Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the third quarter of 2020. Hilltop produced income from continuing operations to common stockholders of $152.5 million, or $1.69 per diluted share, for the third quarter of 2020, compared to $74.2 million, or $0.81 per diluted share, for the third quarter of 2019. Hilltop’s financial results from continuing operations for the third quarter of 2020 reflect a significant increase in mortgage origination segment net gains from sale of loans and other mortgage production income. Including income from discontinued operations related to the insurance segment, income applicable to common stockholders was $153.3 million, or $1.70 per diluted share, for the third quarter of 2020, compared to $79.4 million, or $0.86 per diluted share, for the third quarter of 2019.
Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share, payable on November 30, 2020, to all common stockholders of record as of the close of business on November 16, 2020.
The COVID-19 pandemic has negatively 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 COVID-19 on our operational and financial performance for the remainder of 2020 is dependent on certain developments, including, among others, the broader adverse implications of COVID-19 on our customers and clients, potential further disruption and deterioration in the financial services industry, including the mortgage servicing and commercial paper markets, and additional, or extended, federal, state and local government orders and regulations that might be imposed in response to the pandemic, all of which are uncertain.
Jeremy Ford, President and CEO of Hilltop, said, “Our results this quarter highlight the strength of our diversified operating model and the commitment of our team. I could not be more pleased with the performance of our businesses and our team for working tirelessly to serve customers in a safe and highly effective manner. Our focus on execution and delivering exceptional customer service will continue to provide the foundation for prudent growth in the future.
Hilltop’s results this quarter reflect record performance from our mortgage origination franchise, enhanced performance in our securities businesses and stable credit performance at the bank. The mortgage business generated $6.5 billion of mortgage originations and $146 million of pre-tax income, as PrimeLending leveraged recent investments in technology and superior teamwork. HilltopSecurities generated $149 million of net revenue and a 24% pre-tax margin from improved results in its fixed income capital markets, structured finance and public banking business lines. PlainsCapital Bank generated $50 million of pre-tax income, representing a return to profitability as credit trends remained stable after the significant build in the allowance for credit losses during the second quarter. During the third quarter, the bank continued to support our customers facing adversity in the pandemic, resulting in approximately $291 million of active loan payment deferrals.”
Third Quarter 2020 Highlights for Hilltop:
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For the third quarter of 2020, net gains from sale of loans and other mortgage production income within our mortgage origination segment was $307.9 million, compared to $157.1 million in the third quarter of 2019, a 96.0% increase;
- Mortgage loan origination production volume was $6.5 billion during the third quarter of 2020, compared to $4.8 billion in the third quarter of 2019.
-
The provision for (reversal of) credit losses was $(0.6) million during the third quarter of 2020, compared to $66.0 million in the second quarter of 2020;
- The significant provision for credit losses during the second quarter of 2020 was primarily associated with the increase in the expected lifetime credit losses under CECL on collectively evaluated loans within the portfolio attributable to the continued market disruption and related macroeconomic uncertainties caused by COVID-19 through June 2020.
- The reversal of credit losses during the third quarter of 2020 primarily reflected changes in reserves on margin loans within the broker-dealer segment given that the changes in the provision for credit losses associated with the Bank’s loan portfolio composition and credit quality were offset by improvements in macroeconomic factor assumptions and qualitative factors from the prior quarter.
- Hilltop’s consolidated annualized return on average assets and return on average equity for the third quarter of 2020 were 3.71% and 25.94%, respectively, compared to 2.26% and 15.55%, respectively, for the third quarter of 2019;
- Hilltop’s book value per common share increased to $26.72 at September 30, 2020, compared to $25.08 at June 30, 2020;
- Hilltop’s total assets were $16.9 billion at both September 30, 2020 and June 30, 2020;
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Loans1, net of allowance for credit losses, were $7.3 billion at both September 30, 2020 and June 30, 2020;
- Includes supporting our impacted banking clients through funding of over 2,800 loans through the Paycheck Protection Program, or PPP, which totaled approximately $671 million at September 30, 2020.
