Press Release

Hilltop Holdings Inc. Announces Financial Results for Third Quarter 2021

Company Release - 10/28/2021 5:15 PM ET

DALLAS--(BUSINESS WIRE)-- Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the third quarter of 2021. Hilltop produced income from continuing operations to common stockholders of $92.9 million, or $1.15 per diluted share, for the third quarter of 2021, compared to $152.5 million, or $1.69 per diluted share, for the third quarter of 2020. Hilltop’s financial results from continuing operations for the third quarter of 2021 included a decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income as well as declines in net revenues within the broker-dealer segment’s structured finance business and fixed income services lines, partially offset by improvements in the macroeconomic outlook and resulting beneficial impact on loan expected loss rates within the banking segment.

Including income from discontinued operations related to the former insurance business, income applicable to common stockholders was $92.9 million, or $1.15 per diluted share, for the third quarter of 2021, compared to $153.3 million, or $1.70 per diluted share, for the third quarter of 2020.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per common share, payable on November 30, 2021, to all common stockholders of record as of the close of business on November 15, 2021. Additionally, during the third quarter of 2021, Hilltop paid approximately $74 million to repurchase an aggregate of 2,241,761 shares of its common stock at a weighted average price of $33.06 per share pursuant to the 2021 stock repurchase program. These shares were returned to the pool of authorized but unissued shares of common stock.

Furthermore, in October 2021, the Hilltop Board of Directors authorized, subject to regulatory review, an increase to the aggregate amount of common stock that Hilltop may repurchase under the aforementioned stock repurchase program to $200.0 million, an increase of $50.0 million. As a result of share repurchases during 2021 and giving effect to such increase, Hilltop has approximately $76 million of available share repurchase capacity through expiration of the stock repurchase program in January 2022.

The COVID-19 pandemic has adversely impacted financial markets and overall economic conditions, and is expected to continue to have implications on our business and operations. The extent of the impact of the pandemic on our operational and financial performance for the remainder of 2021 and into 2022 is currently uncertain and will depend on certain developments outside of our control, including, among others, the ongoing distribution and effectiveness of vaccines, government stimulus, the ultimate impact of the pandemic on our customers and clients, and additional, or extended, federal, state and local government orders and regulations that might be imposed in response to the pandemic.

Jeremy B. Ford, President and CEO of Hilltop, said, “I am happy to announce strong operating results for all three businesses at Hilltop. We have seen continued improvement in our asset quality, which is a reflection of both the sound lending practices employed by PlainsCapital Bank and the improving economic environment. The trend of increasing deposits remained steady in the quarter, and we are working diligently to deploy that excess liquidity through relationship-based lending and prudent management of our securities portfolio. At PrimeLending and the mortgage-centric businesses at Hilltop Securities, continued strength in the housing market and solid execution from our teams resulted in strong profitability. In addition, Hilltop continued to return a portion of our excess capital to shareholders through approximately $10 million of dividends paid and $74 million of share repurchases during the third quarter.”

Third Quarter 2021 Highlights for Hilltop:

