​ | ​ ​ | ​ | ​ ​ | 137,640 | ​ | ​ ​ | ​ | ​ ​ |
| Total liabilities | ​ | 11,081,618 | ​ | ​ ​ | ​ | ​ ​ | 12,208,623 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders’ equity | ​ | 1,585,260 | ​ | ​ ​ | ​ | ​ ​ | 1,569,284 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders’ equity** | ​ | $12,666,878 | ​ | ​ ​ | ​ | ​ ​ | $13,777,907 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Net interest income (2)** | ​ | ​ ​ | ​ | $92,604 | ​ | ​ ​ | ​ ​ | ​ | $101,172 | ​ | ​ ​ |
| **Net interest spread (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 1.79% | ​ ​ | ​ | ​ ​ |  | 1.84% |
| **Net interest margin (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 3.10% | ​ ​ | ​ | ​ ​ |  | 3.11% |

| ​ ​ ​ ​ ​ ​ Assets Interest-earning assets | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ | ​ ​ 2023 Average Outstanding Balance ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Interest Earned or Paid ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Annualized Yield or ​ Rate ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- | ---: | --- | --- | --- | --- |
| Loans held for sale | ​ | $9,965 | ​ | $— |  | —% | $— | ​ | $— |  | —% |
| Loans held for investment, gross (1) | ​ | ​ 7,725,806 | ​ | ​ 233,447 |  | 6.06% | ​ 7,779,891 | ​ | ​ 219,504 |  | 5.69% |
| Subsidiary warehouse lines of credit | ​ | 823,946 | ​ | 33,282 |  | 8.08% | 842,636 | ​ | 32,631 |  | 7.74% |
| Investment securities - taxable | ​ | 2,134,407 | ​ | 35,893 |  | 3.36% | 2,380,954 | ​ | 36,471 |  | 3.06% |
| Investment securities - non-taxable (2) | ​ | 111,076 | ​ | 1,878 |  | 3.38% | 113,813 | ​ | 2,005 |  | 3.52% |
| Federal funds sold and securities purchased under agreements to resell | ​ | 68,027 | ​ | 1,923 |  | 5.67% | 57,958 | ​ | 1,417 |  | 4.93% |
| Interest-bearing deposits in other financial institutions | ​ | 1,207,595 | ​ | 32,817 |  | 5.45% | 1,540,567 | ​ | 37,388 |  | 4.89% |
| Other | ​ | 37,466 | ​ | 870 |  | 4.66% | 55,597 | ​ | 1,231 |  | 4.46% |
| Interest-earning assets, gross (2) | ​ | 12,118,288 | ​ | 340,110 |  | 5.63% | 12,771,416 | ​ | 330,647 |  | 5.22% |
| Allowance for credit losses | ​ | (107,472) | ​ | ​ ​ | ​ | ​ ​ | (96,005) | ​ | ​ ​ | ​ | ​ ​ |
| Interest-earning assets, net | ​ | 12,010,816 | ​ | ​ ​ | ​ | ​ ​ | 12,675,411 | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-earning assets | ​ | 798,278 | ​ | ​ ​ | ​ | ​ ​ | 852,626 | ​ | ​ ​ | ​ | ​ ​ |
| **Total assets** | ​ | $12,809,094 | ​ | ​ ​ | ​ | ​ ​ | $13,528,037 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Liabilities and Stockholders’ Equity** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest-bearing deposits | ​ | $7,586,946 | ​ | $148,401 |  | 3.92% | $7,331,842 | ​ | $110,829 |  | 3.05% |
| Notes payable and other borrowings | ​ | 438,851 | ​ | 7,355 |  | 3.36% | 688,504 | ​ | 13,681 |  | 4.01% |
| Total interest-bearing liabilities | ​ | 8,025,797 | ​ | 155,756 |  | 3.89% | 8,020,346 | ​ | 124,510 |  | 3.13% |
| Noninterest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Noninterest-bearing deposits | ​ | 3,050,823 | ​ | ​ ​ | ​ | ​ ​ | 3,799,278 | ​ | ​ ​ | ​ | ​ ​ |
| Other liabilities | ​ | 154,411 | ​ | ​ ​ | ​ | ​ ​ | 145,452 | ​ | ​ ​ | ​ | ​ ​ |
| Total liabilities | ​ | 11,231,031 | ​ | ​ ​ | ​ | ​ ​ | 11,965,076 | ​ | ​ ​ | ​ | ​ ​ |
| Stockholders’ equity | ​ | 1,578,063 | ​ | ​ ​ | ​ | ​ ​ | 1,562,961 | ​ | ​ ​ | ​ | ​ ​ |
| **Total liabilities and stockholders’ equity** | ​ | $12,809,094 | ​ | ​ ​ | ​ | ​ ​ | $13,528,037 | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Net interest income (2)** | ​ | ​ ​ | ​ | $184,354 | ​ | ​ ​ | ​ ​ | ​ | $206,137 | ​ | ​ ​ |
| **Net interest spread (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 1.74% | ​ ​ | ​ | ​ ​ |  | 2.09% |
| **Net interest margin (2)** | ​ | ​ ​ | ​ | ​ ​ |  | 3.05% | ​ ​ | ​ | ​ ​ |  | 3.25% |

(1) Average balance includes non-accrual loans.

(2) Presented on a taxable equivalent basis with annualized taxable equivalent adjustments based on the applicable corporate federal income tax rates of 21% for all the periods presented. The adjustment to interest income was $0.1 million and $0.2 million for the three months ended June 30, 2024 and 2023, respectively, and $0.2 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

The banking segment’s net interest margin exceeds our consolidated net interest margin. Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our banking segment and reduce our consolidated net interest margin, such as the borrowing costs of Hilltop and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities, such as securities borrowed in the broker-dealer segment and securities loaned in the broker-dealer segment, including items related to securities financing operations that particularly decrease net interest margin. In addition, yields and costs on certain interest-earning assets, such as lines of credit extended to other operating segments by the banking segment, are eliminated from the consolidated financial statements.

The following table summarizes the changes in the banking segment’s net interest income for the periods indicated below, 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 (in thousands).

| ​ ​ ​ ​ ​ Interest income | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 vs. 2023 Change Due To (1) Volume ​ ​ | ​ ​ | ​ ​ Yield/Rate ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Change ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 vs. 2023 Change Due To (1) Volume ​ ​ | ​ ​ | ​ ​ Yield/Rate ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Change ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Loans held for sale | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— |
| Loans held for investment, gross (2) | ​ | ​ (1,712) | ​ | ​ 4,785 | ​ | ​ 3,073 | ​ | ​ (1,535) | ​ | ​ 15,478 | ​ | ​ 13,943 |
| Subsidiary warehouse lines of credit (3) | ​ | (1,306) | ​ | 106 | ​ | (1,200) | ​ | (722) | ​ | 1,373 | ​ | 651 |
| Investment securities - taxable | ​ | (1,937) | ​ | 1,298 | ​ | (639) | ​ | (3,766) | ​ | 3,188 | ​ | (578) |
| Investment securities - non-taxable (4) | ​ | (28) | ​ | (29) | ​ | (57) | ​ | (48) | ​ | (79) | ​ | (127) |
| Federal funds sold and securities purchased under agreements to resell | ​ | 686 | ​ | 21 | ​ | 707 | ​ | 248 | ​ | 258 | ​ | 506 |
| Interest-bearing deposits in other financial institutions | ​ | (8,550) | ​ | 849 | ​ | (7,701) | ​ | (8,126) | ​ | 3,555 | ​ | (4,571) |
| Other | ​ | (351) | ​ | 7 | ​ | (344) | ​ | (404) | ​ | 43 | ​ | (361) |
| Total interest income (4) | ​ | (13,198) | ​ | ​ 7,037 | ​ | ​ (6,161) | ​ | ​ (14,353) | ​ | ​ 23,816 | ​ | ​ 9,463 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest expense | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Deposits | ​ | $(823) | ​ | $7,927 | ​ | $7,104 | ​ | $3,877 | ​ | $33,695 | ​ | $37,572 |
| Notes payable and other borrowings | ​ | (3,850) | ​ | (847) | ​ | (4,697) | ​ | (4,988) | ​ | (1,338) | ​ | (6,326) |
| Total interest expense | ​ | (4,673) | ​ | 7,080 | ​ | 2,407 | ​ | (1,111) | ​ | 32,357 | ​ | 31,246 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income (4) | ​ | $(8,525) | ​ | $(43) | ​ | $(8,568) | ​ | $(13,242) | ​ | $(8,541) | ​ | $(21,783) |

(1) Changes attributable to both volume and yield/rate are included in yield/rate column.

(2) Changes in the yields earned on loans held for investment, gross included declines of $1.4 million and $2.0 million, respectively, in accretion of discount on loans during the three and six months ended June 30, 2024, compared with the same periods in 2023. Accretion of discount on loans is expected to decrease in future periods as loans acquired in the Bank Transactions are repaid, refinanced or renewed.

(3) Subsidiary warehouse lines of credit extended to PrimeLending are eliminated from the consolidated financial statements.

(4) Annualized taxable equivalent.

With regard to net interest income, as of June 30, 2024, the banking segment maintained an asset sensitive rate risk position, meaning the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period. During a period of rising interest rates, being asset sensitive tends to result in an increase in net interest income, but during a period of declining interest rates, tends to result in a decrease in net interest income. Net interest income decreased during the three and six months ended June 30, 2024, compared to the same periods in 2023, primarily due to increased costs of our deposits given the intense competition for liquidity and the banking industry disruption, and as customers seek higher yields on deposits, as well as decreases in our deposits in other financial institutions.

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 June 30,

2024, approximately $643 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 69% are not scheduled to reprice for more than one year based upon agreed-upon terms. If interest rates rise further, 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. If interest rates were to fall, the impact on our interest income for certain variable-rate loans would be limited by these rate floors.

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 six months ended June 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 continued intense competition for deposits, as well as economic and market area factors, our deposit funding costs began to stabilize during the second quarter of 2024 as higher cost brokered deposits were fully returned and our interest-bearing deposits yield flattened. The Bank’s deposit base primarily includes a combination of commercial, wealth and public funds deposits, without a high level of industry concentration. At June 30, 2024, total estimated uninsured deposits were $4.8 billion, or approximately 46% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $325.4 million, were $4.5 billion, or approximately 43% of total deposits.

Refer to the discussion in the “Liquidity and Capital Resources – Banking Segment” section that follows for more detail regarding the Bank’s activities regarding deposits, available liquidity and borrowing capacity.

To help mitigate net interest income spread compression between our assets and liabilities as the Federal Reserve increases interest rates, management continues to execute certain derivative trades, as either cash flow hedges or fair value hedges, that benefit the banking segment as interest rates rise. Any changes in interest rates across the term structure will continue to impact net interest income and net interest margin. The impact of rate movements will change with the shape of the yield curve, including any changes in steepness or flatness and inversions at any points on the yield curve.

The banking segment retained approximately $39.6 million and $60.4 million in mortgage loans originated by the mortgage origination segment during the three months ended June 30, 2024 and 2023, respectively, and $71.9 million and $126.4 million in mortgage loans originated by the mortgage origination segment during the six months ended June 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.

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. Specifically, during the three and six 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, slightly offset by improvements to the U.S. economic outlook. The net impact to the allowance of changes associated with individually evaluated loans during the three and six months ended June 30, 2024 included a provision for credit losses of $8.0 million and $12.1 million, respectively, while collectively evaluated loans included a provision for credit losses of $3.0 million and a reversal of credit losses of $4.0 million, respectively. The change in the allowance for credit losses during the three and six months ended June 30, 2024 was also impacted by net charge-offs of $0.1 million and $4.4 million, respectively. During the three and six months ended June 30, 2023, the banking segment’s provision for credit losses reflected a significant build in the allowance related to loan portfolio changes since the prior quarter 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 six months ended June 30, 2023 included a provision for credit losses of $12.9 million and $14.5 million, respectively, while individually evaluated loans included a provision for credit losses of $1.9 million and $2.0 million, respectively. The change in the allowance for credit losses during the three and six months ended June 30, 2023 were also impacted by net charge-offs of $2.9 million and $3.3 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.

The banking segment’s noninterest income decreased during the three and six months ended June 30, 2024, compared to the same periods in 2023, primarily due to valuation adjustments associated with the sale of a single loan from loans held for sale during the second quarter of 2024.

The banking segment’s noninterest expense increased during the three and six months ended June 30, 2024, compared to the same periods in 2023, primarily due to one-time compensation expenses associated with bank leadership changes.

### Broker-Dealer Segment

The following table provides additional details regarding our broker-dealer segment operating results (in thousands).

| ​ ​ ​ Net interest income: Wealth management: | ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2023 ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Variance 2024 vs 2023 ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2023 ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Variance 2024 vs 2023 ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Securities lending | ​ | $1,637 | ​ | $2,102 | ​ | $(465) | ​ | $3,159 | ​ | $3,824 | ​ | $(665) |
| Clearing services | ​ | ​ 2,667 | ​ | ​ 1,477 | ​ | ​ 1,190 | ​ | ​ 5,317 | ​ | ​ 2,958 | ​ | ​ 2,359 |
| Structured finance | ​ | ​ 1,572 | ​ | ​ 1,752 | ​ | ​ (180) | ​ | ​ 3,295 | ​ | ​ 4,377 | ​ | ​ (1,082) |
| Fixed income services | ​ | ​ (550) | ​ | ​ 704 | ​ | ​ (1,254) | ​ | ​ (1,310) | ​ | ​ 2,722 | ​ | ​ (4,032) |
| Other | ​ | ​ 6,892 | ​ | ​ 7,166 | ​ | ​ (274) | ​ | ​ 14,025 | ​ | ​ 13,183 | ​ | ​ 842 |
| Total net interest income | ​ | ​ 12,218 | ​ | ​ 13,201 | ​ | ​ (983) | ​ | ​ 24,486 | ​ | ​ 27,064 | ​ | ​ (2,578) |
| **Noninterest income:** | **​** | **​** ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | **​** ​ | ​ | ​ ​ | ​ | ​ ​ |
| Securities commissions and fees by business line (1) (5): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Fixed income services | ​ | ​ 6,447 | ​ | ​ 5,324 | ​ | ​ 1,123 | ​ | ​ 13,551 | ​ | ​ 11,131 | ​ | ​ 2,420 |
| Wealth management: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Retail | ​ | ​ 16,309 | ​ | ​ 19,433 | ​ | ​ (3,124) | ​ | ​ 33,530 | ​ | ​ 35,966 | ​ | ​ (2,436) |
| Clearing services | ​ | ​ 8,656 | ​ | ​ 9,654 | ​ | ​ (998) | ​ | ​ 18,026 | ​ | ​ 20,428 | ​ | ​ (2,402) |
| Structured finance | ​ | ​ 3,276 | ​ | ​ 2,008 | ​ | ​ 1,268 | ​ | ​ 6,008 | ​ | ​ 3,908 | ​ | ​ 2,100 |
| Other | ​ | ​ 1,233 | ​ | ​ 998 | ​ | ​ 235 | ​ | ​ 1,933 | ​ | ​ 1,666 | ​ | ​ 267 |
| ​ | ​ | ​ 35,921 | ​ | ​ 37,417 | ​ | ​ (1,496) | ​ | ​ 73,048 | ​ | ​ 73,099 | ​ | ​ (51) |
| Investment and securities advisory fees and commissions by business line: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Public finance services | ​ | ​ 22,388 | ​ | ​ 21,591 | ​ | ​ 797 | ​ | ​ 41,240 | ​ | ​ 39,541 | ​ | ​ 1,699 |
| Fixed income services | ​ | ​ 830 | ​ | ​ 2,058 | ​ | ​ (1,228) | ​ | ​ 2,899 | ​ | ​ 3,004 | ​ | ​ (105) |
| Wealth management: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Retail | ​ | ​ 8,894 | ​ | ​ 7,819 | ​ | ​ 1,075 | ​ | ​ 17,438 | ​ | ​ 15,180 | ​ | ​ 2,258 |
| Clearing services | ​ | ​ 452 | ​ | ​ 430 | ​ | ​ 22 | ​ | ​ 888 | ​ | ​ 823 | ​ | ​ 65 |
| Structured finance | ​ | ​ 347 | ​ | ​ 81 | ​ | ​ 266 | ​ | ​ 593 | ​ | ​ 219 | ​ | ​ 374 |
| Other | ​ | ​ 81 | ​ | ​ 58 | ​ | ​ 23 | ​ | ​ 160 | ​ | ​ 118 | ​ | ​ 42 |
| ​ | ​ | ​ 32,992 | ​ | ​ 32,037 | ​ | ​ 955 | ​ | ​ 63,218 | ​ | ​ 58,885 | ​ | ​ 4,333 |
| Other (5): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Structured finance | ​ | ​ 10,157 | ​ | ​ 16,081 | ​ | ​ (5,924) | ​ | ​ 35,641 | ​ | ​ 31,096 | ​ | ​ 4,545 |
| Fixed income services | ​ | ​ 5,569 | ​ | ​ 9,602 | ​ | ​ (4,033) | ​ | ​ 12,776 | ​ | ​ 17,263 | ​ | ​ (4,487) |
| Other | ​ | ​ 7,414 | ​ | ​ 4,903 | ​ | ​ 2,511 | ​ | ​ 11,948 | ​ | ​ 10,332 | ​ | ​ 1,616 |
| ​ | ​ | ​ 23,140 | ​ | ​ 30,586 | ​ | ​ (7,446) | ​ | ​ 60,365 | ​ | ​ 58,691 | ​ | ​ 1,674 |
| Total noninterest income | ​ | ​ 92,053 | ​ | ​ 100,040 | ​ | ​ (7,987) | ​ | ​ 196,631 | ​ | ​ 190,675 | ​ | ​ 5,956 |
| Net revenue (2) | ​ | ​ 104,271 | ​ | ​ 113,241 | ​ | ​ (8,970) | ​ | ​ 221,117 | ​ | ​ 217,739 | ​ | ​ 3,378 |
| **Noninterest expense:** | **​** | **​** ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | **​** ​ | ​ | ​ ​ | ​ | ​ ​ |
| Variable compensation (3) | **​** | **​** 32,734 | ​ | ​ 34,798 | ​ | ​ (2,064) | ​ | ​ 68,009 | ​ | ​ 65,619 | ​ | ​ 2,390 |
| Non-variable compensation and benefits | **​** | **​** 33,447 | ​ | ​ 30,492 | ​ | ​ 2,955 | ​ | ​ 67,629 | ​ | ​ 62,100 | ​ | ​ 5,529 |
| Segment operating costs (4) | ​ | ​ 30,865 | ​ | ​ 29,499 | ​ | ​ 1,366 | ​ | ​ 59,336 | ​ | ​ 58,146 | ​ | ​ 1,190 |
| Total noninterest expense | ​ | ​ 97,046 | ​ | ​ 94,789 | ​ | ​ 2,257 | ​ | ​ 194,974 | ​ | ​ 185,865 | ​ | ​ 9,109 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Income before income taxes | ​ | $7,225 | ​ | $18,452 | ​ | $(11,227) | ​ | $26,143 | ​ | $31,874 | ​ | $(5,731) |

(1) Securities commissions and fees includes income from FDIC sweep investments with the banking segment of $6.4 million and $13.1 million during the three months ended June 30, 2024 and 2023, respectively, and $13.2 million and $22.8 million during the six months ended June 30, 2024 and 2023, respectively, that is eliminated in consolidation.