- Non-performing loans were $82.1 million, or 0.78% of total loans, at September 30, 2020, compared to $68.3 million, or 0.65% of total loans, at June 30, 2020;
-
During the third quarter of 2020, we further supported our impacted banking clients through the approval of COVID-19 related loan modifications, resulting in active deferrals that have not reached the end of their deferral period of approximately $291 million as of September 30, 2020;
- As of June 30, 2020, active COVID-19 related loan modifications totaled approximately $968 million;
- During the third quarter of 2020, COVID-19 related loan modifications of approximately $662 million have made at least one payment pursuant to agreed-upon contractual terms;
- Extent of progression of these loans into non-performing loans during future periods is uncertain.
- Loans held for sale decreased by 1.7% from June 30, 2020 to $2.5 billion at September 30, 2020;
- Total deposits were $11.3 billion at September 30, 2020, compared to $11.6 billion at June 30, 2020;
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Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 13.03% and a Common Equity Tier 1 Capital Ratio of 19.85% at September 30, 2020;
- 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.
- Hilltop’s consolidated net interest margin3 decreased to 2.56% for the third quarter of 2020, compared to 2.80% in the second quarter of 2020;
- For the third quarter of 2020, noninterest income from continuing operations was $502.7 million, compared to $306.5 million in the third quarter of 2019, a 64.0% increase;
- For the third quarter of 2020, noninterest expense from continuing operations was $399.3 million, compared to $321.2 million in the third quarter of 2019, a 24.3% increase; and
- Hilltop’s effective tax rate from continuing operations was 22.7% during the third quarter of 2020, compared to 21.9% during the same period in 2019.
Discontinued Operations
On June 30, 2020, Hilltop completed the sale of its insurance segment, National Lloyds Corporation, for cash proceeds of $154.1 million. Insurance segment results and its assets and liabilities have been presented as discontinued operations. Included within discontinued operations of corporate for the third quarter of 2020 is the recognition of a pre-tax post-closing adjustment gain of $0.7 million related to the finalization of the June 30, 2020 closing balance sheet, resulting in an aggregate gain on sale of NLC of $33.1 million. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules under the Internal Revenue Code. Income from discontinued operations, net of income taxes, was $0.7 million, or $0.01 per diluted share, for the third quarter of 2020, compared to $5.3 million, or $0.05 per diluted share, for the third quarter of 2019.
| ____________________ | |
Note: “Consolidated” refers to our consolidated financial position and consolidated results of operations, including discontinued operations and assets and liabilities classified as held for sale. | |
1 | “Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $502.1 million and $422.1 million at September 30, 2020 and June 30, 2020, respectively. |
2 | Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets. |
3 | 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) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||||||||||||
Cash and due from banks | $ | 1,277,865 | $ | 1,655,492 | $ | 524,370 | $ | 433,626 | $ | 281,445 | ||||||||||
Federal funds sold | 420 | 385 | 401 | 394 | 423 | |||||||||||||||
Assets segregated for regulatory purposes | 221,621 | 194,626 | 178,805 | 157,436 | 83,878 | |||||||||||||||
