Hilltop Holdings Inc.

and welcome to the Hilltop Holdings fourth quarter 2022 earnings conference call and webcast. My name is Bruno and I will be the operator of your call today. During the presentation, you can register to ask a question by pressing star one on your telephone keypad. I will now hand over to your host, Eric Yowie. Please go ahead.

Thank you, Bruno. 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 plan, financial condition, allowance for credit losses, the impact and potential impacts of inflation, stock repurchases and dividends, 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 risk 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 our presentation and those included in our most recent annual and quarterly reports filed with the SEC. Please note that the information presented is preliminary and based upon data available at this time. Except to the extent required by law, we 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 to this presentation, which is posted on our website at hilltop-holdings.com. With that, I will now turn the presentation over to President and CEO Jeremy Ford.

Thank you, Eric, and good morning. For the fourth quarter, Hilltop reported net income of approximately $26 million, or $0.39 per diluted share. Return on average assets for the period was 0.6%, and return on average equity was 5%. Although the mortgage market remained under significant pressure, we still generated consolidated profitability and grew our capital base due to our diversified business model, strong balance sheet, and continued focus on expense discipline across each of our companies. During the fourth quarter, Plains Capital Bank generated $58 million in pre-tax income and a strong return on average assets of 1.3%. Though pre-tax income is down year over year due to changes in provision expense from deterioration of the economic outlook, The bank's pre-tax, pre-provision income grew materially from net interest income expansion and a relatively flat expense base, despite the inflationary environment. Average loans held for investment at Plains Capital Bank increased $101 million, or approximately 4% annualized, in the quarter as a result of both core commercial loans and an increase in retained mortgage balances. Average loan growth would have been higher if not for the approximate $116 million decline in average national warehouse lending balances versus the prior quarter, which has been impacted by the shrinking mortgage market. We are pleased with the loan growth in 2022. However, we are starting to see pressure on the pipeline as a result of our heightened credit standards and declining loan demand in general due to the economy, elevated rates, and other factors. Total average deposits decreased by $270 million or 2% quarter over quarter as customers have migrated deposit balances towards higher yielding assets, both inside and outside of the bank. We are pleased that we have been able to retain meaningful deposit relationships within our private banks assets under management as customers move some money from bank deposits into treasuries and similar securities. For the full year, The bank generated $219 million in pre-tax income and a return on average assets of 1.2%. Net interest income before purchase accounting accretion and PPP income grew by $32 million or 9% as interest rates increased throughout the year. We do expect deposit balances and costs to be under pressure in 2023 due to intense competition across Texas. where many banks will inevitably drive up market pricing for deposits to maintain liquidity. We continue to monitor credit closely in anticipation that economic conditions could result in a downward migration in asset quality. That said, we currently do not show any significant signs of credit deterioration in our loan portfolio. Additionally, with elevated rates expected throughout 2023, we anticipate continuing to see borrowers putting higher amounts of equity into transactions and projects continuing to slow. Overall, we are extremely pleased with Plains Capital Bank's results in 2022 and remain optimistic for the banking environment in 2023. We have a great group of leaders and bankers across Texas and will continue to capitalize on the growth and strong economies within our state. Moving to prime lending. During the fourth quarter, Prime Lending experienced a loss before taxes of approximately $26 million on $2 billion of originated volume. This was driven by a 59% decline in volume and a 151 basis point reduction in gain on sale margin from the same period prior year. There were multiple factors that adversely impacted the mortgage industry in 2022. including inflation, the resulting steep rise in interest rates, limited housing inventory, and the negative residual impacts of the COVID-19 pandemic. These factors have constrained the willingness and ability of prospective homebuyers and existing homeowners to conduct mortgage transactions, both in the purchase and refinancing markets. Additionally, these trends have added to already competitive mortgage pricing pressures. leading to a decline in average loan sales margins, as mortgage volume declines have materially outpaced the capacity that needs to come out of the mortgage origination ecosystem. Throughout the challenging year, our team has remained resilient and undertook difficult but impactful cost reduction and optimization actions to help resize the overall business, specifically reducing non-originator headcount by approximately 515 people. or 37% during the year. That said, our prime lending leadership team remains focused on their two primary objectives, originating profitable loans and continuing to operate the business more efficiently. During the quarter, Hilltop Securities generated pre-tax income of $19.8 million on net revenues of $107 million. an increase in revenues of $12 million or 13% compared to Q4 2021. The revenue increase was primarily driven by fixed income services, which more than offset a slow quarter in public finance as national issuance declined by 41% compared to Q4 2021. Increased revenues from fixed income can be attributed primarily to improvements in municipal and mortgage products. Additionally, Our revenue from sweep deposits continues to improve, so we expect the growth in that revenue to moderate in 2023. For the year, Hilltop Securities generated net revenues of $394 million and a pre-tax margin of 9.6%. Financial results improved over the last three consecutive quarters following a very volatile trading results in the first quarter. Moving to page four. Hilltop maintains strong capital levels with a common equity tier one capital ratio of 18.2% and tangible book value per share of $27.31 at year end. During 2022, Hilltop returned $485 million to shareholders through dividends and share repurchase efforts, repurchasing approximately 19% of the shares outstanding one year ago. This week, Hilltop's Board of Directors declared a quarterly cash dividend of 16 cents per common share, a 7% increase from the prior quarter, and authorized a new stock repurchase program of $75 million through January 2024. Overall, 2022 was a challenging year for our mortgage-related businesses, though buoyed by the strength of our banking franchise. Despite challenges in certain business lines, We feel that we have positioned the organization well entering 2023. First, our financial position is solid. We have a strong balance sheet with ample liquidity, diversified and accessible funding sources, and an outsized capital base. We believe this allows us to invest in our business, stay resilient through unknown economic cycles, and take advantage of growth opportunities as they arise. Second, We have worked to enhance productivity and expense efficiency across all businesses, and in particular, executed on significant actions within our mortgage operations groups to better align with the current market. Through those efforts, we are expecting a more efficient expense base to help combat rising inflation costs, and we are poised to benefit from higher margins as the economy recovers. Additionally, employee engagement is high. and we feel that we are more focused and aligned as a company than ever before. In conclusion, we believe that 2023 will be a prosperous year for Hilltop. We have a solid financial foundation, well-established businesses, and talented teams across our franchise. We are excited about the opportunities that lie ahead and are committed to delivering value to our shareholders. With that, I will now turn the presentation over to Will to discuss the financials.