Hilltop Holdings Inc. Announces Financial Results for Third Quarter 2019

DALLAS–(BUSINESS WIRE)–Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the third quarter of 2019. Hilltop produced income to common stockholders of $79.4 million, or $0.86 per diluted share, for the third quarter of 2019, compared to $35.8 million, or $0.38 per diluted share, for the third quarter of 2018.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.08 per common share payable on December 3, 2019, to all common stockholders of record as of the close of business on November 15, 2019. Additionally, under the stock repurchase program approved by the Hilltop Board of Directors in January 2019, Hilltop was authorized to repurchase its outstanding common stock in the open market or through privately negotiated transactions. Hilltop has paid $73.4 million to repurchase 3,390,247 shares at an average price of $21.64 during the first nine months of 2019. These shares were returned to the pool of authorized but unissued shares of common stock. Share repurchase amounts include the repurchase of common shares to offset issuances under the employee compensation plan.

The aforementioned repurchases are inclusive of the purchase of 2,175,404 shares of our common stock from Oak Hill Capital Partners III, L.P., Oak Hill Capital Management Partners III, L.P. and Oak Hill Capital Management, LLC (collectively, “Oak Hill Capital”) for $48.4 million, or $22.25 per share, and consummated on August 20, 2019. As a result, the repurchase of shares by Hilltop from Oak Hill Capital fully utilized the stock repurchase program previously authorized in January 2019.

Based upon a review recently conducted, Hilltop determined that we did not design and maintain effective internal control over certain aspects relating to the determination of the qualitative factors considered by management in the allowance for loan losses estimation process, particularly quantitative support for such qualitative factors. Based upon the foregoing, management and the Audit Committee of the Board of Directors concluded that this control deficiency constituted a material weakness as of December 31, 2018. As of the date of this press release, we do not expect this control deficiency to result in a restatement of our consolidated financial statements.

We expect to file an amendment to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019 to include disclosures concerning this material weakness. In addition, we anticipate that the report of PricewaterhouseCoopers LLP on our internal control over financial reporting at December 31, 2018 will be revised to reflect the identification of this material weakness.

Hilltop and our Board of Directors are committed to maintaining a strong internal control environment. Management has evaluated the material weakness described above and has made significant progress updating its design and implementation of internal controls to remediate the aforementioned control deficiency and enhance our internal control environment. The remediation plan is being implemented and includes enhanced documentation and quantitative analysis of the qualitative factors considered in the estimation of the allowance for loan losses. Management expects to successfully implement the remediation plan prior to filing our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, and currently plans to evaluate our updated internal controls design and determine whether the controls have operated effectively during the fourth quarter of 2019.

Effective January 1, 2020, Hilltop will adopt the current expected credit loss model, or CECL, which will replace the current process for estimating allowance for loan losses in its entirety. Based upon the work completed to date and the current loan portfolios, we estimate that the allowance for credit losses will be between $80 million and $110 million, inclusive of the change in reserve for unfunded commitments, when CECL is adopted on January 1, 2020. The estimated increase over the current allowance for loan losses is driven by the fact that under CECL the allowance will cover expected credit losses over the entire expected life of the loan portfolios and also will take into account forecasts of expected future macroeconomic conditions. While not expected to be material, the impact of the adoption of CECL also will affect our regulatory capital, performance and other asset quality ratios.

Jeremy Ford, CEO of Hilltop, said, “This was an excellent quarter for all of the Hilltop businesses, as each improved pre-tax income versus the prior quarter and prior year. During the quarter, the Bank generated strong earnings from loan growth and a focus on efficiency, HilltopSecurities delivered profit improvement from growth in Capital Markets and Structured Finance, and National Lloyds produced solid income from reduced storm activity and the execution of our previously disclosed strategy to exit non-core states. Importantly, the mortgage team at PrimeLending reported record results by maintaining their focus on profitable originations and efficiency efforts while the mortage market conditions improved. I want to thank all of our teammates across Hilltop for their part in executing towards our combined vision and am excited about our momentum heading into the fourth quarter of 2019.”