Securities purchased under agreements to resell | 90,103 | 161,457 | 23,356 | 59,031 | 49,998 | |||||||||||||||
Securities: | ||||||||||||||||||||
Trading, at fair value | 667,751 | 648,037 | 393,581 | 689,576 | 707,268 | |||||||||||||||
Available for sale, at fair value, net | 1,310,240 | 1,091,348 | 972,318 | 911,493 | 915,334 | |||||||||||||||
Held to maturity, at amortized cost, net | 323,299 | 343,198 | 355,110 | 386,326 | 371,361 | |||||||||||||||
Equity, at fair value | 117 | 122 | 107 | 166 | 164 | |||||||||||||||
2,301,407 | 2,082,705 | 1,721,116 | 1,987,561 | 1,994,127 | ||||||||||||||||
Loans held for sale | 2,547,975 | 2,592,307 | 2,433,407 | 2,106,361 | 1,984,231 | |||||||||||||||
Loans held for investment, net of unearned income | 7,945,560 | 7,849,904 | 7,345,250 | 7,381,400 | 7,321,208 | |||||||||||||||
Allowance for credit losses | (155,214 | ) | (156,383 | ) | (106,739 | ) | (61,136 | ) | (55,604 | ) | ||||||||||
Loans held for investment, net | 7,790,346 | 7,693,521 | 7,238,511 | 7,320,264 | 7,265,604 | |||||||||||||||
Broker-dealer and clearing organization receivables | 1,363,478 | 1,222,627 | 1,838,789 | 1,780,280 | 1,731,979 | |||||||||||||||
Premises and equipment, net | 208,078 | 210,975 | 215,261 | 210,375 | 203,601 | |||||||||||||||
Operating lease right-of-use assets | 109,354 | 119,954 | 113,395 | 114,320 | 119,035 | |||||||||||||||
Mortgage servicing assets | 127,712 | 81,264 | 30,299 | 55,504 | 51,297 | |||||||||||||||
Other assets | 607,932 | 627,982 | 846,316 | 404,754 | 527,125 | |||||||||||||||
Goodwill | 267,447 | 267,447 | 267,447 | 267,447 | 267,447 | |||||||||||||||
Other intangible assets, net | 21,814 | 23,374 | 25,019 | 26,666 | 28,432 | |||||||||||||||
Assets of discontinued operations | — | — | 249,758 | 248,429 | 248,407 | |||||||||||||||
Total assets | $ | 16,935,552 | $ | 16,934,116 | $ | 15,706,250 | $ | 15,172,448 | $ | 14,837,029 | ||||||||||
Deposits: | ||||||||||||||||||||
Noninterest-bearing | $ | 3,557,603 | $ | 3,467,500 | $ | 2,865,192 | $ | 2,769,556 | $ | 2,732,325 | ||||||||||
Interest-bearing | 7,704,312 | 8,182,098 | 7,082,297 | 6,262,658 | 5,998,547 | |||||||||||||||
Total deposits | 11,261,915 | 11,649,598 | 9,947,489 | 9,032,214 | 8,730,872 | |||||||||||||||
Broker-dealer and clearing organization payables | 1,310,835 | 1,158,628 | 1,259,181 | 1,605,518 | 1,546,163 | |||||||||||||||
Short-term borrowings | 780,109 | 720,164 | 1,329,948 | 1,424,010 | 1,502,755 | |||||||||||||||
Securities sold, not yet purchased, at fair value | 56,023 | 55,340 | 22,768 | 43,817 | 59,249 | |||||||||||||||
Notes payable | 396,006 | 450,158 | 244,042 | 256,269 | 217,841 | |||||||||||||||
Operating lease liabilities | 122,402 | 131,411 | 124,123 | 125,619 | 128,295 | |||||||||||||||
Junior subordinated debentures | 67,012 | 67,012 | 67,012 | 67,012 | 67,012 | |||||||||||||||
Other liabilities | 502,517 | 409,672 | 408,224 | 348,519 | 355,629 | |||||||||||||||
Liabilities of discontinued operations | — | — | 139,730 | 140,674 | 145,786 | |||||||||||||||
Total liabilities | 14,496,819 | 14,641,983 | 13,542,517 | 13,043,652 | 12,753,602 | |||||||||||||||
Common stock | 902 | 902 | 901 | 906 | 906 | |||||||||||||||
Additional paid-in capital | 1,443,588 | 1,439,686 | 1,437,301 | 1,445,233 | 1,441,604 | |||||||||||||||
Accumulated other comprehensive income | 23,790 | 23,813 | 20,939 | 11,419 | 12,305 | |||||||||||||||
Retained earnings | 942,461 | 797,331 | 676,946 | 644,860 | 602,835 | |||||||||||||||
Deferred compensation employee stock trust, net | 774 | 778 | 774 | 776 | 789 | |||||||||||||||