(2) Net revenue is defined as the sum of total net interest income and total noninterest income. We consider net revenue to be a key performance measure in the evaluation of the broker-dealer segment’s financial position and operating performance as we believe it is the primary revenue performance measure used by investors and analysts. Net revenue provides for some level of comparability of trends across the financial services industry as it reflects both noninterest income, including investment and securities advisory fees and commissions, as well as net interest income. Internally, we assess the broker-dealer segment’s performance on a revenue basis for comparability with our banking segment.

(3) Variable compensation represents performance-based commissions and incentives.

(4) Segment operating costs include provision for (reversal of) credit losses associated with the broker-dealer segment within other noninterest expenses.

(5) During the second quarter of 2024, the Company identified an immaterial error related to the classification within noninterest income associated with the allocation of earned revenue between commission and principal gains on certain principal trades of fixed income securities. As a result, certain prior period amounts within securities commissions and fees noninterest income and other noninterest income have been corrected for consistency with the current period presentation.

The changes in net revenue and income before income taxes for the six months ended June 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 the sale of insurance products and revenue 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 trading profits, particularly from a decrease in underwriting activities. Income before income taxes was impacted by increased noninterest expense primarily due to increased segment compensation.

The decreases in net revenue and income before income taxes for the three months ended June 30, 2024, compared with the same period in 2023, were primarily due to declines in all business line results, except public finance, which remained relatively flat period-over-period. The structured finance business line’s net revenues decrease was primarily due to a decrease in our structured housing business due to lower origination volumes and less robust investor demand, partially offset by an increase in commissions earned on commodities transactions. The slight 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 decline was driven by decreases in the commission revenue earned on the sale of insurance products and a reduction in the FDIC program sweep revenue resulting from an overall decrease in customer assets. 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, trading profits and investment banking and advisory fees, particularly from a decrease in underwriting activities.

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.

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 decreases in net interest income during the three and six months ended June 30, 2024, compared with the same periods in 2023, were 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.

Noninterest income decreased during the three months ended June 30, 2024, compared with the same period in 2023, due to decreases in securities commissions and fees and other income, partially offset by increases in investment and securities advisory fees. Noninterest income increased during the six months ended June 30, 2024, compared with the same period in 2023, due primarily to increases in investment and securities advisory fees and commissions.

Securities commissions and fees decreased during the three months ended June 30, 2024, compared with the same period in 2023, primarily due to decreases in FDIC sweep revenues and net clearing revenues as well as a decline in commissions earned on insurance product sales. These decreases were partially offset by an increase in commodities commissions. Securities commissions and fees remained relatively flat during the six months ended June 30, 2024, compared with the same period in 2023. However, during the six months ended June 30, 2024, compared with the same period in 2023, securities commissions and fees increased 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 increase in trading 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.

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

The decrease in other noninterest income during the three months ended June 30, 2024, compared with the same period in 2023, was primarily due to decreases in trading gains earned from fixed income and structured finance trading activities, partially offset by distributions received on investments. Other noninterest income increased during the six months ended June 30, 2024, compared to the same period in 2023, 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 income trading activities. Mortgage originations decreased and buy-side demand declined for the three and six months ended June 30, 2024. Demand declined during the three months period when compared with the same period in 2023. Decreased fixed income trading gains for the three and six months ended June 30, 2024, compared with the same periods in 2023, were primarily driven by municipal and taxable securities trading.

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

Selected information concerning the broker-dealer segment, including key performance indicators, follows (dollars in thousands).

| ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 | ​ ​ ​ ​ ​ 2023 |
| --- | --- | --- | --- | --- | --- |
| Total compensation as a % of net revenue (1) | ​ 63.5% | ​ 57.7% | ​ | ​ 61.3% | ​ 58.7% |
| Pre-tax margin (2) | **​** 6.9% | ​ 16.3% | ​ | **​** 11.8% | ​ 14.6% |
| FDIC insured program balances at the Bank (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $758,292 ​ | $1,464,127 ​ |
| Other FDIC insured program balances (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $981,548 ​ | $639,107 ​ |
| Customer funds on deposit, including short credits (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $201,390 ​ | $252,746 ​ |
| ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Public finance services: | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Number of issues (3) | ​ 266 ​ | ​ 264 ​ | ​ | ​ 441 ​ | ​ 418 ​ |
| Aggregate amount of offerings (3) | $15,739,724 ​ | $11,912,408 ​ | ​ | $28,396,561 ​ | $21,030,809 ​ |
| ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Structured finance: | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Lock production/TBA volume | $834,520 ​ | $1,580,022 ​ | ​ | $1,448,702 ​ | $2,767,848 ​ |
| ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Fixed income services: | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Total volumes | $115,243,095 ​ | $59,566,067 ​ | ​ | $203,299,886 ​ | $107,063,941 ​ |
| Net inventory (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $645,781 ​ | $621,811 ​ |
| ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Wealth management (Retail and Clearing services groups): | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Retail employee representatives (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | ​ 89 ​ | ​ 94 ​ |
| Independent registered representatives (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | ​ 171 ​ | ​ 191 ​ |
| Correspondents (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | ​ 99 ​ | ​ 109 ​ |
| Correspondent receivables (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $142,591 ​ | $115,487 ​ |
| Customer margin balances (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $200,030 ​ | $243,590 ​ |
| ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Wealth management (Securities lending group): | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Interest-earning assets - stock borrowed (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $1,258,578 ​ | $1,326,418 ​ |
| Interest-bearing liabilities - stock loaned (end of period) | ​ ​ ​ | ​ ​ ​ | ​ | $1,244,028 ​ | $1,229,368 ​ |

(1) Total compensation includes the sum of non-variable compensation and benefits and variable compensation. We consider total compensation as a percentage of net revenue to be a key performance measure and indicator of segment profitability.

(2) Pre-tax margin is defined as income before income taxes divided by net revenue. We consider pre-tax margin to be a key performance measure given its use as a profitability metric representing the percentage of net revenue earned that results in a profit.

(3) Noted balances during all prior periods include certain reclassifications to conform to current period presentation.

### Mortgage Origination Segment

The following table presents certain information regarding the operating results of our mortgage origination segment (in thousands).

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Net interest income (expense) | ​ | $(4,571) | ​ | $(5,901) | ​ | $1,330 | ​ | $(8,823) | ​ | $(10,109) | ​ | $1,286 | ​ |
| Noninterest income | ​ | 92,867 | ​ | 90,079 | ​ | 2,788 | ​ | 159,567 | ​ | 158,909 | ​ | 658 | ​ |
| Noninterest expense | ​ | ​ 86,946 | ​ | 98,660 | ​ | (11,714) | ​ | ​ 165,843 | ​ | 187,413 | ​ | (21,570) | ​ |
| Income (loss) before income taxes | ​ | $1,350 | ​ | $(14,482) | ​ | $15,832 | ​ | $(15,099) | ​ | $(38,613) | ​ | $23,514 | ​ |

The mortgage lending business is subject to variables that can impact loan origination volume, including seasonal transaction volumes and interest rate fluctuations. Historically, the mortgage origination segment has experienced increased loan origination volume from purchases of homes during the spring and summer months, when more people tend to move and buy or sell homes. An increase in mortgage interest rates tends to result in decreased loan origination volume from refinancings, while a decrease in mortgage interest rates tends to result in increased loan origination volume from refinancings. While changes in mortgage interest rates have historically had a lesser impact on home purchases volume than on refinancing volume, net increases in mortgage interest rates since 2022 have continued to negatively impact home purchase volume through the first six months of 2024. A slight decline in mortgage rates experienced since the fourth quarter of 2023 have had a minimal impact on 2024 loan origination volume. See details regarding loan origination volume in the table below.

Recent trends, as well as typical historical patterns in loan origination volume from purchases of homes or from refinancings because of movements in mortgage interest rates, may not be indicative of future loan origination volumes. During 2023, and continuing through the first six months of 2024, certain events have adversely impacted total mortgage market origination volumes because of their effect on the economy, including inflation and an increase in interest rates during these periods when compared to the average of the three years prior to 2023, the Federal Reserve’s actions and communications, and geopolitical threats. These events have also adversely impacted the willingness and ability of the mortgage origination segment’s customers to conduct mortgage transactions. Specifically, current home inventory shortages and affordability challenges are impacting customers’ abilities to purchase homes. Competitive mortgage pricing pressure experienced during the last two years driven by a sharp reduction in national refinancing volume and the reduction of willing and eligible home buyers, has slightly eased during the first half of 2024. This has led to a modest increase in the average combined net gains from mortgage loan sales and mortgage loan origination fees when compared to the same period in 2023. Currently, we anticipate seasonal transaction volumes, while lower than historically experienced, to continue from the second to the third quarter of 2024. We expect the fourth quarter of 2024 to more closely follow loan production experienced during the first quarter of 2024. PrimeLending continues to evaluate its cost structure to address the current mortgage environment.

We believe that ongoing initiatives are critical to improving PrimeLending’s short- and long-term financial condition and operating results. The mortgage origination segment experienced operating losses during 2023 which, despite improved performance in the second quarter of 2024, have continued into the first half of 2024 due to conditions and challenges discussed in detail within this discussion of segment results. In light of these macroeconomic challenges in the mortgage industry including tight housing inventories and mortgage interest rate levels, the fair value of the mortgage origination reporting unit may decline and we may be required to record a goodwill impairment charge. These conditions will continue to be considered during future impairment evaluations of reporting unit goodwill.

As a Government National Mortgage Association (“GNMA”) approved lender, we are subject to certain Department of Housing and Urban Development (“HUD”) and GNMA minimum capital ratio reporting requirements, including timely reporting if a quarter’s operating loss exceeds more than 20% of its previous quarter or year-end net worth (the “operating loss ratio”) and/or if a quarter’s capital ratio is below 6% (the “GNMA capital ratio”). If this occurs, certain additional financial reporting submissions are required. During the first and fourth quarters of 2023, the HUD operating loss ratio was 21.2% and 20.5%, respectively, while during the second and third quarters of 2023, the HUD operating loss ratio decreased to 15.8% and 10.0%, respectively. During the first quarter of 2024, the HUD operating loss ratio was 22.6%, while during the second quarter of 2024, PrimeLending reported a HUD operating gain. During each quarter of 2023, the GNMA capital ratio exceeded the required 6%, however during the first and second quarters of 2024, the GNMA capital ratio decreased to 5.56% and 4.41%, respectively. All trends requiring notification to GNMA and HUD have been reported to those entities, respectively.

In addition, as a Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) approved lender, we are subject to certain minimum capital, net worth and liquidity requirements established by FNMA and FHLMC, including maintaining a minimum capital ratio of 6% (the “FNMA/FHLMC capital ratio”). During each quarter of 2023 and the first quarter of 2024, the FNMA/FHLMC capital ratio exceeded the required 6%, however during the second quarter of 2024, the FNMA/FHLMC capital ratio decreased to 5.52%. FNMA and FHLMC may also monitor additional financial performance trends at their discretion, including risk-based analyses focused on loans that the mortgage origination segment is currently responsible for representations and warranties that agency loans sold meet certain requirements, including representations as to underwriting standards and the validity of certain borrower representations in connection with the loan. One FNMA discretionary performance trend monitors the change in adjusted net worth during the prior twelve months. FNMA’s acceptable threshold for this performance trend is less than minus 30%, but is only considered if a company has four consecutive quarterly losses. During the second, third and fourth quarters of 2023, PrimeLending experienced four consecutive quarterly losses; the loss ratio during these periods were 50.2%, 37.6% and 39.8%, respectively. PrimeLending also recognized four consecutive quarterly losses during the first quarter and the second quarter of 2024; the loss ratio during these periods was 37.5% and 29.9%, respectively. All trends requiring notification to FNMA and FHLMC have been reported to those entities, respectively.

During the three months ended June 30, 2024, PrimeLending reported net income before income taxes, while a net loss before income taxes was reported during the same period in 2023. In addition, the loss before income taxes decreased during the six months ended June 30, 2024, compared with the same period in 2023. The improvement from net loss to net income before income taxes during the three months ended June 30, 2024, and the decrease in net loss before income taxes during the six months ended June 30, 2024,was primarily the result of a decrease in noninterest expense, and to a lesser extent, an increase in average loan sales margin.

During 2022 and continuing through the beginning of the fourth quarter of 2023, the U.S. 10-Year Treasury Rate and mortgage interest rates increased significantly. During the later part of the fourth quarter of 2023, both rates decreased to levels that approximated rates at the beginning of 2023. During the six months ended June 30, 2024, both rates increased slightly. Average interest rates during the three and six months ended June 30, 2024, increased slightly compared to average interest rates during the same periods in 2023. Refinancing volume as a percentage of total origination volume was relatively flat during the three and six months ended June 30, 2024, as compared to the same periods in 2023. Although we anticipate a relatively stable percentage of refinancing volume relative to total loan origination volume during 2024, as compared to 2023, a higher refinance percentage could be driven by a slowing of purchase volume due to the negative impact on new and existing home sales resulting from existing home inventory shortages and affordability challenges related to new home construction, and/or an increase in all-cash buyers.

The mortgage origination segment primarily originates its mortgage loans through a retail channel, with limited lending through its affiliated business arrangements (“ABAs”). For the six months ended June 30, 2024, funded volume through ABAs was approximately 15% of the mortgage origination segment’s total loan volume. Currently, PrimeLending owns a greater than 50% membership interest in two ABAs. We expect total production within the ABA channel to continue to approximate 15% of loan volume of the mortgage origination segment during the remainder of 2024.

The following table provides further details regarding our mortgage loan originations and sales for the periods indicated below (dollars in thousands).

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 ​ Amount | ​ ​ | ​ ​ ​ % of Total ​ | ​ ​ 2023 ​ Amount | ​ ​ | ​ ​ ​ % of Total | ​ ​ ​ ​ ​ ​ ​ Variance ​ 2024 vs 2023 | ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 ​ Amount | ​ ​ | ​ ​ ​ % of Total ​ | ​ ​ 2023 ​ Amount | ​ ​ | ​ ​ ​ ​ % of Total ​ | ​ ​ ​ ​ ​ ​ ​ Variance ​ 2024 vs 2023 |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | ---: |
| Mortgage Loan Originations - units |  | ​ 7,438 | ​ | ​ ​ | ​ 7,868 | ​ | ​ ​ | ​ (430) |  | ​ 12,849 | ​ | ​ ​ | ​ 13,651 | ​ | ​ ​ | ​ (802) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Mortgage Loan Originations - volume: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Conventional | ​ | $1,423,789 |  | 59.84% | $1,543,272 |  | 62.95% | $(119,483) | ​ | $2,439,985 |  | 60.16% | $2,635,107 |  | 62.97% | $(195,122) |
| Government | ​ | 485,741 |  | 20.42% | 554,565 |  | 22.62% | (68,824) | ​ | 886,101 |  | 21.85% | 989,114 |  | 23.64% | (103,013) |
| Jumbo | ​ | 146,405 |  | 6.15% | 100,051 |  | 4.08% | 46,354 | ​ | 211,323 |  | 5.21% | 163,536 |  | 3.91% | 47,787 |
| Other | ​ | 323,363 |  | 13.59% | 253,762 |  | 10.35% | 69,601 | ​ | 518,375 |  | 12.78% | 396,646 |  | 9.48% | 121,729 |
| ​ | ​ | $2,379,298 |  | 100.00% | $2,451,650 |  | 100.00% | $(72,352) | ​ | $4,055,784 |  | 100.00% | $4,184,403 |  | 100.00% | $(128,619) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Home purchases | ​ | $2,205,157 |  | 92.68% | $2,301,007 |  | 93.86% | $(95,850) | ​ | $3,754,098 |  | 92.56% | $3,912,502 |  | 93.50% | $(158,404) |
| Refinancings | ​ | 174,141 |  | 7.32% | 150,643 |  | 6.14% | 23,498 | ​ | 301,686 |  | 7.44% | 271,901 |  | 6.50% | 29,785 |
| ​ | ​ | $2,379,298 |  | 100.00% | $2,451,650 |  | 100.00% | $(72,352) | ​ | $4,055,784 |  | 100.00% | $4,184,403 |  | 100.00% | $(128,619) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Texas | ​ | $709,383 |  | 29.81% | $640,384 |  | 26.12% | $68,999 | ​ | $1,287,075 |  | 31.73% | $1,137,227 |  | 27.18% | $149,848 |
| California | ​ | 196,939 |  | 8.28% | 215,237 |  | 8.78% | (18,298) | ​ | 316,147 |  | 7.79% | 359,840 |  | 8.60% | (43,693) |
| South Carolina | ​ | 142,609 |  | 5.99% | 137,816 |  | 5.62% | 4,793 | ​ | 224,220 |  | 5.53% | 225,100 |  | 5.38% | (880) |
| Missouri | ​ | 114,669 |  | 4.82% | 90,219 |  | 3.68% | 24,450 | ​ | 183,103 |  | 4.51% | 145,333 |  | 3.47% | 37,770 |
| Florida | ​ | 93,758 |  | 3.94% | 120,971 |  | 4.93% | (27,213) | ​ | 165,134 |  | 4.07% | 211,210 |  | 5.05% | (46,076) |
| New York | ​ | 84,702 |  | 3.56% | 100,180 |  | 4.09% | (15,478) | ​ | 153,172 |  | 3.78% | 170,370 |  | 4.07% | (17,198) |
| Arizona | ​ | 68,463 |  | 2.88% | 119,399 |  | 4.87% | (50,936) | ​ | 127,653 |  | 3.15% | 206,869 |  | 4.94% | (79,216) |
| Ohio | ​ | 73,474 |  | 3.09% | 76,348 |  | 3.11% | (2,874) | ​ | 118,976 |  | 2.93% | 128,805 |  | 3.08% | (9,829) |
| Washington | ​ | 67,511 |  | 2.84% | 59,089 |  | 2.41% | 8,422 | ​ | 112,103 |  | 2.76% | 100,173 |  | 2.39% | 11,930 |
| North Carolina | ​ | 46,623 |  | 1.96% | 74,014 |  | 3.02% | (27,391) | ​ | 92,219 |  | 2.27% | 129,422 |  | 3.09% | (37,203) |
| All other states | ​ | ​ 781,167 |  | 32.83% | 817,993 |  | 33.37% | (36,826) | ​ | 1,275,982 |  | 31.48% | 1,370,054 |  | 32.75% | (94,072) |
| ​ | ​ | $2,379,298 |  | 100.00% | $2,451,650 |  | 100.00% | $(72,352) | ​ | $4,055,784 |  | 100.00% | $4,184,403 |  | 100.00% | $(128,619) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Mortgage Loan Sales - volume: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Third parties | ​ | $1,799,284 | ​ | 97.85% | $2,055,295 | ​ | 97.14% | $(256,011) | ​ | $3,516,814 |  | 98.00% | $3,650,829 |  | 96.65% | $(134,015) |
| Banking segment | ​ | 39,557 | ​ | 2.15% | 60,411 | ​ | 2.86% | (20,854) | ​ | 71,885 |  | 2.00% | 126,397 |  | 3.35% | (54,512) |
| ​ | ​ | $1,838,841 | ​ | 100.00% | $2,115,706 | ​ | 100.00% | $(276,865) | ​ | $3,588,699 |  | 100.00% | $3,777,226 |  | 100.00% | $(188,527) |

We consider the mortgage origination segment’s total loan origination volume to be a key performance measure. Loan origination volume is central to the segment’s ability to generate income by originating and selling mortgage loans, resulting in net gains from the sale of loans, mortgage loan origination fees, and other mortgage production income. Total loan origination volume is a measure utilized by management, our investors, and analysts in assessing market share and growth of the mortgage origination segment.