Third Quarter 2019 Highlights for Hilltop:

  • Hilltop’s annualized return on average assets and return on average equity for the third quarter of 2019 were 2.26% and 15.55%, respectively, compared to 1.07% and 7.41%, respectively, for the third quarter of 2018;
  • Hilltop’s book value per common share increased to $22.71 at September 30, 2019, compared to $21.85 at June 30, 2019;
  • Hilltop’s total assets were $14.8 billion at September 30, 2019, compared to $14.3 billion at June 30, 2019;
  • Loans1, net of allowance for loan losses, increased to $6.7 billion compared to $6.6 billion at June 30, 2019;
  • Non-performing loans were $35.5 million, or 0.38% of total loans at September 30, 2019, compared to $32.0 million, or 0.36% of total loans, at June 30, 2019;
  • Loans held for sale increased by 23.3% from June 30, 2019 to $2.0 billion at September 30, 2019;
  • Total deposits were $8.7 billion at September 30, 2019, compared to $8.5 billion at June 30, 2019;
  • Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 12.67% and a Common Equity Tier 1 Capital Ratio of 16.15% at September 30, 2019;
  • Hilltop’s net interest margin3 decreased to 3.45% for the third quarter of 2019, compared to 3.49% in the second quarter of 2019;
  • The provision (recovery) for loan losses was $47 thousand during the third quarter of 2019, compared to ($0.7) million in the second quarter of 2019;
  • For the third quarter of 2019, noninterest income was $341.4 million, compared to $269.7 million in the third quarter of 2018, a 26.6% increase;
  • For the third quarter of 2019, noninterest expense was $350.1 million, compared to $335.7 million in the third quarter of 2018, a 4.3% increase; and
  • Hilltop’s effective tax rate increased to 21.8% during the third quarter of 2019, compared to 17.0% during the same period in 2018.

    • The effective tax rate during the third quarter of 2018 was lower than the statutory rate due to tax planning strategies and a tax benefit recognized on the deductible portion of settlement of litigation.

1

“Loans” reflect loans held for investment excluding broker dealer loans, net of allowance for loan losses, of $558.1 million and $570.3 million at September 30, 2019 and June 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

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(in 000’s)

 

2019

 

2019

 

2019

 

2018

 

2018

Cash and due from banks

 

$

326,129

 

 

$

342,001

 

 

$

313,192

 

 

$

644,073

 

 

$

405,682

 

Federal funds sold

 

 

423

 

 

 

521

 

 

 

438

 

 

 

400

 

 

 

468

 

Assets segregated for regulatory purposes

 

 

83,878

 

 

 

151,271

 

 

 

156,851

 

 

 

133,993

 

 

 

220,115

 

Securities purchased under agreements to resell

 

 

49,998

 

 

 

50,660

 

 

 

65,205

 

 

 

61,611

 

 

 

164,656

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading, at fair value

 

 

707,268

 

 

 

601,524

 

 

 

703,295

 

 

 

745,466

 

 

 

660,314

 

Available for sale, at fair value

 

 

1,003,850

 

 

 

1,009,924

 

 

 

1,019,851

 

 

 

875,658

 

 

 

874,496

 

Held to maturity, at amortized cost

 

 

371,361

 

 

 

365,905

 

 

 

369,865

 

 

 

351,012

 

 

 

348,163

 

Equity, at fair value

 

 

19,494

 

 

 

19,592

 

 

 

19,343

 

 

 

19,679

 

 

 

21,555

 

 

 

 

2,101,973

 

 

 

1,996,945

 

 

 

2,112,354

 

 

 

1,991,815

 

 

 

1,904,528

 

Loans held for sale

 

 

1,984,231

 

 

 

1,609,477

 

 

 

1,059,280

 

 

 

1,393,246

 

 

 

1,524,980

 

Loans held for investment, net of unearned income

 

 

7,321,208

 

 

 

7,202,604

 

 

 

7,011,679

 

 

 

6,930,458

 

 

 

6,940,306

 

Allowance for loan losses

 

 

(55,604

)

 

 

(55,177

)

 

 

(58,809

)

 

 