Employee stock trust | (143 | ) | (150 | ) | (150 | ) | (155 | ) | (170 | ) | ||||||||||
Total Hilltop stockholders' equity | 2,411,372 | 2,262,360 | 2,136,711 | 2,103,039 | 2,058,269 | |||||||||||||||
Noncontrolling interests | 27,361 | 29,773 | 27,022 | 25,757 | 25,158 | |||||||||||||||
Total stockholders' equity | 2,438,733 | 2,292,133 | 2,163,733 | 2,128,796 | 2,083,427 | |||||||||||||||
Total liabilities & stockholders' equity | $ | 16,935,552 | $ | 16,934,116 | $ | 15,706,250 | $ | 15,172,448 | $ | 14,837,029 | ||||||||||
Three Months Ended | ||||||||||||||||
Consolidated Income Statements | September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
(in 000's, except per share data) | 2020 | 2020 | 2020 | 2019 | 2019 | |||||||||||
Interest income: | ||||||||||||||||
Loans, including fees | $ | 104,955 | $ | 107,860 | $ | 111,168 | $ | 115,696 | $ | 119,580 | ||||||
Securities borrowed | 10,705 | 12,883 | 13,327 | 16,196 | 21,010 | |||||||||||
Securities: | ||||||||||||||||
Taxable | 11,035 | 11,698 | 15,695 | 15,174 | 14,885 | |||||||||||
Tax-exempt | 1,687 | 1,539 | 1,610 | 1,572 | 1,576 | |||||||||||
Other | 1,446 | 951 | 3,075 | 3,180 | 3,889 | |||||||||||
Total interest income | 129,828 | 134,931 | 144,875 | 151,818 | 160,940 | |||||||||||
Interest expense: | ||||||||||||||||
Deposits | 10,700 | 11,947 | 15,124 | 17,480 | 18,887 | |||||||||||
Securities loaned | 8,729 | 10,796 | 11,277 | 13,989 | 17,889 | |||||||||||
Short-term borrowings | 2,346 | 2,367 | 4,744 | 6,244 | 8,166 | |||||||||||
Notes payable | 4,904 | 3,768 | 2,418 | 2,337 | 2,265 | |||||||||||
Junior subordinated debentures | 608 | 705 | 850 | 909 | 955 | |||||||||||
Other | 641 | 790 | 126 | 99 | 132 | |||||||||||
Total interest expense | 27,928 | 30,373 | 34,539 | 41,058 | 48,294 | |||||||||||
Net interest income | 101,900 | 104,558 | 110,336 | 110,760 | 112,646 | |||||||||||
Provision for (reversal of) credit losses | (602 | ) | 66,026 | 34,549 | 6,880 | 47 | ||||||||||
Net interest income after provision for (reversal of) credit losses | 102,502 | 38,532 | 75,787 | 103,880 | 112,599 | |||||||||||
Noninterest income: | ||||||||||||||||
Net gains from sale of loans and other mortgage production income | 307,896 | 295,317 | 150,486 | 120,573 | 157,050 | |||||||||||
Mortgage loan origination fees | 47,681 | 45,341 | 28,554 | 36,939 | 37,782 | |||||||||||
Securities commissions and fees | 32,496 | 34,234 | 40,069 | 33,205 | 34,426 | |||||||||||
Investment and securities advisory fees and commissions | 36,866 | 29,120 | 23,180 | 32,083 | 28,685 | |||||||||||
Other | 77,772 | 64,113 | 29,424 | 40,846 | 48,562 | |||||||||||
Total noninterest income | 502,711 | 468,125 | 271,713 | 263,646 | 306,505 | |||||||||||
Noninterest expense: | ||||||||||||||||
Employees' compensation and benefits | 294,907 | 276,893 | 196,356 | 212,498 | 232,449 | |||||||||||
Occupancy and equipment, net | 26,124 | 26,174 | 19,522 | 30,617 | 27,002 | |||||||||||
Professional services | 17,522 | 15,737 | 14,798 | 17,211 | 15,472 | |||||||||||
Other | 60,792 | 51,405 | 51,225 | 47,542 | 46,263 | |||||||||||
Total noninterest expense | 399,345 | 370,209 | 281,901 | 307,868 | 321,186 | |||||||||||
Income from continuing operations before income taxes | 205,868 | 136,448 | 65,599 | 59,658 | 97,918 | |||||||||||
Income tax expense | 46,820 | 31,808 | 15,148 | 13,579 | 21,472 | |||||||||||
Income from continuing operations | 159,048 | 104,640 | 50,451 | 46,079 | 76,446 | |||||||||||
Income from discontinued operations, net of income taxes | 736 | 30,775 | 3,151 | 5,623 | 5,261 | |||||||||||