The mortgage origination segment’s total loan origination volume decreased 3.0% and 3.1%, respectively, during the three and six months ended June 30, 2024, compared to the same periods in 2023. Net income before taxes during the three months ended June 30, 2024 compares to the loss before income taxes during the three months ended June 30, 2023, with an improvement of 109.3%. The loss before income taxes decreased 60.9% during the six months ended June 30, 2024, compared to the same period in 2023. The decreases in loss before income taxes during the three and six months ended June 30, 2024, when compared to the same periods in 2023, was primarily due to decreases in non-variable compensation and benefits expense, segment operating costs, variable compensation and an increase in the average loan sales margin compared to the same periods in 2023. These trends were partially offset by decreases in the volume of IRLCs and mortgage loan originations, compared to the same periods in 2023.

The information shown in the table below includes certain additional key performance indicators for the mortgage origination segment.

| ​ ​ ​ Net gains from mortgage loan sales (basis points): | ​ ​ ​ ​ | ​ Three Months Ended June 30, ​ ​ | ​ ​ 2024 ​ ​ ​ | ​ ​ ​ | ​ ​ ​ 2023 ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 ​ ​ ​ | ​ ​ ​ ​ 2023 ​ ​ ​ |
| --- | --- | --- | ---: | --- | ---: | --- | --- |
| Loans sold to third parties | ​ | ​ | 233 ​ | ​ | 207 ​ | ​ 227 ​ | ​ 201 ​ |
| Impact of loans retained by banking segment | ​ | ​ | (5) ​ | ​ | (6) ​ | ​ (4) ​ | ​ (7) ​ |
| As reported | ​ | ​ | 228 ​ | ​ | 201 ​ | ​ 223 ​ | ​ 194 ​ |
| Variable compensation as a percentage of total compensation | ​ | ​ | 56.6% | ​ | 51.1% | ​ 49.9% | ​ 46.4% |
| Mortgage servicing rights asset ($000's) (end of period) (1) | ​ | ​ | ​ ​ | ​ | ​ ​ | $52,902 ​ | $95,101 ​ |

(1) Reported on a consolidated basis and therefore does not include mortgage servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation.

Net interest expense was comprised of interest income earned on loans held for sale offset by interest incurred on warehouse lines of credit primarily held with the Bank, and related intercompany financing costs. Net interest expense decreased during the three and six months ended June 30, 2024, as compared to the same periods in 2023, primarily due to a decrease in the negative net interest margin.

Noninterest income was comprised of the items set forth in the table below (in thousands).

| ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net gains from sale of loans | $42,002 | ​ | $42,488 | ​ | $(486) | ​ | $79,882 | ​ | $73,364 | ​ | $6,518 |
| Mortgage loan origination fees and other related income | ​ 34,398 | ​ | ​ 41,440 | ​ | ​ (7,042) | ​ | ​ 60,836 | ​ | ​ 70,217 | ​ | ​ (9,381) |
| Other mortgage production income: | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Change in net fair value and related derivative activity: | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| IRLCs and loans held for sale | ​ 11,130 | ​ | ​ (197) | ​ | ​ 11,327 | ​ | ​ 15,307 | ​ | ​ 9,493 | ​ | ​ 5,814 |
| Mortgage servicing rights asset | ​ (3,110) | ​ | ​ (1,943) | ​ | ​ (1,167) | ​ | ​ (13,155) | ​ | ​ (9,811) | ​ | ​ (3,344) |
| Servicing fees | ​ 8,447 | ​ | ​ 8,291 | ​ | ​ 156 | ​ | ​ 16,697 | ​ | ​ 15,646 | ​ | ​ 1,051 |
| Total noninterest income | $92,867 | ​ | $90,079 | ​ | $2,788 | ​ | $159,567 | ​ | $158,909 | ​ | $658 |

Net gains from sale of loans increased 8.9%, while total loans sales volume decreased 5.0% during the six months ended June 30, 2024, compared with the same period in 2023. The increase in net gains from sales of loans was primarily the result of an increase in average loan sale margin, which more than offset the impact of the decrease in loan sales volume.

The decrease in mortgage loan origination fees during the three and six months ended June 30, 2024, compared with the same periods in 2023, was primarily the result of a decrease in average mortgage loan origination fees, and to a lesser extent, a decrease in loan origination volume during both periods.

Fluctuations in mortgage loan origination fees and net gains on sale of loans are not always aligned with fluctuations in loan origination and loan sale volumes, respectively, since customers may opt to pay PrimeLending discount fees on their mortgage loans, which are included in mortgage loan origination fees, in exchange for a lower interest rate, which decreases the value of a loan in the secondary market.

We consider the mortgage origination segment’s net gains from sale of loans margin, in basis points, to be a key performance measure. Net gains from mortgage loan sales margin is defined as net gains from sale of loans divided by mortgage loan sales volume. The net gains from sale of loans is central to the segment’s generation of income and may include loans sold to third parties and loans sold to and retained by the banking segment. For origination services provided, the mortgage origination segment was reimbursed direct origination costs associated with loans retained by the banking segment, in addition to payment of a correspondent fee. The reimbursed origination costs and correspondent fees are included in the mortgage origination segment operating results, and the correspondent fees are eliminated in consolidation. Loan volumes to be originated on behalf of and retained by the banking segment are evaluated each quarter. Loans sold to and retained by the banking segment during the three months ended June 30, 2024 and 2023 were $39.6 million and $60.4 million, respectively, and $71.9 million and $126.4 million during the six months ended June 30, 2024 and 2023, respectively. Loan volumes to be originated on behalf of and retained by the banking segment are expected to 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.

Noninterest income included changes in the net fair value of the mortgage origination segment’s interest rate lock commitments (“IRLCs”) and loans held for sale and the related activity associated with forward commitments used by the mortgage origination segment to mitigate interest rate risk associated with its IRLCs and mortgage loans held for sale (“net fair value of IRLCs and loans held for sale”). The increase in net fair value of IRLCs and loans held for sale during the three and six months ended June 30, 2024, was the result of an increase in the average value of individual IRLCs and loans held for sale and the total volume of individual IRLCs and loans held for sale since December 31, 2023.

The mortgage origination segment sells substantially all mortgage loans it originates to various investors in the secondary market. In addition, the mortgage origination segment originates loans on behalf of the Bank. The mortgage origination segment’s determination of whether to retain or release servicing on mortgage loans it sells is impacted by, among other things, changes in mortgage interest rates, refinancing and market activity, and balance sheet positioning at Hilltop. During the three and six months ended June 30, 2024, PrimeLending retained servicing on approximately 7% and 9% of the loans sold, compared with approximately 17% and 27% of loans sold during the same periods in 2023. A reduction in third-party mortgage servicers purchasing mortgage servicing rights, even if modest, may result in PrimeLending increasing the rate of retained servicing on mortgage loans sold at any time. The mortgage origination segment may, from time to time, manage its MSR asset through different strategies, including varying the percentage of mortgage loans sold, servicing released and opportunistically selling MSR assets. The mortgage origination segment has also retained servicing on certain loans sold to and retained by the banking segment. Gains and losses associated with such sales to the banking segment and the related MSR asset are eliminated in consolidation.

The mortgage origination segment uses derivative financial instruments, including U.S. Treasury bond futures and options and MBS commitments, to mitigate interest rate risk associated with its MSR asset. Changes in the net fair value of the MSR asset and the related derivatives are associated with normal customer payments, changes in discount rates, prepayment speed assumptions and customer payoffs. The operating results of the mortgage origination segment were negatively impacted during the three and six months ended June 30, 2024 by a decrease of $3.1 million and $13.2 million, respectively, in the net fair value of the MSR asset. In addition, $7.3 million of the decrease during the six months ended June 30, 2024, was recognized during the three months ended March 31, 2024, and related to a change in the prepayment rates used as inputs to value the MSR asset and to reflect the difference between the MSR carrying value and the sales price reflected in a signed letter of intent executed prior to the June 28, 2024 MSR sale discussed below. The remaining fluctuations in the net fair value of the MSR asset during the respective periods were driven by net changes in long-term U.S. Treasury bond rates and customer payoffs, and losses of $2.8 million and $8.5 million generated by the derivatives used to hedge the MSR. In addition to gains and losses generated by changes in the net fair value of the MSR asset, net servicing income of $3.6 million and $7.2 million was recognized during the three and six months ended June 30, 2024, respectively. On June 28, 2024, the mortgage origination segment sold MSR assets of $45.1 million, which represented $2.9 billion of its serviced loan volume at the time.

During the three and six months ended June 30, 2023, the operating results of the mortgage origination segment were impacted by an increase of $4.0 million and a decrease of $6.8 million, respectively, in the net fair value of the MSR asset, of which $5.5 million of the decrease during the six months ended June 30, 2023, was primarily driven by market sales trends during the first quarter of 2023. The remaining fluctuations in the net fair value of the MSR asset during the respective periods were primarily due to the net gains driven by the net changes in long-term U.S. Treasury bond rates and customer payoffs during the three and six months ended June 30, 2023, and losses of $5.9 million and $3.1 million generated by the derivatives used to hedge the MSR. In addition to gains and losses generated by changes in the net fair value of the MSR asset, net servicing income of $3.8 million and $6.8 million was recognized during the three and six months ended June 30, 2023, respectively. On June 2, 2023, the mortgage origination segment sold MSR assets of $19.1 million, which represented $991.0 million of its serviced loan volume at the time.

Noninterest expenses were comprised of the items set forth in the table below (in thousands).

| ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Variable compensation | $34,886 | ​ | $36,249 | ​ | $(1,363) | ​ | $57,074 | ​ | $61,822 | ​ | $(4,748) | ​ |
| Non-variable compensation and benefits | ​ 26,738 | ​ | ​ 34,733 | ​ | ​ (7,995) | ​ | ​ 57,244 | ​ | ​ 71,515 | ​ | ​ (14,271) | ​ |
| Segment operating costs | ​ 18,463 | ​ | ​ 21,776 | ​ | ​ (3,313) | ​ | ​ 38,747 | ​ | ​ 42,654 | ​ | ​ (3,907) | ​ |
| Lender paid closing costs | ​ 1,996 | ​ | ​ 1,387 | ​ | ​ 609 | ​ | ​ 3,253 | ​ | ​ 2,562 | ​ | ​ 691 | ​ |
| Servicing expense | ​ 4,863 | ​ | ​ 4,515 | ​ | ​ 348 | ​ | ​ 9,525 | ​ | ​ 8,860 | ​ | ​ 665 | ​ |
| Total noninterest expense | $86,946 | ​ | $98,660 | ​ | $(11,714) | ​ | $165,843 | ​ | $187,413 | ​ | $(21,570) | ​ |

Total employees’ compensation and benefits accounted for the majority of noninterest expenses incurred during all periods presented. Historically, variable compensation comprises the majority of total employees’ compensation and benefits expenses. However, during the six months ended June 30, 2024, non-variable compensation approximated variable compensation, and during the six months ended June 30, 2023, non-variable compensation exceeded variable compensation. Variable compensation, which is primarily driven by loan origination volume, tends to fluctuate to a greater degree than loan origination volume, because mortgage loan originator and fulfillment staff incentive compensation plans are structured to pay at increasing rates as higher monthly volume tiers are achieved. However, certain other incentive compensation plans driven by non-mortgage production criteria may alter this trend.

While total loan origination volume decreased 3.0% and 3.1% during the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, the aggregate non-variable compensation and benefits of the mortgage origination segment decreased by 23.0% and 20.0% during the same periods. This decrease during the three and six months ended June 30, 2024, compared to the same periods in 2023, was primarily due to a decrease in salaries associated with a reduction in underwriting and loan fulfillment, operations and corporate staff as PrimeLending continued to evaluate its cost structure to address the current mortgage environment. Segment operating costs decreased during the three and six months ended June 30, 2024, compared to the same periods in 2023, primarily due to decreases in occupancy and equipment expense, software and licensing fees, and miscellaneous fees.

In exchange for a higher interest rate, customers may opt to have PrimeLending pay certain costs associated with the origination of their mortgage loans (“lender paid closing costs”). Fluctuations in lender paid closing costs are not always aligned with fluctuations in loan origination volume. Other loan pricing conditions, including the mortgage loan interest rate, loan origination fees paid by the customer, and a customer’s willingness to pay closing costs, may influence fluctuations in lender paid closing costs.

Between January 1, 2015 and June 30, 2024, the mortgage origination segment sold mortgage loans totaling $141.5 billion. These loans were sold under sales contracts that generally include provisions that hold the mortgage origination segment responsible for errors or omissions relating to its representations and warranties that loans sold meet certain requirements, including representations as to underwriting standards and the validity of certain borrower representations in connection with the loan. In addition, the sales contracts typically require the refund of purchased servicing rights plus certain investor servicing costs if a loan experiences an early payment default. While the mortgage origination segment sold loans prior to 2015, it does not anticipate experiencing significant losses in the future on loans originated prior to 2015 as a result of investor claims under these provisions of its sales contracts.

When a claim for indemnification of a loan sold is made by an agency, investor, or other party, the mortgage origination segment evaluates the claim and determines if the claim can be satisfied through additional documentation or other deliverables. If the claim is valid and cannot be satisfied in that manner, the mortgage origination segment negotiates with the claimant to reach a settlement of the claim. Settlements typically result in either the repurchase of a loan or reimbursement to the claimant for losses incurred on the loan.

The following is a summary of the mortgage origination segment’s claims resolution activity relating to loans sold between January 1, 2015 and June 30, 2024 (dollars in thousands).

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Original Loan Balance ​ ​ Amount | ​ ​ | ​ ​ ​ % of ​ Loans Sold | ​ ​ Loss Recognized ​ ​ Amount | ​ ​ | ​ ​ ​ % of ​ Loans Sold |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Claims resolved with no payment | ​ | $220,723 | ​ | 0.16% | $— | ​ | -% |
| Claims resolved because of a loan repurchase or payment to an investor for losses incurred (1) | ​ | ​ 316,567 | ​ | 0.22% | ​ 25,131 | ​ | 0.02% |
| ​ | ​ | $537,290 | ​ | 0.38% | $25,131 | ​ | 0.02% |

(1) Losses incurred include refunded purchased servicing rights.

For each loan, when the mortgage origination segment concludes its obligation to a claimant is both probable and reasonably estimable, the mortgage origination segment has established a specific claims indemnification liability reserve.

An additional indemnification liability reserve has been established for probable agency, investor or other party losses that may have been incurred, but not yet reported to the mortgage origination segment based upon a reasonable estimate of such losses. Factors considered in the calculation of this reserve include, but are not limited to, the total volume of loans sold exclusive of specific claimant requests, actual claim inquiries, claim settlements and the severity of estimated losses resulting from future claims, and the mortgage origination segment’s history of successfully curing defects identified in claim requests.

Although management considers the total indemnification liability reserve to be appropriate, there may be changes in the reserve over time to address incurred losses due to unanticipated adverse changes in the economy and historical loss patterns, discrete events adversely affecting specific borrowers or industries, and/or actions taken by institutions or investors. The impact of such matters is considered in the reserving process when probable and estimable. During the second quarter of 2024, PrimeLending increased the indemnification reserve rate applied to loans sold subsequent to April 30, 2024, to address recent loss trends.

At June 30, 2024 and December 31, 2023, the mortgage origination segment’s total indemnification liability reserve totaled $9.1 million and $11.7 million, respectively. The related provision for indemnification losses was $0.8 million and $0.5 million during the three months ended June 30, 2024 and 2023, respectively, and $1.1 million and $0.8 million during the six months ended June 30, 2024 and 2023, respectively.

### Corporate

The following table presents certain financial information regarding the operating results of corporate (in thousands).

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ ​ | ​ ​ 2023 | ​ ​ | ​ ​ Variance 2024 vs 2023 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net interest income (expense) | ​ | $(3,153) | ​ | $(3,479) | ​ | $326 | ​ | $(6,255) | ​ | $(6,801) | ​ | $546 |
| Noninterest income | ​ | 6,001 | ​ | 3,081 | ​ | 2,920 | ​ | 11,785 | ​ | 5,786 | ​ | 5,999 |
| Noninterest expense | ​ | ​ 14,716 | ​ | 16,301 | ​ | (1,585) | ​ | ​ 32,101 | ​ | 31,814 | ​ | 287 |
| Loss before income taxes | ​ | $(11,868) | ​ | $(16,699) | ​ | $4,831 | ​ | $(26,571) | ​ | $(32,829) | ​ | $6,258 |

Corporate includes certain activities not allocated to specific business segments. These activities include holding company financing and investing activities, merchant banking investment opportunities and management and administrative services to support the overall operations of the Company. Hilltop’s merchant banking investment activities include the identification of attractive opportunities for capital deployment in companies engaged in non-financial activities through its merchant bank subsidiary, Hilltop Opportunity Partners LLC. These merchant banking activities currently include investments within various industries, including power generation, youth sports and entertainment, dental health, and industrial equipment manufacturing, with an aggregate carrying value of approximately $64 million at June 30, 2024.