(59,486

)

 

 

(60,152

)

Loans held for investment, net

 

 

7,265,604

 

 

 

7,147,427

 

 

 

6,952,870

 

 

 

6,870,972

 

 

 

6,880,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broker-dealer and clearing organization receivables

 

 

1,731,979

 

 

 

1,707,249

 

 

 

1,651,199

 

 

 

1,440,287

 

 

 

1,491,507

 

Premises and equipment, net

 

 

213,757

 

 

 

208,975

 

 

 

210,333

 

 

 

237,373

 

 

 

236,172

 

Operating lease right-of-use assets

 

 

121,838

 

 

 

123,832

 

 

 

108,806

 

 

 

 

 

 

 

Other assets

 

 

633,794

 

 

 

602,143

 

 

 

591,442

 

 

 

580,362

 

 

 

604,445

 

Goodwill

 

 

291,435

 

 

 

291,435

 

 

 

291,435

 

 

 

291,435

 

 

 

291,435

 

Other intangible assets, net

 

 

31,990

 

 

 

33,934

 

 

 

35,965

 

 

 

38,005

 

 

 

40,394

 

Total assets

 

$

14,837,029

 

 

$

14,265,870

 

 

$

13,549,370

 

 

$

13,683,572

 

 

$

13,764,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non interest-bearing

 

$

2,732,325

 

 

$

2,598,253

 

 

$

2,490,144

 

 

$

2,560,750

 

 

$

2,525,677

 

Interest-bearing

 

 

5,998,547

 

 

 

5,864,826

 

 

 

5,807,975

 

 

 

5,975,406

 

 

 

5,764,556

 

Total deposits

 

 

8,730,872

 

 

 

8,463,079

 

 

 

8,298,119

 

 

 

8,536,156

 

 

 

8,290,233

 

Broker-dealer and clearing organization payables

 

 

1,546,163

 

 

 

1,531,891

 

 

 

1,490,227

 

 

 

1,294,925

 

 

 

1,396,401

 

Short-term borrowings

 

 

1,502,755

 

 

 

1,338,893

 

 

 

914,525

 

 

 

1,065,807

 

 

 

1,216,649

 

Securities sold, not yet purchased, at fair value

 

 

59,249

 

 

 

45,447

 

 

 

69,354

 

 

 

81,667

 

 

 

179,582

 

Notes payable

 

 

245,341

 

 

 

231,923

 

 

 

225,372

 

 

 

228,872

 

 

 

220,192

 

Operating lease liabilities

 

 

131,133

 

 

 

132,750

 

 

 

118,452

 

 

 

 

 

 

 

Junior subordinated debentures

 

 

67,012

 

 

 

67,012

 

 

 

67,012

 

 

 

67,012

 

 

 

67,012

 

Other liabilities

 

 

471,077

 

 

 

403,070

 

 

 

351,178

 

 

 

435,240

 

 

 

430,309

 

Total liabilities

 

 

12,753,602

 

 

 

12,214,065

 

 

 

11,534,239

 

 

 

11,709,679

 

 

 

11,800,378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

906

 

 

 

928

 

 

 

938

 

 

 

936

 

 

 

946

 

Additional paid-in capital

 

 

1,441,604

 

 

 

1,473,599

 

 

 

1,491,585

 

 

 

1,489,816

 

 

 

1,504,467

 

Accumulated other comprehensive income (loss)

 

 

12,305

 

 

 

7,862

 

 

 

(1,062

)

 

 

(8,627

)

 

 

(14,722

)

Retained earnings

 

 

602,835

 

 

 

544,275

 

 

 

499,452

 

 

 

466,737

 

 

 

448,923

 

Deferred compensation employee stock trust, net

 

 

789

 

 

 

788

 

 

 

827

 

 

 

825

 

 

 

860

 

Employee stock trust

 

 

(170

)

 

 

(171

)

 

 

(213

)

 

 

(217

)

 

 

(252

)

Total Hilltop stockholders’ equity

 

 

2,058,269

 

 

 

2,027,281

 

 

 

1,991,527

 

 

 

1,949,470

 