Net income | 159,784 | 135,415 | 53,602 | 51,702 | 81,707 | |||||||||||
Less: Net income attributable to noncontrolling interest | 6,505 | 6,939 | 3,966 | 2,426 | 2,289 | |||||||||||
Income attributable to Hilltop | $ | 153,279 | $ | 128,476 | $ | 49,636 | $ | 49,276 | $ | 79,418 | ||||||
Earnings per common share: | ||||||||||||||||
Basic: | ||||||||||||||||
Earnings from continuing operations | $ | 1.69 | $ | 1.08 | $ | 0.51 | $ | 0.48 | $ | 0.81 | ||||||
Earnings from discontinued operations | 0.01 | 0.34 | 0.04 | 0.06 | 0.06 | |||||||||||
$ | 1.70 | $ | 1.42 | $ | 0.55 | $ | 0.54 | $ | 0.87 | |||||||
Diluted: | ||||||||||||||||
Earnings from continuing operations | $ | 1.69 | $ | 1.08 | $ | 0.51 | $ | 0.48 | $ | 0.81 | ||||||
Earnings from discontinued operations | 0.01 | 0.34 | 0.04 | 0.06 | 0.05 | |||||||||||
$ | 1.70 | $ | 1.42 | $ | 0.55 | $ | 0.54 | $ | 0.86 | |||||||
Cash dividends declared per common share | $ | 0.09 | $ | 0.09 | $ | 0.09 | $ | 0.08 | $ | 0.08 | ||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 90,200 | 90,164 | 90,509 | 90,606 | 91,745 | |||||||||||
Diluted | 90,200 | 90,164 | 90,550 | 90,711 | 91,824 | |||||||||||
Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||
Segment Results | Mortgage | All Other and | Hilltop | |||||||||||||||||||||||
(in 000's) | Banking | Broker-Dealer | Origination | Insurance | Corporate | Eliminations | Consolidated | |||||||||||||||||||
Net interest income (expense) | $ | 96,416 | $ | 8,168 | $ | (2,349 | ) | $ | — | $ | (4,594 | ) | $ | 4,259 | $ | 101,900 | ||||||||||
Provision for (reversal of) credit losses | — | (602 | ) | — | — | — | — | (602 | ) | |||||||||||||||||
Noninterest income | 9,819 | 141,022 | 355,471 | — | 477 | (4,078 | ) | 502,711 | ||||||||||||||||||
Noninterest expense | 55,980 | 114,393 | 207,176 | — | 21,999 | (203 | ) | 399,345 | ||||||||||||||||||
Income (loss) from continuing operations before taxes | 50,255 | 35,399 | 145,946 | — | (26,116 | ) | 384 | 205,868 | ||||||||||||||||||
Income from discontinued operations before taxes | — | — | — | — | 736 | — | 736 | |||||||||||||||||||
$ | 50,255 | $ | 35,399 | $ | 145,946 | $ | — | $ | (25,380 | ) | $ | 384 | $ | 206,604 | ||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||
Segment Results | Mortgage | All Other and | Hilltop | ||||||||||||||||||||||
(in 000's) | Banking | Broker-Dealer | Origination | Insurance | Corporate | Eliminations | Consolidated | ||||||||||||||||||
Net interest income (expense) | $ | 284,440 | $ | 31,005 | $ | (3,647 | ) | $ | — | $ | (9,482 | ) | $ | 14,478 | $ | 316,794 | |||||||||
Provision for credit losses | 99,875 | 98 | — | — | — | — | 99,973 | ||||||||||||||||||
Noninterest income | 29,246 | 350,192 | 874,926 | — | 3,315 | (15,130 | ) | 1,242,549 | |||||||||||||||||
Noninterest expense | 169,569 | 299,743 | 547,222 | — | 35,741 | (820 | ) | 1,051,455 | |||||||||||||||||
Income (loss) from continuing operations before taxes | 44,242 | 81,356 | 324,057 | — | (41,908 | ) | 168 | 407,915 | |||||||||||||||||
Income from discontinued operations before taxes | — | — | — | 2,103 | 33,077 | — | 35,180 | ||||||||||||||||||
$ | 44,242 | $ | 81,356 | $ | 324,057 | $ | 2,103 | $ | (8,831 | ) | $ | 168 | $ | 443,095 | |||||||||||
Three Months Ended | |||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
Selected Financial Data | 2020 | 2020 | 2020 | 2019 | 2019 | ||||||||||
Hilltop Consolidated (1): | |||||||||||||||
Return on average stockholders' equity | 25.94% | 23.32% | 9.38% | 9.43% | 15.55% | ||||||||||
Return on average assets | 3.71% | 3.30% | 1.47% | 1.40% | 2.26% | ||||||||||
