KBRA Affirms Ratings for Hilltop Holdings Inc. and Hilltop Securities Inc.

KBRA affirms the senior unsecured debt rating of A-, the subordinated debt rating of BBB+, and the short-term debt rating of K2 for Dallas, Texas-based Hilltop Holdings Inc. (NYSE: HTH) (“the company”). Additionally, KBRA affirms the deposit and senior unsecured debt ratings of A, the subordinated debt rating of A-, and the short-term deposit and debt ratings of K1 for lead bank subsidiary, PlainsCapital Bank (“PCB”). The Outlook for all long-term ratings is Stable.

KBRA also affirms the K1 short-term debt rating for Hilltop Securities Inc.’s (“HTS”) Secured Commercial Paper Notes, Series 2024-1 ("CP Programs") and withdraws the K1 rating for its Secured Commercial Paper Notes, Series 2019-1, following the final maturity and retirement of the program.

Key Credit Considerations

The ratings are principally supported by HTH's exceptionally strong capital position (CET1 ratio of 18.3% at 2Q26), though we note the recent downward trend, which is likely to continue through organic growth, share repurchases, and opportunistic M&A. According to management, HTH currently operates with nearly $1 billion of excess capital above regulatory well-capitalized levels and internal stress buffers, while maintaining a targeted excess capital cushion of ~$500 million. As such, KBRA expects HTH's stronger-than-peer capital position to persist even with meaningful capital deployment. While a material reduction in capital could have negative rating implications, KBRA would also consider whether such deployment enhances the company’s franchise strength and earnings profile, which could partially or fully offset lower capital levels.

The ratings further benefit from conservative balance sheet and liquidity management, together with PCB's historically favorable credit performance. The bank maintains a relationship-oriented commercial lending model characterized by limited participation in higher-risk lending verticals and has demonstrated comparatively low credit losses over an extended period. HTH also maintains substantial liquidity resources across the organization, including a defensible deposit franchise at PCB and considerable contingent funding capacity, while HTS maintains diversified access to repo, bank lines, and secured CP programs.

We also positively view HTH's diversified business model and revenue streams (noninterest income generally represents 60% of total revenue; 63% during 1H26), anchored by the fairly stable earnings at PCB and complemented by meaningful fee-based revenues generated through HTS and PrimeLending ("PL"). KBRA views the differentiated business mix favorably, including the synergies across the subsidiaries and a degree of countercyclicality that has historically supported consolidated results across varying interest rate and operating environments. While KBRA appreciates the revenue diversification, certain businesses can produce greater earnings variability across market cycles, resulting in higher peaks and valleys. Nevertheless, HTH has generally produced stronger profitability than peers over the longer term, notably the last 10 years across varying rate environments. Recent profitability (ROA of 1.0% in 1H26) remains below longer-term averages, reflecting weaker contributions from PL, which remains challenged by the prolonged downturn in mortgage activity, as well as variability within HTS's capital markets-oriented businesses. PCB continues to produce solid earnings, while management has taken actions to right-size PL to return to profitability.

HTS's ratings are primarily supported by the secured structure of the CP programs and conservative collateral requirements and haircuts, which provide meaningful protection to noteholders. At 2Q26, $247 million of CP was supported by $270 million of pledged securities. The ratings further benefit from HTS's substantial funding and liquidity flexibility. At 2Q26, the firm maintained $610 million of bank lines and ~$2.5 billion of repo capacity, with utilization of just 17% and 16%, respectively, while CP maturities are actively laddered to limit refinancing concentrations. Capitalization remains strong, with $214 million of net capital and $206 million of excess net capital at 2Q26, compared with management's targeted excess cushion of ~$175-$200 million. Additional support is derived from HTS's strategic importance to HTH and the parent's substantial financial capacity. KBRA believes the likelihood of parental support is high given HTS's meaningful earnings contribution, operating synergies, and management's demonstrated ability to move capital across the organization. However, the ratings are constrained by the absence of an explicit HTH guarantee. HTS maintains a strong, diversified franchise anchored by its national municipal finance platform and supplemented by wealth management, clearing, fixed income, and structured finance. However, earnings remain subject to greater variability than traditional banking businesses given exposure to interest rates, securities issuance, trading activity, mortgage volumes, and broader capital markets conditions. Additionally, outside of its national public banking business (and, to a lesser degree its clearing business), HTS is a comparatively smaller firm with regional focus in its legacy markets.

Rating Sensitivities

The likelihood of positive rating movement over the medium term is remote. However, a meaningful increase in diversification and scale of the banking franchise and broker-dealer could provide positive momentum for ratings over the longer term. Outsized weakness in asset quality, inability to be offset by strong earnings, or a more aggressive capital posture, beyond our expectations, could also pressure ratings as this represents one of the primary considerations for HTH’s ratings.

The ratings profile of Hilltop Securities (HTS) is largely constrained by that of its parent, Hilltop Holdings Inc. Given HTS’s strategic importance to the Hilltop organization, KBRA has a high degree of confidence that the parent would provide support to HTS, if needed. A change in KBRA’s assessment of the parent’s willingness or ability to provide such support could negatively impact HTS’s ratings.

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Methodologies