 

 

1,940,222

 

Noncontrolling interests

 

 

25,158

 

 

 

24,524

 

 

 

23,604

 

 

 

24,423

 

 

 

23,936

 

Total stockholders’ equity

 

 

2,083,427

 

 

 

2,051,805

 

 

 

2,015,131

 

 

 

1,973,893

 

 

 

1,964,158

 

Total liabilities & stockholders’ equity

 

$

14,837,029

 

 

$

14,265,870

 

 

$

13,549,370

 

 

$

13,683,572

 

 

$

13,764,536

 

 

 

Three Months Ended

 

Consolidated Income Statements

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

(in 000’s, except per share data)

 

2019

 

2019

 

2019

 

2018

 

2018

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

119,580

 

$

114,325

 

 

$

110,870

 

$

119,322

 

$

113,535

 

 

Securities borrowed

 

 

21,010

 

 

15,517

 

 

 

16,859

 

 

16,782

 

 

16,346

 

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

15,764

 

 

14,684

 

 

 

15,616

 

 

15,512

 

 

11,994

 

 

Tax-exempt

 

 

1,576

 

 

1,513

 

 

 

1,498

 

 

1,648

 

 

1,717

 

 

Other

 

 

4,026

 

 

4,017

 

 

 

5,197

 

 

4,438

 

 

4,734

 

 

Total interest income

 

 

161,956

 

 

150,056

 

 

 

150,040

 

 

157,702

 

 

148,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

18,887

 

 

18,036

 

 

 

17,106

 

 

14,838

 

 

12,353

 

 

Securities loaned

 

 

17,889

 

 

13,470

 

 

 

14,738

 

 

13,935

 

 

13,984

 

 

Short-term borrowings

 

 

8,166

 

 

6,897

 

 

 

5,471

 

 

7,476

 

 

7,831

 

 

Notes payable

 

 

2,715

 

 

2,629

 

 

 

2,641

 

 

2,627

 

 

2,702

 

 

Junior subordinated debentures

 

 

955

 

 

986

 

 

 

1,001

 

 

968

 

 

955

 

 

Other

 

 

132

 

 

162

 

 

 

152

 

 

143

 

 

160

 

 

Total interest expense

 

 

48,744

 

 

42,180

 

 

 

41,109

 

 

39,987

 

 

37,985

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

113,212

 

 

107,876

 

 

 

108,931

 

 

117,715

 

 

110,341

 

 

Provision (recovery) for loan losses

 

 

47

 

 

(672

)

 

 

951

 

 

6,926

 

 

(371

)

 

Net interest income after provision (recovery) for loan losses

 

 

113,165

 

 

108,548

 

 

 

107,980

 

 

110,789

 

 

110,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gains from sale of loans and other mortgage production income

 

 

157,050

 

 

131,173

 

 

 

96,139

 

 

90,628

 

 

116,243

 

 

Mortgage loan origination fees

 

 

37,782

 

 

33,409

 

 

 

21,873

 

 

26,615

 

 

27,004

 

 

Securities commissions and fees

 

 

34,426

 

 

34,142

 

 

 

35,969

 

 

36,984

 

 

36,968

 

 

Investment and securities advisory fees and commissions

 

 

28,685

 

 

22,859

 

 

 

20,160

 

 

26,260

 

 

23,487

 

 

Net insurance premiums earned

 

 

32,654

 

 

33,466

 

 

 

33,203

 

 

34,146

 

 

34,185

 

 

Other

 

 

50,804

 

 

57,822

 

 

 

45,124

 

 

23,883

 

 

31,810

 

 

Total noninterest income

 

 

341,401

 

 

312,871

 

 

 

252,468

 

 

238,516

 

 

269,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees’ compensation and benefits

 

 

235,197

 

 

215,743

 

 

 

189,898

 

 

179,881

 

 

205,575

 

 

Occupancy and equipment, net

 

 

27,202

 

 

28,219

 

 

 

28,023

 

 

30,512

 

 

29,015

 

 

Professional services

 

 

24,346

 

 

23,753

 

 

 

22,942

 

 