  • The reversal of credit losses was $5.8 million during the third quarter of 2021, compared to a reversal of credit losses of $28.7 million in the second quarter of 2021;
    • The reversal of credit losses during the third quarter of 2021 primarily reflected improvements in both macroeconomic forecast assumptions and credit quality metrics on COVID-19 impacted industry sector exposures;
  • For the third quarter of 2021, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $241.9 million, compared to $355.6 million in the third quarter of 2020, a 32.0% decrease;
    • Mortgage loan origination production volume was $5.6 billion during the third quarter of 2021, compared to $6.5 billion in the third quarter of 2020;
    • Net gains from mortgage loans sold to third parties declined to 359 basis points during the third quarter of 2021, compared to 376 basis points in the second quarter of 2021.
  • Hilltop’s consolidated annualized return on average assets and return on average equity for the third quarter of 2021 were 2.13% and 14.96%, respectively, compared to 3.71% and 25.94%, respectively, for the third quarter of 2020;
  • Hilltop’s book value per common share increased to $31.36 at September 30, 2021, compared to $30.44 at June 30, 2021;
  • Hilltop’s total assets were $18.0 billion and $17.7 billion at September 30, 2021 and June 30, 2021, respectively;
  • Loans1, net of allowance for credit losses, decreased to $6.8 billion at September 30, 2021 compared to $6.9 billion at June 30, 2021;
    • Includes supporting our impacted banking clients through funding of over 4,100 loans through both rounds of the Paycheck Protection Program, or PPP, with a remaining balance of approximately $133 million as of September 30, 2021, compared to approximately $261 million as of June 30, 2021;
    • Through October 22, 2021, the Small Business Administration, or SBA, had approved approximately 3,300 PPP forgiveness applications from the Bank totaling approximately $775 million, with PPP loans of approximately $12 million pending SBA review and approval.
  • Non-performing loans were $62.2 million, or 0.64% of total loans, at September 30, 2021, compared to $69.0 million, or 0.66% of total loans, at June 30, 2021;
  • We further supported our impacted banking clients during 2020 through the approval of COVID-19 related loan modifications of approximately $1.0 billion, and continued such support during 2021, resulting in a portfolio of active deferrals that have not reached the end of their deferral period of approximately $17 million as of September 30, 2021, compared to approximately $76 million in active deferment as of June 30, 2021;
    • While the majority of the portfolio of COVID-19 related loan modifications no longer require deferral, such loans may continue to represent elevated risk; therefore, monitoring of these loans continues;
    • The extent of these loans progressing into non-performing loans during future periods is uncertain.
  • Loans held for sale decreased by 26.9% from June 30, 2021 to $2.1 billion at September 30, 2021;
  • Total deposits were $12.1 billion and $11.7 billion at September 30, 2021 and June 30, 2021, respectively;
  • Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 12.64% and a Common Equity Tier 1 Capital Ratio of 21.28% at September 30, 2021;
  • We redeemed in full all of our outstanding junior subordinated debentures of $67.0 million, which resulted in the full redemption to the holders of the associated preferred securities and common securities during the third quarter of 2021;
  • Hilltop’s consolidated net interest margin4 decreased to 2.53% for the third quarter of 2021, compared to 2.62% in the second quarter of 2021;
    • Includes previously deferred interest income of $4.6 million during the third quarter of 2021 related to PPP loan-related origination fees.
  • For the third quarter of 2021, noninterest income from continuing operations was $367.9 million, compared to $502.7 million in the third quarter of 2020, a 26.8% decrease;
  • For the third quarter of 2021, noninterest expense from continuing operations was $355.2 million, compared to $399.3 million in the third quarter of 2020, a 11.1% decrease; and
  • Hilltop’s effective tax rate from continuing operations was 22.8% during the third quarter of 2021, compared to 22.7% during the same period in 2020.

Discontinued Operations

On June 30, 2020, Hilltop completed the sale of National Lloyds Corporation, or NLC, which comprised the operations of its former insurance segment, for cash proceeds of $154.1 million. During 2020, Hilltop recognized an aggregate gain associated with this transaction of $36.8 million, net of transaction costs. Accordingly, insurance segment results and its assets and liabilities have been presented as discontinued operations. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules promulgated under the Internal Revenue Code.

 
Note: “Consolidated” refers to our consolidated financial position and consolidated results of operations, including discontinued operations and assets and liabilities of discontinued operations.

1

   

“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $645.6 million and $628.3 million at September 30, 2021 and June 30, 2021, respectively.

2

   

Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period.

3

   

Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets.

4

   

Net interest margin is defined as net interest income divided by average interest-earning assets.

 

Consolidated Financial and Other Information

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(in 000's)

 

2021

 

2021

 

2021

 

2020

 

2020

Cash and due from banks

 

$

2,463,111

 

 

$

1,372,818

 

 

$

1,564,489

 

 

$

1,062,560

 

 

$

1,277,865

 

Federal funds sold

 

 

406

 

 

 

387

 

 

 

396

 

 

 

386

 

 

 

420

 

Assets segregated for regulatory purposes

 

 

269,506

 

 

 

207,284

 

 

 

273,393

 

 

 

290,357

 

 

 

221,621

 

Securities purchased under agreements to resell

 

 

155,908

 

 

 

202,638

 

 

 

106,342

 

 

 

80,319

 

 

 

90,103

 

Securities:

 

 

 

 

 

 

 

 

 

 

Trading, at fair value

 

 

609,813

 

 

 

682,483

 

 

 

528,712

 

 

 

694,255

 

 

 

667,751

 

Available for sale, at fair value, net

 

 

1,994,183

 

 

 

1,817,807

 

 

 

1,715,406

 

 

 

1,462,205

 

 

 

1,310,240

 

Held to maturity, at amortized cost, net

 

 

277,419

 

 

 

288,776

 

 

 

300,088

 

 

 

311,944

 

 

 

323,299

 

Equity, at fair value

 

 

221

 

 

 

193

 

 

 

189

 

 

 

140

 

 

 

117

 

 

 

 

2,881,636

 

 

 

2,789,259

 

 

 

2,544,395

 

 

 

