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Hilltop Holdings Inc. Announces Financial Results for Fourth Quarter and Full Year 2020

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Hilltop Holdings Inc. (NYSE: HTH) ("Hilltop") today announced financial results for the fourth quarter and full year 2020. Hilltop produced income from continuing operations to common stockholders of $112.7 million, or $1.30 per diluted share, for the fourth quarter of 2020, compared to $43.7 million, or $0.48 per diluted share, for the fourth quarter of 2019. Income from continuing operations to common stockholders for the full year 2020 was $409.4 million, or $4.58 per diluted share, compared to $211.3 million, or $2.29 per diluted share, for the full year 2019. Hilltop’s financial results from continuing operations for the fourth quarter and full year 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 business, income applicable to common stockholders was $116.4 million, or $1.35 per diluted share, for the fourth quarter of 2020, compared to $49.3 million, or $0.54 per diluted share, for the fourth quarter of 2019, and $447.8 million, or $5.01 per diluted share, for full year 2020, compared to $225.3 million, or $2.44 per diluted share, for full year 2019.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per common share, a 33% increase from the prior quarter, payable on February 26, 2021, to all common stockholders of record as of the close of business on February 15, 2021.

Additionally, during 2020, Hilltop paid $208.7 million to repurchase approximately 8.78 million shares of its common stock at a weighted average price of $23.76 pursuant to the 2020 stock repurchase program, and inclusive of the tender offer completed in November 2020. These shares were returned to the pool of authorized but unissued shares of common stock. The previously authorized stock repurchase program was active through April 2020 when, in light of the uncertain outlook for 2020 due to the COVID-19 pandemic, the Hilltop Board of Directors suspended the stock repurchase program. Based on Hilltop’s expected ability to maintain strong capital and liquidity to meet the needs of its customers and communities during this exceptional period of economic uncertainty, and given that the previously noted stock repurchase program expired in January 2021, the Hilltop Board of Directors authorized, subject to regulatory review, a new stock repurchase program through January 2022, under which Hilltop may repurchase, in the aggregate, up to $75.0 million of its outstanding common stock.

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 2021 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 B. Ford, President and CEO of Hilltop, said, "Hilltop’s strong fourth quarter caps off a remarkable, yet unprecedented year. 2020 was a record-breaking year for our company, as PrimeLending funded a record 84 thousand residential mortgage loans, HilltopSecurities generated record net revenue of over $530 million, and Hilltop produced record consolidated earnings. While the pandemic created unique challenges, I could not be prouder of our teammates across the franchise and how they responded to take care of our clients and the communities we serve. Notably, our team at PlainsCapital Bank originated approximately 2,800 PPP loans and deferred loan payments for their commercial and consumer clients that were most impacted by the pandemic.

"Although the pandemic caused Hilltop to change the way we work, it did not deter our team from making progress on large and complex initiatives. By leveraging shared services, the coordinated efforts of our technology, properties management and human resources groups enabled us to effectively transition to a work-from-home model for a majority of our employees since last March. Further, we completed the implementation of our new mortgage loan origination system at PrimeLending and the core operating system at HilltopSecurities, both of which are foundational for the future growth in these businesses.

"As we embark upon 2021, we believe Hilltop is well positioned with established businesses, synchronized leadership and robust capital. We also believe our dividend increase and share repurchase authorization demonstrate the strength and momentum of our franchise."

Fourth Quarter 2020 Highlights for Hilltop:

  • For the fourth quarter of 2020, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $297.6 million, compared to $157.5 million in the fourth quarter of 2019, an 88.9% increase;

    • Mortgage loan origination production volume was $6.8 billion during the fourth quarter of 2020, compared to $4.4 billion in the fourth quarter of 2019.

  • The reversal of credit losses was $3.5 million during the fourth quarter of 2020, compared to $0.6 million in the third quarter of 2020;

    • The reversal of credit losses during the fourth quarter of 2020 primarily reflected improvements in Bank loan portfolio macroeconomic factor assumptions and qualitative factors from the prior quarter, partially offset by the identified changes in the loan portfolio composition and credit quality.