26,793

 

 

27,984

 

 

Loss and loss adjustment expenses

 

 

14,677

 

 

24,981

 

 

 

14,926

 

 

20,694

 

 

18,712

 

 

Other

 

 

48,687

 

 

50,981

 

 

 

53,296

 

 

52,939

 

 

54,425

 

 

Total noninterest expense

 

 

350,109

 

 

343,677

 

 

 

309,085

 

 

310,819

 

 

335,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

104,457

 

 

77,742

 

 

 

51,363

 

 

38,486

 

 

44,698

 

 

Income tax expense

 

 

22,750

 

 

17,951

 

 

 

11,586

 

 

8,928

 

 

7,600

 

 

Net income

 

 

81,707

 

 

59,791

 

 

 

39,777

 

 

29,558

 

 

37,098

 

 

Less: Net income attributable to noncontrolling interest

 

 

2,289

 

 

1,980

 

 

 

991

 

 

1,443

 

 

1,293

 

 

Income attributable to Hilltop

 

$

79,418

 

$

57,811

 

 

$

38,786

 

$

28,115

 

$

35,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.87

 

$

0.62

 

 

$

0.41

 

$

0.30

 

$

0.38

 

 

Diluted

 

$

0.86

 

$

0.62

 

 

$

0.41

 

$

0.30

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.08

 

$

0.08

 

 

$

0.08

 

$

0.07

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

91,745

 

 

93,399

 

 

 

93,669

 

 

94,092

 

 

94,554

 

 

Diluted

 

 

91,824

 

 

93,418

 

 

 

93,669

 

 

94,130

 

 

94,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2019

Segment Results

 

 

 

 

Broker-

 

Mortgage

 

 

 

 

 

 

All Other and

 

Hilltop

(in 000’s)

 

Banking

 

Dealer

 

Origination

 

Insurance

 

Corporate

 

Eliminations

 

Consolidated

Net interest income (expense)

 

$

97,642

 

$

13,724

 

$

(2,725

)

 

$

566

 

$

(1,384

)

 

$

5,389

 

 

$

113,212

Provision (recovery) for loan losses

 

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

 

 

47

Noninterest income

 

 

8,856

 

 

107,742

 

 

194,857

 

 

 

34,896

 

 

460

 

 

 

(5,410

)

 

 

341,401

Noninterest expense

 

 

53,767

 

 

94,411

 

 

160,634

 

 

 

28,923

 

 

12,561

 

 

 

(187

)

 

 

350,109

Income (loss) before income taxes

 

$

52,731

 

$

27,008

 

$

31,498

 

 

$

6,539

 

$

(13,485

)

 

$

166

 

 

$

104,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

Segment Results

 

 

 

 

Broker-

 

Mortgage

 

 

 

 

 

 

All Other and

 

Hilltop

(in 000’s)

 

Banking

 

Dealer

 

Origination

 

Insurance

 

Corporate

 

Eliminations

 

Consolidated

Net interest income (expense)

 

$

283,755

 

$

37,984

 

 

$

(4,224

)

 

$

1,802

 

$

(4,045

)

 

$

14,747

 

 

$

330,019

Provision (recovery) for loan losses

 

 

355

 

 

(29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

326

Noninterest income

 

 

30,219

 

 

304,607

 

 

 

477,438

 

 

 

107,539

 

 

1,850

 

 

 

(14,913

)

 

 

906,740

Noninterest expense

 

 

172,744

 

 

277,088

 

 

 

417,032

 

 

 

98,850

 

 

37,397

 

 

 

(240

)

 

 

1,002,871

Income (loss) before income taxes

 

$

140,875

 

$

65,532

 

 

$

56,182

 

 

$

10,491

 

$

(39,592

)

 

$

74

 

 

$

233,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Selected Financial Data

 

2019

 

2019

 

2019

 

2018

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hilltop Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average stockholders’ equity

 

 

15.55%

 

 

11.63%

 

 

8.04%

 

 

5.76%

 

 

7.41%

Return on average assets

 

 

2.26%

 

 

1.74%

 

 

1.21%

 

 

