Operator: Hello everyone. Thank you for joining us and welcome to Hilltop Holdings Second Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press *1. To raise your hand. To withdraw your question, please press *1 again. I will now hand the conference over to Matthew Dunn. Corporate development officer and head of investor relations. Matthew, please go ahead.
Matthew Dunn: Thank you. Before we get started, please note that certain statements during today's presentation that are not statements of historical fact including statements concerning such items as our outlook, business strategy, future plans, financial condition, credit risks and trends in credit, allowance for credit losses, liquidity and sources of funding, funding costs, dividends, stock repurchases, subsequent events, and impacts of interest rate changes, as well as such other items referenced in the preface of our presentation are forward looking statements. These statements are based on management's current expectations concerning future events that, by their nature, are subject to risks and uncertainties. Our actual results, capital, liquidity, and financial condition may differ materially from these statements due to a variety of factors. Including the precautionary statements referenced in the preface of our presentation and those included in our most recent annual and quarterly reports filed with the SEC. Please note that certain information presented is preliminary and based upon data available at this time. Except to the extent required by law, expressly disclaim any obligation to update earlier statements as a result of new information. Additionally, this presentation includes certain non GAAP measures including tangible common equity and tangible book value per share. A reconciliation of these measures to the nearest GAAP measure may be found in the appendix of to this presentation which is posted on our website at ir.hilltop.com. I will now be turning the presentation over to Jeremy Blueford.
Jeremy Blue Ford: Thank you, Matthew, and good morning. For the second quarter, Hilltop reported net income of $36.5 million or $0.63 per diluted share. Return on average assets for the period was 1.0%, and return on average equity was 6.9%. To summarize the lines of business, PlainsCapital Bank produced continued strong loan growth and further expansion in net interest margin while delivering $51 million in pretax income. PrimeLending reported a pretax loss of $2 million as the mortgage market faced a muted start to the summer buying season. And Hilltop Securities delivered a $6 million year over year increase in pretax income primarily due to strong quarters within wealth management and structured finance. At PlainsCapital Bank, a robust loan pipeline and pull through rate paired with the continued expansion of net interest margin to 3.42%. Helped to produce a 1.30% return on average assets. During the second quarter, favorable results at the bank were supported by a modest decline in the cost of total deposits and an efficiency ratio of 55.0%. Which is in line with both the first quarter of 2026 and the second quarter of 2025. Deposit balances at the bank remained relatively stable on a quarter over quarter basis. And core deposit balances which exclude the sweep deposits from Hilltop Securities, increased on a year-over-year basis. A portion of our core customers' base at PlainsCapital typically experience seasonal declines in deposit during the second quarter of a year. And we expect those deposits to return during the second half of the year. Results in the quarter included a $1 million provision release. This was largely driven by an improvement in economic conditions. As well as a decline in nonperforming assets. Will is going to provide further commentary on credit in his prepared remarks. While competition in core markets continues to increase from both in state and out of state peers, we believe that PlainsCapital Bank is well positioned to deliver strong organic growth. From a recruiting perspective, we remain actively engaged across our markets to source and sign talented bankers who embody our commitment to relationship based community banking. We believe the Texas economy we will continue to provide a healthy backdrop for our banking operation. And we plan to invest further in the bank's already strong momentum. Moving to PrimeLending, for the company reported a pretax loss of $2 million during the second quarter, an elevated interest rate environment when compared to the first quarter of 2026 alongside the prolonged headwinds of higher property taxes, higher insurance costs, tight inventory levels. Continue to weigh on overall industry volumes and gain on sale margins. Further evidence of the challenging mortgage market is highlighted by a new all time low share of homes being sold to first time homebuyers. While we continue to fight for mortgage volumes, amid an ultra competitive environment, PrimeLending has been able to successfully lower its fixed cost. Which are down approximately $10 million annualized when compared to the second quarter of 2025. Until long term rates show signs of decline, and therefore drive higher industry volumes, we anticipate the market will remain highly contested. We remain focused on achieving internal goals around productivity and operational results. For the second half of the year. During the quarter, Hilltop Securities generated pretax income of $12 million on net revenue of $124 million, for a pretax margin of 10.0%. Speaking to the lines of business at Hilltop Securities. Public finance services continued to produce healthy top line results, delivering $30 million of net revenue which is a modest decrease versus the second quarter of 2025. Industry issuance volumes were strong during the quarter, and we expect issuances to remain elevated for the second half of the year. Structured finance realized a 73.0% increase in net revenue compared to the second quarter of 2 thousand 25, as buy side demand for call protected collateral remained robust throughout the quarter. Wealth management showed continued improvement on a year-over-year basis through an increase in revenue generated by advisory and transaction fees, within the retail portion of the business. Finally, fixed income services saw a 10.0% increase in net revenue compared to the second quarter of 2025. As both municipal and taxable products saw an increase in sales and trading revenue. Overall, Hilltop Securities produced an increase in net revenue of 13.0% and expanded pretax margin when compared to the second quarter of 2025. The firm has delivered a strong second quarter and first half of the year, remains focused on building deep and meaningful client connectivity across core competencies. Moving to page 4. Hilltop maintains strong capital levels with a common equity tier 1 capital ratio of 18.30%. Additionally, our tangible book value per share increased to $32.36. During the period, we returned $11.6 million to stockholders, through dividends and repurchased $47 million in shares. Notably, Hilltop's board declared a 10.0% increase to the quarterly cash dividend to $0.22 per share and authorized a $75 million increase to the stock repurchase program. Thank you. I will now turn the presentation over to Will for our financials in more detail.
