Hilltop earnings for the third quarter of 2026 showed a profitable banking business offset by mortgage losses and rate-sensitive markdowns. Results released on October 23 put net income at $24.9 million, or $0.44 per diluted share, as PlainsCapital Bank’s loan growth and wider lending margin contrasted with weaker performance at PrimeLending.
Key Takeaways
- Net interest income rose 9% year over year to $122 million, supported by commercial loan growth.
- PrimeLending lost $10.8 million before tax as mortgage rate-lock volumes and gain-on-sale margins declined.
- Management expects further lending-income growth but warned that deposit competition could limit interest margins.
Table of Contents
- Hilltop earnings reflect divergent business results
- Mortgage weakness and markdowns weigh on profitability
- Loan growth supports outlook as deposit costs face pressure
- Capital remains available, but buybacks slow
- Conclusion
Hilltop earnings reflect divergent business results
PlainsCapital Bank generated $44 million in pretax income. Its net interest margin expanded by more than 25 basis points from a year earlier to 3.49%, while loans held for investment increased $134 million from the preceding quarter and $580 million, or 7%, year over year.
Across Hilltop, net interest income increased by $10 million to $122 million. The consolidated net interest margin reached 3.33%, up 12 basis points sequentially. Those consolidated figures are distinct from the bank subsidiary’s margin.
Hilltop Securities earned $7 million before tax on $117 million of net revenue. Public finance contributed $37 million of net revenue, while management said rate volatility pressured trading activities. Consolidated noninterest expenses fell $7.8 million year over year to $264 million, helped by lower variable compensation.
| Item | Details |
|---|---|
| Return on average assets | 0.67% for Q3 2026. |
| Return on average equity | 4.7% for Q3 2026. |
| Net charge-offs | $1.2 million, or 6 basis points of the loan portfolio. |
| Allowance coverage | 1.07% of loans held for investment. |
| Common equity Tier 1 ratio | 18.3%. |
| Tangible book value | $32.20 per share. |
Mortgage weakness and markdowns weigh on profitability
PrimeLending’s $10.8 million pretax loss came as rate-lock volumes fell 18% to $2.2 billion and gain-on-sale margins narrowed 26 basis points to 200 basis points. Mortgage revenues declined $9 million.
CEO Jeremy B. Ford said mortgage rates jumped nearly 70 basis points in September, reducing purchase activity and hedge effectiveness. CFO William B. Furr said the company would adjust expenses to market conditions while continuing to recruit productive loan officers.
HilltopSecurities’ credit and lending services overview describes its affiliation with PlainsCapital Bank and PrimeLending, whose offerings include conventional, government-backed and renovation mortgages. That business background is separate from the quarter’s financial results.
Across the mortgage and broker-dealer businesses, pretax mark-to-market losses totaled approximately $16 million, including $6.6 million in the mortgage trading pipeline. Separately, available-for-sale securities marks, net of hedges, had an approximately $21 million negative effect on accumulated other comprehensive income. These are different accounting effects, not a single charge to quarterly earnings.
Loan growth supports outlook as deposit costs face pressure
Hilltop expects full-year average total bank loans to grow 7%–8% from 2025 levels, excluding mortgage warehouse lending and retained mortgages. Furr said Texas markets drove much of the recent growth, with about $300 million coming from commercial real estate and the remainder from commercial and industrial lending.
Management expects net interest income to continue improving with loan growth. However, Furr said deposit costs had likely reached their trough and competition could push interest-bearing deposit costs higher. The consolidated margin could therefore level out or drift slightly below 3.33%, even if net interest income rises.
Credit provisioning also increased. Hilltop recorded a $10.1 million provision and built its allowance for credit losses by $9 million to $94 million, reflecting loan growth and risk-rating adjustments. Management said it did not anticipate significant systemic portfolio risk, while continuing to monitor individual exposures.
Capital remains available, but buybacks slow
Hilltop returned approximately $33 million to shareholders, comprising $12.6 million of dividends and $20 million of share repurchases. Buybacks were lower than the $50 million completed in each of the two preceding quarters.
Ford attributed the slower pace to prudence as the share price rose and higher rates signaled pressure on accumulated other comprehensive income. With $85 million remaining under an authorization expiring in January, he said completing the balance in one quarter was unlikely. The remaining authorization is capacity to repurchase shares, not a commitment to spend the full amount.
Conclusion
The fourth quarter will test whether loan growth can keep lifting lending income as deposit costs rise and mortgage conditions remain difficult. Management said it would update its deposit outlook at the January meeting.
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