Net interest margin (2) | 2.56% | 2.80% | 3.41% | 3.30% | 3.45% | ||||||||||
Net interest margin (taxable equivalent) (3): | |||||||||||||||
As reported | 2.57% | 2.81% | 3.42% | 3.31% | 3.46% | ||||||||||
Impact of purchase accounting | 10 bps | 10 bps | 22 bps | 19 bps | 26 bps | ||||||||||
Book value per common share ($) | 26.72 | 25.08 | 23.71 | 23.20 | 22.71 | ||||||||||
Shares outstanding, end of period (000's) | 90,238 | 90,222 | 90,108 | 90,641 | 90,629 | ||||||||||
Dividend payout ratio (4) | 5.30% | 6.32% | 16.41% | 14.71% | 9.24% | ||||||||||
Banking Segment: | |||||||||||||||
Net interest margin (2) | 3.03% | 3.11% | 3.81% | 3.77% | 3.97% | ||||||||||
Net interest margin (taxable equivalent) (3): | |||||||||||||||
As reported | 3.03% | 3.12% | 3.82% | 3.78% | 3.98% | ||||||||||
Impact of purchase accounting | 13 bps | 12 bps | 30 bps | 25 bps | 35 bps | ||||||||||
Accretion of discount on loans ($000's) | 3,346 | 3,217 | 6,639 | 5,698 | 7,868 | ||||||||||
Net charge-offs (recoveries) ($000's) | 567 | 16,382 | 1,508 | 1,348 | (380) | ||||||||||
Return on average assets | 1.14% | -0.42% | 0.33% | 1.17% | 1.51% | ||||||||||
Fee income ratio | 9.2% | 10.2% | 8.5% | 10.8% | 8.3% | ||||||||||
Efficiency ratio | 52.7% | 54.1% | 55.5% | 54.9% | 50.5% | ||||||||||
Employees' compensation and benefits ($000's) | 29,808 | 31,583 | 32,347 | 31,455 | 31,309 | ||||||||||
Broker-Dealer Segment: | |||||||||||||||
Net revenue ($000's) (5) | 149,190 | 132,624 | 99,382 | 113,128 | 121,466 | ||||||||||
Employees' compensation and benefits ($000's) | 88,063 | 79,697 | 56,550 | 64,301 | 69,954 | ||||||||||
Variable compensation expense ($000's) | 60,774 | 52,372 | 32,024 | 39,505 | 44,921 | ||||||||||
Compensation as a % of net revenue | 59.0% | 60.1% | 56.9% | 56.8% | 57.6% | ||||||||||
Pre-tax margin (6) | 23.7% | 21.0% | 18.3% | 21.4% | 22.2% | ||||||||||
Mortgage Origination Segment: | |||||||||||||||
Mortgage loan originations - volume ($000's): | |||||||||||||||
Home purchases | 4,183,560 | 3,204,573 | 2,341,847 | 2,958,176 | 3,380,812 | ||||||||||
Refinancings | 2,266,793 | 2,894,486 | 1,280,741 | 1,442,329 | 1,390,989 | ||||||||||
Total mortgage loan originations - volume | 6,450,353 | 6,099,059 | 3,622,588 | 4,400,505 | 4,771,801 | ||||||||||
Mortgage loan sales - volume ($000's) | 6,521,773 | 5,934,914 | 3,486,249 | 4,226,425 | 4,316,118 | ||||||||||
Net gains from mortgage loan sales (basis points): | |||||||||||||||
As reported | 440 | 368 | 325 | 304 | 335 | ||||||||||
Impact of sales to banking segment | (1) | (1) | (13) | (8) | (1) | ||||||||||
Mortgage servicing rights asset ($000's) (7) | 127,712 | 81,263 | 30,299 | 55,504 | 51,297 | ||||||||||
Employees' compensation and benefits ($000's) | 161,738 | 160,824 | 100,328 | 109,753 | 123,890 | ||||||||||
Variable compensation expense ($000's) | 116,275 | 113,826 | 58,280 | 67,224 | 81,287 | ||||||||||
________________________________________ | |
(1) | Ratios and financial data presented on a consolidated basis and includes discontinued operations and those assets and liabilities classified as held for sale. |
(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 $0.3 million, $0.3 million, $0.3 million, $0.1 million, and $0.1 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.1 million, and $0.1 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 plus total broker-dealer noninterest income. |
(6) | Pre-tax margin is defined as income before income taxes divided by net revenue. |
(7) | 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 | 2020 | 2020 | 2020 | 2019 | 2019 | ||||||||||