  • Hilltop’s consolidated annualized return on average assets and return on average equity for the fourth quarter of 2020 were 2.83% and 20.56%, respectively, compared to 1.40% and 9.43%, respectively, for the fourth quarter of 2019;

  • Hilltop’s book value per common share increased to $28.28 at December 31, 2020, compared to $26.72 at September 30, 2020;

  • Hilltop’s total assets were $16.9 billion at both December 31, 2020 and September 30, 2020;

  • Loans1, net of allowance for credit losses, were $7.1 billion at December 31, 2020, compared to $7.3 billion September 30, 2020;

    • Includes supporting our impacted banking clients through funding of over 2,800 loans through the Paycheck Protection Program, or PPP, with a remaining balance of approximately $487 million as of December 31, 2020, compared to approximately $671 million as of September 30, 2020.

  • Non-performing loans were $79.9 million, or 0.76% of total loans, at December 31, 2020, compared to $84.0 million, or 0.80% of total loans, at September 30, 2020;

  • During the fourth 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 $240 million as of December 31, 2020;

    • As of September 30, 2020 and June 30, 2020, active COVID-19 related loan modifications totaled approximately $291 million and $968 million, respectively;

    • During the third and fourth quarters of 2020, COVID-19 related loan modifications of approximately $714 million have made at least one payment pursuant to agreed-upon contractual terms;

    • The extent of these loans progressing into non-performing loans during future periods is uncertain.

  • Loans held for sale increased by 9.4% from September 30, 2020 to $2.8 billion at December 31, 2020;

  • Total deposits were $11.2 billion at December 31, 2020, compared to $11.3 billion at September 30, 2020;

  • Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 12.64% and a Common Equity Tier 1 Capital Ratio of 18.97% at December 31, 2020;

    • 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.

  • Hilltop’s consolidated net interest margin3 increased to 2.71% for the fourth quarter of 2020, compared to 2.56% in the third quarter of 2020;

  • For the fourth quarter of 2020, noninterest income from continuing operations was $447.9 million, compared to $263.6 million in the fourth quarter of 2019, a 69.9% increase;

  • For the fourth quarter of 2020, noninterest expense from continuing operations was $402.3 million, compared to $307.9 million in the fourth quarter of 2019, a 30.7% increase; and

  • Hilltop’s effective tax rate from continuing operations was 25.1% during the fourth quarter of 2020, compared to 22.8% during the same period in 2019.

________________________________________

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 $436.8 million and $502.1 million at December 31, 2020 and September 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.

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. Insurance segment results and its assets and liabilities have been presented as discontinued operations. Included within discontinued operations of corporate for the fourth quarter of 2020 is the recognition of a pre-tax post-closing adjustment gain of $3.7 million related to the finalization of the June 30, 2020 closing balance sheet, resulting in an aggregate gain on sale of NLC of $36.8 million, net of transaction costs. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules promulgated under the Internal Revenue Code.

Consolidated Financial and Other Information

Consolidated Balance Sheets

December 31,

September 30,

June 30,

March 31,

December 31,

(in 000's)

2020

2020

2020

2020

2019

Cash and due from banks

$

1,062,560

$

1,277,865

$

1,655,492

$

524,370

$

433,626

Federal funds sold

386

420

385

401

394

Assets segregated for regulatory purposes

290,357

221,621

194,626

178,805

157,436

Securities purchased under agreements to resell

80,319

90,103

161,457

23,356

59,031

Securities:

Trading, at fair value

694,255

667,751

648,037

393,581

689,576

Available for sale, at fair value, net

1,462,205

1,310,240

1,091,348

972,318

911,493

Held to maturity, at amortized cost, net

311,944

323,299

343,198

355,110

386,326

Equity, at fair value

140

117

122

107

166

2,468,544

2,301,407

2,082,705

1,721,116

1,987,561

Loans held for sale

2,788,386

2,547,975

2,592,307

2,433,407

2,106,361

Loans held for investment, net of unearned income

7,693,141

7,945,560

7,849,904

7,345,250

7,381,400

Allowance for credit losses

(149,044

)

(155,214

)

(156,383

)

(106,739

)

(61,136

)

Loans held for investment, net

7,544,097

7,790,346

7,693,521

7,238,511

7,320,264

Broker-dealer and clearing organization receivables

1,404,727

1,363,478

1,222,627

1,838,789

1,780,280

Premises and equipment, net

211,595

208,078

210,975

215,261

210,375

Operating lease right-of-use assets

105,757

109,354

119,954

113,395

114,320

Mortgage servicing assets

143,742

127,712

81,264

30,299

55,504

Other assets

555,983

607,932

627,982

846,316

404,754

Goodwill

267,447

267,447

267,447

267,447

267,447

Other intangible assets, net

20,364

21,814

23,374

25,019

26,666

Assets of discontinued operations

249,758

248,429

Total assets

$

16,944,264

$

16,935,552

$

16,934,116

$

15,706,250

$

15,172,448

Deposits:

Noninterest-bearing

$

3,612,384

$

3,557,603

$

3,467,500

$

2,865,192

$

2,769,556

Interest-bearing

7,629,935

7,704,312

8,182,098

7,082,297

6,262,658

Total deposits

11,242,319

11,261,915

11,649,598

9,947,489

9,032,214

Broker-dealer and clearing organization payables

1,368,373

1,310,835

1,158,628

1,259,181

1,605,518

Short-term borrowings

695,798

780,109

720,164

1,329,948

1,424,010

Securities sold, not yet purchased, at fair value

79,789

56,023

55,340

22,768

43,817

Notes payable

381,987

396,006

450,158

244,042

256,269

Operating lease liabilities

125,450

122,402

131,411

124,123

125,619

Junior subordinated debentures

67,012

67,012

67,012

67,012

67,012

Other liabilities

632,889

502,517

409,672

408,224

348,519

Liabilities of discontinued operations

139,730

140,674

Total liabilities

14,593,617

14,496,819

14,641,983

13,542,517

13,043,652

Common stock

822

902

902

901

906

Additional paid-in capital

1,317,929

1,443,588

1,439,686

1,437,301

1,445,233

Accumulated other comprehensive income

17,763

23,790

23,813

20,939

11,419

Retained earnings

986,792

942,461

797,331

676,946

644,860

Deferred compensation employee stock trust, net

771

774

778

774

776

Employee stock trust

(138

)

(143

)

(150

)

(150

)

(155

)

Total Hilltop stockholders' equity

2,323,939

2,411,372

2,262,360

2,136,711

2,103,039

Noncontrolling interests

26,708

27,361

29,773

27,022

25,757

Total stockholders' equity

2,350,647

2,438,733

2,292,133

2,163,733

2,128,796

Total liabilities & stockholders' equity

$

16,944,264

$

16,935,552

$

16,934,116

$

15,706,250

$

15,172,448

Three Months Ended

Year Ended

Consolidated Income Statements

December 31,

September 30,

December 31,

December 31,

December 31,

(in 000's, except per share data)

2020

2020

2019

2020

2019

Interest income:

Loans, including fees

$

109,328

$

104,955

$

115,696

$

433,311

$

460,471

Securities borrowed

14,445

10,705

16,196

51,360

69,582

Securities:

Taxable

9,845

11,035

15,174

48,273

58,493

Tax-exempt

1,862

1,687

1,572

6,698

6,159

Other

1,381

1,446

3,180

6,853

15,991

Total interest income

136,861

129,828

151,818

546,495

610,696

Interest expense:

Deposits

9,269

10,700

17,480

47,040

71,509

Securities loaned

12,014

8,729

13,989

42,816

60,086

Short-term borrowings

2,154

2,346

6,244

11,611

26,778

Notes payable

4,807

4,904

2,337

15,897

8,948

Junior subordinated debentures

609

608

909

2,772

3,851

Other

636

641

99

2,193

545

Total interest expense

29,489

27,928

41,058

122,329

171,717

Net interest income

107,372

101,900

110,760

424,166

438,979

Provision for (reversal of) credit losses

(3,482

)

(602

)

6,880

96,491

7,206

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

110,854

102,502

103,880

327,675

431,773

Noninterest income:

Net gains from sale of loans and other mortgage production income

247,360

307,896

120,573

1,001,059

504,935

Mortgage loan origination fees

50,193

47,681

36,939

171,769

130,003

Securities commissions and fees

35,921

32,496

33,205

142,720

137,742

Investment and securities advisory fees and commissions

42,161

36,866

32,083

131,327

103,787

Other

72,296

77,772

40,846

243,605

186,350

Total noninterest income

447,931

502,711

263,646

1,690,480

1,062,817

Noninterest expense:

Employees' compensation and benefits

291,489

294,907

212,498

1,059,645

844,602

Occupancy and equipment, net

27,596

26,124

30,617

99,416

113,336

Professional services

21,927

17,522

17,211

69,984

60,565

Other

61,336

60,792

47,542

224,758

193,386

Total noninterest expense

402,348

399,345

307,868

1,453,803

1,211,889

Income from continuing operations before income taxes

156,437

205,868

59,658

564,352

282,701

Income tax expense

39,295

46,820

13,579

133,071

63,714

Income from continuing operations

117,142

159,048

46,079

431,281

218,987

Income from discontinued operations, net of income taxes

3,734

736

5,623

38,396

13,990

Net income

120,876

159,784

51,702

469,677

232,977

Less: Net income attributable to noncontrolling interest

4,431

6,505

2,426

21,841

7,686

Income attributable to Hilltop

$

116,445

$

153,279

$

49,276

$

447,836

$

225,291

Earnings per common share:

Basic:

Earnings from continuing operations

$

1.31

$

1.69

$

0.48

$

4.59

$

2.29

Earnings from discontinued operations

0.04

0.01

0.06

0.43

0.15

$

1.35

$

1.70

$

0.54

$

5.02

$

2.44

Diluted:

Earnings from continuing operations

$

1.30

$

1.69

$

0.48

$

4.58

$

2.29

Earnings from discontinued operations

0.05

0.01

0.06

0.43

0.15

$

1.35

$

1.70

$

0.54

$

5.01

$

2.44

Cash dividends declared per common share

$

0.09

$

0.09

$

0.08

$

0.36

$

0.32

Weighted average shares outstanding:

Basic

86,269

90,200

90,606

89,280

92,345

Diluted

86,420

90,200

90,711

89,304

92,394

Three Months Ended December 31, 2020

Segment Results

Mortgage

All Other and

Continuing

(in 000's)

Banking

Broker-Dealer

Origination

Corporate

Eliminations

Operations

Net interest income (expense)

$

106,431

$

8,907

$

(6,842

)

$

(4,710

)

$

3,586

$

107,372

Provision for (reversal of) credit losses

(3,549

)

67

(3,482

)

Noninterest income

12,130

141,163

297,523

630

(3,515

)

447,931

Noninterest expense

62,878

115,719

206,695

17,299

(243

)

402,348

Income (loss) from continuing operations before taxes

$

59,232

$

34,284

$

83,986

$

(21,379

)

$

314

$

156,437

Year Ended December 31, 2020

Segment Results

Mortgage

All Other and

Continuing

(in 000's)

Banking

Broker-Dealer

Origination

Corporate

Eliminations

Operations

Net interest income (expense)

$

390,871

$

39,912

$

(10,489

)

$

(14,192

)

$

18,064

$

424,166

Provision for credit losses

96,326

165

96,491

Noninterest income

41,376

491,355

1,172,450

3,945

(18,646

)

1,690,480

Noninterest expense

232,447

415,463

753,917

53,040

(1,064

)

1,453,803

Income (loss) from continuing operations before taxes

$

103,474

$

115,639

$

408,044

$

(63,287

)

$

482

$

564,352

Three Months Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

Selected Financial Data

2020

2020

2019

2020

2019

Hilltop Consolidated (1):

Return on average stockholders' equity

20.56%

25.94%

9.43%

20.03%

11.18%

Return on average assets

2.83%

3.71%

1.40%

2.88%

1.66%

Net interest margin (2)

2.71%

2.56%

3.30%

2.85%

3.48%

Net interest margin (taxable equivalent) (3):

As reported

2.72%

2.57%

3.31%

2.85%

3.48%

Impact of purchase accounting

15 bps

10 bps

19 bps

14 bps

25 bps

Book value per common share ($)

28.28

26.72

23.20

28.28

23.20

Shares outstanding, end of period (000's)

82,185

90,238

90,641

82,185

90,641

Dividend payout ratio (4)

6.67%

5.30%

14.71%

7.18%

13.12%

Banking Segment:

Net interest margin (2)

3.37%

3.03%

3.77%

3.31%

4.00%

Net interest margin (taxable equivalent) (3):

As reported

3.38%

3.03%

3.78%

3.31%

4.01%

Impact of purchase accounting

20 bps

13 bps

25 bps

18 bps

33 bps

Accretion of discount on loans ($000's)

5,629

3,346

5,698

18,831

28,745

Net charge-offs ($000's)

2,688

567

1,348

21,145

5,556

Return on average assets

1.37%

1.14%

1.17%

0.63%

1.36%

Fee income ratio

10.2%

9.2%

10.8%

9.6%

9.9%

Efficiency ratio

53.0%

52.7%

54.9%

53.8%

55.0%

Employees' compensation and benefits ($000's)

34,007

29,808

31,455

127,745

127,985

Broker-Dealer Segment:

Net revenue ($000's) (5)

150,070

149,190

113,128

531,267

455,719

Employees' compensation and benefits ($000's)

87,469

88,063

64,301

311,778

267,663

Variable compensation expense ($000's)

60,295

60,774

39,505

205,464

163,840

Compensation as a % of net revenue

58.3%

59.0%

56.8%

58.7%

58.7%

Pre-tax margin (6)

22.8%

23.7%

21.4%

21.8%

19.7%

Mortgage Origination Segment:

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

Home purchases

3,683,564

4,183,560

2,958,176

13,413,545

11,718,772

Refinancings

3,114,630

2,266,793

1,442,329

9,556,649

3,860,665

Total mortgage loan originations - volume

6,798,194

6,450,353

4,400,505

22,970,194

15,579,437

Mortgage loan sales - volume ($000's)

6,571,234

6,521,773

4,226,425

22,514,170

14,591,727

Net gains from mortgage loan sales (basis points):

As reported

448

440

304

406

324

Impact of sales to banking segment

(3

)

(1

)

(8

)

(3

)

(3

)

Mortgage servicing rights asset ($000's) (7)

143,742

127,712

55,504

143,742

55,504

Employees' compensation and benefits ($000's)

163,822

161,738

109,753

586,713

419,135

Variable compensation expense ($000's)

116,736

116,275

67,224

405,116

252,956

________________________________________

(1)

Ratios and financial data presented on a consolidated basis and includes discontinued operations and those assets and liabilities of 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 $0.3 million, $0.3 million, $0.1 million, $1.2 million, and $0.6 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.1 million, $0.8 million, and $0.6 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.

December 31,

September 30,

June 30,

March 31,

December 31,

Capital Ratios

2020

2020

2020

2020

2019

Tier 1 capital (to average assets):

PlainsCapital

10.44%

10.19%

10.37%

12.06%

11.61%

Hilltop

12.64%

13.03%

12.60%

13.03%

12.71%

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

PlainsCapital

14.40%

14.64%

14.03%

13.33%

13.45%

Hilltop

18.97%

19.85%

18.46%

15.96%

16.70%

Tier 1 capital (to risk-weighted assets):

PlainsCapital

14.40%

14.64%

14.03%

13.33%

13.45%

Hilltop

19.57%

20.46%

19.06%

16.38%

17.13%

Total capital (to risk-weighted assets):

PlainsCapital

15.27%

15.49%

14.88%

14.26%

14.13%

Hilltop

22.34%

23.22%

21.82%

17.00%

17.55%

December 31,

September 30,

June 30,

March 31,

December 31,

Non-Performing Assets Portfolio Data

2020

2020

2020

2020

2019

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

Commercial real estate

11,133

14,079

13,743

23,352

7,308

Commercial and industrial

34,049

38,708

32,259

47,121

15,262

Construction and land development

507

528

1,404

1,402

1,316

1-4 family residential

32,263

28,707

20,552

15,237

12,204

Consumer

28

53

308

310

26

Broker-dealer

77,980

82,075

68,266

87,422

36,116

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

1,954

1,919

2,025

2,286

2,173

Non-performing loans ($000's)

79,934

83,994

70,291

89,708

38,289

Non-performing loans as a % of total loans (2)

0.76%

0.80%

0.67%

0.92%

0.40%

Other real estate owned ($000's)

21,289

25,387

26,602

15,429

18,202

Other repossessed assets ($000's)

101

239

315

315

Non-performing assets ($000's) (2)

101,324

109,620

97,208

105,452

56,491

Non-performing assets as a % of total assets (2)

0.60%

0.65%

0.57%

0.67%

0.37%

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

243,631

187,105

124,682

101,300

102,707

________________________________________

(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 fourth quarter of 2020, the Bank’s actions included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $240 million as of December 31, 2020, down from approximately $291 million and $968 million as of September 30, 2020 and June 30, 2020, respectively. 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)

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

Three Months Ended December 31,

2020

2019

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

$

2,760,798

$

18,692

2.71

%

$

1,914,703

$

19,124

4.00

%

Loans held for investment, gross (2)

7,732,754

90,636

4.62

%

7,258,086

96,572

5.24

%

Investment securities - taxable

2,132,863

9,823

1.84

%

1,871,993

16,011

3.42

%

Investment securities - non-taxable (3)

