Securities

9 Months Ended

Sep. 30, 2024

Securities

Securities

4. Securities

The fair value of trading securities is summarized as follows (in thousands).

	September 30,		December 31,
	2024		2023
U.S. Treasury securities	$	127	$	3,736
U.S. government agencies:
Bonds		9,141		12,867
Residential mortgage-backed securities		127,499		124,768
Collateralized mortgage obligations		55,061		86,281
Other		23,381		13,079
Corporate debt securities		41,867		37,569
States and political subdivisions		260,323		180,890
Private-label securitized product		13,130		47,768
Other		10,307		9,033
Totals	$	540,836	$	515,991

In addition to the securities shown above, 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 obligations 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 $47.8 million and $34.9 million at September 30, 2024 and December 31, 2023, respectively.

The amortized cost and fair value of available for sale and held to maturity securities are summarized as follows (in thousands).

	Available for Sale
	Amortized		Unrealized		Unrealized
September 30, 2024	Cost		Gains		Losses		Fair Value
U.S. Treasury securities	$	4,990	$	—	$	(228)	$	4,762
U.S. government agencies:
Bonds		115,645		381		(343)		115,683
Residential mortgage-backed securities		358,539		449		(29,321)		329,667
Commercial mortgage-backed securities		204,089		744		(6,673)		198,160
Collateralized mortgage obligations		741,458		606		(46,066)		695,998
Corporate debt securities		29,408		215		(537)		29,086
States and political subdivisions		34,941		40		(2,637)		32,344
Totals	$	1,489,070	$	2,435	$	(85,805)	$	1,405,700

	Available for Sale
	Amortized		Unrealized		Unrealized
December 31, 2023	Cost		Gains		Losses		Fair Value
U.S. Treasury securities	$	4,985	$	—	$	(368)	$	4,617
U.S. government agencies:
Bonds		166,617		360		(811)		166,166
Residential mortgage-backed securities		389,160		25		(39,315)		349,870
Commercial mortgage-backed securities		200,236		468		(8,958)		191,746
Collateralized mortgage obligations		797,876		291		(61,686)		736,481
Corporate debt securities		25,919		—		(1,501)		24,418
States and political subdivisions		36,954		39		(2,696)		34,297
Totals	$	1,621,747	$	1,183	$	(115,335)	$	1,507,595

	Held to Maturity
	Amortized		Unrealized		Unrealized
September 30, 2024	Cost		Gains		Losses		Fair Value
U.S. government agencies:
Residential mortgage-backed securities	$	261,526	$	—	$	(20,625)	$	240,901
Commercial mortgage-backed securities		152,657		—		(7,777)		144,880
Collateralized mortgage obligations		263,546		—		(30,857)		232,689
States and political subdivisions		77,095		107		(4,826)		72,376
Totals	$	754,824	$	107	$	(64,085)	$	690,846

	Held to Maturity
	Amortized		Unrealized		Unrealized
December 31, 2023	Cost		Gains		Losses		Fair Value
U.S. government agencies:
Residential mortgage-backed securities	$	278,172	$	—	$	(25,765)	$	252,407
Commercial mortgage-backed securities		172,879		—		(12,670)		160,209
Collateralized mortgage obligations		284,208		—		(37,189)		247,019
States and political subdivisions		77,418		149		(5,344)		72,223
Totals	$	812,677	$	149	$	(80,968)	$	731,858

Additionally, the Company had unrealized net gains of $0.2 million and $0.3 million at September 30, 2024 and December 31, 2023, respectively, from equity securities with fair values of $0.3 million and $0.3 million held at September 30, 2024 and December 31, 2023, respectively. The Company recognized nominal net gains during the three months ended September 30, 2024 and 2023, respectively, and recognized nominal net losses and net gains of $0.1 million during the nine months ended September 30, 2024 and 2023, respectively, due to changes in the fair value of equity securities still held at the balance sheet date. During the three and nine months ended September 30, 2024 and 2023, net gains and losses recognized from equity securities sold were nominal.

Information regarding available for sale and held to maturity securities that were in an unrealized loss position is shown in the following tables (dollars in thousands).