As a holding company, Hilltop’s primary investment objectives are to support capital deployment for organic growth and to preserve capital to be deployed through acquisitions, dividend payments and potential stock repurchases. Investment and interest income earned during the three and six months ended June 30, 2024 was primarily comprised of dividend income from merchant banking investment activities, in addition to interest income earned on intercompany notes.

Interest expense during each of the three months ended June 30, 2024 and 2023 included recurring quarterly interest expense of $5.0 million incurred on our $150.0 million aggregate principal amount of 5% senior notes due 2025 (“Senior Notes”), on our $50 million aggregate principal amount of subordinated notes due 2030 (“2030 Subordinated Notes”) and on our $150 million aggregate principal amount of subordinated notes due 2035 (“2035 Subordinated Notes,” the 2030 Subordinated Notes and the 2035 Subordinated Notes, collectively, the “Subordinated Notes”).

Noninterest income during each period included activity related to our investment in a real estate development in Dallas’ University Park, which also serves as headquarters for both Hilltop and the Bank, and net noninterest income associated with activity within our merchant bank subsidiary. During the three and six months ended June 30, 2024, noninterest income included pre-tax gains of $1.9 million and $4.7 million, respectively, associated with the sale of merchant bank equity investments.

Noninterest expenses were primarily comprised of employees’ compensation and benefits, occupancy expenses and professional fees, including corporate governance, legal and transaction costs. During the three months ended June 30, 2024, noninterest expenses decreased, compared to the same period in 2023, primarily due to decreases associated with employees’ compensation and benefits and professional fees. Noninterest expenses were relatively flat during the six months ended June 30, 2024, compared to the same period in 2023.

### Financial Condition

The following discussion contains a more detailed analysis of our financial condition at June 30, 2024, as compared with December 31, 2023.

### Securities Portfolio

At June 30, 2024, investment securities consisted of securities of the U.S. Treasury, U.S. government and its agencies, obligations of municipalities and other political subdivisions, primarily in the State of Texas, as well as mortgage-backed, corporate debt, and equity securities. We may categorize investments as trading, available for sale, held to maturity and equity securities.

Trading securities are bought and held principally for the purpose of selling them in the near term and are carried at fair value, marked to market through operations and held at the Bank and the Hilltop Broker-Dealers. Securities classified as available for sale may, from time to time, be bought and sold in response to changes in market interest rates, changes in securities’ prepayment risk, increases in loan demand, general liquidity needs and to take advantage of market conditions that create more economically attractive returns. Such securities are carried at estimated fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Equity investments are carried at fair value, with all changes in fair value recognized in net income. Securities are classified as held to maturity based on the intent and ability of our management, at the time of purchase, to hold such securities to maturity. These securities are carried at amortized cost.

The table below summarizes our securities portfolio (in thousands).

| ​ ​ ​ Trading securities, at fair value | ​ ​ ​ | ​ ​ June 30, 2024 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2023 ​ ​ | ​ ​ ​ |
| --- | --- | --- | --- | --- | --- |
| U.S. Treasury securities | ​ | $253 | ​ | $3,736 | ​ |
| U.S. government agencies: | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Bonds | ​ | ​ 6,755 | ​ | ​ 12,867 | ​ |
| Residential mortgage-backed securities | ​ | ​ 117,113 | ​ | ​ 124,768 | ​ |
| Collateralized mortgage obligations | ​ | ​ 192,779 | ​ | ​ 86,281 | ​ |
| Other | ​ | ​ 9,955 | ​ | ​ 13,079 | ​ |
| Corporate debt securities | ​ | ​ 64,768 | ​ | ​ 37,569 | ​ |
| States and political subdivisions | ​ | ​ 249,933 | ​ | ​ 180,890 | ​ |
| Private-label securitized product | ​ | ​ 69,401 | ​ | ​ 47,768 | ​ |
| Other | ​ | 10,427 | ​ | 9,033 | ​ |
| **​** | ​ | 721,384 | ​ | 515,991 | ​ |
| **Securities available for sale, at fair value** | ​ | ​ ​ | ​ | ​ ​ | ​ |
| U.S. Treasury securities | ​ | ​ 4,637 | ​ | ​ 4,617 | ​ |
| U.S. government agencies: | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Bonds | ​ | 148,139 | ​ | ​ 166,166 | ​ |
| Residential mortgage-backed securities | ​ | 331,769 | ​ | ​ 349,870 | ​ |
| Commercial mortgage-backed securities | ​ | ​ 190,233 | ​ | ​ 191,746 | ​ |
| Collateralized mortgage obligations | ​ | 703,466 | ​ | ​ 736,481 | ​ |
| Corporate debt securities | ​ | 21,145 | ​ | ​ 24,418 | ​ |
| States and political subdivisions | ​ | 33,718 | ​ | 34,297 | ​ |
| ​ | ​ | 1,433,107 | ​ | 1,507,595 | ​ |
| **Securities held to maturity, at amortized cost** | ​ | ​ ​ | ​ | ​ ​ | ​ |
| U.S. government agencies: | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Residential mortgage-backed securities | ​ | 267,450 | ​ | ​ 278,172 | ​ |
| Commercial mortgage-backed securities | ​ | ​ 162,032 | ​ | ​ 172,879 | ​ |
| Collateralized mortgage obligations | ​ | 270,876 | ​ | ​ 284,208 | ​ |
| States and political subdivisions | ​ | 77,098 | ​ | ​ 77,418 | ​ |
| ​ | ​ | 777,456 | ​ | 812,677 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| **Equity securities, at fair value** | ​ | ​ 254 | ​ | ​ 321 | ​ |
| **Total securities portfolio** | ​ | $2,932,201 | ​ | $2,836,584 | ​ |

We had net unrealized losses of $112.9 million and $114.2 million at June 30, 2024 and December 31, 2023, respectively, related to the available for sale investment portfolio, and net unrealized losses of $90.3 million and $80.8 million at June 30, 2024 and December 31, 2023, respectively, associated with the securities held to maturity portfolio. Equity securities included net unrealized gains of $0.2 million and $0.3 million at June 30, 2024 and December 31, 2023, respectively. In future periods, we expect changes in prevailing market interest rates, coupled with changes in the aggregate size of the investment portfolio, to be significant drivers of changes in the unrealized losses or gains in these portfolios, and therefore accumulated other comprehensive income (loss).

#### Banking Segment

The banking segment’s securities portfolio plays a role in the management of our interest rate sensitivity and generates additional interest income. In addition, the securities portfolio is used to meet collateral requirements for public and trust deposits, securities sold under agreements to repurchase and other purposes. The available for sale and equity securities portfolios serve as a source of liquidity. Historically, the Bank’s policy has been to invest primarily in securities of the U.S. government and its agencies, obligations of municipalities in the State of Texas and other high grade fixed income securities to minimize credit risk. At June 30, 2024, the banking segment’s securities portfolio of $2.2 billion was comprised of trading securities of $0.1 million, available for sale securities of $1.4 billion, held to maturity securities of $777.5 million and equity securities of $0.3 million, in addition to $11.8 million of other investments included in other assets within the consolidated balance sheets.

#### Broker-Dealer Segment

The broker-dealer segment holds securities to support sales, underwriting and other customer activities. The interest rate risk inherent in holding these securities is managed by setting and monitoring limits on the size and duration of positions and on the length of time the securities can be held. The Hilltop Broker-Dealers are required to carry their securities at fair value and record changes in the fair value of the portfolio to the statement of operations. Accordingly, the securities portfolio of the Hilltop Broker-Dealers included trading securities of $721.3 million at June 30, 2024. In addition, the Hilltop Broker-Dealers enter into transactions that represent commitments to purchase and deliver securities at prevailing future market prices to facilitate customer transactions and satisfy such commitments. Accordingly, the Hilltop Broker-Dealers’ ultimate obligation may exceed the amount recognized in the financial statements. These securities, which are carried at fair value and reported as securities sold, not yet purchased in the consolidated balance sheets, had a value of $75.5 million at June 30, 2024.

#### Corporate

At June 30, 2024, the corporate portfolio included other investments, including those associated with merchant banking, of available for sale securities of $21.1 million and other assets of $44.2 million within the consolidated balance sheets.

#### Allowance for Credit Losses for Available for Sale Securities and Held to Maturity Securities

We have evaluated available for sale debt securities that are in an unrealized loss position and have determined that any declines in value are unrelated to credit loss and related to changes in market interest rates since purchase. None of the available for sale debt securities held were past due at June 30, 2024. In addition, as of June 30, 2024, we evaluated our held to maturity debt securities, considering the current credit ratings and recognized losses, and determined the potential credit loss to be minimal. With respect to these securities, we considered the risk of credit loss to be negligible, and therefore, no allowance was recognized on the debt securities portfolio at June 30, 2024.

### Loan Portfolio

Consolidated loans held for investment are detailed in the table below, classified by portfolio segment (in thousands).

| ​ ​ ​ Commercial real estate: | ​ ​ ​ | ​ ​ June 30, 2024 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2023 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Non-owner occupied | ​ | $2,001,338 | ​ | $1,889,882 |
| Owner occupied | ​ | ​ 1,475,218 | ​ | ​ 1,422,234 |
| Commercial and industrial | ​ | 1,687,502 | ​ | 1,607,833 |
| Construction and land development | ​ | 858,185 | ​ | 1,031,095 |
| 1-4 family residential | ​ | 1,775,571 | ​ | 1,757,178 |
| Consumer | ​ | ​ 27,291 | ​ | ​ 27,351 |
| Broker-dealer | ​ | ​ 348,415 | ​ | ​ 344,172 |
| Loans held for investment, gross | ​ | 8,173,520 | ​ | 8,079,745 |
| Allowance for credit losses | ​ | (115,082) | ​ | (111,413) |
| Loans held for investment, net of allowance | ​ | $8,058,438 | ​ | $7,968,332 |

#### Banking Segment

The loan portfolio constitutes the primary earning asset of the banking segment and typically offers the best alternative for obtaining the maximum interest spread above the banking segment’s cost of funds. The overall economic strength of the banking segment generally parallels the quality and yield of its loan portfolio. As discussed in more detail within the section captioned “Financial Condition – Allowance for Credit Losses on Loans” set forth in Part II, Item 7 of our 2023 Form 10-K and further within the section captioned “Financial Condition – Allowance for Credit Losses on Loans” below, the banking segment’s credit policies emphasize strong underwriting and governance standards and early detection of potential problem credits in order to develop and implement action plans on a timely basis to mitigate potential losses.

To manage the credit risks associated with its loan portfolio, management may, depending upon current or anticipated economic conditions and related exposures, apply enhanced risk management measures to loans through analysis of a specific borrower’s financial condition, including cash flow, collateral values, and guarantees, among other credit factors. Given the current market dynamics, including economic uncertainties, the rapid increase in market interest rates since 2022, and a deteriorating outlook for commercial real estate markets, management has heightened its specific review procedures of credits maturing in the next six to twelve months as well as those credits associated with real estate.

The banking segment’s total loans held for investment, net of the allowance for credit losses, were $8.9 billion and $8.5 billion at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024, the banking segment’s loan portfolio included warehouse lines of credit extended to PrimeLending and its ABAs of $1.3 billion, of which $1.2 billion was drawn. At December 31, 2023, amounts drawn on the available warehouse lines of credit was $0.9 billion. Amounts advanced against the warehouse lines of credit are eliminated from net loans held for investment on our consolidated balance sheets. The banking segment does not generally participate in syndicated loan transactions and has no foreign loans in its portfolio.

A significant portion of the banking segment’s loan portfolio at June 30, 2024, consisted of commercial real estate loans secured by properties. Such loans can involve high principal loan amounts, and the repayment of these loans is dependent, in large part, on a borrower’s ongoing business operations or on income generated from the properties that are leased to third parties.

The table below sets forth the banking segment’s commercial real estate loan portfolio, by portfolio industry sector and collateral location as of June 30, 2024 (in thousands).

| ​ ​ ​ Commercial Real Estate Non-owner occupied: | ​ ​ ​ ​ Dallas- Fort Worth ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Austin ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Houston ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Brownsville- Harlingen- McAllen ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ San Antonio ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Lubbock ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ Other ​ ​ Texas ​ ​ | ​ ​ ​ ​ | ​ ​ Outside Texas ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Total ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Office | $138,623 | ​ | $220,242 | ​ | $38,898 | ​ | $16,201 | ​ | $21,146 | ​ | $2,957 | ​ | $59,511 | ​ | $322 | ​ | $497,900 |
| Retail | ​ 159,126 | ​ | ​ 73,985 | ​ | ​ 30,711 | ​ | ​ 19,002 | ​ | ​ 20,465 | ​ | ​ 12,830 | ​ | ​ 45,194 | ​ | ​ 8,804 | ​ | ​ 370,117 |
| Hotel/Motel | ​ 48,562 | ​ | ​ 24,640 | ​ | ​ 32,320 | ​ | ​ 17,315 | ​ | ​ 104 | ​ | ​ 17,599 | ​ | ​ 35,609 | ​ | ​ 13,788 | ​ | ​ 189,937 |
| Multifamily | ​ 11,112 | ​ | ​ 53,588 | ​ | ​ 41,596 | ​ | ​ 55,824 | ​ | ​ 43,297 | ​ | ​ 35,825 | ​ | ​ 55,676 | ​ | ​ 16,466 | ​ | ​ 313,384 |
| Industrial | ​ 139,304 | ​ | ​ 63,862 | ​ | ​ 8,595 | ​ | ​ 3,288 | ​ | ​ 2,529 | ​ | ​ 629 | ​ | ​ 31,665 | ​ | ​ 413 | ​ | ​ 250,285 |
| All other | ​ 101,132 | ​ | ​ 58,338 | ​ | ​ 33,678 | ​ | ​ 11,772 | ​ | ​ 24,545 | ​ | ​ 52,322 | ​ | ​ 58,270 | ​ | ​ 39,658 | ​ | ​ 379,715 |
| ​ | $597,859 | ​ | $494,655 | ​ | $185,798 | ​ | $123,402 | ​ | $112,086 | ​ | $122,162 | ​ | $285,925 | ​ | $79,451 | ​ | $2,001,338 |
| Owner occupied: | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Office | $138,030 | ​ | $87,613 | ​ | $21,580 | ​ | $15,565 | ​ | $34,165 | ​ | $7,669 | ​ | $10,540 | ​ | $4,011 | ​ | $319,173 |
| Retail | ​ 10,050 | ​ | ​ 15,317 | ​ | ​ 3,241 | ​ | ​ 1,048 | ​ | ​ 639 | ​ | ​ 161 | ​ | ​ 4,895 | ​ | ​ 980 | ​ | ​ 36,331 |
| Industrial | ​ 190,807 | ​ | ​ 45,861 | ​ | ​ 31,893 | ​ | ​ 9,166 | ​ | ​ 21,300 | ​ | ​ 6,950 | ​ | ​ 33,519 | ​ | ​ 22,477 | ​ | ​ 361,973 |
| All other | ​ 339,021 | ​ | ​ 70,995 | ​ | ​ 86,148 | ​ | ​ 21,068 | ​ | ​ 51,416 | ​ | ​ 17,094 | ​ | ​ 149,411 | ​ | ​ 22,588 | ​ | ​ 757,741 |
| ​ | $677,908 | ​ | $219,786 | ​ | $142,862 | ​ | $46,847 | ​ | $107,520 | ​ | $31,874 | ​ | $198,365 | ​ | $50,056 | ​ | $1,475,218 |
| Total commercial real estate loans | $1,275,767 | ​ | $714,441 | ​ | $328,660 | ​ | $170,249 | ​ | $219,606 | ​ | $154,036 | ​ | $484,290 | ​ | $129,507 | ​ | $3,476,556 |

At June 30, 2024, the banking segment had loan concentrations (loans to borrowers engaged in similar activities) that exceeded 10% of total loans in its real estate portfolio. The areas of concentration within our real estate portfolio were non-construction commercial real estate loans, non-construction residential real estate loans, and construction and land development loans, which represented 44.4%, 22.7% and 11.0%, respectively, of the banking segment’s total loans held for investment at June 30, 2024. The banking segment’s loan concentrations were within regulatory guidelines at June 30, 2024.

In addition, the Bank’s loan portfolio includes collateralized loans extended to businesses that depend on the energy industry, including those within the exploration and production, field services, pipeline construction and transportation sectors. Crude oil prices remain uncertain given future supply and demand for oil are influenced by international armed conflicts, return to business travel, new energy policies and government regulation, and the pace of transition towards renewable energy resources. At June 30, 2024, the Bank’s energy loan exposure was approximately $49 million of loans held for investment with unfunded commitment balances of approximately $13 million. The allowance for credit losses on the Bank’s energy portfolio was $0.2 million, or 0.3% of loans held for investment at June 30, 2024.