0.86%

 

 

1.07%

Net interest margin (1)

 

 

3.45%

 

 

3.49%

 

 

3.69%

 

 

3.75%

 

 

3.48%

Net interest margin (taxable equivalent) (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

 

3.46%

 

 

3.49%

 

 

3.70%

 

 

3.76%

 

 

3.49%

Impact of purchase accounting

 

 

26 bps

 

 

23 bps

 

 

32 bps

 

 

43 bps

 

 

28 bps

Book value per common share ($)

 

 

22.71

 

 

21.85

 

 

21.23

 

 

20.83

 

 

20.51

Shares outstanding, end of period (000’s)

 

 

90,629

 

 

92,775

 

 

93,821

 

 

93,610

 

 

94,594

Dividend payout ratio (3)

 

 

9.24%

 

 

12.92%

 

 

19.32%

 

 

23.43%

 

 

18.48%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

 

3.97%

 

 

4.06%

 

 

4.24%

 

 

4.50%

 

 

4.13%

Net interest margin (taxable equivalent) (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

 

3.98%

 

 

4.06%

 

 

4.25%

 

 

4.51%

 

 

4.14%

Impact of purchase accounting

 

 

35 bps

 

 

31 bps

 

 

44 bps

 

 

61 bps

 

 

39 bps

Accretion of discount on loans ($000’s)

 

 

7,868

 

 

6,444

 

 

8,735

 

 

12,737

 

 

8,147

Net charge-offs (recoveries) ($000’s)

 

 

(380)

 

 

2,960

 

 

1,628

 

 

7,592

 

 

1,447

Return on average assets

 

 

1.51%

 

 

1.43%

 

 

1.34%

 

 

1.31%

 

 

1.19%

Fee income ratio

 

 

8.3%

 

 

10.3%

 

 

10.3%

 

 

10.1%

 

 

10.7%

Efficiency ratio

 

 

50.5%

 

 

55.9%

 

 

58.8%

 

 

56.8%

 

 

63.7%

Employees’ compensation and benefits ($000’s)

 

 

31,309

 

 

33,050

 

 

32,171

 

 

31,955

 

 

36,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broker-Dealer Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue ($000’s) (4)

 

 

121,466

 

 

116,969

 

 

104,157

 

 

89,750

 

 

95,266

Employees’ compensation and benefits ($000’s)

 

 

69,954

 

 

70,333

 

 

63,075

 

 

54,249

 

 

59,535

Variable compensation expense ($000’s)

 

 

44,921

 

 

44,833

 

 

34,581

 

 

31,744

 

 

33,574

Compensation as a % of net revenue

 

 

57.6%

 

 

60.1%

 

 

60.6%

 

 

60.4%

 

 

62.5%

Pre-tax margin (5)

 

 

22.2%

 

 

18.9%

 

 

15.8%

 

 

12.1%

 

 

10.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Origination Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loan originations – volume ($000’s):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home purchases

 

 

3,380,812

 

 

3,329,024

 

 

2,050,760

 

 

2,586,677

 

 

3,237,444

Refinancings

 

 

1,390,989

 

 

631,065

 

 

396,282

 

 

384,990

 

 

416,201

Total mortgage loan originations – volume

 

 

4,771,801

 

 

3,960,089

 

 

2,447,042

 

 

2,971,667

 

 

3,653,645

Mortgage loan sales – volume ($000’s)

 

 

4,316,118

 

 

3,338,070

 

 

2,711,114

 

 

3,008,793

 

 

4,015,051

Net gains from mortgage loan sales (basis points)

 

 

335

 

 

333

 

 

330

 

 

334

 

 

330

Mortgage servicing rights asset ($000’s) (6)

 

 

51,297

 

 

53,695

 

 

62,049

 

 

66,102

 

 

68,804

Employees’ compensation and benefits ($000’s)

 

 

123,890

 

 

106,449

 

 

79,043

 

 

84,334

 

 

102,025

Variable compensation expense ($000’s)

 

 

81,287

 

 

65,516

 

 

38,929

 

 

44,529

 

 

58,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

 

44.9%

 