2,468,544

 

 

 

2,301,407

 

Loans held for sale

 

 

2,108,878

 

 

 

2,885,458

 

 

 

2,538,986

 

 

 

2,788,386

 

 

 

2,547,975

 

Loans held for investment, net of unearned income

 

 

7,552,926

 

 

 

7,645,227

 

 

 

7,810,657

 

 

 

7,693,141

 

 

 

7,945,560

 

Allowance for credit losses

 

 

(109,512

)

 

 

(115,269

)

 

 

(144,499

)

 

 

(149,044

)

 

 

(155,214

)

Loans held for investment, net

 

 

7,443,414

 

 

 

7,529,958

 

 

 

7,666,158

 

 

 

7,544,097

 

 

 

7,790,346

 

 

 

 

 

 

 

 

 

 

 

 

Broker-dealer and clearing organization receivables

 

 

1,419,652

 

 

 

1,403,447

 

 

 

1,596,817

 

 

 

1,404,727

 

 

 

1,363,478

 

Premises and equipment, net

 

 

210,026

 

 

 

212,402

 

 

 

213,304

 

 

 

211,595

 

 

 

208,078

 

Operating lease right-of-use assets

 

 

115,942

 

 

 

115,698

 

 

 

101,055

 

 

 

105,757

 

 

 

109,354

 

Mortgage servicing assets

 

 

110,931

 

 

 

124,497

 

 

 

142,125

 

 

 

143,742

 

 

 

127,712

 

Other assets

 

 

526,339

 

 

 

535,536

 

 

 

648,895

 

 

 

555,983

 

 

 

607,932

 

Goodwill

 

 

267,447

 

 

 

267,447

 

 

 

267,447

 

 

 

267,447

 

 

 

267,447

 

Other intangible assets, net

 

 

16,455

 

 

 

17,705

 

 

 

19,035

 

 

 

20,364

 

 

 

21,814

 

Total assets

 

$

17,989,651

 

 

$

17,664,534

 

 

$

17,682,837

 

 

$

16,944,264

 

 

$

16,935,552

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

4,433,148

 

 

$

4,231,082

 

 

$

4,031,181

 

 

$

3,612,384

 

 

$

3,557,603

 

Interest-bearing

 

 

7,699,014

 

 

 

7,502,703

 

 

 

7,701,598

 

 

 

7,629,935

 

 

 

7,704,312

 

Total deposits

 

 

12,132,162

 

 

 

11,733,785

 

 

 

11,732,779

 

 

 

11,242,319

 

 

 

11,261,915

 

Broker-dealer and clearing organization payables

 

 

1,496,923

 

 

 

1,439,620

 

 

 

1,546,227

 

 

 

1,368,373

 

 

 

1,310,835

 

Short-term borrowings

 

 

747,040

 

 

 

915,919

 

 

 

676,652

 

 

 

695,798

 

 

 

780,109

 

Securities sold, not yet purchased, at fair value

 

 

113,064

 

 

 

132,950

 

 

 

97,055

 

 

 

79,789

 

 

 

56,023

 

Notes payable

 

 

395,804

 

 

 

396,653

 

 

 

401,713

 

 

 

381,987

 

 

 

396,006

 

Operating lease liabilities

 

 

134,296

 

 

 

134,019

 

 

 

120,339

 

 

 

125,450

 

 

 

122,402

 

Junior subordinated debentures

 

 

 

 

 

67,012

 

 

 

67,012

 

 

 

67,012

 

 

 

67,012

 

Other liabilities

 

 

468,020

 

 

 

348,200

 

 

 

595,045

 

 

 

632,889

 

 

 

502,517

 

Total liabilities

 

 

15,487,309

 

 

 

15,168,158

 

 

 

15,236,822

 

 

 

14,593,617

 

 

 

14,496,819

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

790

 

 

 

812

 

 

 

823

 

 

 

822

 

 

 

902

 

Additional paid-in capital

 

 

1,270,272

 

 

 

1,302,439

 

 

 

1,319,518

 

 

 

1,317,929

 

 

 

1,443,588

 

Accumulated other comprehensive income

 

 

367

 

 

 

7,093

 

 

 

3,486

 

 

 

17,763

 

 

 

23,790

 

Retained earnings

 

 

1,204,307

 

 

 

1,159,304

 

 

 

1,094,727

 

 

 

986,792

 

 

 

942,461

 

Deferred compensation employee stock trust, net

 

 

751

 

 

 

754

 

 

 

752

 

 

 

771

 

 

 

774

 

Employee stock trust

 

 

(116

)

 

 

(121

)

 

 

(121

)