William Furr: Thank you, Jeremy. I will start on page 5. As Jeremy noted, for the second quarter of 2026, Hilltop reported consolidated income attributable to common stockholders of $36.5 million equating to $0.63 per diluted share. Quarter's results included a 5.0% year over year increase in net interest income, a 4.0% year over year increase in noninterest income, and a modest increase in noninterest expenses which was largely driven by variable compensation. Please note in the prior year period, did include a $9.5 million legal recovery recorded in noninterest income. Further, Hilltop recorded a net reversal in the provision for credit losses of $1 million during the quarter, which I will review in more detail as I move to Page 6. Hilltop's allowance for credit losses declined during the quarter by $4 million to $85 million. As is noted in the graph, Hilltop recorded net charge offs of approximately $3.2 million and increased specific reserves by $1.9 million largely related to the deterioration of 1 loan in the portfolio. In addition, modest improvements in the macroeconomic outlook, adjustments to qualitative factors, the quarterly scoring activity in the portfolio resulted in a net reduction to the ACL of $2.9 million. Of note, we continue to believe that the ACL could be volatile as it is impacted by changes in the mix and makeup of the credit portfolio, net loan growth, credit migration trends, and changes to the macroeconomic outlook over time. Turning to Page 7. Net interest income in the second quarter equated to $116 million including $0.8 million of purchase accounting accretion. Versus the prior-year second quarter, net interest income increased by $5 million or 5.0% driven primarily by lower interest bearing deposit cost coupled with the balance sheet composition shifting from cash into loans held for investment. During the second quarter, net interest margin increased versus the first quarter of 2026 by 8 basis points to 3.21%. The improvement in NIM was largely driven by the same items delivering higher net interest income including lower deposit yields improved balance sheet composition, and the modest increase in net borrowings versus the prior year period. In our current macroeconomic outlook, the scenario includes 1 rate increase to occur in December 2026. Based on this rate scenario, we expect that NIM will moderate at current levels potentially declining modestly during the second half of the year, and the net interest income will remain relatively stable at these levels over the coming quarters. Turning to page 8. Second In the second quarter, average total deposits are approximately $10.4 billion which reflects a decline of $263 million versus the second quarter of 2025. During the quarter, total deposits were stable versus the first quarter of 2026 levels at $10.5 billion on an ending balance basis. Including an increase of $300 million of Hilltop Securities sweep deposits being moved into the bank. Excluding the impact of the sweep movement in the period, the decline in other customer deposits reflects normal seasonal flows related to tax payments, scheduled distributions from certain of our public fund depositors, and business flows and distributions from some large C&I clients. We do expect the customer deposits will begin growing again in the second half of the year. As a result of our ongoing pricing efforts, interest bearing deposit costs declined from first-quarter levels to 3.27% basis points. During this down rate cycle, PlainsCapital has been able to achieve a 75.0% interest bearing deposit beta. As we have noted in the past, we expect that our beta levels could decline even with no further rate actions as deposit competition in our markets has substantially increased, and we believe that this could result in higher offered rates, and a higher level of exception pricing activity. With competitive intensity increasing, we will continue to balance the support of our long term customer relationships with prudently managing net interest income over time. Moving to page 9. Total noninterest income for the second quarter of 2026 equated to $200 million. Versus the same period in the prior year. Mortgage revenues declined by $1.8 million driven primarily by lower valuation marks on the rate lock pipeline. Second quarter origination volumes were consistent with the prior year period levels, Our mortgage gain on sale margins, the loan sale to third parties declined versus the prior year period to 217 basis points. A decline of 6 basis points. It remains important to note the ongoing challenges in mortgage banking continue as a combination of the current level of mortgage rates, and home affordability concerns have created an environment that remains restrictive and continues to push back a recovery in margins, and production volumes across the industry. Growth in principal transactions, commissions, and fees at the broker dealer were driven by structured finance, experienced a $170 million increase in lock activity and improved marks on the mortgage lock pipeline. In addition, wealth management has produced solid growth in fees resulting from growth in client wealth assets and productivity enhancements across the brokerage chain. The decline in other noninterest income largely relates the prior year legal recovery reported at PrimeLending. of $9.5 million. As we have noted in the past, revenues from structured finance, fixed income capital markets at the broker dealer can be