Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2021

07/22/2021

DALLAS–(BUSINESS WIRE)– Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the second quarter of 2021. Hilltop produced income from continuing operations to common stockholders of $99.1 million, or $1.21 per diluted share, for the second quarter of 2021, compared to $97.7 million, or $1.08 per diluted share, for the second quarter of 2020. Hilltop’s financial results from continuing operations for the second quarter of 2021 benefited from the significant improvement in the macroeconomic outlook and resulting impact on loan expected loss rates within the banking segment. However, Hilltop also realized a decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income.

Including income from discontinued operations related to the former insurance business, income applicable to common stockholders was $99.1 million, or $1.21 per diluted share, for the second quarter of 2021, compared to $128.5 million, or $1.42 per diluted share, for the second quarter of 2020.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per common share, payable on August 31, 2021, to all common stockholders of record as of the close of business on August 13, 2021. Additionally, during the second quarter of 2021, Hilltop paid $44.5 million to repurchase an aggregate of 1,240,843 shares of its common stock at an average price of $35.85 per share pursuant to the 2021 stock repurchase program. These shares were returned to the pool of authorized but unissued shares of common stock.

Furthermore, in July 2021, the Hilltop Board of Directors authorized, subject to regulatory review, an increase to the aggregate amount of common stock that Hilltop may repurchase under the aforementioned stock repurchase program to $150.0 million, an increase of $75.0 million. As a result of share repurchases during 2021, Hilltop has approximately $100 million of available share repurchase capacity through expiration of the stock repurchase program in January 2022.

The COVID-19 pandemic has adversely 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 the pandemic on our operational and financial performance for the remainder of 2021 is currently uncertain and will depend on certain developments outside of our control, including, among others, the ongoing distribution and effectiveness of vaccines, government stimulus, the ultimate impact of the pandemic on our customers and clients, and additional, or extended, federal, state and local government orders and regulations that might be imposed in response to the pandemic.

Jeremy B. Ford, President and CEO of Hilltop, said, “I am very pleased with the results from the second quarter and first half of 2021. Hilltop’s performance this year highlights the versatility of our franchise and the value of our diversified operating model. During the second quarter, credit trends at the bank continued to improve and we believe we are well situated for growth with robust liquidity and capital levels. The mortgage team has proven nimble across the country as the market has evolved over the past year and a half, and we also believe we are well positioned to grow our purchase-focused customer base. Although HilltopSecurities realized mixed results primarily due to market volatility, the broker-dealer remains healthy with a diverse revenue base. In addition to our strong operating performance, Hilltop distributed approximately $10 million of dividends and repurchased approximately $45 million of shares in the open market.”

Second Quarter 2021 Highlights for Hilltop:

  • The reversal of credit losses was $28.7 million during the second quarter of 2021, compared to a reversal of credit losses of $5.1 million in the first quarter of 2021;
    • The significant reversal of credit losses during the second quarter of 2021 primarily reflected improvements in the macroeconomic forecast assumptions and positive risk rating grade migration, including a high concentration of credits within the restaurant and commercial real estate industry sectors;
  • For the second 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 $241.8 million, compared to $340.7 million in the second quarter of 2020, a 29.0% decrease;
    • Mortgage loan origination production volume was $5.9 billion during the second quarter of 2021, compared to $6.1 billion in the second quarter of 2020;
    • Net gains from mortgage loans sold to third parties declined to 376 basis points during the second quarter of 2021, compared to 398 basis points in the first quarter of 2021.
  • Hilltop’s consolidated annualized return on average assets and return on average equity for the second quarter of 2021 were 2.29% and 16.42%, respectively, compared to 3.30% and 23.32%, respectively, for the second quarter of 2020;
  • Hilltop’s book value per common share increased to $30.44 at June 30, 2021, compared to $29.41 at March 31, 2021;
  • Hilltop’s total assets were $17.7 billion at both June 30, 2021 and March 31, 2021;
  • Loans1, net of allowance for credit losses, decreased to $6.9 billion at June 30, 2021 compared to $7.1 billion at March 31, 2021;
    • Includes supporting our impacted banking clients through funding of over 4,100 loans through both rounds of the Paycheck Protection Program, or PPP, with a remaining balance of approximately $261 million as of June 30, 2021, compared to approximately $492 million as of March 31, 2021;
    • Through July 16, 2021, the Small Business Administration, or SBA, had approved approximately 2,600 initial round PPP forgiveness applications from the Bank totaling approximately $643 million, with initial round PPP loans of approximately $9 million pending SBA review and approval;
    • Submissions to SBA of second round PPP forgiveness applications by the Bank in early stages.
  • Non-performing loans were $69.0 million, or 0.66% of total loans, at June 30, 2021, compared to $79.9 million, or 0.77% of total loans, at March 31, 2021;
  • We further supported our impacted banking clients during 2020 through the approval of COVID-19 related loan modifications of approximately $1.0 billion, and continued such support during 2021, resulting in a portfolio of active deferrals that have not reached the end of their deferral period of approximately $76 million as of June 30, 2021, compared to approximately $130 million in active deferment as of March 31, 2021;
    • While the majority of the portfolio of COVID-19 related loan modifications no longer require deferral, such loans may continue to represent elevated risk; therefore, monitoring of these loans continues;
    • The extent of these loans progressing into non-performing loans during future periods is uncertain.
  • Loans held for sale increased by 13.6% from March 31, 2021 to $2.9 billion at June 30, 2021;
  • Total deposits were $11.7 billion at both June 30, 2021 and March 31, 2021;
  • Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 12.87% and a Common Equity Tier 1 Capital Ratio of 20.22% at June 30, 2021;
  • Hilltop’s consolidated net interest margin4 decreased to 2.62% for the second quarter of 2021, compared to 2.69% in the first quarter of 2021;
    • Includes previously deferred interest income of $5.4 million during the second quarter of 2021 related to PPP loan-related origination fees.
  • For the second quarter of 2021, noninterest income from continuing operations was $339.9 million, compared to $468.1 million in the second quarter of 2020, a 27.4% decrease;
    • Includes $6.5 million of pre-tax gains associated with observable transactions related to two merchant bank equity investments.
  • For the second quarter of 2021, noninterest expense from continuing operations was $343.4 million, compared to $370.2 million in the second quarter of 2020, a 7.3% decrease; and
  • Hilltop’s effective tax rate from continuing operations was 23.5% during the second quarter of 2021, compared to 23.3% during the same period in 2020.

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. 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, July 23, 2021. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second 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).

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 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 June 30, 2021, Hilltop employed approximately 5,025 people and operated approximately 410 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.

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,” “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 had and may continue to have an adverse impact on the global economy and our business operations and performance; (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.

 

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

___________________
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 $628.3 million and $519.9 million at June 30, 2021 and March 31, 2021, 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.

 

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