 

 

(138

)

 

 

(143

)

Total Hilltop stockholders' equity

 

 

2,476,371

 

 

 

2,470,281

 

 

 

2,419,185

 

 

 

2,323,939

 

 

 

2,411,372

 

Noncontrolling interests

 

 

25,971

 

 

 

26,095

 

 

 

26,830

 

 

 

26,708

 

 

 

27,361

 

Total stockholders' equity

 

 

2,502,342

 

 

 

2,496,376

 

 

 

2,446,015

 

 

 

2,350,647

 

 

 

2,438,733

 

Total liabilities & stockholders' equity

 

$

17,989,651

 

 

$

17,664,534

 

 

$

17,682,837

 

 

$

16,944,264

 

 

$

16,935,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Consolidated Income Statements

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(in 000's, except per share data)

 

2021

 

2021

 

2021

 

2020

 

2020

Interest income:

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

99,769

 

 

$

104,162

 

 

$

104,277

 

 

$

109,328

 

 

$

104,955

 

Securities borrowed

 

 

8,585

 

 

 

15,586

 

 

 

28,972

 

 

 

14,445

 

 

 

10,705

 

Securities:

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

12,341

 

 

 

11,125

 

 

 

10,251

 

 

 

9,845

 

 

 

11,035

 

Tax-exempt

 

 

2,687

 

 

 

2,338

 

 

 

2,102

 

 

 

1,862

 

 

 

1,687

 

Other

 

 

1,796

 

 

 

1,607

 

 

 

1,321

 

 

 

1,381

 

 

 

1,446

 

Total interest income

 

 

125,178

 

 

 

134,818

 

 

 

146,923

 

 

 

136,861

 

 

 

129,828

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

5,303

 

 

 

6,176

 

 

 

7,741

 

 

 

9,269

 

 

 

10,700

 

Securities loaned

 

 

6,519

 

 

 

12,345

 

 

 

25,486

 

 

 

12,014

 

 

 

8,729

 

Short-term borrowings

 

 

2,400

 

 

 

2,374

 

 

 

2,013

 

 

 

2,154

 

 

 

2,346

 

Notes payable

 

 

5,465

 

 

 

5,253

 

 

 

4,797

 

 

 

4,807

 

 

 

4,904

 

Junior subordinated debentures

 

 

419

 

 

 

577

 

 

 

562

 

 

 

609

 

 

 

608

 

Other

 

 

(18

)

 

 

177

 

 

 

642

 

 

 

636

 

 

 

641

 

Total interest expense

 

 

20,088

 

 

 

26,902

 

 

 

41,241

 

 

 

29,489

 

 

 

27,928

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

105,090

 

 

 

107,916

 

 

 

105,682

 

 

 

107,372

 

 

 

101,900

 

Provision for (reversal of) credit losses

 

 

(5,819

)

 

 

(28,720

)

 

 

(5,109

)

 

 

(3,482

)

 

 

(602

)

Net interest income after provision for (reversal of) credit losses

 

 

110,909

 

 

 

136,636

 

 

 

110,791

 

 

 

110,854

 

 

 

102,502

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

Net gains from sale of loans and other mortgage production income

 

 

203,152

 

 

 

199,625

 

 

 

267,080

 

 

 

247,360

 

 

 

307,896

 

Mortgage loan origination fees

 

 

38,780

 

 

 

42,146

 

 

 

43,155

 

 

 

50,193

 

 

 

47,681

 

Securities commissions and fees

 

 

34,412

 

 

 

38,300

 

 

 

38,314

 

 

 

35,921

 

 

 

32,496

 

Investment and securities advisory fees and commissions

 

 

49,646

 

 

 

32,268

 

 

 

27,695

 

 

 

42,161

 

 

 

36,866

 

Other

 

 

41,955

 

 

 

27,560

 

 

 

41,341

 

 

 

72,296

 

 

 

77,772

 

Total noninterest income

 

 

367,945

 

 

 

339,899

 

 

 

417,585

 

 

 

447,931

 

 

 

502,711

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

Employees' compensation and benefits

 

 

258,679

 

 

 

248,486

 

 

 

270,353

 

 

 

291,489

 

 

 

294,907

 

Occupancy and equipment, net

 

 

25,428

 

 

 

25,004

 

 

 

24,429

 

 

 

27,596

 

 

 

26,124

 

Professional services

 

 

14,542

 

 

 

16,239

 

 

 

13,585

 

 

 

21,927

 

 

 

17,522

 

Other

 

 

56,525

 

 

 

53,639

 

 

 

58,295

 

 

 

61,336

 

 

 