volatile from period to period as they are impacted by market volatility, interest rates, market liquidity, and production volumes. Turning to Page 10. Noninterest expenses increased from the same period in the prior year by $5.5 million or 2.0% to $267 million. The increase in expenses versus the prior year second quarter was driven by increases in variable compensation, largely at Hilltop Securities, and reflect the impact of higher revenue in structured finance and wealth management. Looking forward, we expect that expenses other than variable compensation will remain relatively stable at current levels as we remain diligently focused on prudent growth of revenue producers while continuing to improve productivity across our middle and back office functions. Turning to Page 11. Second quarter, average HFI loans equated to $8.5 billion. On a period ending basis, HFI loans grew versus the first quarter of 2026 by $239 million driven by $114 million of growth in CRE lending. $54 million of growth in C&I lending, $45 million of growth in loans from our broker dealer, and $28 million of seasonal growth in the mortgage warehouse lending business. Related to our lending activity, we are pleased with our commercial lending pipelines, which have remained stable throughout the year and we expect the pipeline will provide support for continued growth for the balance of 2026. As a result, we are increasing our full year expected average loan growth rate to a range of 5.0% to 7.0% for 2026. Both of these outlooks exclude any impacts related to mortgage warehouse lending, any mortgages retained from prime lending. Moving to Page 12. As it is shown in the chart on the upper left of the page, classified and special mention loans increased during the second quarter, largely driven by a large single family credit that deteriorated during the quarter. Overall, we believe credit quality remains sound, and the bank team is monitoring the portfolio closely for any signs of deterioration and we will continue to move swiftly to protect its exposure on any loans that experience challenges. As is shown in the upper right chart, NPA levels have declined consistently over the last 12 months. As we continue to see steady improvement and solid workouts in this portfolio. Further, net charge offs for the second quarter of 2026 equated to $3.2 million or 16 basis points of average loans. Lastly, as presented on the graph on the bottom right of the page, the allowance for credit loss coverage at the bank ended the second quarter at 1.03%. Including mortgage warehouse lending. The declines in allowance over the last year are to be attributed to the adoption of the baseline scenario for CECL during the second quarter of 2025 and the ongoing workout of the auto note portfolio that we have addressed in previous quarters. Moving to Page 13. As we move into the third quarter of 2026, there continues to be a lot of uncertainty in the market regarding interest rates, the impact of ongoing inflation, as well as the resilience of the overall economy. In the face of these uncertainties, we are pleased with the work that our teams are doing each day to support our customers and the communities we serve. We believe that this work is helping us build momentum in the bank, and broker dealer businesses supporting our focus on returning our mortgage business to profitability. As is noted in the table, our current outlook for 2026 reflects our current assessment of the economy, and the markets where we participate. Further, as the market changes and we adjust our business to respond, we will provide updates to our outlook on future quarterly calls. Operator, that concludes our prepared comments. We will turn the call back to you for the Q&A section of the call.
Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, please press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matt Olney with Stephens. Matthew, your line is now open.
Matt Olney: Hey, thanks. Good morning. I want to ask more about loan growth. Saw some really good growth in the second quarter, and it sounds like you expect more growth in the back half of the year. So I guess I am curious what you are seeing on the loan yields? It looks like it was pretty flat this quarter, but do you have any color on the new production yields? Any pressure there? And any more benefits you expect from the back book or pricing? Thanks.
William Furr: Thanks, Matthew. So we have seen solid growth through the first half of the year, which we are excited about. The bank teams are working diligently every day to kind of serve customers. So again, as I noted in my comments, the pipeline has remained stable. We feel like that supports growth in the back half. As it relates to kind of going on yields, to your point, across our footprint and across the certainly, we are seeing, competition's intense markets we serve, And we are seeing kind of go-in yields in the 6.5 to 7.0% range depending on depending on the asset class and the deal in particular. In terms of repricing, we are seeing some repricing activity, but that is largely occurred certainly as it relates to kind of repricing up as rates moved up over the last couple of years. And so that will be we believe that to be pretty modest, a modest impact. But, again, our we are pleased with our closing activity. Pleased with the rates and going on position there. And we will continue to push forward with the market being pretty competitive as we sit here today.