The following table provides information regarding the maturities of the banking segment’s gross loans held for investment, net of unearned income (in thousands). The commercial and industrial portfolio segment includes amounts advanced against the warehouse lines of credit extended to PrimeLending.

| ​ ​ ​ ​ Commercial real estate: | ​ ​ ​ ​ | ​ ​ June 30, 2024 Due Within One Year ​ ​ | ​ ​ ​ | ​ ​ Due From One To Five Years ​ ​ | ​ ​ ​ | ​ ​ Due from Five To Fifteen Years ​ ​ | ​ ​ ​ | ​ ​ Due After Fifteen Years ​ ​ | ​ ​ ​ | ​ ​ ​ Total ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Non-owner occupied | ​ | $719,734 | ​ | $978,627 | ​ | $302,778 | ​ | $199 | ​ | $2,001,338 |
| Owner occupied | ​ | ​ 374,192 | ​ | ​ 557,510 | ​ | ​ 525,577 | ​ | ​ 17,939 | ​ | ​ 1,475,218 |
| Commercial and industrial | ​ | ​ 2,466,930 | ​ | ​ 329,088 | ​ | ​ 88,417 | ​ | ​ — | ​ | ​ 2,884,435 |
| Construction and land development | ​ | ​ 766,521 | ​ | ​ 74,556 | ​ | ​ 16,224 | ​ | ​ 884 | ​ | ​ 858,185 |
| 1-4 family residential | ​ | ​ 159,493 | ​ | ​ 471,055 | ​ | ​ 405,750 | ​ | ​ 739,273 | ​ | ​ 1,775,571 |
| Consumer | ​ | 15,251 | ​ | 11,902 | ​ | 127 | ​ | 11 | ​ | 27,291 |
| Total | ​ | $4,502,121 | ​ | $2,422,738 | ​ | $1,338,873 | ​ | $758,306 | ​ | $9,022,038 |

The following table provides information regarding the interest rate composition, based on contractual terms, of the banking segment's loans held for investment, net of unearned income (in thousands).

| ​ ​ ​ June 30, 2024 Commercial real estate: | ​ ​ ​ ​ | ​ ​ Loans maturing after one year Fixed Interest Rate ​ ​ | ​ ​ ​ | ​ ​ Floating Interest Rate ​ ​ | ​ ​ ​ | ​ ​ ​ Total ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Non-owner occupied | ​ | $702,962 | ​ | $578,642 | ​ | $1,281,604 |
| Owner occupied | ​ | ​ 710,683 | ​ | ​ 390,343 | ​ | ​ 1,101,026 |
| Commercial and industrial | ​ | ​ 301,524 | ​ | ​ 115,981 | ​ | ​ 417,505 |
| Construction and land development | ​ | ​ 54,658 | ​ | ​ 37,006 | ​ | ​ 91,664 |
| 1-4 family residential | ​ | ​ 956,314 | ​ | ​ 659,764 | ​ | ​ 1,616,078 |
| Consumer | ​ | 12,040 | ​ | — | ​ | 12,040 |
| Total | ​ | $2,738,181 | ​ | $1,781,736 | ​ | $4,519,917 |

In the table above, floating interest rate loans totaling $446.6 million as of June 30, 2024 had reached their applicable rate floor and are expected to reprice, subject to their scheduled repricing timing and frequency terms. The majority of floating rate loans carry an interest rate tied to a SOFR rate or The Wall Street Journal Prime Rate, as published in The Wall Street Journal.

#### Broker-Dealer Segment

The loan portfolio of the broker-dealer segment consists primarily of margin loans to customers and correspondents that are due within one year. The interest rate on margin accounts is computed on the settled margin balance at a fixed rate established by management. These loans are collateralized by the securities purchased or by other securities owned by the clients and, because of collateral coverage ratios, are believed to present minimal collectability exposure. Additionally, these loans are subject to a number of regulatory requirements as well as the Hilltop Broker-Dealers’ internal policies. The broker-dealer segment’s total loans held for investment, net of the allowance for credit losses, were $348.3 million and $344.1 million at June 30, 2024 and December 31, 2023, respectively. This increase from December 31, 2023 to June 30, 2024 was primarily attributable to increases of $22.6 million, or 19%, in receivables from correspondents and $5.0 million from non-customer cash accounts, partially offset by a decrease of $23.4 million, or 10%, in customer margin accounts.

#### Mortgage Origination Segment

The loan portfolio of the mortgage origination segment consists of loans held for sale, primarily single-family residential mortgages funded through PrimeLending, and IRLCs with customers pursuant to which we agree to originate a mortgage loan on a future date at an agreed-upon interest rate. The components of the mortgage origination segment’s loans held for sale and IRLCs are as follows (in thousands).

| ​ ​ ​ Loans held for sale: | ​ ​ ​ | ​ ​ June 30, 2024 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2023 ​ ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Unpaid principal balance | ​ | $1,118,242 | ​ | $802,348 | ​ |
| Fair value adjustment | ​ | 18,693 | ​ | 19,846 | ​ |
| ​ | ​ | $1,136,935 | ​ | $822,194 | ​ |
| IRLCs: | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Unpaid principal balance | ​ | $683,767 | ​ | $383,767 | ​ |
| Fair value adjustment | ​ | 8,465 | ​ | 7,734 | ​ |
| ​ | ​ | $692,232 | ​ | $391,501 | ​ |

The mortgage origination segment uses forward commitments to mitigate interest rate risk associated with its loans held for sale and IRLCs. The notional amounts of these forward commitments at June 30, 2024 and December 31, 2023 were $1.2 billion and $1.0 billion, respectively, while the related estimated fair values were $1.0 million and ($10.2) million, respectively.

### Allowance for Credit Losses on Loans

For additional information regarding the allowance for credit losses, refer to the section captioned “Critical Accounting Estimates” set forth in Part II, Item 7 of our 2023 Form 10-K.

#### Loans Held for Investment

The Bank has lending policies in place with the goal of establishing an asset portfolio that will provide a return on stockholders’ equity sufficient to maintain capital to assets ratios that meet or exceed established regulations. Loans are underwritten with careful consideration of the borrower’s financial condition, the specific purpose of the loan, the primary sources of repayment and any collateral pledged to secure the loan. As discussed in more detail within the section captioned “Financial Condition – Allowance for Credit Losses on Loans” set forth in Part II, Item 7 of our 2023 Form 10-K, the Bank’s underwriting procedures address financial components based on the size and complexity of the credit, while the Bank’s loan policy provides specific underwriting guidelines by portfolio segment, including commercial and industrial, real estate, construction and land development, and consumer loans.

The allowance for credit losses for loans held for investment represents management’s best estimate of all expected credit losses over the expected contractual life of our existing portfolio. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. Such future changes in the allowance for credit losses are expected to be volatile given dependence upon, among other things, the portfolio composition and quality, as well as the impact of significant drivers, including prepayment assumptions and macroeconomic conditions and forecasts.

Significant judgment is required to estimate the severity and duration of the current economic uncertainties, as well as its potential impact on borrower defaults and loss severity. In particular, macroeconomic conditions and forecasts are rapidly changing and remain highly uncertain.

One of the most significant judgments involved in estimating our allowance for credit losses relates to the macroeconomic forecasts used to estimate credit losses over the reasonable and supportable forecast period. To determine the allowance for credit losses as of June 30, 2024, we utilized a single macroeconomic alternative scenario, or S7, published by Moody’s Analytics in June 2024. During our previous quarterly macroeconomic assessment as of March 31, 2024, we also utilized a single macroeconomic alternative scenario, or S7, published by Moody’s Analytics in March 2024.

The following table and paragraphs summarize the U.S. Real Gross Domestic Product (“GDP”) growth rates and unemployment rate assumptions used in our economic forecast to determine our best estimate of expected credit losses.

| ​ ​ ​ ​ GDP growth rates: | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ As of June 30, 2024 ​ | ​ ​ ​ ​ | ​ March 31, 2024 ​ | ​ ​ ​ ​ | ​ December 31, 2023 ​ | ​ ​ ​ ​ | ​ September 30, 2023 ​ | ​ ​ ​ ​ | ​ June 30, 2023 ​ |
| --- | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| ​ | Q2 2023 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1.4% |
| ​ | Q3 2023 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 2.9% | ​ | 0.1% |
| ​ | Q4 2023 | ​ | ​ | ​ | ​ | ​ | 1.1% | ​ | 0.2% | ​ | 0.3% |
| ​ | Q1 2024 | ​ | ​ | ​ | 2.4% | ​ | (1.6)% | ​ | (1.9)% | ​ | (3.1)% |
| ​ | Q2 2024 | ​ | 2.1% | ​ | 0.7% | ​ | (2.4)% | ​ | (3.0)% | ​ | (2.7)% |
| ​ | Q3 2024 | ​ | 1.2% | ​ | 0.4% | ​ | (1.3)% | ​ | (1.5)% | ​ | (0.9)% |
| ​ | Q4 2024 | ​ | 0.6% | ​ | 0.0% | ​ | 1.3% | ​ | 1.4% | ​ | 2.0% |
| ​ | Q1 2025 | ​ | 1.0% | ​ | (1.8)% | ​ | 2.6% | ​ | 3.1% | ​ | ​ |
| ​ | Q2 2025 | ​ | (2.0)% | ​ | (2.8)% | ​ | 3.0% | ​ | ​ | ​ | ​ |
| ​ | Q3 2025 | ​ | (2.5)% | ​ | (1.7)% | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | Q4 2025 | ​ | (1.3)% | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Unemployment rates: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | Q2 2023 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3.5% |
| ​ | Q3 2023 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3.8% | ​ | 3.8% |
| ​ | Q4 2023 | ​ | ​ | ​ | ​ | ​ | 3.8% | ​ | 4.1% | ​ | 4.0% |
| ​ | Q1 2024 | ​ | ​ | ​ | 3.8% | ​ | 4.8% | ​ | 4.9% | ​ | 4.9% |
| ​ | Q2 2024 | ​ | 4.0% | ​ | 4.0% | ​ | 5.6% | ​ | 5.7% | ​ | 5.6% |
| ​ | Q3 2024 | ​ | 4.1% | ​ | 4.0% | ​ | 6.1% | ​ | 6.0% | ​ | 6.0% |
| ​ | Q4 2024 | ​ | 4.1% | ​ | 4.0% | ​ | 5.6% | ​ | 5.7% | ​ | 5.8% |
| ​ | Q1 2025 | ​ | 4.1% | ​ | 4.8% | ​ | 5.2% | ​ | 5.3% | ​ | ​ |
| ​ | Q2 2025 | ​ | 4.8% | ​ | 5.6% | ​ | 5.0% | ​ | ​ | ​ | ​ |
| ​ | Q3 2025 | ​ | 5.6% | ​ | 6.0% | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | Q4 2025 | ​ | 6.0% | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

As of June 30, 2024, our U.S. economic forecast assumes persistent inflation, and elevated interest rates continue to weigh on consumer and business spending. The combination of the persistent inflation, the Federal Reserve rate increases and declining confidence causes economic growth to decelerate during the remainder of 2024 and to fall into recession in the second quarter of 2025. The changes in real GDP on an annual average basis are 2.3% in 2024 and (0.2%) in 2025. The unemployment rate increases in 2025 and reaches a peak of 6% in the fourth quarter of 2025. Our forecast considers the potential for tighter monetary policy from the Federal Reserve with the federal funds rate at 5.8% this year before reverting to 4.1% by year end 2025. Vacancy rates for several commercial real estate sectors remain elevated, and the interest rate outlook challenges the recovery.

Since December 31, 2023, we updated our U.S. economic outlook for recent consumer and business spending. Real GDP growth was assumed to contract more modestly (0.0%) on an annual average basis and (1.3%) peak to trough in 2024. Labor market conditions remained tighter than expected as the unemployment rate decreased to 3.7% in December despite several downward revisions to recent payroll data. We expected monetary policy to remain restrictive at 5.25% to 5.5% in the near term but revert to 3.5% by year end 2025 as the Federal Reserve balances slower economic growth with its inflation and unemployment mandates.

During the three and six 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, slightly offset by improvements to the U.S. economic outlook. Specific to the Bank, the net impact to the allowance of changes associated with individually evaluated loans during the three and six months ended June 30, 2024 included a provision for credit losses of $8.0 million and $12.1 million, respectively, while the net impact to the allowance of changes associated with collectively evaluated loans during the three and six months ended June 30, 2024 included a provision for credit losses of $3.0 million and a reversal of credit losses of $4.0 million, respectively. The changes in the allowance for credit losses during the noted periods were primarily attributable to the Bank and also reflected other factors including, but not limited to, loan mix, and changes in loan balances and qualitative factors from the prior quarter. The changes in the allowance during the three and six months ended June 30, 2024 were also impacted by net charge-offs of $0.1 million and $4.4 million, respectively.

As noted above, the combined impacts of specific reserves and loan portfolio changes within the banking segment and changes in the U.S. economic outlook since December 31, 2023 have resulted in a net increase in the allowance at June 30, 2024, compared to December 31, 2023. The resulting allowance for credit losses as a percentage of our total loan portfolio, excluding margin loans in the broker-dealer segment and banking segment mortgage warehouse lending programs, was 1.52% and 1.47% as of June 30, 2024 and December 31, 2023. While changes in the U.S. economic outlook have been reflected in our current allowance at June 30, 2024, uncertainties that include, among others, the uncertain timing, duration and significance of further increases in market interest rates and a worsening macroeconomic forecast could adversely impact borrower cash flows and result in further increases in the allowance during future periods. While all industries could experience adverse impacts, certain of our loan portfolio industry sectors and subsectors, including real estate collateralized by office buildings and auto note financing, have an increased level of risk.

The respective distribution of the allowance for credit losses as a percentage of our total loan portfolio, excluding margin loans in the broker-dealer segment and banking segment mortgage warehouse lending programs, are presented in the following table (dollars in thousands).

| ​ ​ ​ ​ ​ ​ June 30, 2024 Commercial real estate: | ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ Total Loans Held For Investment ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Total Allowance for Credit Losses ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ Allowance For ​ Credit Losses ​ as a % of Total Loans ​ Held For Investment ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: |
| Non-owner occupied (1) | **​** | $2,001,338 | **​** | $37,321 | **​** | 1.86% |
| Owner occupied (2) | **​** | ​ 1,475,218 | **​** | ​ 32,772 | **​** | 2.22% |
| Commercial and industrial (3) | ​ | ​ 1,409,543 | ​ | ​ 28,728 | ​ | 2.04% |
| Construction and land development (4) | ​ | 858,185 | ​ | 7,594 | ​ | 0.88% |
| Total commercial loans | ​ | ​ 5,744,284 | ​ | ​ 106,415 | ​ | 1.85% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| 1-4 family residential | ​ | 1,775,571 | ​ | 7,912 | ​ | 0.45% |
| Consumer | ​ | ​ 27,291 | ​ | 547 | ​ | 2.00% |
| Total retail loans | ​ | 1,802,862 | ​ | 8,459 | ​ | 0.47% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Total commercial and retail loans | ​ | ​ 7,547,146 | ​ | ​ 114,874 | ​ | 1.52% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Broker-dealer | ​ | ​ 348,415 | ​ | ​ 67 | ​ | 0.02% |
| Mortgage warehouse lending | ​ | ​ 277,959 | ​ | ​ 141 | ​ | 0.05% |
| Total loans held for investment | ​ | $8,173,520 | ​ | $115,082 | ​ | 1.41% |

(1) Included within commercial real estate non-owner occupied portfolio are loans within the office, retail and hotel/motel portfolio industry subsectors. At June 30, 2024, the office, retail and hotel/motel loans held for investment balances of approximately $498 million, $370 million and $190 million, respectively, had an allowance for credit losses of approximately $18 million, $5 million and $2 million, respectively, and an allowance for credit losses as a percentage of total loans held for investment of 3.5%, 1.3% and 1.2%, respectively.

(2) Included within commercial real estate owner occupied portfolio are loans within the industrial and office portfolio industry subsectors. At June 30, 2024, the industrial and office loans held for investment balances of approximately $362 million and $319 million, respectively, had an allowance for credit losses of approximately $9 million and $7 million, respectively, and an allowance for credit losses as a percentage of total loans held for investment of 2.4% and 2.3%, respectively.

(3) Commercial and industrial portfolio amounts reflect balances excluding banking segment mortgage warehouse lending. Included within commercial and industrial portfolio are loans within the auto note financing industry subsector. At June 30, 2024, the auto note financing loans held for investment balance of approximately $127 million had an allowance for credit losses of approximately $9 million, and an allowance for credit losses as a percentage of total loans held for investment of 7.3%.

(4) Included within construction and land development portfolio are loans within the retail and office portfolio industry subsectors. At June 30, 2024, the retail and office loans held for investment balances of approximately $27 million and $23 million, respectively, had an allowance for credit losses of approximately $0.4 million and $0.3 million, respectively, and an allowance for credit losses as a percentage of total loans held for investment of 1.5% and 1.4%, respectively.

#### Allowance Model Sensitivity

Our allowance model was designed to capture the historical relationship between economic and portfolio changes. As such, evaluating shifts in individual portfolio attributes or macroeconomic variables in isolation may not be indicative of past or future performance. It is difficult to estimate how potential changes in any one factor or input might affect the overall allowance for credit losses because we consider a wide variety of factors and inputs in the allowance for credit losses estimate. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

However, to consider the sensitivity of credit loss estimates to alternative macroeconomic forecasts, we compared the Company’s allowance for credit loss estimates as of June 30, 2024, excluding margin loans in the broker-dealer segment, and the banking segment mortgage warehouse programs, with modeled results using both upside (“S1”) and downside (“S3”) economic scenario forecasts published by Moody’s Analytics.

Compared to our economic forecast, the upside scenario assumes the economic impacts from international armed conflicts recede faster than expected and an increased demand for U.S. exports and manufacturing. Business sentiment and consumer confidence rise significantly. Real GDP is expected to grow 4.0% in the third quarter of 2024, 3.5% in the fourth quarter of 2024, 3.4% in the first quarter of 2025, and 3.5% in the second quarter of 2025. Average unemployment rates are expected to decline to 3.2% by the fourth quarter of 2024 and to 3.1% by the second quarter of 2025 before reverting to historical data. Inflation is expected to trend back toward the Federal Reserve’s target sooner than expected, and we expect the federal funds rate to peak at 5.3% during 2024.

Compared to our economic forecast, the downside scenario assumes the Federal Reserve’s efforts to resolve bank failures are not successful at restoring consumer and business confidence, causing banks to tighten lending standards while the Fed keeps the federal funds rate elevated due to inflation concerns. The international armed conflicts persist longer than anticipated and global supply chain issues worsen causing weaker manufacturing, increased good shortages, and the economy to fall back into recession. Real GDP is expected to decrease 3.4% in the third quarter of 2024, 3.7% in the fourth quarter of 2024, and 3.4% in the first quarter of 2025. Average unemployment rates are expected to increase to 6.9% by the fourth quarter of 2024, and to 8.0% by the third quarter of 2025 and then revert back to historical average rates over time. The Federal Reserve reduces the federal funds rate to support the economy to a 4.2% target by the fourth quarter of 2024 and to a 1.1% target by the first quarter of 2026.

The impact of applying all of the assumptions of the upside economic scenario during the reasonable and supportable forecast period would have resulted in a decrease in the allowance for credit losses of approximately $27 million or a weighted average expected loss rate of 1.2% as a percentage of our total loan portfolio, excluding margin loans in the broker-dealer segment and the banking segment mortgage warehouse lending programs.

The impact of applying all of the assumptions of the downside economic scenario during the reasonable and supportable forecast period would have resulted in an increase in the allowance for credit losses of approximately $50 million or a weighted average expected loss rate of 2.2% as a percentage of our total loan portfolio, excluding margin loans in the broker-dealer segment and the banking segment mortgage warehouse lending programs.