Tier 1 capital (to average assets): | |||||||||||||||
PlainsCapital | 10.19% | 10.37% | 12.06% | 11.61% | 11.79% | ||||||||||
Hilltop | 13.03% | 12.60% | 13.03% | 12.71% | 12.67% | ||||||||||
Common equity Tier 1 capital (to risk-weighted assets): | |||||||||||||||
PlainsCapital | 14.64% | 14.03% | 13.33% | 13.45% | 13.25% | ||||||||||
Hilltop | 19.85% | 18.46% | 15.96% | 16.70% | 16.15% | ||||||||||
Tier 1 capital (to risk-weighted assets): | |||||||||||||||
PlainsCapital | 14.64% | 14.03% | 13.33% | 13.45% | 13.25% | ||||||||||
Hilltop | 20.46% | 19.06% | 16.38% | 17.13% | 16.58% | ||||||||||
Total capital (to risk-weighted assets): | |||||||||||||||
PlainsCapital | 15.49% | 14.88% | 14.26% | 14.13% | 13.87% | ||||||||||
Hilltop | 23.22% | 21.82% | 17.00% | 17.55% | 16.95% | ||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
Non-Performing Assets Portfolio Data | 2020 | 2020 | 2020 | 2019 | 2019 | ||||||||||
Loans accounted for on a non-accrual basis ($000's) (1): | |||||||||||||||
Commercial real estate | 14,079 | 13,743 | 23,352 | 7,308 | 8,727 | ||||||||||
Commercial and industrial | 38,708 | 32,259 | 47,121 | 15,262 | 13,313 | ||||||||||
Construction and land development | 528 | 1,404 | 1,402 | 1,316 | 1,358 | ||||||||||
1-4 family residential | 28,707 | 20,552 | 15,237 | 12,204 | 12,103 | ||||||||||
Consumer | 53 | 308 | 310 | 26 | 30 | ||||||||||
Broker-dealer | — | — | — | — | — | ||||||||||
82,075 | 68,266 | 87,422 | 36,116 | 35,531 | |||||||||||
Non-performing loans as a % of total loans | 0.78% | 0.65% | 0.89% | 0.38% | 0.38% | ||||||||||
Other real estate owned ($000's) | 25,387 | 26,602 | 15,429 | 18,202 | 18,738 | ||||||||||
Other repossessed assets ($000's) | 239 | 315 | 315 | — | — | ||||||||||
Non-performing assets ($000's) | 107,701 | 95,183 | 103,166 | 54,318 | 54,269 | ||||||||||
Non-performing assets as a % of total assets | 0.64% | 0.56% | 0.66% | 0.36% | 0.37% | ||||||||||
Loans past due 90 days or more and still accruing ($000's) | 187,105 | 124,682 | 101,300 | 102,707 | 81,678 | ||||||||||
Troubled debt restructurings included in accruing loans held for investment ($000's) | 1,919 | 2,025 | 2,286 | 2,173 | 2,222 | ||||||||||
________________________________________ | |
(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 maturity date of the existing loan. During the third quarter of 2020, the Bank’s actions included approval of COVID-19 related loan modifications, resulting in active loan modificaitons of approximately $291 million as of September 30, 2020, down from approximately $968 million as of June 30, 2020. 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. |
Three Months Ended September 30, | |||||||||||||||||||
2020 | 2019 | ||||||||||||||||||
Net Interest Margin (Taxable Equivalent) Details (1) | Average
| Interest
| Annualized
| Average
| Interest
| Annualized
| |||||||||||||
Assets | |||||||||||||||||||
Interest-earning assets | |||||||||||||||||||
Loans held for sale | $ | 2,530,805 | $ | 20,108 | 3.18 | % | $ | 1,754,975 | $ | 18,178 | 4.14 | % | |||||||
Loans held for investment, gross (2) | 7,730,711 | 84,847 | 4.32 | % | 7,167,169 | 101,402 | 5.57 | % | |||||||||||
Investment securities - taxable | 1,974,911 | 11,017 | 2.23 | % | 1,815,454 | 15,733 | 3.47 | % | |||||||||||
Investment securities - non-taxable (3) | 243,716 | 2,011 | 3.30 | % | 240,595 | 1,694 | 2.82 | % | |||||||||||
Federal funds sold and securities purchased under agreements to resell | 154,588 | 10 | 0.03 | % | 50,522 | 251 | 1.97 | % | |||||||||||
