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Hilltop Holdings Inc. Announces Financial Results for Fourth Quarter and Full Year 2019

Hilltop Holdings Inc. (NYSE: HTH) ("Hilltop") today announced financial results for the fourth quarter and full year 2019. Hilltop produced income to common stockholders of $49.3 million, or $0.54 per diluted share, for the fourth quarter of 2019, compared to $28.1 million, or $0.30 per diluted share, for the fourth quarter of 2018. Income to common stockholders for the full year 2019 was $225.3 million, or $2.44 per diluted share, compared to $121.4 million, or $1.28 per diluted share, for the full year 2018.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share, a 12.5% increase from the prior quarter, payable on February 28, 2020, to all common stockholders of record as of the close of business on February 14, 2020. Additionally, Hilltop paid $73.4 million to repurchase 3,390,247 shares at a weighted average price of $21.64 during 2019, inclusive of privately negotiated transactions. These shares were returned to the pool of authorized but unissued shares of common stock. The Hilltop Board of Directors authorized a new stock repurchase program through January 2021, under which Hilltop may repurchase, in the aggregate, up to $75.0 million of its outstanding common stock.

Effective January 1, 2020, Hilltop adopted the current expected credit loss model, or CECL, which replaces the current process for estimating allowance for loan losses in its entirety. Our implementation efforts are substantially complete, and based upon the current loan portfolio, we estimate that the allowance for credit losses will be between $80 million and $100 million, inclusive of the estimate of change in reserve for unfunded commitments of between $6 million and $9 million, as of CECL’s adoption on January 1, 2020. The estimated increase over the current allowance for loan losses is driven by the fact that under CECL the allowance covers expected credit losses over the entire expected life of the loan portfolios and also takes into account forecasts of expected future macroeconomic conditions. This estimated increase, net of tax, will be reflected as a decrease to opening retained earnings at January 1, 2020. While not material, the impact of the adoption of CECL also affects our regulatory capital, performance and other asset quality ratios.

Jeremy Ford, CEO of Hilltop, said, "The strong results delivered in the fourth quarter capped off a fantastic year for Hilltop, and I credit the collective efforts of our teammates in the businesses and our holding company. PrimeLending rebounded from a challenging year in 2018 by generating $65 million of pre-tax income in 2019, an increase of $52 million. HilltopSecurities executed on its targeted strategies and grew net revenues by $103 million to $456 million during 2019. PlainsCapital Bank delivered $182 million of pre-tax income in 2019, an increase of $30 million from 2018, by focusing on prudent growth in loans and deposits while maintaining its moderate risk profile and reducing expenses. National Lloyds’ results reflect improved core operations and lower loss experience during 2019 as it generated $17 million of pre-tax income.

"In addition to these favorable financial results, we continued to position Hilltop for long-term success by executing on our platform for efficiency and growth initiatives. In 2019, we delivered significant productivity improvements through key technology investments and the addition of talented professionals across our organization. We enter 2020 with strong momentum and focus."

Fourth Quarter 2019 Highlights for Hilltop:

  • Hilltop’s annualized return on average assets and return on average equity for the fourth quarter of 2019 were 1.40% and 9.43%, respectively, compared to 0.86% and 5.76%, respectively, for the fourth quarter of 2018;
  • Hilltop’s book value per common share increased to $23.20 at December 31, 2019, compared to $22.71 at September 30, 2019;
  • Hilltop’s total assets were $15.2 billion at December 31, 2019, compared to $14.8 billion at September 30, 2019;
  • Loans1, net of allowance for loan losses, remained stable at $6.7 billion compared to September 30, 2019;
  • Non-performing loans were $36.1 million, or 0.38% of total loans at December 31, 2019, compared to $35.5 million, or 0.38% of total loans, at September 30, 2019;
  • Loans held for sale increased by 6.2% from September 30, 2019 to $2.1 billion at December 31, 2019;
  • Total deposits were $9.0 billion at December 31, 2019, compared to $8.7 billion at September 30, 2019;
  • Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 12.71% and a Common Equity Tier 1 Capital Ratio of 16.69% at December 31, 2019;
  • Hilltop’s net interest margin3 decreased to 3.30% for the fourth quarter of 2019, compared to 3.45% in the third quarter of 2019;
  • The provision for loan losses was $6.9 million during the fourth quarter of 2019, compared to $47 thousand in the third quarter of 2019;
    • The provision for loan losses increased during the fourth quarter 2019 primarily as a result of adjustments to qualitative factors associated with concentrations in the commercial real estate loan portfolio, growth in the overall loan portfolio and the recast of cash flows associated with certain PCI loans
  • For the fourth quarter of 2019, noninterest income was $299.3 million, compared to $238.5 million in the fourth quarter of 2018, a 25.5% increase;
  • For the fourth quarter of 2019, noninterest expense was $336.9 million, compared to $310.8 million in the fourth quarter of 2018, a 8.4% increase; and
  • Hilltop’s effective tax rates were 22.5% and 22.4% during the fourth quarter and full year of 2019, respectively, compared to 23.2% and 21.8% during the same periods in 2018.