This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall allowance for credit losses as they do not reflect any potential changes in the adjustment to the quantitative calculation, which would also be influenced by the judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these modeled lifetime loss estimates based on then-current circumstances and conditions.

Our allowance for credit losses reflects our best estimate of current expected credit losses, which is highly dependent on several assumptions, including the macroeconomic outlook, inflationary pressures and labor market conditions, international armed conflicts and their impact on supply chains, the U.S elections and other various fiscal and monetary policy decisions. The sensitivity of many of these assumptions are often correlated and nonlinear so these results should not be simply extrapolated to estimate the allowance for credit losses accurately for more severe changes in economic scenarios. Future allowance for credit losses may vary considerably for these reasons.

#### Allowance Activity

The following table presents the activity in our allowance for credit losses and selected credit metrics within our loan portfolio for the periods presented (in thousands). Substantially all of the activity shown within the allowance for credit losses below occurred within the banking segment.

| ​ ​ ​ Loans Held for Investment: | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 ​ ​ ​ | ​ ​ ​ ​ 2023 ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 ​ ​ ​ | ​ ​ ​ 2023 ​ ​ ​ |
| --- | --- | --- | ---: | --- | --- | ---: |
| Balance, beginning of period | ​ | $104,231 ​ | $97,354 ​ | ​ | $111,413 ​ | $95,442 ​ |
| Provision for credit losses | ​ | 10,934 ​ | 14,836 ​ | ​ | 8,063 ​ | 17,167 ​ |
| Recoveries of loans previously charged off: | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Commercial real estate: | ​ | ​ ​ | ​ ​ ​ | ​ | ​ ​ | ​ ​ |
| Non-owner occupied | ​ | ​ — ​ | 9 ​ | ​ | ​ — ​ | ​ 9 ​ |
| Owner occupied | ​ | ​ 6 ​ | 11 ​ | ​ | ​ 15 ​ | ​ 22 ​ |
| Commercial and industrial | ​ | 452 ​ | 88 ​ | ​ | 794 ​ | 780 ​ |
| Construction and land development | ​ | 1 ​ | — ​ | ​ | 2 ​ | — ​ |
| 1-4 family residential | ​ | 93 ​ | 35 ​ | ​ | 104 ​ | 52 ​ |
| Consumer | ​ | ​ 46 ​ | 46 ​ | ​ | ​ 83 ​ | 85 ​ |
| Broker-dealer | ​ | ​ — ​ | — ​ | ​ | ​ — ​ | — ​ |
| Total recoveries | ​ | 598 ​ | 189 ​ | ​ | 998 ​ | 948 ​ |
| Loans charged off: | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Commercial real estate: | ​ | ​ ​ | ​ ​ ​ | ​ | ​ ​ | ​ ​ |
| Non-owner occupied | ​ | ​ — ​ | — ​ | ​ | ​ 1,647 ​ | ​ — ​ |
| Owner occupied | ​ | ​ — ​ | — ​ | ​ | ​ — ​ | ​ 977 ​ |
| Commercial and industrial | ​ | 615 ​ | 3,020 ​ | ​ | 3,598 ​ | 3,079 ​ |
| Construction and land development | ​ | — ​ | — ​ | ​ | — ​ | — ​ |
| 1-4 family residential | ​ | 1 ​ | — ​ | ​ | 1 ​ | 73 ​ |
| Consumer | ​ | ​ 65 ​ | 53 ​ | ​ | ​ 146 ​ | 122 ​ |
| Broker-dealer | ​ | ​ — ​ | — ​ | ​ | ​ — ​ | — ​ |
| Total charge-offs | ​ | 681 ​ | 3,073 ​ | ​ | 5,392 ​ | 4,251 ​ |
| Net recoveries (charge-offs) | ​ | (83) ​ | (2,884) ​ | ​ | (4,394) ​ | (3,303) ​ |
| Balance, end of period | ​ | $115,082 ​ | $109,306 ​ | ​ | $115,082 ​ | $109,306 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Average loans held for investment for the period | ​ | $7,892,879 ​ | $8,033,095 ​ | ​ | $7,864,263 ​ | $7,964,263 ​ |
| Total loans held for investment (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | $8,173,520 ​ | $8,354,122 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| **Loans Held for Sale:** | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Average loans held for sale for the period | ​ | $934,445 ​ | $1,043,526 ​ | ​ | $868,271 ​ | $930,090 ​ |
| Total loans held for sale (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | $1,264,437 ​ | $1,333,044 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| **Selected Credit Metrics:** | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Net recoveries (charge-offs) to average total loans held for investment (1) | ​ | ​ (0.00)% | ​ (0.14)% | ​ | ​ (0.11)% | ​ (0.17)% |
| Non-accrual loans: | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Loans held for investment (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | $101,605 ​ | $35,195 ​ |
| Loans held for sale (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | $4,059 ​ | $3,761 ​ |
| Non-accrual loans to total loans (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ 1.12% | ​ 0.40% |
| Allowance for credit losses on loans held for investment to: | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ ​ |
| Total loans (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ 1.22% | ​ 1.13% |
| Total loans held for investment (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ 1.41% | ​ 1.31% |
| Total non-accrual loans (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ 108.91% | ​ 280.59% |
| Non-accrual loans held for investment (end of period) | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ 113.26% | ​ 310.57% |

(1) Net recoveries (charge-offs) to average total loans held for investment ratio presented on a consolidated basis for all periods given relative immateriality of resulting measure by loan portfolio segment.

Total non-accrual loans classified as loans held for investment increased by $37.3 million from December 31, 2023 to June 30, 2024. This increase was primarily due to the addition of commercial and industrial loans to non-accrual status, partially offset by a decrease due to the reclassification of a single loan from loans held for investment to loans held for sale, which was sold during the second quarter of 2024, as well as decreases in construction and land development loans and decreases in 1-4 family residential loans.

As previously discussed in detail within this section, the allowance for credit losses has fluctuated from period to period, which impacted the resulting ratios noted in the table above. The distribution of the allowance for credit losses among loan types and the percentage of the loans for that type to gross loans, excluding unearned income, within our loan portfolio are presented in the table below (dollars in thousands).

| ​ ​ ​ Allocation of the Allowance for Credit Losses Commercial real estate: | ​ ​ ​ ​ | ​ ​ June 30, 2024 ​ ​ Reserve ​ ​ | ​ ​ ​ ​ | ​ ​ ​ % of ​ Gross Loans ​ ​ ​ | ​ ​ December 31, 2023 ​ ​ Reserve ​ | ​ ​ ​ | ​ ​ ​ % of ​ Gross Loans ​ ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Non-owner occupied | ​ | $37,321 | ​ | 24.49% | $40,061 | ​ | 23.39% |
| Owner occupied | ​ | ​ 32,772 | ​ | 18.05% | ​ 28,114 | ​ | 17.60% |
| Commercial and industrial |  | 28,869 |  | 20.65% | 20,926 |  | 19.90% |
| Construction and land development |  | 7,594 |  | 10.50% | 12,102 |  | 12.76% |
| 1-4 family residential |  | 7,912 |  | 21.72% | 9,461 |  | 21.75% |
| Consumer | ​ | ​ 547 |  | 0.33% | 648 |  | 0.34% |
| Broker-dealer | ​ | ​ 67 |  | 4.26% | 101 |  | 4.26% |
| Total |  | $115,082 |  | 100.00% | $111,413 |  | 100.00% |

The following table summarizes historical levels of the allowance for credit losses on loans held for investment, distributed by portfolio segment (in thousands).

| ​ ​ ​ Commercial real estate: | ​ ​ ​ | ​ ​ June 30, 2024 ​ ​ | ​ ​ ​ | ​ ​ March 31, 2024 ​ ​ | ​ ​ ​ ​ | ​ ​ December 31, 2023 ​ ​ | ​ ​ ​ | ​ ​ September 30, 2023 ​ ​ | ​ ​ ​ | ​ ​ June 30, 2023 ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Non-owner occupied | ​ | $37,321 | ​ | $39,563 | ​ | $40,061 | ​ | $40,433 | ​ | $43,582 |
| Owner occupied | ​ | ​ 32,772 | ​ | ​ 28,737 | ​ | ​ 28,114 | ​ | ​ 29,438 | ​ | ​ 27,880 |
| Commercial and industrial | ​ | 28,869 | ​ | 16,552 | ​ | 20,926 | ​ | 19,722 | ​ | 17,315 |
| Construction and land development | ​ | 7,594 | ​ | 10,008 | ​ | 12,102 | ​ | 8,970 | ​ | 7,395 |
| 1-4 family residential | ​ | 7,912 | ​ | 8,744 | ​ | 9,461 | ​ | 11,472 | ​ | 11,618 |
| Consumer | ​ | ​ 547 | ​ | ​ 544 | ​ | ​ 648 | ​ | ​ 601 | ​ | ​ 615 |
| Broker-dealer | ​ | ​ 67 | ​ | ​ 83 | ​ | ​ 101 | ​ | ​ 186 | ​ | ​ 901 |
| ​ | ​ | $115,082 | ​ | $104,231 | ​ | $111,413 | ​ | $110,822 | ​ | $109,306 |

#### Unfunded Loan Commitments

In order to estimate the allowance for credit losses on unfunded loan commitments, the Bank uses a process similar to that used in estimating the allowance for credit losses on the funded portion. The allowance is based on the estimated exposure at default, multiplied by the lifetime probability of default grade and loss given default grade for that particular loan segment. The Bank estimates expected losses by calculating a commitment usage factor based on industry usage factors. The commitment usage factor is applied over the relevant contractual period. Loss factors from the underlying loans to which commitments are related are applied to the results of the usage calculation to estimate any liability for credit losses related for each loan type. Letters of credit are not currently reserved because they are issued primarily as credit enhancements and the likelihood of funding is low.

Changes in the allowance for credit losses for loans with off-balance sheet credit exposures are shown below (in thousands).

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Balance, beginning of period | ​ | $8,296 | ​ | $6,805 | ​ | $8,876 | ​ | $7,784 |
| Other noninterest expense | ​ | ​ 289 | ​ | ​ 1,187 | ​ | ​ (291) | ​ | ​ 208 |
| Balance, end of period | ​ | $8,585 | ​ | $7,992 | ​ | $8,585 | ​ | $7,992 |

The increases in the reserve for unfunded commitments during the three and six months ended June 30, 2023 were primarily due to increases in expected loss rates. During the three months ended June 30, 2024 the increase in the reserve for unfunded commitments was primarily due to an increase in expected loss rates, while the decrease in the reserve for unfunded commitments during the six months ended June 30, 2024 was primarily due to decreases in commitment balances.

#### Potential Problem Loans

Potential problem loans consist of loans that are performing in accordance with contractual terms but for which management has concerns about the ability of an obligor to continue to comply with repayment terms because of the obligor’s potential operating or financial difficulties or whether repayment may depend on collateral or other risk mitigation. Management monitors these loans and reviews their performance on a regular basis. Potential problem loans contain potential weaknesses that could improve, persist or further deteriorate. If such potential weaknesses persist without improving, the loan is subject to downgrade, typically to substandard, in three to six months. Potential problem loans include those loans assigned a grade of special mention and substandard accrual within our risk grading matrix. Potential problem loans do not include purchased credit deteriorated (“PCD”) loans because PCD loans exhibited evidence of more than insignificant credit deterioration at acquisition that made it probable that all contractually required principal payments would not be collected.

At June 30, 2024, we had $176.8 million of potential problem loans, compared to $207.4 million at December 31, 2023. Our potential problem loans designated as substandard accrual at June 30, 2024 and December 31, 2023, totaled $123.8 million and $204.1 million, respectively. The decrease from December 31, 2023 to June 30, 2024 was primarily attributable to decreases in commercial and industrial loans, construction and land development loans and commercial real estate non-owner occupied, partially offset by an increase in commercial real estate owner occupied loans. Of the $123.8 million of potential problem loans designated as substandard accrual at June 30, 2024, $41.0 million, $38.0 million and $30.4 million were associated with commercial real estate owner occupied loans, commercial real estate non-owner occupied loans and commercial and industrial loans.

Potential problem loans designated as special mention were comprised of nine credit relationships totaling $53.0 million at June 30, 2024, compared with three credit relationships totaling $3.2 million at December 31, 2023. Of the $53.0 million of potential problem loans at June 30, 2024, $44.1 million was associated with three credit relationships included in our commercial real estate non-owner occupied loan portfolio within the office and multifamily industry subsectors.

#### Non-Performing Assets

The following table presents components of our non-performing assets (dollars in thousands).

| ​ ​ ​ Loans accounted for on a non-accrual basis: Commercial real estate: | ​ ​ ​ ​ | ​ ​ ​ June 30, ​ 2024 ​ ​ ​ ​ ​ | ​ ​ ​ December 31, ​ 2023 ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Variance ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | ---: |
| Non-owner occupied | ​ | $6,894 ​ | $36,440 ​ | ​ | $(29,546) ​ |
| Owner occupied | ​ | ​ 6,437 ​ | ​ 5,098 ​ | ​ | ​ 1,339 ​ |
| Commercial and industrial | ​ | 80,755 ​ | 9,502 ​ | ​ | 71,253 ​ |
| Construction and land development | ​ | 485 ​ | 3,480 ​ | ​ | (2,995) ​ |
| 1-4 family residential | ​ | 11,092 ​ | 13,801 ​ | ​ | (2,709) ​ |
| Consumer | ​ | ​ 1 ​ | 6 ​ | ​ | ​ (5) ​ |
| Broker-dealer | ​ | ​ — ​ | — ​ | ​ | ​ — ​ |
| Non-accrual loans | ​ | $105,664 ​ | $68,327 ​ | ​ | $37,337 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Non-accrual loans as a percentage of total loans | ​ | 1.12% | 0.76% | ​ | 0.36% |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Other real estate owned | ​ | $2,973 ​ | $5,095 ​ | ​ | $(2,122) ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Other repossessed assets | ​ | $464 ​ | $— ​ | ​ | $464 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Non-performing assets | ​ | $109,101 ​ | $73,422 ​ | ​ | $35,679 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Non-performing assets as a percentage of total assets | ​ | 0.70% | 0.45% | ​ | 0.25% |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Loans past due 90 days or more and still accruing | ​ | $122,451 ​ | $115,090 ​ | ​ | $7,361 ​ |

At June 30, 2024, non-accrual loans included 35 commercial and industrial relationships with loans secured by finance company notes receivable, accounts receivable, inventory and equipment. Commercial and industrial non-accrual loans increased by $71.3 million from December 31, 2023 to June 30, 2024 primarily due to the additions of two credit relationships within our auto note financing industry subsector with an aggregate loan balance of $65.3 million. Non-accrual loans at June 30, 2024 also included $4.1 million of loans secured by residential and commercial real estate which were classified as loans held for sale. At December 31, 2023, non-accrual loans included 40 commercial and industrial relationships with loans secured primarily by notes receivable, accounts receivable and equipment. Non-accrual loans at December 31, 2023 also included $4.0 million of loans secured by residential real estate which were classified as loans held for sale.

Other real estate owned (“OREO”) decreased from December 31, 2023 to June 30, 2024, primarily due to disposals and valuation adjustments totaling $4.5 million, offset by additions totaling $2.4 million. At both June 30, 2024 and December 31, 2023, OREO was primarily comprised of commercial properties.

### Deposits

The banking segment’s major source of funds and liquidity is its deposit base. Deposits provide funding for its investments in loans and securities. Interest paid for deposits must be managed carefully to control the level of interest expense and overall net interest margin. The composition of the deposit base (time deposits versus interest-bearing demand deposits and savings), as discussed in more detail within the section titled “Liquidity and Capital Resources — Banking Segment” below, is constantly changing due to the banking segment’s needs and market conditions. Currently, the banking segment is facing intense competition for its deposit base as customers seek higher yields on deposits. Consistent with the consolidated trend in average rates paid on interest-bearing deposits noted in the table below, the banking segment’s average rate paid on interest-bearing deposits during the three months ended June 30, 2024 was 3.92%, compared to 3.93% during the three months ended March 31, 2024 and 3.50% during the three months ended June 30, 2023.

Given the increases in interest rates since the first quarter of 2022 and the intense competition for deposits in its market area, the Bank’s cumulative interest-bearing deposit pricing beta, excluding deposits from the Hilltop Securities FDIC-insured sweep program and brokered deposits, has approximated 67%. The deposit pricing beta represents the change in interest-bearing deposit pricing in response to a change in market interest rates. The historical interest-bearing deposit pricing beta for the Bank, excluding deposits from our Hilltop Securities FDIC-insured sweep program and brokered deposits, has approximated 55%. We expect that the Bank’s cost related to interest-bearing deposits during 2024 to continue to be driven by various factors, including competition as well as economic and market area factors.

The table below presents the average balance of, and rate paid on, consolidated deposits (dollars in thousands).

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 Average Balance | ​ ​ | ​ ​ ​ Average Rate Paid ​ | ​ ​ 2023 Average Balance | ​ ​ | ​ ​ ​ ​ Average Rate Paid ​ |
| --- | --- | --- | ---: | --- | ---: | --- | --- | ---: |
| Noninterest-bearing demand deposits | ​ | ​ | $2,882,768 |  | 0.00% | $3,664,512 |  | 0.00% |
| Interest-bearing deposits: | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Demand | ​ | ​ | 6,224,385 |  | 3.54% | ​ 6,246,926 |  | 2.50% |
| Savings | ​ | ​ | 248,147 |  | 1.19% | ​ 297,066 |  | 0.97% |
| Time | ​ | ​ | 1,210,715 |  | 4.29% | ​ 945,450 |  | 2.47% |
| ​ | ​ | ​ | ​ 7,683,247 | ​ | 3.58% | ​ 7,489,442 | ​ | 2.44% |
| Total deposits | ​ | ​ | $10,566,015 |  | 2.60% | $11,153,954 |  | 1.64% |

The table above includes interest-bearing brokered deposits with balances of approximately $10 million at June 30, 2024, compared with approximately $208 million at December 31, 2023. As previously discussed, to bolster our liquidity position given banking sector uncertainties in early 2023, we increased brokered deposits at the Bank by approximately $390 million during the second quarter of 2023, which have subsequently matured during the first and second quarters of 2024. The variability in the level of brokered deposits has been, and will continue to be, managed through asset/liability strategy and policies that address diversification of funding sources and market conditions, including demand by customers and other investors for those deposits, and the cost of funds available from alternative sources at the time.

