DALLAS–(BUSINESS WIRE)– Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter 2021. Hilltop produced income from continuing operations to common stockholders of $120.3 million, or $1.46 per diluted share, for the first quarter of 2021, compared to $46.5 million, or $0.51 per diluted share, for the first quarter of 2020. Hilltop’s financial results from continuing operations for the first quarter of 2021 reflected a significant increase in mortgage origination segment net gains from sale of loans and other mortgage production income, while the first quarter of 2020 results included a build in the allowance for credit losses associated with the impact of macroeconomic forecast assumptions attributable to the market disruption and economic uncertainties caused by COVID-19.
Including income from discontinued operations related to the former insurance business, income applicable to common stockholders was $120.3 million, or $1.46 per diluted share, for the first quarter of 2021, compared to $49.6 million, or $0.55 per diluted share, for the first quarter of 2020.
Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per common share, payable on May 28, 2021, to all common stockholders of record as of the close of business on May 14, 2021. Additionally, during the first quarter of 2021, Hilltop paid $5.0 million to repurchase an aggregate of 149,878 shares of its common stock at an average price of $33.01 per share pursuant to the 2021 stock repurchase program. These shares were returned to the pool of authorized but unissued shares of 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 the remainder of 2021 is dependent on certain developments, including, among others, the ongoing distribution and effectiveness of vaccines, government stimulus, the ultimate impact 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 results in the first quarter reflect the focus of our teammates across Hilltop on serving our clients and executing on our strategic initiatives. The mortgage origination segment had another exceptional quarter, generating $6.2 billion of production volume, a year-over-year increase of 71%, and $93 million of pre-tax income. The banking segment generated $65 million of pre-tax income, including a $5 million reduction in credit reserves, and delivered an efficiency ratio below 50%. The banking team also continued to support its clients through the origination of approximately $200 million of additional PPP loans, bringing the total PPP originations since the inception of the program to approximately $900 million. Additionally, the broker-dealer segment generated $18 million of pre-tax income, as its structured finance and public finance services businesses produced revenue growth versus the prior year in a very volatile interest rate market.
“Overall, we are very pleased with the strong start to 2021, as our diversified, yet integrated, business model continues to generate solid results for our shareholders. At Hilltop, we are focused on value creation over the long-term and will continue to make investments in people and technology for prudent future growth.”
First Quarter 2021 Highlights for Hilltop:
- For the first quarter of 2021, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $310.2 million, compared to $179.0 million in the first quarter of 2020, a 73.3% increase;
- Mortgage loan origination production volume was $6.2 billion during the first quarter of 2021, compared to $3.6 billion in the first quarter of 2020.
- The reversal of credit losses was $5.1 million during the first quarter of 2021, compared to a reversal of credit losses of $3.5 million in the fourth quarter of 2020;
- The reversal of credit losses during the first quarter of 2021 primarily reflected improvements in loan portfolio macroeconomic forecast assumptions from the prior quarter, partially offset by slower prepayment assumptions on certain portfolios, changes in risk rating grades and updated realizable values.
- Hilltop’s consolidated annualized return on average assets and return on average equity for the first quarter of 2021 were 2.90% and 20.58%, respectively, compared to 1.47% and 9.38%, respectively, for the first quarter of 2020;
- Hilltop’s book value per common share increased to $29.41 at March 31, 2021, compared to $28.28 at December 31, 2020;
- Hilltop’s total assets were $17.7 billion at March 31, 2021, compared to $16.9 billion at December 31, 2020;
- Loans1, net of allowance for credit losses, were $7.1 billion at both March 31, 2021 and December 31, 2020;
- Includes supporting our impacted banking clients through funding of over 3,950 loans through both rounds of the Paycheck Protection Program, or PPP, with a remaining balance of approximately $492 million as of March 31, 2021, compared to approximately $487 million as of December 31, 2020;
- Through April 16, 2021, the SBA had approved approximately 2,270 initial round PPP forgiveness applications from the Bank totaling approximately $420 million, with PPP loans of approximately $185 million pending SBA review and approval.
- Non-performing loans were $79.9 million, or 0.77% of total loans, at March 31, 2021, compared to $79.9 million, or 0.76% of total loans, at December 31, 2020;
- We further supported our impacted banking clients through the approval of COVID-19 related loan modifications of approximately $1.0 billion, resulting in a portfolio of active deferrals that have not reached the end of their deferral period of approximately $130 million as of March 31, 2021, compared to approximately $240 million in active deferment as of December 31, 2020;
- While the majority of the portfolio of COVID-19 related loan modifications no longer require deferral, such loans may continue to represent elevated risk, and therefore management continues to monitor these loans;
- The extent of these loans progressing into non-performing loans during future periods is uncertain.
- Loans held for sale decreased by 8.9% from December 31, 2020 to $2.5 billion at March 31, 2021;
- Total deposits were $11.7 billion at March 31, 2021, compared to $11.2 billion at December 31, 2020;
- Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 13.01% and a Common Equity Tier 1 Capital Ratio of 19.63% at March 31, 2021;
- Hilltop’s consolidated net interest margin4 decreased to 2.69% for the first quarter of 2021, compared to 2.71% in the fourth quarter of 2020;
- For the first quarter of 2021, noninterest income from continuing operations was $417.6 million, compared to $271.7 million in the first quarter of 2020, a 53.7% increase;
- For the first quarter of 2021, noninterest expense from continuing operations was $366.7 million, compared to $281.9 million in the first quarter of 2020, a 30.1% increase; and
- Hilltop’s effective tax rate from continuing operations was 23.4% during the first quarter of 2021, compared to 23.1% during the same period in 2020.
On June 30, 2020, Hilltop completed the sale of National Lloyds Corporation, or NLC, which comprised the operations of its former insurance segment, for cash proceeds of $154.1 million. During 2020, Hilltop recognized an aggregate gain associated with this transaction of $36.8 million, net of transaction costs. Accordingly, insurance segment results and its assets and liabilities have been presented as discontinued operations. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules promulgated under the Internal Revenue Code.
Conference Call Information
Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, April 23, 2021. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review first quarter 2021 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).
Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank’s wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings’ broker-dealer subsidiaries, Hilltop Securities Inc. and Momentum Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At March 31, 2021, Hilltop employed approximately 4,980 people and operated approximately 430 locations in 47 states. Hilltop Holdings’ common stock is listed on the New York Stock Exchange under the symbol “HTH.” Find more information at Hilltop-Holdings.com, PlainsCapital.com, PrimeLending.com and Hilltopsecurities.com.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “building,” “could,” “estimates,” “expects,” “extent,” “focus,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “projects,” “seeks,” “should,” “target,” “view,” “will” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: (i) the COVID-19 pandemic and the response of governmental authorities to the pandemic, which have 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.
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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 $519.9 million and $436.8 million at March 31, 2021 and December 31, 2020, respectively.
2 Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period.
3 Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets.
4 Net interest margin is defined as net interest income divided by average interest-earning assets.