60,792

 

Total noninterest expense

 

 

355,174

 

 

 

343,368

 

 

 

366,662

 

 

 

402,348

 

 

 

399,345

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

 

123,680

 

 

 

133,167

 

 

 

161,714

 

 

 

156,437

 

 

 

205,868

 

Income tax expense

 

 

28,257

 

 

 

31,234

 

 

 

37,770

 

 

 

39,295

 

 

 

46,820

 

Income from continuing operations

 

 

95,423

 

 

 

101,933

 

 

 

123,944

 

 

 

117,142

 

 

 

159,048

 

Income from discontinued operations, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

3,734

 

 

 

736

 

Net income

 

 

95,423

 

 

 

101,933

 

 

 

123,944

 

 

 

120,876

 

 

 

159,784

 

Less: Net income attributable to noncontrolling interest

 

 

2,517

 

 

 

2,873

 

 

 

3,599

 

 

 

4,431

 

 

 

6,505

 

Income attributable to Hilltop

 

$

92,906

 

 

$

99,060

 

 

$

120,345

 

 

$

116,445

 

 

$

153,279

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

1.16

 

 

$

1.21

 

 

$

1.46

 

 

$

1.31

 

 

$

1.69

 

Earnings from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

0.04

 

 

 

0.01

 

 

 

$

1.16

 

 

$

1.21

 

 

$

1.46

 

 

$

1.35

 

 

$

1.70

 

Diluted:

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

1.15

 

 

$

1.21

 

 

$

1.46

 

 

$

1.30

 

 

$

1.69

 

Earnings from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

0.05

 

 

 

0.01

 

 

 

$

1.15

 

 

$

1.21

 

 

$

1.46

 

 

$

1.35

 

 

$

1.70

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.12

 

 

$

0.12

 

 

$

0.12

 

 

$

0.09

 

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

80,109

 

 

 

81,663

 

 

 

82,169

 

 

 

86,269

 

 

 

90,200

 

Diluted

 

 

80,542

 

 

 

82,199

 

 

 

82,657

 

 

 

86,420

 

 

 

90,200

 

 

 

 

 

 

     

 

 

 

 

 

 Three Months Ended September 30, 2021

Segment Results

 

    

 

   

 

Mortgage    

 

      

 

All Other and 

Continuing

(in 000's)

 

    Banking    

 

Broker-Dealer

 

Origination    

 

Corporate    

 

Eliminations

Operations

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) from continuing operations before taxes

 

$

62,913

 

 

$

17,421

 

  $

62,180

  $

(18,939

)  

$

105

 

$

123,680

 

 

   

 

 

 

 

 

 

 

 

 Nine Months Ended September 30, 2021

Segment Results

 

    

 

  

 

 Mortgage

 

          

 

All Other and

 

Continuing

(in 000's)

 

    Banking    

 

Broker-Dealer

 

    Origination

 

    Corporate    

 

Eliminations

Operations

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) from continuing operations before taxes

  $

214,479

 

$

41,944

 

 

$

204,241

 

 

$

(42,595

)

  $

492

 

$

418,561

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Selected Financial Data

 

2021

 

2021

 

2021

 

2020

 

2020

 

 

 

 

 

 

 

 

 

 

 

Hilltop Consolidated (1):

 

 

 

 

 

 

 

 

 

 

Return on average stockholders' equity

 

14.96

%

 

16.42

%

 

20.58

%

 

20.56

%

 

25.94

%

Return on average assets

 

2.13

%

 

2.29

%

 

2.90

%

 

2.83

%

 

3.71

%

Net interest margin (2)

 

2.53

%

 

2.62

%

 

2.69

%

 

2.71

%

 

2.56

%

Net interest margin (taxable equivalent) (3):

 

 

 

 

 

 

 

 

 

 

As reported

 

2.54

%

 

2.63

%

 

2.69

%

 

2.72

%

 

2.57

%

Impact of purchase accounting

 

9 bps

 

16 bps

 

13 bps

 

15 bps

 

10 bps

Without purchase accounting impact

 

2.45

%

 

2.47

%

 

2.56

%

 

2.57

%

 

2.47

%

Book value per common share ($)

 

31.36

 

 

30.44

 

 

29.41

 

 

28.28

 

 

26.72

 

Shares outstanding, end of period (000's)

 

78,959

 

 

81,153

 

 

82,261

 

 

82,185

 

 

90,238

 

Dividend payout ratio (4)

 

10.34

%

 

9.92

%

 

8.19

%

 

6.67

%

 

5.30

%

 

 

 

 

 

 

 

 

 

 

 