Interest-bearing deposits in other financial institutions | 1,794,652 | 626 | 0.14 | % | 330,968 | 1,928 | 2.31 | % | |||||||||||
Securities borrowed | 1,297,112 | 10,705 | 3.23 | % | 1,565,608 | 21,010 | 5.25 | % | |||||||||||
Other | 49,701 | 823 | 6.59 | % | 83,379 | 1,862 | 8.89 | % | |||||||||||
Interest-earning assets, gross (3) | 15,776,196 | 130,147 | 3.26 | % | 13,008,670 | 162,058 | 4.92 | % | |||||||||||
Allowance for credit losses | (156,071 | ) | (55,710 | ) | |||||||||||||||
Interest-earning assets, net | 15,620,125 | 12,952,960 | |||||||||||||||||
Noninterest-earning assets | 1,493,194 | 1,389,963 | |||||||||||||||||
Total assets | $ | 17,113,319 | $ | 14,342,923 | |||||||||||||||
Liabilities and Stockholders' Equity | |||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||
Interest-bearing deposits | $ | 7,868,100 | $ | 10,700 | 0.54 | % | $ | 5,943,901 | $ | 18,887 | 1.26 | % | |||||||
Securities loaned | 1,193,497 | 8,729 | 2.91 | % | 1,448,345 | 17,889 | 4.90 | % | |||||||||||
Notes payable and other borrowings | 1,259,559 | 8,500 | 2.69 | % | 1,605,598 | 11,968 | 2.94 | % | |||||||||||
Total interest-bearing liabilities | 10,321,156 | 27,929 | 1.08 | % | 8,997,844 | 48,744 | 2.15 | % | |||||||||||
Noninterest-bearing liabilities | |||||||||||||||||||
Noninterest-bearing deposits | 3,508,282 | 2,680,729 | |||||||||||||||||
Other liabilities | 903,571 | 611,337 | |||||||||||||||||
Total liabilities | 14,733,009 | 12,289,910 | |||||||||||||||||
Stockholders’ equity | 2,350,900 | 2,029,511 | |||||||||||||||||
Noncontrolling interest | 29,410 | 23,502 | |||||||||||||||||
Total liabilities and stockholders' equity | $ | 17,113,319 | $ | 14,342,923 | |||||||||||||||
Net interest income (3) | $ | 102,218 | $ | 113,314 | |||||||||||||||
Net interest spread (3) | 2.18 | % | 2.77 | % | |||||||||||||||
Net interest margin (3) | 2.57 | % | 3.46 | % | |||||||||||||||
________________________________________ | |
(1) | Information presented on a consolidated basis and includes discontinued operations and those assets and liabilities classified as held for sale. |
(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 $0.3 million and $0.1 million for the three months ended September 30, 2020 and 2019, 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 23, 2020. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third quarter 2020 financial results. Interested parties can access the conference call by dialing 1-877-508-9457 (domestic) or 1-412-317-0789 (international). 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 Hilltop Securities 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, 2020, Hilltop employed approximately 4,800 people and operated approximately 430 locations in 48 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,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “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) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (ii) the COVID-19 pandemic and the response of governmental authorities to the pandemic, which have caused and are causing significant harm to the global economy and our business; (iii) the credit risks of lending activities, including our ability to estimate credit losses, as well as the effects of, and trends in, loan delinquencies and write-offs; (iv) risks of participation as a lender in the PPP; (v) changes in the interest rate environment and transitions away from London Interbank Offered Rate; and (vi) risks associated with concentration in real estate related loans. 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201022006191/en/
Contacts:
Erik Yohe
214-525-4634
eyohe@hilltop-holdings.com