 

74.6%

 

 

45.0%

 

 

60.6%

 

 

54.7%

Expense ratio

 

 

38.3%

 

 

38.4%

 

 

41.5%

 

 

37.9%

 

 

38.8%

Combined ratio

 

 

83.2%

 

 

113.0%

 

 

86.5%

 

 

98.5%

 

 

93.5%

Employees’ compensation and benefits ($000’s)

 

 

2,748

 

 

2,784

 

 

3,202

 

 

2,670

 

 

2,595

(1)

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

(2)

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 $0.1 million, $0.2 million, $0.2 million, $0.3 million, and $0.2 million, respectively, for the periods presented and for the banking segment were $0.1 million, $0.2 million, $0.2 million, $0.2 million, and $0.2 million, respectively, for each of the periods presented.

(3)

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

(4)

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

(5)

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

(6)

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

 

2019

 

2019

 

2019

 

2018

 

2018

Tier 1 capital (to average assets):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

11.79

%

 

 

12.53

%

 

 

12.61

%

 

 

12.47

%

 

 

11.86

%

Hilltop

 

 

12.67

%

 

 

13.00

%

 

 

13.22

%

 

 

12.53

%

 

 

12.40

%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

13.25

%

 

 

13.84

%

 

 

13.89

%

 

 

13.90

%

 

 

13.88

%

Hilltop

 

 

16.15

%

 

 

16.32

%

 

 

16.75

%

 

 

16.58

%

 

 

16.95

%

Tier 1 capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

13.25

%

 

 

13.84

%

 

 

13.89

%

 

 

13.90

%

 

 

13.88

%

Hilltop

 

 

16.58

%

 

 

16.77

%

 

 

17.22

%

 

 

17.04

%

 

 

17.42

%

Total capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

13.87

%

 

 

14.48

%

 

 

14.60

%

 

 

14.63

%

 

 

14.63

%

Hilltop

 

 

16.95

%

 

 

17.14

%

 

 

17.64

%

 

 

17.47

%

 

 

17.87

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Non-Performing Loans Portfolio Data

 

2019

 

2019

 

2019

 

2018

 

2018

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

 

8,727

 

 

 

5,276

 

 

 

5,332

 

 

 

5,324

 

 

 

7,506

 

Commercial and industrial

 

 

13,313

 

 

 

14,152

 

 

 

13,350

 

 

 

14,870

 

 

 

21,323

 

Construction and land development

 

 

1,358

 

 

 

1,413

 

 

 

1,473

 

 

 

3,278

 

 

 

3,402

 

1-4 family residential

 

 

12,103

 

 

 

11,136

 

 

 

10,662

 

 

 

10,437

 

 

 

4,476

 

Mortgage warehouse

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

 

 

30

 

 

 

34

 

 

 

38

 

 

 

41

 

 

 

45

 

Broker-dealer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,777

 

 

 

 

35,531

 

 

 

32,011

 

 

 

30,855

 

 

 

33,950

 

 

 

42,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans as a % of total loans

 

 

0.38

%

 

 

0.36

%

 

 

0.38

%

 

 

0.41

%

 

 

0.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned ($000’s)

 

 

18,738

 

 

 

20,753

 

 

 

23,066

 

 

 

27,578

 

 

 

32,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other repossessed assets ($000’s)

 

 

 

 

 

 

 

 

30

 

 

 

68

 

 

 

99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets ($000’s)

 

 

54,269

 

 

 

52,764

 

 

 

53,951

 

 

 

61,596

 

 

 

75,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets as a % of total assets

 

 

0.37

%

 

 

0.37

%

 

 

0.40

%

 

 

0.45

%

 

 

0.55

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-PCI loans past due 90 days or more and still accruing ($000’s)

 

 

81,678

 

 

 

77,425

 

 

 

77,045

 

 

 

83,131

 

 

 

80,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

2,222

 

 

 

2,256

 

 

 

1,313

 

 

 

1,339

 

 

 

1,362

 

Contacts

Erik Yohe

214-525-4634

eyohe@hilltop-holdings.com

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