Segment and Related Information

9 Months Ended

Sep. 30, 2022

Segment and Related Information

Segment and Related Information

21. Segment and Related Information

The Company has two primary business units, PCC (banking and mortgage origination) and Securities Holdings (broker-dealer). Under GAAP, the Company’s business 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. These segments reflect the manner in which operations are managed and the criteria used by the chief operating decision maker, the Company’s President and Chief Executive Officer, to evaluate segment performance, develop strategy and allocate resources.

The banking segment includes the operations of the Bank. The broker-dealer segment includes the operations of Securities Holdings and the mortgage origination segment is composed of PrimeLending.

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.

Balance sheet amounts not discussed previously and the elimination of intercompany transactions are included in “All Other and Eliminations.” The following tables present certain information about reportable business segment revenues, operating results, goodwill and assets (in thousands).

					Mortgage				All Other and		Hilltop
Three Months Ended September 30, 2022	Banking		Broker-Dealer		Origination		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	110,939	$	13,386	$	(2,939)	$	(3,276)	$	5,376	$	123,486
Provision for (reversal of) credit losses		(650)		(130)		—		—		—		(780)
Noninterest income		12,200		100,798		98,200		1,809		(6,032)		206,975
Noninterest expense		60,160		96,843		118,345		14,034		(644)		288,738
Income (loss) before taxes	$	63,629	$	17,471	$	(23,084)	$	(15,501)	$	(12)	$	42,503
					Mortgage				All Other and		Hilltop
Nine Months Ended September 30, 2022	Banking		Broker-Dealer		Origination		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	304,269	$	37,481	$	(6,066)	$	(9,856)	$	9,705	$	335,533
Provision for (reversal of) credit losses		4,325		346		—		—		—		4,671
Noninterest income		37,438		249,139		381,477		5,655		(11,033)		662,676
Noninterest expense		175,921		268,307		386,372		44,388		(1,357)		873,631
Income (loss) before taxes	$	161,461	$	17,967	$	(10,961)	$	(48,589)	$	29	$	119,907

					Mortgage				All Other and		Hilltop
Three Months Ended September 30, 2021	Banking		Broker-Dealer		Origination		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	99,978	$	10,427	$	(3,503)	$	(4,341)	$	2,529	$	105,090
Provision for (reversal of) credit losses		(5,775)		(44)		—		—		—		(5,819)
Noninterest income		11,727		116,143		242,270		757		(2,952)		367,945
Noninterest expense		54,567		109,193		176,587		15,355		(528)		355,174
Income (loss) before taxes	$	62,913	$	17,421	$	62,180	$	(18,939)	$	105	$	123,680

					Mortgage				All Other and		Hilltop
Nine Months Ended September 30, 2021	Banking		Broker-Dealer		Origination		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	309,330	$	31,623	$	(16,554)	$	(13,720)	$	8,009	$	318,688
Provision for (reversal of) credit losses		(39,725)		77		—		—		—		(39,648)
Noninterest income		33,293		298,229		794,679		8,140		(8,912)		1,125,429
Noninterest expense		167,869		287,831		573,884		37,015		(1,395)		1,065,204
Income (loss) before taxes	$	214,479	$	41,944	$	204,241	$	(42,595)	$	492	$	418,561

					Mortgage				All Other and		Hilltop
	Banking		Broker-Dealer		Origination		Corporate		Eliminations		Consolidated
September 30, 2022
Goodwill	$	247,368	$	7,008	$	13,071	$	—	$	—	$	267,447
Total assets	$	13,455,679	$	2,866,990	$	1,405,712	$	2,453,933	$	(3,567,023)	$	16,615,291
December 31, 2021
Goodwill	$	247,368	$	7,008	$	13,071	$	—	$	—	$	267,447
Total assets	$	14,944,249	$	3,673,346	$	2,207,822	$	2,940,670	$	(5,077,007)	$	18,689,080

The Company performs required annual impairment tests of its goodwill as of October 1st. The goodwill impairment

tests require the Company to make judgments in determining what assumptions to use in the calculations. The process consists of estimating the fair value of each reporting unit based on valuation techniques, including a discounted cash flow model using revenue and profit forecasts and recent industry transaction and trading multiples of peers, and comparing those estimated fair values with the carrying values of the assets and liabilities of the reporting unit, which includes the allocated goodwill.

Specifically, the mortgage origination and broker-dealer reporting units have each experienced lower-than-forecasted operating results during the first nine months of 2022. Should future operating performance of these reporting units remain challenged and below forecasted projections, there may be a risk of impairment. These conditions will continue to be considered during future impairment evaluations of goodwill of each reporting unit. If the estimated fair value is less than the carrying value, the Company would be required to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.