258,644

2,188

3.38

%

244,378

1,763

2.89

%

Federal funds sold and securities purchased under agreements to resell

85,716

0.00

%

68,278

228

1.32

%

Interest-bearing deposits in other financial institutions

1,200,635

487

0.16

%

325,984

1,408

1.71

%

Securities borrowed

1,501,389

14,445

3.76

%

1,589,465

16,196

3.99

%

Other

49,648

913

7.31

%

87,188

1,654

7.55

%

Interest-earning assets, gross (3)

15,722,447

137,184

3.45

%

13,360,075

152,956

4.52

%

Allowance for credit losses

(155,142

)

(56,124

)

Interest-earning assets, net

15,567,305

13,303,951

Noninterest-earning assets

1,420,479

1,367,068

Total assets

$

16,987,784

$

14,671,019

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

7,523,955

$

9,269

0.49

%

$

6,100,621

$

17,480

1.14

%

Securities loaned

1,398,943

12,014

3.42

%

1,487,288

13,989

3.73

%

Notes payable and other borrowings

1,150,439

8,206

2.84

%

1,526,567

10,021

2.59

%

Total interest-bearing liabilities

10,073,337

29,489

1.17

%

9,114,476

41,490

1.80

%

Noninterest-bearing liabilities

Noninterest-bearing deposits

3,669,230

2,789,662

Other liabilities

965,150

669,798

Total liabilities

14,707,717

12,573,936

Stockholders’ equity

2,252,989

2,072,865

Noncontrolling interest

27,078

24,218

Total liabilities and stockholders' equity

$

16,987,784

$

14,671,019

Net interest income (3)

$

107,695

$

111,466

Net interest spread (3)

2.28

%

2.72

%

Net interest margin (3)

2.72

%

3.31

%

Year Ended December 31,

2020

2019

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

$

2,306,203

$

74,467

3.23

%

$

1,501,154

$

64,830

4.32

%

Loans held for investment, gross (2)

7,618,723

358,844

4.71

%

7,088,208

395,641

5.58

%

Investment securities - taxable

1,897,859

49,936

2.63

%

1,803,622

61,983

3.44

%

Investment securities - non-taxable (3)

231,824

7,918

3.42

%

233,713

6,803

2.91

%

Federal funds sold and securities purchased under agreements to resell

90,961

138

0.15

%

63,598

1,236

1.94

%

Interest-bearing deposits in other financial institutions

1,257,902

3,165

0.25

%

371,312

8,469

2.28

%

Securities borrowed

1,435,572

51,360

3.58

%

1,550,322

69,582

4.49

%

Other

59,412

3,687

6.21

%

75,298

6,869

9.12

%

Interest-earning assets, gross (3)

14,898,456

549,515

3.69

%

12,687,227

615,413

4.85

%

Allowance for credit losses

(122,148

)

(57,690

)

Interest-earning assets, net

14,776,308

12,629,537

Noninterest-earning assets

1,537,269

1,397,420

Total assets

$

16,313,577

$

14,026,957

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

7,397,121

$

47,040

0.64

%

$

5,916,491

$

71,509

1.21

%

Securities loaned

1,336,873

42,817

3.20

%

1,423,847

60,086

4.22

%

Notes payable and other borrowings

1,222,044

33,249

2.72

%

1,398,559

41,928

3.00

%

Total interest-bearing liabilities

9,956,038

123,106

1.24

%

8,738,897

173,523

1.99

%

Noninterest-bearing liabilities

Noninterest-bearing deposits

3,304,475

2,635,924

Other liabilities

791,002

614,164

Total liabilities

14,051,515

11,988,985

Stockholders’ equity

2,235,690

2,014,535

Noncontrolling interest

26,372

23,437

Total liabilities and stockholders' equity

$

16,313,577

$

14,026,957

Net interest income (3)

$

426,409

$

441,890

Net interest spread (3)

2.45

%

2.86

%

Net interest margin (3)

2.85

%

3.48

%

________________________________________

(1)

Information presented on a consolidated basis and includes discontinued operations and those assets and liabilities classified of 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 $0.3 million and $0.1 million for the three months ended December 31, 2020 and 2019, respectively, and $1.2 million and $0.6 million for the year ended December 31, 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, January 29, 2021. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review fourth quarter and full year 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 December 31, 2020, Hilltop employed approximately 4,900 people and operated approximately 420 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," "extent," "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 caused and are causing significant harm to the global economy and our business; (ii) 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; (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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210128006107/en/

Contacts

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