Matt Olney: Okay. Appreciate that, Will. Thank you. And then, I guess, the other side, the deposit side, obviously, some softness this quarter. I think that loan to deposit ratio is kind of at the higher end of what we have seen more recently. Just remind me of kind of what your internal range preferences are and kind of the upper end of that? Curious if we are gonna see that continue to move higher. Thanks.
William Furr: So we have you have seen it tick higher. We had historically, and over the last couple of years since the COVID era, if you will, maintained a higher than kind of average cash level we have seen our cash levels, which are driven by kind of excess deposits, track lower. We are at a level now that I think is more consistent with normal operating from a cash perspective. And so what that yields is again, that loan-to-deposit ratio has moved higher as you have seen deposits be relatively stable as well as loans growing. So, our view is, 80% to 90%, probably closer to 85% is a more normalized, let's say, loan-to-deposit level For the organization over time. But, objectively, we are focused on growing core deposits across the portfolio and across the footprint and then also as we noted just moment ago, growing loans.
Matt Olney: Okay, guys. Thanks for the color. I will step back.
Operator: Thank you. Our next question comes from the line of EvanYi with Raymond James. Evan, your line is now open.
Analyst: Hey. Good morning, guys. Thank you for taking my question. So I just wanted to start on broker dealer. You provide a bit more color on the puts and takes with your broker-dealer outlook, just given the change in the rate outlook? Thank you.
Jeremy Blue Ford: As far as the Outlook's concerned?
Operator: Go ahead.
William Furr: So our broker dealer fee guide here is negative 3.0% to 1.0%. So, as it as it relates to rates, as you think about the broker dealer, there is a few things that are impacted, obviously, sweep fees across our wealth management business are impacted. We have talked historically that our public finance businesses as rates would move higher Obviously, the appetite for debt issuance and otherwise could be could be pressured. And then in fixed income services, it benefits largely from a upward sloping yield curve. If that were to flatten out, obviously, those impacts could be negative to net revenue across the period. As we look at as we look out and from a guidance perspective, we think the curve is going to remain upward sloping. As we noted, our guidance all consider a rate increase in the December period. And so from our perspective, we are constructive on public finance. As well as fixed income wealth management and structured finance. We are pretty constructive on those businesses. Public finance had a record year last year, as issuance In the marketplace was substantial. But we will continue to monitor it. So we had a solid year from a baseline perspective. And our teams continue to execute. But we recognize the volatility in the marketplace, whether it be rates, whether it be inflation, or it be the macroeconomic backdrop, or geopolitical matters, have continued to pressure all facets of our business, and so, our guidance reflects that as well.
Jeremy Blue Ford: Yeah. And I will just add a little bit more color. I mean, we are seeing national issuance in municipal volumes be very strong. We have had it through the first half of the year, and we continue to expect that in the second half of the year. So I think the public finance business we will continue to chug along. And our wealth management business has, really, shown a lot of improvement over the last several years. And we see a lot of good momentum there. Particularly in our retail segment of that. So I echo Will's sentiment that we feel pretty good about the results for 2025 and the momentum that is being carried into 2026. Okay. Great. And I guess just another question from me. You know, I appreciate the $47 million of buybacks in the second quarter and the increase in the program. But how should we think about the cadence of repurchases from here And I guess more broadly, where does it fall in the priority stack of capital deployment uses? Thank you. I guess from my standpoint, we are really happy about the what we have just put out with our strong results and our financial position and our outlook. So I think that shows in us increasing our authorization by $75 million from the already approved $125 million. So that brings it to a $200 million total authorization for 2026. As well, as you know you saw that we, increased our dividend by 10% to $0.22 a share per quarter. So I think that just reflects our confidence in the company. And so, as far as the capital stack is concerned, we are-- if you see-- our capital ratios are heading, down. Our common equity tier 1 ratio is 18.3%, And, we think that is a good direction in that we are seeing part of that come from, growth in our loan portfolio. And also in our capital deployment. And I think we will continue to, prioritize organic growth first, and then capital return second. And we will be mindful of how accretive that is to the shareholder. And, also, we have, ample resources to be able to do M&A. Okay.
Analyst: Great. Thank you. I will step back.
Operator: We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.