	September 30, 2024					December 31, 2023
	Number of			Unrealized		Number of			Unrealized
	Securities	Fair Value		Losses		Securities	Fair Value		Losses
Available for Sale
U.S. treasury securities:
Unrealized loss for less than twelve months	—	$	—	$	—	—	$	—	$	—
Unrealized loss for twelve months or longer	1		4,762		228	1		4,617		368
	1		4,762		228	1		4,617		368
U.S. government agencies:
Bonds:
Unrealized loss for less than twelve months	—		—		—	4		28,988		103
Unrealized loss for twelve months or longer	15		77,173		343	20		112,502		708
	15		77,173		343	24		141,490		811
Residential mortgage-backed securities:
Unrealized loss for less than twelve months	13		7,804		448	14		8,989		616
Unrealized loss for twelve months or longer	107		305,146		28,873	109		338,769		38,699
	120		312,950		29,321	123		347,758		39,315
Commercial mortgage-backed securities:
Unrealized loss for less than twelve months	—		—		—	2		10,413		282
Unrealized loss for twelve months or longer	20		196,733		6,673	18		162,470		8,676
	20		196,733		6,673	20		172,883		8,958
Collateralized mortgage obligations:
Unrealized loss for less than twelve months	1		810		2	2		11,560		22
Unrealized loss for twelve months or longer	134		662,145		46,064	138		709,571		61,665
	135		662,955		46,066	140		721,131		61,687
Corporate debt securities:
Unrealized loss for less than twelve months	1		8,618		537	2		13,483		1,501
Unrealized loss for twelve months or longer	—		—		—	—		—		—
	1		8,618		537	2		13,483		1,501
States and political subdivisions:
Unrealized loss for less than twelve months	—		—		—	10		7,023		55
Unrealized loss for twelve months or longer	52		25,648		2,637	50		20,857		2,640
	52		25,648		2,637	60		27,880		2,695
Total available for sale:
Unrealized loss for less than twelve months	15		17,232		987	34		80,456		2,579
Unrealized loss for twelve months or longer	329		1,271,607		84,818	336		1,348,786		112,756
	344	$	1,288,839	$	85,805	370	$	1,429,242	$	115,335

	September 30, 2024					December 31, 2023
	Number of			Unrealized		Number of			Unrealized
	Securities	Fair Value		Losses		Securities	Fair Value		Losses
Held to Maturity
U.S. government agencies:
Residential mortgage-backed securities:
Unrealized loss for less than twelve months	—	$	—	$	—	—	$	—	$	—
Unrealized loss for twelve months or longer	45		240,901		20,625	44		278,172		25,765
	45		240,901		20,625	44		278,172		25,765
Commercial mortgage-backed securities:
Unrealized loss for less than twelve months	—		—		—	—		—		—
Unrealized loss for twelve months or longer	27		144,880		7,777	31		160,208		12,670
	27		144,880		7,777	31		160,208		12,670
Collateralized mortgage obligations:
Unrealized loss for less than twelve months	—		—		—	—		—		—
Unrealized loss for twelve months or longer	54		232,688		30,857	54		247,019		37,189
	54		232,688		30,857	54		247,019		37,189
States and political subdivisions:
Unrealized loss for less than twelve months	11		6,223		56	39		15,506		479
Unrealized loss for twelve months or longer	158		58,520		4,770	128		45,208		4,865
	169		64,743		4,826	167		60,714		5,344
Total held to maturity:
Unrealized loss for less than twelve months	11		6,223		56	39		15,506		479
Unrealized loss for twelve months or longer	284		676,989		64,029	257		730,607		80,489
	295	$	683,212	$	64,085	296	$	746,113	$	80,968

Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties. The amortized cost and fair value of securities, excluding trading and equity securities, at September 30, 2024 are shown by contractual maturity below (in thousands).

	Available for Sale				Held to Maturity
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	21,587	$	21,579	$	—	$	—
Due after one year through five years		63,709		63,311		3,823		3,693
Due after five years through ten years		54,250		53,730		49,427		47,044
Due after ten years		45,438		43,255		23,845		21,639
		184,984		181,875		77,095		72,376
Residential mortgage-backed securities		358,539		329,667		261,526		240,901
Commercial mortgage-backed securities		204,089		198,160		152,657		144,880
Collateralized mortgage obligations		741,458		695,998		263,546		232,689
	$	1,489,070	$	1,405,700	$	754,824	$	690,846

The Company recognized net gains of $7.4 million and $9.4 million from its trading portfolio during the three months ended September 30, 2024 and 2023, respectively, and net gains of $27.4 million and $39.0 million during the nine months ended September 30, 2024 and 2023, respectively. In addition, the Hilltop Broker-Dealers realized net gains from structured product trading activities of $14.6 million and $8.2 million during the three months ended September 30, 2024 and 2023, respectively, and net gains from structured product trading activities of $55.4 million and $52.8 million during the nine months ended September 30, 2024 and 2023, respectively. The Company had no other realized gains and losses on securities during the three and nine months ended September 30, 2024 and nominal other realized losses on securities during the three and nine months ended September 30, 2023, respectively. All such realized gains and losses are recorded as a component of other noninterest income within the consolidated statements of operations.

Securities with a carrying amount of $590.5 million and $537.2 million (with a fair value of $556.1 million and $503.1 million, respectively) at September 30, 2024 and December 31, 2023, respectively, were pledged by the Bank to secure public and trust deposits, federal funds purchased and securities sold under agreements to repurchase, and for other purposes as required or permitted by law. Substantially all of these pledged securities were included in the available for sale and held to maturity securities portfolios at September 30, 2024 and December 31, 2023.

Mortgage-backed securities and collateralized mortgage obligations consist primarily of Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) pass-through and participation certificates. GNMA securities are guaranteed by the full faith and credit of the United States, while FNMA and FHLMC securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States.