Banking Segment:

 

 

 

 

 

 

 

 

 

 

Net interest margin (2)

 

2.99

%

 

3.19

%

 

3.30

%

 

3.37

%

 

3.03

%

Net interest margin (taxable equivalent) (3):

 

 

 

 

 

 

 

 

 

 

As reported

 

3.00

%

 

3.20

%

 

3.31

%

 

3.38

%

 

3.03

%

Impact of purchase accounting

 

11 bps

 

20 bps

 

17 bps

 

20 bps

 

13 bps

Accretion of discount on loans ($000's)

 

3,221

 

 

6,001

 

 

4,851

 

 

5,629

 

 

3,346

 

Net recoveries (charge-offs) ($000's)

 

62

 

 

(510

)

 

564

 

 

(2,688

)

 

(567

)

Return on average assets

 

1.36

%

 

1.91

%

 

1.48

%

 

1.37

%

 

1.14

%

Fee income ratio

 

10.5

%

 

8.9

%

 

9.8

%

 

10.2

%

 

9.2

%

Efficiency ratio

 

48.8

%

 

49.7

%

 

48.4

%

 

53.0

%

 

52.7

%

Employees' compensation and benefits ($000's)

 

31,500

 

 

33,369

 

 

30,992

 

 

34,007

 

 

29,808

 

 

 

 

 

 

 

 

 

 

 

 

Broker-Dealer Segment:

 

 

 

 

 

 

 

 

 

 

Net revenue ($000's) (5)

 

126,570

 

 

94,145

 

 

109,137

 

 

150,070

 

 

149,190

 

Employees' compensation and benefits ($000's) (6)

 

82,429

 

 

62,289

 

 

66,157

 

 

87,622

 

 

88,211

 

Variable compensation expense ($000's)

 

53,505

 

 

34,409

 

 

37,412

 

 

60,295

 

 

60,774

 

Compensation as a % of net revenue (6)

 

65.1

%

 

66.2

%

 

60.6

%

 

58.4

%

 

59.1

%

Pre-tax margin (7)

 

13.8

%

 

7.3

%

 

16.2

%

 

22.8

%

 

23.7

%

 

 

 

 

 

 

 

 

 

 

 

Mortgage Origination Segment:

 

 

 

 

 

 

 

 

 

 

Mortgage loan originations - volume ($000's):

 

 

 

 

 

 

 

 

 

 

Home purchases

 

3,948,420

 

 

4,018,922

 

 

2,902,710

 

 

3,683,564

 

 

4,183,560

 

Refinancings

 

1,646,208

 

 

1,881,121

 

 

3,281,395

 

 

3,114,630

 

 

2,266,793

 

Total mortgage loan originations - volume

 

5,594,628

 

 

5,900,043

 

 

6,184,105

 

 

6,798,194

 

 

6,450,353

 

Mortgage loan sales - volume ($000's)

 

6,195,559

 

 

5,524,226

 

 

6,350,837

 

 

6,571,234

 

 

6,521,773

 

Net gains from mortgage loan sales (basis points):

 

 

 

 

 

 

 

 

 

 

Loans sold to third parties

 

359

 

 

376

 

 

398

 

 

451

 

 

441

 

Impact of loans retained by banking segment

 

(13

)

 

(12

)

 

(10

)

 

(3

)

 

(1

)

As reported

 

346

 

 

364

 

 

388

 

 

448

 

 

440

 

Mortgage servicing rights asset ($000's) (8)

 

110,931

 

 

124,497

 

 

142,125

 

 

143,742

 

 

127,712

 

Employees' compensation and benefits ($000's)

 

134,814

 

 

145,401

 

 

166,248

 

 

163,822

 

 

161,738

 

Variable compensation expense ($000's)

 

88,153

 

 

97,081

 

 

115,486

 

 

116,736

 

 

116,275

 

(1)

 

 

Ratios and financial data presented on a consolidated basis. For all 2020 periods presented, information includes discontinued operations.

(2)

 

 

Net interest margin is defined as net interest income divided by average interest-earning assets.

(3)

 

 

Net interest margin (taxable equivalent), a non-GAAP measure, is defined as taxable equivalent net interest income divided by average interest-earning assets.  Taxable equivalent adjustments are based on the applicable 21% federal income tax rate for all periods presented. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest margins for all earning assets, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. The taxable equivalent adjustments to interest income for Hilltop (consolidated) were $0.6 million, $0.4 million, $0.2 million, $0.3 million, and $0.3 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.2 million, and $0.2 million, respectively, for the periods presented.

(4)

 

 

Dividend payout ratio is defined as cash dividends declared per common share divided by basic earnings per common share.