At June 30, 2024, total estimated uninsured deposits were $4.8 billion, or approximately 46% of total deposits, while estimated uninsured deposits, excluding collateralized deposits of $325.4 million, were $4.5 billion, or approximately 43% of total deposits. Total estimated uninsured deposits were $4.7 billion, or approximately 42% of total deposits, as of December 31, 2023.

The following table presents the scheduled maturities of the portion of our time deposits that are in excess of the FDIC insurance limit of $250,000 as of June 30, 2024 (in thousands).

| ​ Months to maturity: | ​ | ​ ​ ​ |
| --- | --- | ---: |
| 3 months or less | ​ | $323,412 |
| 3 months to 6 months | ​ | 65,735 |
| 6 months to 12 months | ​ | 90,069 |
| Over 12 months | ​ | 75,251 |
| ​ | ​ | $554,467 |

### Borrowings

Our consolidated borrowings are shown in the table below (dollars in thousands).

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ June 30, 2024 ​ Balance | ​ ​ ​ ​ Average ​ Rate Paid ​ | ​ ​ December 31, 2023 ​ Balance | ​ ​ ​ ​ Average ​ Rate Paid ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Variance | ​ ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: | --- | ---: | --- |
| Short-term borrowings | ​ | $897,613 | 4.73% | $900,038 | 4.75% | ​ | $(2,425) | ​ |
| Notes payable | ​ | 347,402 | 4.15% | 347,145 | 4.27% | ​ | ​ 257 | ​ |
| ​ | ​ | $1,245,015 | 4.58% | $1,247,183 | 4.64% | ​ | $(2,168) | ​ |

Short-term borrowings consisted of federal funds purchased, securities sold under agreements to repurchase, borrowings at the FHLB, short-term bank loans and commercial paper. The decrease in short-term borrowings at June 30, 2024, compared with December 31, 2023, primarily reflected a decrease in federal funds purchased by the banking segment, significantly offset by increases in commercial paper and securities sold under agreements to repurchase by the broker-dealer segment. Notes payable at June 30, 2024 was comprised of $149.6 million related to the Senior Notes, net of loan origination fees, and Subordinated Notes, net of origination fees, of $197.8 million.

### Liquidity and Capital Resources

Hilltop is a financial holding company whose assets primarily consist of the stock of its subsidiaries and invested assets. Hilltop’s primary investment objectives, as a holding company, are to support capital deployment for organic growth and to preserve capital to be deployed through acquisitions, dividend payments and stock repurchases. At June 30, 2024, Hilltop had $197.9 million in cash and cash equivalents, an increase of $6.3 million from $191.6 million at December 31, 2023. This increase in cash and cash equivalents was primarily due to the receipt of $71.9 million of dividends from subsidiaries, significantly offset by cash outflows of $22.2 million in cash dividends declared, $19.9 million in stock repurchases and other general corporate expenses. Subject to regulatory restrictions, Hilltop has received, and may also continue to receive, dividends from its subsidiaries. If necessary or appropriate, we may also finance acquisitions with the proceeds from equity or debt issuances. We believe that Hilltop’s liquidity is sufficient for the foreseeable future, with current short-term liquidity needs including operating expenses, interest on debt obligations, dividend payments to stockholders and potential stock repurchases.

As discussed in more detail below, our Senior Notes mature in May 2025, and we have the ability to redeem the 2030 Subordinated Notes, in whole or in part, beginning in May 2025. We continue to evaluate our options and may choose to refinance and/or utilize available cash on hand to satisfy such existing indebtedness. Although it is difficult in the current economic environment to predict the terms and conditions of financing that may be available in the future, we believe that we have sufficient access to credit from financial institutions and/or financing from public and private debt and equity markets to refinance or repay our Senior Notes.

#### Economic Environment

As previously discussed, operational and financial headwinds during 2023 have had, and are expected to continue to have, an adverse impact on our operating results during 2024. The impacts of noted headwinds in 2024 are highly uncertain and will depend 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, exposure to increasing funding costs from intense competition for deposits, inflationary pressures associated with compensation, occupancy and software costs and labor market conditions, and international armed conflicts and their impact on supply chains. As demonstrated during both the extreme volatility and disruptions in the capital and credit markets beginning in March 2020 resulting from the pandemic and banking sector-related uncertainty and concerns associated with liquidity primarily due to high-profile bank failures during early 2023 and their respective negative impacts on the economy, we will continue to monitor the economic environment and evaluate appropriate actions to enhance our financial flexibility, protect capital, minimize losses and ensure target liquidity levels.

#### Dividend Declaration

On July 25, 2024, our board of directors declared a quarterly cash dividend of $0.17 per common share, payable on August 30, 2024 to all common stockholders of record as of the close of business on August 16, 2024.

Future dividends on our common stock are subject to the determination by the board of directors based on an evaluation of our earnings and financial condition, liquidity and capital resources, the general economic and regulatory climate, our ability to service any equity or debt obligations senior to our common stock and other factors.

#### Stock Repurchases

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 six months ended June 30, 2024, Hilltop paid $19.9 million to repurchase an aggregate of 640,042 shares of our common stock at an average price of $31.01 per share pursuant to the stock repurchase program.

#### Senior Notes due 2025

The Senior Notes bear interest at a rate of 5% per year, payable semi-annually in arrears in cash on April 15 and October 15 of each year, commencing on October 15, 2015. The Senior Notes will mature on April 15, 2025, unless we redeem the Senior Notes, in whole at any time or in part from time to time, on or after January 15, 2025 (three months prior to the maturity date of the Senior Notes) at our election at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date. At June 30, 2024, $150.0 million of our Senior Notes was outstanding.

#### Subordinated Notes due 2030 and 2035

On May 7, 2020, we completed a public offering of $50 million aggregate principal amount of 2030 Subordinated Notes and $150 million aggregate principal amount of 2035 Subordinated Notes that mature on May 15, 2030 and May 15, 2035, respectively. The price to the public for the Subordinated Notes was 100% of the principal amount of the Subordinated Notes. The net proceeds from the offering, after deducting underwriting discounts and fees and expenses of $3.4 million, were $196.6 million.

We may redeem the Subordinated Notes, in whole or in part, from time to time, subject to obtaining Federal Reserve approval, beginning with the interest payment date of May 15, 2025 for the 2030 Subordinated Notes and beginning with the interest payment date of May 15, 2030 for the 2035 Subordinated Notes at a redemption price equal to 100% of the principal amount of the Subordinated Notes being redeemed plus accrued and unpaid interest to but excluding the date of redemption.

The 2030 Subordinated Notes bear interest at a rate of 5.75% per year, payable semi-annually in arrears commencing on November 15, 2020. The interest rate for the 2030 Subordinated Notes will reset quarterly beginning May 15, 2025 to an interest rate, per year, equal to the then-current benchmark rate, which is expected to be three-month term SOFR rate, plus 5.68%, payable quarterly in arrears. The 2035 Subordinated Notes bear interest at a rate of 6.125% per year, payable semi-annually in arrears commencing on November 15, 2020. The interest rate for the 2035 Subordinated Notes will reset quarterly beginning May 15, 2030 to an interest rate, per year, equal to the then-current benchmark rate, which is expected to be three-month term SOFR rate plus 5.80%, payable quarterly in arrears. At June 30, 2024, $200.0 million of our Subordinated Notes was outstanding.

#### Regulatory Capital

We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy and regulatory requirements, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

In order to avoid limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers, Basel III requires banking organizations to maintain a capital conservation buffer above minimum risk-based capital requirements measured relative to risk-weighted assets.

The following table shows PlainsCapital’s and Hilltop’s actual capital amounts and ratios in accordance with Basel III compared to the regulatory minimum capital requirements including conservation buffer ratio in effect at June 30, 2024 (dollars in thousands). Based on actual capital amounts and ratios shown in the following table, PlainsCapital’s ratios place it in the “well capitalized” (as defined) capital category under regulatory requirements. Actual capital amounts and ratios as of June 30, 2024 reflect PlainsCapital’s and Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period through December 31, 2024.

| ​ ​ ​ ​ ​ Tier 1 capital (to average assets): | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ June 30, 2024 Amount ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ Ratio ​ ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Minimum Capital ​ Requirements Including ​ Conservation Buffer ​ Ratio ​ ​ | ​ ​ ​ ​ To Be Well Capitalized Ratio ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- |
| PlainsCapital | ​ | $1,431,873 |  | 11.36% | ​ | 4.0% | 5.0% |
| Hilltop | ​ | 1,982,667 |  | 12.87% | ​ | 4.0% | N/A ​ |
| Common equity Tier 1 capital (to risk-weighted assets): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| PlainsCapital | ​ | ​ 1,431,873 |  | 15.58% | ​ | 7.0% | 6.5% |
| Hilltop | ​ | ​ 1,982,667 |  | 19.45% | ​ | 7.0% | N/A ​ |
| Tier 1 capital (to risk-weighted assets): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| PlainsCapital | ​ | 1,431,873 |  | 15.58% | ​ | 8.5% | 8.0% |
| Hilltop | ​ | 1,982,667 |  | 19.45% | ​ | 8.5% | N/A ​ |
| Total capital (to risk-weighted assets): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| PlainsCapital | ​ | 1,541,564 |  | 16.77% | ​ | 10.5% | 10.0% |
| Hilltop | ​ | 2,300,909 |  | 22.57% | ​ | 10.5% | N/A ​ |

We discuss regulatory capital requirements in more detail in Note 16 to our consolidated financial statements, as well as under the caption “Government Supervision and Regulation — Corporate — Capital Adequacy Requirements and BASEL III” set forth in Part I, Item 1, of our 2023 Form 10-K.

#### Banking Segment

Within our banking segment, our primary uses of cash are for customer withdrawals and extensions of credit as well as our borrowing costs and other operating expenses. Our corporate treasury group is responsible for continuously monitoring our liquidity position to ensure that our assets and liabilities are managed in a manner that will meet our short-term and long-term cash requirements. Our goal is to manage our liquidity position in a manner such that we can meet our customers’ short-term and long-term deposit withdrawals and anticipated and unanticipated increases in loan demand without penalizing earnings. Funds invested in short-term marketable instruments, the continuous maturing of other interest-earning assets, cash flows from self-liquidating investments such as mortgage-backed securities and collateralized mortgage obligations, the possible sale of available for sale securities and the ability to securitize certain types of loans provide sources of liquidity from an asset perspective. The liability base provides sources of liquidity through deposits and the maturity structure of short-term borrowed funds. For short-term liquidity needs, we utilize federal fund lines of credit with correspondent banks, securities sold under agreements to repurchase, borrowings from the Federal Reserve and borrowings under lines of credit with other financial institutions. For intermediate liquidity needs, we utilize advances from the FHLB. To supply liquidity over the longer term, we have access to brokered time deposits, term loans at the FHLB and borrowings under lines of credit with other financial institutions.

The above sources of liquidity allow the banking segment to meet increased liquidity demands without adversely affecting daily operations. The Bank’s borrowing capacity through access to secured funding sources is summarized in the following table (in millions). Available liquidity noted below does not include borrowing capacity available through the discount window at the Federal Reserve.

| ​ ​ ​ | ​ ​ ​ | ​ ​ June 30, 2024 | ​ ​ ​ | ​ ​ December 31, 2023 |
| --- | --- | ---: | --- | ---: |
| FHLB capacity | ​ | $4,386 | ​ | $4,205 |
| Investment portfolio (available) | ​ | 1,446 | ​ | 1,594 |
| Fed deposits (excess daily requirements) | ​ | ​ 626 | ​ | ​ 1,612 |
| ​ | ​ | $6,458 | ​ | $7,411 |

As previously discussed, the banking sector experienced increased uncertainty and concerns associated with its liquidity positions primarily due to high-profile bank failures during early 2023 as depositors sought to reduce risks associated with uninsured deposits and withdraw such deposits from existing bank relationships. As a result, both regulatory scrutiny and market focus on liquidity increased. These failures 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 are maintained. During 2023, we began increasing interest-bearing deposit rates to address rising market interest rates and intense competition for liquidity to combat deposit outflows. During the second quarter of 2024, our deposit funding costs began to stabilize as higher cost brokered deposits were fully returned and our interest-bearing deposits yield flattened. At June 30, 2024, the Bank also accessed and included approximately $750 million of core deposits on its balance sheet from our Hilltop Securities FDIC-insured sweep program, while the Bank is not utilizing any of its FHLB borrowing capacity noted above through the use of short-term borrowings.

Further, to bolster our liquidity position, we increased brokered deposits at the Bank by approximately $390 million during the second quarter of 2023, which have subsequently matured during the first and second quarters of 2024. To date, we have not leveraged the discount window at the Federal Reserve or the BTFP.

Within our banking segment, deposit flows 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. An economic recovery and improved commercial real estate investment outlook may result in an outflow of deposits at an accelerated pace as customers utilize such available funds for expanded operations and investment opportunities. The Bank regularly evaluates its deposit products and pricing structures relative to the market to maintain competitiveness over time. Currently, the Bank is facing intense competition from bank and non-bank competitors for its deposit base and expects that its interest expense on certain deposits will continue to be driven by various factors, including competition as well as economic and market area factors.

The Bank’s 15 largest depositors, excluding Hilltop and Hilltop Securities, collectively accounted for 10.94% of the Bank’s total deposits, and the Bank’s five largest depositors, excluding Hilltop and Hilltop Securities, collectively accounted for 5.85% of the Bank’s total deposits at June 30, 2024. The loss of one or more of our largest Bank customers, or a significant decline in our deposit balances due to ordinary course fluctuations related to these customers’ businesses, could adversely affect our liquidity and might require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short-term basis to replace such deposits.

#### Broker-Dealer Segment

The Hilltop Broker-Dealers rely on their equity capital, short-term bank borrowings, interest-bearing and noninterest-bearing client credit balances, correspondent deposits, securities lending arrangements, repurchase agreement financing, commercial paper issuances and other payables to finance their assets and operations, subject to their respective compliance with broker-dealer net capital and customer protection rules. At June 30, 2024, Hilltop Securities had credit arrangements with two unaffiliated banks, with maximum aggregate commitments of up to $425.0 million. These credit arrangements are used to finance securities owned, securities held for correspondent accounts, receivables in customer margin accounts and underwriting activities. These credit arrangements are provided on an “as offered” basis and are not committed lines of credit. In addition, Hilltop Securities has committed revolving credit facilities with two unaffiliated banks, with aggregate availability of up to $200.0 million. At June 30, 2024, Hilltop Securities had no borrowings under its credit arrangements or under its credit facilities.

Hilltop Securities uses the net proceeds (after deducting related issuance expenses) from the sale of two commercial paper programs for general corporate purposes, including working capital and the funding of a portion of its securities inventories. The commercial paper notes (“CP Notes”) may be issued with maturities of 14 days to 270 days from the date of issuance. The CP Notes are issued under two separate programs, Series 2019-1 CP Notes and Series 2019-2 CP Notes, in maximum aggregate amounts of $300 million and $200 million, respectively. As of June 30, 2024, the weighted average maturity of the CP Notes was 148 days at a rate of 6.13% with a weighted average remaining life of 68 days. At June 30, 2024, the aggregate amount outstanding under these secured arrangements was $224.2 million, which was collateralized by securities held for Hilltop Securities accounts valued at $249.8 million.

#### Mortgage Origination Segment

PrimeLending funds the mortgage loans it originates through a warehouse line of credit maintained with the Bank, which had a total commitment of $1.2 billion, of which $1.15 billion was drawn at June 30, 2024. PrimeLending sells substantially all mortgage loans it originates to various investors in the secondary market, historically with the majority with servicing released. As these mortgage loans are sold in the secondary market, PrimeLending pays down its warehouse line of credit with the Bank. In addition, PrimeLending has an available line of credit with an unaffiliated bank of up to $1.0 million, of which no borrowings were drawn at June 30, 2024.

PrimeLending owns a 100% membership interest in PrimeLending Ventures Management, LLC (“Ventures Management”), which holds a controlling ownership interest in and is the managing member of certain ABAs. At June 30, 2024, these ABAs had combined available lines of credit totaling $65.0 million, all of which was with the Bank, with outstanding borrowings of $39.6 million.

#### Other Material Contractual Obligations, Off-Balance Sheet Arrangements, Commitments and Guarantees

Since December 31, 2023, there have been no material changes in other material contractual obligations disclosed within the section captioned “Other Material Contractual Obligations, Off-Balance Sheet Arrangements, Commitments and Guarantees” set forth in Part II, Item 7 of our 2023 Form 10-K.

Additionally, in the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets.

#### Banking Segment

We enter into contractual loan commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of our commitments to extend credit are contingent upon customers maintaining specific credit standards until the time of loan funding. We minimize our exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. We assess the credit risk associated with certain commitments to extend credit and have recorded a liability related to such credit risk in our consolidated financial statements.

Standby letters of credit are written conditional commitments issued by us to guarantee the performance of a customer to a third-party. In the event the customer does not perform in accordance with the terms of the agreement with the third-party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the customer. Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

In the aggregate, the Bank had outstanding unused commitments to extend credit of $2.0 billion at June 30, 2024 and outstanding financial and performance standby letters of credit of $62.6 million at June 30, 2024.

#### Broker-Dealer Segment

The Hilltop Broker-Dealers execute, settle and finance various securities transactions that may expose the Hilltop Broker-Dealers to off-balance sheet risk in the event that a customer or counterparty does not fulfill its contractual obligations. Examples of such transactions include the sale of securities not yet purchased by customers or for the account of the Hilltop Broker-Dealers, use of derivatives to support certain non-profit housing organization clients, clearing agreements between the Hilltop Broker-Dealers and various clearinghouses and broker-dealers, secured financing arrangements that involve pledged securities, and when-issued underwriting and purchase commitments.

### Impact of Inflation and Changing Prices

Our consolidated financial statements included herein have been prepared in accordance with GAAP, which presently require us to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on our operations is reflected in increased operating costs. Historically, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. However, inflation rose sharply at the end of 2021 and continued to rise in 2023 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated during 2024. Furthermore, a prolonged period of inflation could cause our costs, including compensation, occupancy and software costs, to increase, which could adversely affect our results of operations and financial condition.

While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the U.S. government, its agencies and various other governmental regulatory authorities.