_____________

1

"Loans" reflect loans held for investment excluding broker-dealer loans, net of allowance for loan losses, of $576.5 million and $558.1 million at December 31, 2019 and September 30, 2019, 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

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

(in 000's)

 

2019

 

 

 

2019

 

 

 

2019

 

 

 

2019

 

 

 

2018

 

Cash and due from banks

$

484,959

 

$

326,129

 

$

342,001

 

$

313,192

 

$

644,073

 

Federal funds sold

 

394

 

 

423

 

 

521

 

 

438

 

 

400

 

Assets segregated for regulatory purposes

 

157,436

 

 

83,878

 

 

151,271

 

 

156,851

 

 

133,993

 

Securities purchased under agreements to resell

 

59,031

 

 

49,998

 

 

50,660

 

 

65,205

 

 

61,611

 

Securities:
Trading, at fair value

 

689,576

 

 

707,268

 

 

601,524

 

 

703,295

 

 

745,466

 

Available for sale, at fair value

 

998,392

 

 

1,003,850

 

 

1,009,924

 

 

1,019,851

 

 

875,658

 

Held to maturity, at amortized cost

 

386,326

 

 

371,361

 

 

365,905

 

 

369,865

 

 

351,012

 

Equity, at fair value

 

20,007

 

 

19,494

 

 

19,592

 

 

19,343

 

 

19,679

 

 

2,094,301

 

 

2,101,973

 

 

1,996,945

 

 

2,112,354

 

 

1,991,815

 

Loans held for sale

 

2,106,361

 

 

1,984,231

 

 

1,609,477

 

 

1,059,280

 

 

1,393,246

 

Loans held for investment, net of unearned income

 

7,381,400

 

 

7,321,208

 

 

7,202,604

 

 

7,011,679

 

 

6,930,458

 

Allowance for loan losses

 

(61,136

)

 

(55,604

)

 

(55,177

)

 

(58,809

)

 

(59,486

)

Loans held for investment, net

 

7,320,264

 

 

7,265,604

 

 

7,147,427

 

 

6,952,870

 

 

6,870,972

 

 
Broker-dealer and clearing organization receivables

 

1,780,280

 

 

1,731,979

 

 

1,707,249

 

 

1,651,199

 

 

1,440,287

 

Premises and equipment, net

 

219,982

 

 

213,757

 

 

208,975

 

 

210,333

 

 

237,373

 

Operating lease right-of-use assets

 

117,059

 

 

121,838

 

 

123,832

 

 

108,806

 

Other assets

 

516,134

 

 

633,794

 

 

602,143

 

 

591,442

 

 

580,362

 

Goodwill

 

291,435

 

 

291,435

 

 

291,435

 

 

291,435

 

 

291,435

 

Other intangible assets, net

 

30,155

 

 

31,990

 

 

33,934

 

 

35,965

 

 

38,005

 

Total assets

$

15,177,791

 

$

14,837,029

 

$

14,265,870

 

$

13,549,370

 

$

13,683,572

 

 
Deposits:
Non-interest bearing

$

2,769,556

 

$

2,732,325

 

$

2,598,253

 

$

2,490,144

 

$

2,560,750

 

Interest bearing

 

6,262,658

 

 

5,998,547

 

 

5,864,826

 

 

5,807,975

 

 

5,975,406

 

Total deposits

 

9,032,214

 

 

8,730,872

 

 

8,463,079

 

 

8,298,119

 

 

8,536,156

 

Broker-dealer and clearing organization payables

 

1,605,518

 

 

1,546,163

 

 

1,531,891

 

 

1,490,227

 

 

1,294,925

 

Short-term borrowings

 

1,424,010

 

 

1,502,755

 

 

1,338,893

 

 

914,525

 

 

1,065,807

 

Securities sold, not yet purchased, at fair value

 

43,817

 

 

59,249

 

 

45,447

 

 

69,354

 

 

81,667

 

Notes payable

 

283,769

 

 

245,341

 

 

231,923

 

 

225,372

 

 

228,872

 

Operating lease liabilities

 

128,402

 

 

131,133

 

 

132,750

 

 

118,452

 

Junior subordinated debentures

 

67,012

 

 

67,012

 

 

67,012

 

 

67,012

 

 

67,012

 

Other liabilities

 

464,253

 

 

471,077

 

 

403,070

 

 

351,178

 

 

435,240

 

Total liabilities

 

13,048,995

 

 

12,753,602

 

 

12,214,065

 

 

11,534,239

 

 

11,709,679

 

 
Common stock

 

906

 

 

906

 

 

928

 

 

938

 

 

936

 

Additional paid-in capital

 

1,445,233

 

 

1,441,604

 

 

1,473,599

 

 

1,491,585

 

 

1,489,816

 

Accumulated other comprehensive income (loss)

 

11,419

 

 

12,305

 

 

7,862

 

 

(1,062

)

 

(8,627

)

Retained earnings

 

644,860

 

 

602,835

 

 

544,275

 

 

499,452

 

 

466,737

 

Deferred compensation employee stock trust, net

 

776

 

 

789

 

 

788

 

 

827

 

 

825

 

Employee stock trust

 

(155

)

 

(170

)

 

(171

)

 

(213

)

 

(217

)

Total Hilltop stockholders' equity

 

2,103,039

 

 

2,058,269

 

 

2,027,281

 

 

1,991,527

 

 

1,949,470

 

Noncontrolling interests

 

25,757

 

 

25,158

 

 

24,524

 

 

23,604

 

 

24,423

 

Total stockholders' equity

 

2,128,796

 

 

2,083,427

 

 

2,051,805

 

 

2,015,131

 

 

1,973,893

 

Total liabilities & stockholders' equity

$

15,177,791

 

$

14,837,029

 

$

14,265,870

 

$

13,549,370

 

$

13,683,572

 

 

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)

 

2019

 

 

...