(5)

 

 

Net revenue is defined as the sum of total broker-dealer net interest income and total broker-dealer noninterest income.

(6)

 

 

Noted balances and ratios during all prior periods reflect certain reclassifications to conform to current period presentation.

(7)

 

 

Pre-tax margin is defined as income before income taxes divided by net revenue.

(8)

 

 

Reported on a consolidated basis and therefore does not include mortgage servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation.

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Capital Ratios

 

2021

 

2021

 

2021

 

2020

 

2020

Tier 1 capital (to average assets):

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

10.02

%

 

10.22

%

 

10.50

%

 

10.44

%

 

10.19

%

Hilltop

 

12.64

%

 

12.87

%

 

13.01

%

 

12.64

%

 

13.03

%

Common equity Tier 1 capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

15.40

%

 

15.00

%

 

14.74

%

 

14.40

%

 

14.64

%

Hilltop

 

21.28

%

 

20.22

%

 

19.63

%

 

18.97

%

 

19.85

%

Tier 1 capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

15.40

%

 

15.00

%

 

14.74

%

 

14.40

%

 

14.64

%

Hilltop

 

21.28

%

 

20.82

%

 

20.22

%

 

19.57

%

 

20.46

%

Total capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

16.32

%

 

15.95

%

 

15.64

%

 

15.27

%

 

15.49

%

Hilltop

 

24.00

%

 

23.48

%

 

22.96

%

 

22.34

%

 

23.22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Non-Performing Assets Portfolio Data

 

2021

 

2021

 

2021

 

2020

 

2020

Loans accounted for on a non-accrual basis ($000's) (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

5,705

 

 

7,211

 

 

10,668

 

 

11,133

 

 

14,079

Commercial and industrial

 

 

29,808

 

 

33,033

 

 

36,144

 

 

34,049

 

 

38,708

Construction and land development

 

 

366

 

 

474

 

 

501

 

 

507

 

 

528

1-4 family residential

 

 

25,255

 

 

27,100

 

 

30,937

 

 

32,263

 

 

28,707

Consumer

 

 

24

 

 

26

 

 

26

 

 

28

 

 

53

Broker-dealer

 

 

 

 

 

 

 

 

 

 

 

 

 

61,158

 

 

67,844

 

 

78,276

 

 

77,980

 

 

82,075

Troubled debt restructurings included in accruing loans held for investment ($000's)

 

 

1,038

 

 

1,139

 

 

1,584

 

 

1,954

 

 

1,919

Non-performing loans ($000's)

 

 

62,196

 

 

68,983

 

 

79,860

 

 

79,934

 

 

83,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans as a % of total loans

 

 

0.64%

 

 

0.66%

 

 

0.77%

 

 

0.76%

 

 

0.80%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned ($000's)

 

 

21,605

 

 

21,078

 

 

19,899

 

 

21,289

 

 

25,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other repossessed assets ($000's)

 

 

 

 

 

 

 

 

101

 

 

239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets ($000's)

 

 

83,801

 

 

90,061

 

 

99,759

 

 

101,324

 

 

109,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets as a % of total assets

 

 

0.47%

 

 

0.51%

 

 

0.56%

 

 

0.60%

 

 

0.65%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans past due 90 days or more and still accruing ($000's) (2):

 

 

175,734

 

 

245,828

 

 

265,230

 

 

243,630

 

 

187,105

 

(1)

   

Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications. The Bank’s COVID-19 payment deferral programs allow for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. Since the second quarter of 2020, the Bank’s actions included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $17 million as of September 30, 2021, down from approximately $76 million as of June 30, 2021. The extent to which these measures will impact the Bank is uncertain, and any progression of loans, whether receiving COVID-19 payment deferrals or not, into non-accrual status, during future periods is uncertain and will depend on future developments that cannot be predicted.

(2)

   

Loans past due 90 days or more and still accruing were primarily comprised of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

2021

 

2020

 

 

Average

 

Interest

 

Annualized

 

Average

 

Interest

 

Annualized

 

 

Outstanding

 

Earned or

 

Yield or

 

Outstanding

 

Earned or

 

Yield or

Net Interest Margin (Taxable Equivalent) Details (1)

 

Balance

 

Paid

 

Rate

 

Balance

 

Paid

 

Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

2,300,939

 

 

$

17,696

 

3.08

%

 

$

2,530,805

 

 

$

20,108

 

3.18

%

Loans held for investment, gross (2)

 

 

7,514,392

 

 

 

82,073

 

4.33

%

 

 

7,730,711

 