### Critical Accounting Estimates

We have identified certain accounting estimates which involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our accounting policies are more fully described in Note 1 to the consolidated financial statements. Actual amounts and values as of the balance sheet dates may be materially different than the amounts and values reported due to the inherent uncertainty in the estimation process. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date. The critical accounting estimates, as summarized below, which we believe to be the most critical in preparing our consolidated financial statements relate to allowance for credit losses, mortgage servicing rights asset, goodwill and identifiable intangible assets, mortgage loan indemnification liability and acquisition accounting. Since December 31, 2023, there have been no changes in critical accounting estimates as further described under “Critical Accounting Estimates” in our 2023 Form 10-K.

## Market risk

As filed, 21,591 characters.

Our assessment of market risk as of June 30, 2024 indicates there are no material changes in the quantitative and qualitative disclosures from those previously reported in our 2023 Form 10-K, except as discussed below.

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. Market risk represents the risk of loss that may result from changes in value of a financial instrument as a result of changes in interest rates, market prices and the credit perception of an issuer. The disclosure is not meant to be a precise indicator of expected future losses, but rather an indicator of reasonably possible losses, and therefore our actual results may differ from any of the following projections. This forward-looking information provides an indicator of how we view and manage our ongoing market risk exposures.

#### Banking Segment

The banking segment is engaged primarily in the business of investing funds obtained from deposits and borrowings in interest-earning loans and investments, and our primary component of market risk is sensitivity to changes in interest rates. Consequently, our earnings depend to a significant extent on our net interest income, which is the difference between interest income on loans and investments and our interest expense on deposits and borrowings. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-bearing assets, we are subject to interest rate risk and corresponding fluctuations in net interest income.

There are several common sources of interest rate risk that must be effectively managed if there is to be minimal impact on our earnings and capital. Repricing risk arises largely from timing differences in the pricing of assets and liabilities. Reinvestment risk refers to the reinvestment of cash flows from interest payments and maturing assets at lower or higher rates. Basis risk exists when different yield curves or pricing indices do not change at precisely the same time or in the same magnitude such that assets and liabilities with the same maturity are not all affected equally. Yield curve risk refers to unequal movements in interest rates across a full range of maturities.

We have employed asset/liability management policies that attempt to manage our interest-earning assets and interest-bearing liabilities, thereby attempting to control the volatility of net interest income, without having to incur unacceptable levels of risk. We employ procedures which include interest rate shock analysis, repricing gap analysis and balance sheet decomposition techniques to help mitigate interest rate risk in the ordinary course of business. In addition, the asset/liability management policies permit the use of various derivative instruments to manage interest rate risk or hedge specified assets and liabilities. To help mitigate net interest income spread compression between our assets and liabilities as the Federal Reserve increases interest rates, management continues to execute certain derivative trades, as either cash flow hedges or fair value hedges, that benefit the banking segment as interest rates rise. Any changes in interest rates across the term structure will continue to impact net interest income and net interest margin. The impact of rate movements will change with the shape of the yield curve, including any changes in steepness or flatness and inversions at any points on the yield curve.

An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market interest rates. The management of interest rate risk is performed by analyzing the maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time (“GAP”) and by analyzing the effects of interest rate changes on net interest income over specific periods of time by projecting the performance of the mix of assets and liabilities in varied interest rate environments. Interest rate sensitivity reflects the potential effect on net interest income resulting from a movement in interest rates. A company is considered to be asset sensitive, or have a positive GAP, when the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period. Conversely, a company is considered to be liability sensitive, or have a negative GAP, when the amount of its interest-bearing liabilities maturing or repricing within a given period exceeds the amount of its interest-earning assets also maturing or repricing within that time period. During a period of rising interest rates, a negative GAP would tend to affect net interest income adversely, while a positive GAP would tend to result in an increase in net interest income. During a period of falling interest rates, a negative GAP would tend to result in an increase in net interest income, while a positive GAP would tend to affect net interest income adversely.

As illustrated in the table below, the banking segment is currently asset sensitive overall. Loans that adjust daily or monthly to the Wall Street Journal Prime rate comprise a large percentage of interest sensitive assets and are the primary cause of the banking segment’s asset sensitivity. To help neutralize interest rate sensitivity, the banking segment has kept the terms of most of its borrowings under one year as shown in the following table (dollars in thousands).

| ​ ​ ​ ​ Interest sensitive assets: | ​ ​ ​ ​ | ​ ​ ​ June 30, 2024 3 Months or Less ​ ​ ​ ​ | ​ ​ ​ \> 3 Months to 1 Year ​ ​ ​ ​ | ​ ​ ​ \> 1 Year to 3 Years ​ ​ ​ ​ | ​ ​ ​ \> 3 Years to 5 Years ​ ​ ​ ​ | ​ ​ ​ ​ ​ \> 5 Years ​ ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ | ​ ​ |
| --- | --- | ---: | ---: | ---: | ---: | ---: | ---: | --- |
| Loans | ​ | $4,620,638 ​ | $1,305,791 ​ | $1,798,706 ​ | $743,166 ​ | $552,766 ​ | $9,021,067 | ​ |
| Securities | ​ | 468,144 ​ | 216,289 ​ | 417,178 ​ | 327,203 ​ | 951,468 ​ | 2,380,282 | ​ |
| Federal funds sold and securities purchased under agreements to resell | ​ | 1,419,743 ​ | — ​ | — ​ | — ​ | — ​ | 1,419,743 | ​ |
| Other interest sensitive assets | ​ | 8,245 ​ | — ​ | — ​ | — ​ | 59,447 ​ | 67,692 | ​ |
| Total interest sensitive assets | ​ | 6,516,770 ​ | 1,522,080 ​ | 2,215,884 ​ | 1,070,369 ​ | 1,563,681 ​ | 12,888,784 | ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ |
| **Interest sensitive liabilities:** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ |
| Interest bearing checking | ​ | $6,022,698 ​ | $— ​ | $— ​ | $— ​ | $— ​ | $6,022,698 | ​ |
| Savings | ​ | 232,048 ​ | — ​ | — ​ | — ​ | — ​ | 232,048 | ​ |
| Time deposits | ​ | 702,511 ​ | 372,121 ​ | 79,582 ​ | 48,854 ​ | — ​ | 1,203,068 | ​ |
| Notes payable and other borrowings | ​ | 835,384 ​ | — ​ | — ​ | — ​ | — ​ | 835,384 | ​ |
| Total interest sensitive liabilities | ​ | 7,792,641 ​ | 372,121 ​ | 79,582 ​ | 48,854 ​ | — ​ | 8,293,198 | ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ |
| Interest sensitivity gap | ​ | $(1,275,871) ​ | $1,149,959 ​ | $2,136,302 ​ | $1,021,515 ​ | $1,563,681 ​ | $4,595,586 | ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ |
| Cumulative interest sensitivity gap | ​ | $(1,275,871) ​ | $(125,912) ​ | $2,010,390 ​ | $3,031,905 ​ | $4,595,586 ​ | ​ ​ | ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ | ​ |
| Percentage of cumulative gap to total interest sensitive assets | ​ | (9.90)% | (0.98)% | 15.60% | 23.52% | 35.66% | ​ ​ | ​ |

The positive GAP in the interest rate analysis indicates that banking segment net interest income would generally rise if rates increase. Because of inherent limitations in interest rate GAP analysis, the banking segment uses multiple interest rate risk measurement techniques. Simulation analysis is used to subject the current repricing conditions to rising and falling interest rates in increments and decrements of 50 to 100 basis points to determine the effect on net interest income changes for the next twelve months. The banking segment also measures the effects of changes in interest rates on economic value of equity by discounting projected cash flows of deposits and loans. Economic value changes in the investment portfolio are estimated by discounting future cash flows and using duration analysis. Investment security prepayments are estimated using current market information. We believe the simulation analysis presents a more accurate picture than the GAP analysis. Simulation analysis recognizes that deposit products may not react to changes in interest rates as quickly or with the same magnitude as earning assets contractually tied to a market rate index. The sensitivity to changes in market rates varies across deposit products. Also, unlike GAP analysis, simulation analysis takes into account the effect of embedded options in the securities and loan portfolios as well as any off-balance sheet derivatives.

The table below shows the estimated impact of a range of changes in interest rates on net interest income and on economic value of equity for the banking segment at June 30, 2024 (dollars in thousands).

| ​ Change in Interest Rates (basis points) | ​ ​ ​ | ​ ​ Changes in Net Interest Income Amount | ​ ​ ​ ​ ​ Percent | ​ ​ ​ | ​ ​ Changes in Economic Value of Equity Amount | ​ ​ ​ Percent |
| ---: | --- | ---: | ---: | --- | ---: | ---: |
| +200 | ​ | $30,892 | 7.44% | ​ | $136,429 | 8.27% |
| +100 | ​ | $16,581 | 3.99% | ​ | $87,578 | 5.31% |
| -50 | ​ | $(8,094) | (1.95)% | ​ | $(66,513) | (4.03)% |
| -100 | ​ | $(16,733) | (4.03)% | ​ | $(147,751) | (8.96)% |
| -200 | ​ | $(34,439) | (8.29)% | ​ | $(332,060) | (20.13)% |

The projected changes in the table above were in compliance with established internal policy guidelines, with the exception of the estimated change in economic value of equity impact based on a -200 basis points change in interest rates, which marginally exceeded management’s internal policy limit. These projected changes are based on numerous assumptions. Upon implementation of pending assumption updates based on the expected transition into the next interest rate cycle, management anticipates that over time the estimated change in economic value of equity impact will return to compliance with established internal policy limit. Furthermore, the projected changes in net interest income are being impacted by the heightened level of cash balances, which represent a significant portion of the Bank’s sensitivity given simulation analysis assumptions/limitations. As a result, the timing and magnitude of future changes in interest rates and any runoff of deposits, and related decline in cash, may impact projected changes in net interest income as noted in the table above. Given projected impacts on net interest income associated with the expected transition into the next phase of the interest rate cycle, we continue to evaluate our current GAP position, which may result in a repositioning of the banking segment towards a more neutral or liability sensitive balance sheet.

Our portfolio includes loans that periodically reprice or mature prior to the end of an amortized term. Some of our variable-rate loans remain at applicable rate floors, which may delay and/or limit changes in interest income during a period of changing rates. If interest rates were to fall, the impact on our interest income would be limited by these rate floors. In addition, declining interest rates may negatively affect our cost of funds on deposits. The extent of this impact 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. If interest rates were to rise, yields on the portion of our portfolio that remain at applicable rate floors would rise more slowly than increases in market interest rates. Any changes in interest rates across the term structure will continue to impact net interest income and net interest margin. The impact of rate movements will change with the shape of the yield curve, including any changes in steepness or flatness and inversions at any points on the yield curve.

#### Broker-Dealer Segment

Our broker-dealer segment is exposed to market risk primarily due to its role as a financial intermediary in customer transactions, which may include purchases and sales of securities, use of derivatives and securities lending activities, and in our trading activities, which are used to support sales, underwriting and other customer activities. We are subject to the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates, market prices, investor expectations and changes in credit ratings of the issuer.

Our broker-dealer segment is exposed to interest rate risk as a result of maintaining inventories of interest rate sensitive financial instruments and other interest-earning assets including customer and correspondent margin loans and receivables and securities borrowing activities. Our funding sources, which include customer and correspondent cash balances, bank borrowings, repurchase agreements and securities lending activities, also expose the broker-dealer to interest rate risk. Movement in short-term interest rates could reduce the positive spread between the broker-dealer segment’s interest income and interest expense.

With respect to securities held, our interest rate risk is managed by setting and monitoring limits on the size and duration of positions and on the length of time securities can be held. Much of the interest rates on customer and correspondent margin loans and receivables are indexed and can vary daily. Our funding sources are generally short term with interest rates that can vary daily. The following table categorizes the broker-dealer segment’s net trading securities, which are subject to interest rate and market price risk (dollars in thousands).

| ​ ​ ​ ​ Trading securities, at fair value | ​ ​ ​ ​ ​ | ​ ​ ​ June 30, 2024 1 Year ​ or Less ​ ​ ​ ​ | ​ ​ ​ \> 1 Year ​ to 5 Years ​ ​ ​ ​ | ​ ​ ​ \> 5 Years ​ to 10 Years ​ ​ ​ ​ | ​ ​ ​ ​ ​ \> 10 Years ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Municipal obligations | ​ | $282 ​ | $12,151 ​ | $51,394 ​ | $186,106 ​ | $249,933 ​ |
| U.S. government and government agency obligations | ​ | ​ 40 ​ | ​ (5,947) ​ | ​ (14,104) ​ | ​ 285,578 ​ | ​ 265,567 ​ |
| Corporate obligations | ​ | ​ 7,513 ​ | ​ 32,429 ​ | ​ 36,370 ​ | ​ 46,559 ​ | ​ 122,871 ​ |
| Total debt securities | ​ | ​ 7,835 ​ | ​ 38,633 ​ | ​ 73,660 ​ | ​ 518,243 ​ | ​ 638,371 ​ |
| Corporate equity securities | ​ | ​ — ​ | ​ — ​ | ​ — ​ | ​ — ​ | ​ — ​ |
| Other | ​ | ​ 7,410 ​ | ​ — ​ | ​ — ​ | ​ — ​ | ​ 7,410 ​ |
| ​ | ​ | $15,245 ​ | $38,633 ​ | $73,660 ​ | $518,243 ​ | $645,781 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| **Weighted average yield** | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Municipal obligations | ​ | ​ 0.03% | ​ 4.50% | ​ 3.71% | ​ 3.71% | ​ 3.80% |
| U.S. government and government agency obligations | ​ | ​ 4.05% | ​ 4.81% | ​ 3.92% | ​ 1.51% | ​ 1.81% |
| Corporate obligations | ​ | ​ 6.15% | ​ 6.03% | ​ 5.21% | ​ 4.03% | ​ 5.19% |

Derivatives are used to support certain customer programs and hedge our related exposure to interest rate risks.

Our broker-dealer segment is engaged in various brokerage and trading activities that expose us to credit risk arising from potential non-performance from counterparties, customers or issuers of securities. This risk is managed by setting and monitoring position limits for each counterparty, conducting periodic credit reviews of counterparties, reviewing concentrations of securities and conducting business through central clearing organizations.

Collateral underlying margin loans to customers and correspondents and with respect to securities lending activities is marked to market daily and additional collateral is required as necessary.

#### Mortgage Origination Segment

Within our mortgage origination segment, our principal market exposure is to interest rate risk due to the impact on our mortgage-related assets and commitments, including mortgage loans held for sale, IRLCs and MSR. Changes in interest rates could also materially and adversely affect our volume of mortgage loan originations.

IRLCs represent an agreement to extend credit to a mortgage loan applicant, whereby the interest rate on the loan is set prior to funding. Our mortgage loans held for sale, which we hold in inventory while awaiting sale into the secondary market, and our IRLCs are subject to the effects of changes in mortgage interest rates from the date of the commitment through the sale of the loan into the secondary market. As a result, we are exposed to interest rate risk and related price risk during the period from the date of the lock commitment until (i) the lock commitment cancellation or expiration date or (ii) the date of sale into the secondary mortgage market. Loan commitments generally range from 20 to 60 days, and our average holding period of the mortgage loan from funding to sale is approximately 30 days. An integral component of our interest rate risk management strategy is our execution of forward commitments to sell MBSs to minimize the impact on earnings resulting from significant fluctuations in the fair value of mortgage loans held for sale and IRLCs caused by changes in interest rates.

As a result of our mortgage servicing business, we have a portfolio of retained MSR. One of the principal risks associated with MSR is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments. Moreover, if prepayments are greater than expected, the cash we receive over the life of the mortgage loans would be reduced. The mortgage origination segment uses derivative financial instruments, including U.S. Treasury bond futures and options, and MBS commitments, as a means to mitigate market risk associated with MSR assets. No hedging strategy can protect us completely, and hedging strategies may fail because they are improperly designed, improperly executed and documented or based on inaccurate assumptions and, as a result, could actually increase our risks and losses. The MSR portfolio exposes us to interest rate risk and, correspondingly, the volatility of our earnings, especially if we cannot adequately hedge the interest rate risk relating to our MSR.

The goal of our interest rate risk management strategy within our mortgage origination segment is not to eliminate interest rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, we have established policies and procedures, which include guidelines on the amount of exposure to interest rate changes we are willing to accept.

#### Consolidated

At June 30, 2024, total debt obligations on our consolidated balance sheet, excluding short-term borrowings and unamortized debt issuance costs and premiums, were $350 million, and was all subject to fixed interest rates. If interest rates were to increase by one eighth of one percent (0.125%), the increase in interest expense on the variable rate debt would not have a significant impact on our future consolidated earnings or cash flows.

As noted above within the discussion for each business segment, on a consolidated basis, our primary component of market risk is sensitivity to changes in interest rates. Consequently, and in large part due to the significance of our banking segment, our consolidated earnings depend to a significant extent on our net interest income. Refer to the discussion in the “Banking Segment” section above that provides more details regarding sources of interest rate risk and asset/liability management policies and procedures employed to manage our interest-earning assets and interest-bearing liabilities, and potential future repositioning of our GAP position, thereby attempting to control the volatility of net interest income, without having to incur unacceptable levels of risk.

The table below shows the estimated impact of a range of changes in interest rates on net interest income on a consolidated basis at June 30, 2024 (dollars in thousands).

| ​ Change in Interest Rates (basis points) | ​ ​ ​ | ​ ​ Changes in Net Interest Income Amount | ​ ​ ​ ​ ​ Percent |
| ---: | --- | ---: | ---: |
| +200 | ​ | $43,887 | 9.91% |
| +100 | ​ | $23,052 | 5.21% |
| -50 | ​ | $(11,355) | (2.56)% |
| -100 | ​ | $(23,234) | (5.25)% |
| -200 | ​ | $(47,421) | (10.71)% |

The projected changes in the table above were in compliance with established internal policy guidelines. These projected changes are based on numerous assumptions of growth and changes in the mix of assets or liabilities. The projected changes in net interest income are being impacted by the heightened level of cash balances, which represent a significant portion of our asset sensitivity given simulation analysis assumptions/limitations. As a result, the timing and magnitude of future changes in interest rates including runoff of deposits, and related decline in cash, may impact projected changes in net interest income as noted in the table above.

## Controls and procedures

As filed, 1,454 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the supervision and participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.

Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the second fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 237 characters.

There have been no material changes to the risk factors disclosed under “Item 1A. Risk Factors” of our 2023 Form 10-K. For additional information concerning our risk factors, please refer to “Item 1A. Risk Factors” of our 2023 Form 10-K.

Filed Aug 2, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-010724. Last ingested by Listed: Oct 24, 2026, 15:10 ET. No prices; not investment advice.