 

 

84,847

 

4.32

%

Investment securities - taxable

 

 

2,585,362

 

 

 

12,328

 

1.91

%

 

 

1,974,911

 

 

 

11,017

 

2.23

%

Investment securities - non-taxable (3)

 

 

318,408

 

 

 

3,252

 

4.09

%

 

 

243,716

 

 

 

2,011

 

3.30

%

Federal funds sold and securities purchased under agreements to resell

 

 

161,577

 

 

 

207

 

%

 

 

154,588

 

 

 

10

 

0.03

%

Interest-bearing deposits in other financial institutions

 

 

2,197,478

 

 

 

788

 

0.14

%

 

 

1,794,652

 

 

 

626

 

0.14

%

Securities borrowed

 

 

1,364,726

 

 

 

8,585

 

2.46

%

 

 

1,297,112

 

 

 

10,705

 

3.23

%

Other

 

 

51,350

 

 

 

813

 

6.28

%

 

 

49,701

 

 

 

823

 

6.59

%

Interest-earning assets, gross (3)

 

 

16,494,232

 

 

 

125,742

 

3.02

%

 

 

15,776,196

 

 

 

130,147

 

3.26

%

Allowance for credit losses

 

 

(115,688

)

 

 

 

 

 

 

(156,071

)

 

 

 

 

Interest-earning assets, net

 

 

16,378,544

 

 

 

 

 

 

 

15,620,125

 

 

 

 

 

Noninterest-earning assets

 

 

1,371,207

 

 

 

 

 

 

 

1,493,194

 

 

 

 

 

Total assets

 

$

17,749,751

 

 

 

 

 

 

$

17,113,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

7,622,748

 

 

$

5,303

 

0.28

%

 

$

7,868,100

 

 

$

10,700

 

0.54

%

Securities loaned

 

 

1,306,314

 

 

 

6,519

 

1.98

%

 

 

1,193,497

 

 

 

8,729

 

2.91

%

Notes payable and other borrowings

 

 

1,231,545

 

 

 

8,266

 

2.66

%

 

 

1,259,559

 

 

 

8,500

 

2.69

%

Total interest-bearing liabilities

 

 

10,160,607

 

 

 

20,088

 

0.78

%

 

 

10,321,156

 

 

 

27,929

 

1.08

%

Noninterest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

4,299,987

 

 

 

 

 

 

 

3,508,282

 

 

 

 

 

Other liabilities

 

 

800,225

 

 

 

 

 

 

 

903,571

 

 

 

 

 

Total liabilities

 

 

15,260,819

 

 

 

 

 

 

 

14,733,009

 

 

 

 

 

Stockholders’ equity

 

 

2,463,821

 

 

 

 

 

 

 

2,350,900

 

 

 

 

 

Noncontrolling interest

 

 

25,111

 

 

 

 

 

 

 

29,410

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

17,749,751

 

 

 

 

 

 

$

17,113,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (3)

 

 

 

$

105,654

 

 

 

 

 

$

102,218

 

 

Net interest spread (3)

 

 

 

 

 

2.24

%

 

 

 

 

 

2.18

%

Net interest margin (3)

 

 

 

 

 

2.54

%

 

 

 

 

 

2.57

%

       

(1)

   

Information presented on a consolidated basis. For the three months ended September 30, 2020, information includes discontinued operations.

(2)

 

 

Average balance includes non-accrual loans.

(3)

   

Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rates for the periods presented. The adjustment to interest income was $0.6 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively.

Conference Call Information

Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, October 29, 2021. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third quarter 2021 financial results. Interested parties can access the conference call by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 343796. The conference call also will be webcast simultaneously on Hilltop’s Investor Relations website (http://ir.hilltop-holdings.com).

About Hilltop

Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank’s wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings’ broker-dealer subsidiaries, Hilltop Securities Inc. and Momentum Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At September 30, 2021, Hilltop employed approximately 5,000 people and operated approximately 410 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and Hilltopsecurities.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “could,” “estimates,” “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “projects,” “seeks,” “should,” “target,” “view,” “will” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: (i) the COVID-19 pandemic and the response of governmental authorities to the pandemic, which have had and may continue to have an adverse impact on the global economy and our business operations and performance; (ii) the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (iii) effectiveness of our data security controls in the face of cyber attacks; (iv) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (v) risks associated with concentration in real estate related loans; and (vi) changes in the interest rate environment and transitions away from the London Interbank Offered Rate. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement.

Investor Relations Contact:
Erik Yohe
214-525-4634
eyohe@hilltop-holdings.com

Source: Hilltop Holdings Inc.