EX-99.1 2 ex-99d1.htm EX-99.1 hth_Ex_99-1_Earnings

Exhibit 99.1

 

 

Investor Relations Contact:

 

Isabell Novakov

 

214-252-4029

 

inovakov@hilltop-holdings.com

 

Hilltop Holdings Inc. Announces Financial Results for Third Quarter 2018

 

DALLAS — (BUSINESS WIRE) October  25, 2018 — Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the third quarter of 2018. Hilltop produced income of $35.8 million, or $0.38 per diluted share, for the third quarter of 2018, compared to $30.2 million, or $0.31 per diluted share, for the third quarter of 2017.  

 

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.07 per common share, payable on November  30, 2018, to all common stockholders of record as of the close of business on November 15, 2018.  Additionally,  pursuant to the stock repurchase program authorized by the Hilltop Board of Directors, Hilltop has paid $38.8 million to repurchase 1,702,696 shares at an average price of $22.81 during the first nine months of 2018. These shares were returned to the pool of authorized but unissued shares of common stock. Aggregate repurchases of $61.2 million remain available under this program which expires in January 2019. Amounts repurchased are inclusive of repurchases to offset dilution related to grants of stock-based compensation.

 

On August 1, 2018, Hilltop completed its $85 million, all-cash acquisition of The Bank of River Oaks (“BORO”).  Based on preliminary purchase date valuations, the fair value of the assets acquired was $434.8 million (excluding goodwill), including $326.6 million in loans (net of a $17.3 million fair value adjustment), while the fair value of liabilities assumed was $389.4 million, consisting primarily of $376.4 million in deposits. The operations of BORO were included in Hilltop operating results beginning August 1, 2018. The estimated fair value of the core deposit intangible asset acquired as of August 1, 2018 was $10.0 million (approximately 3.1% of core deposits) and resulting preliminary goodwill was $39.6 million. In connection with the acquisition, BORO was merged into PlainsCapital  Bank, and all customer accounts were converted to the PlainsCapital Bank platform in October 2018. Transaction expenses related to the BORO acquisition were $6.6 million during the third quarter of 2018.

 

Jeremy Ford, Co-CEO of Hilltop, said, “Hilltop’s results this quarter reflect our focus on execution, as we closed and successfully integrated The Bank of River Oaks and delivered profitability in all of our operating segments. We continue to make progress with our strategic objectives to enhance our financial services platform through investments in technology solutions and to streamline our operations through the adoption of shared services. During 2018, Hilltop has deployed $85 million of capital through the acquisition of The Bank of River Oaks and returned $59 million of capital through dividends and share repurchases.”

 

Alan White, Co-CEO of Hilltop, added, “Serving our clients and expanding relationships across all of our businesses remains the primary focus. PlainsCapital Bank has continued to demonstrate strong credit quality and prudent loan growth. The mortgage business remains challenging given competitive pressures on both pricing and volume.  PrimeLending, through our purchase mortgage-focused strategy, remained profitable in the quarter and took steps to optimize its cost structure. HilltopSecurities delivered improved profitability from its Structured Finance and Clearing businesses. National Lloyds’ performance for the quarter was substantially improved versus 2017 from lower storm activity within our footprint.”

 

Third  Quarter 2018 Highlights for Hilltop:

 

·

Hilltop invested a total of $24.6 million in land and a mixed-use real estate project that is currently under construction, which is expected to serve as the headquarters for both Hilltop and PlainsCapital Bank starting in the fourth quarter of 2019;

·

Hilltop’s annualized return on average assets and return on average equity for the third quarter of 2018 were 1.07% and 7.41%, respectively, compared to 0.90% and 6.32%, respectively, for the third quarter of 2017;

·

Hilltop’s book value per common share increased to $20.51 at September 30, 2018, compared to $20.21 at June 30, 2018; 

·

Hilltop’s total assets were $13.8 billion at September 30, 2018, compared to $13.7 billion at June 30, 2018;

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·

Non-covered loans1 held for investment, net of allowance for loan losses, increased by 7.3% to $6.1 billion and covered loans2, net of allowance for loan losses, decreased by 10.2%  to $142.7 million at September 30, 2018 compared to June 30, 2018;

·

Non-covered non-performing loans decreased to $36.8 million, or 0.44% of total non-covered loans, at September 30, 2018, compared to $42.0 million, or 0.50% of total non-covered loans, at June 30, 2018;

·

Loans held for sale  decreased by 21.9% from  June 30, 2018 to $1.5 billion at September 30, 2018;

·

Total deposits were $8.3 billion at September 30, 2018, compared to $7.8 billion at June 30, 2018;

·

Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio3 of 12.40% and a Common Equity Tier 1 Capital Ratio of 16.95% at September 30, 2018;

·

Hilltop’s net interest margin4 increased to 3.48% for the third quarter of 2018, compared to 3.46% in the second quarter of 2018;

·

The provision (recovery) for loan losses was  ($0.4)  million during the third quarter of 2018, compared to $0.3 million in the second quarter of 2018;  

·

For the third quarter of 2018, noninterest income was $269.7 million, compared to $298.5 million in the third quarter of 2017,  a 9.6%  decrease;

·

For the third quarter of 2018, noninterest expense was $335.7 million, compared to $353.8 million in the third quarter of 2017, a 5.1%  decrease; and

·

Hilltop’s effective tax rate decreased to 17.0% during the third quarter of 2018, compared to 37.2% during the third quarter of 2017, and included significant items related to the following:

o

Reduction of the corporate tax rate in 2018 from 35% to 21% pursuant to the enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Legislation”); and

o

Reduction in the third quarter of 2018 due to tax planning strategies and a tax benefit recognized on the deductible portion of settlement of litigation.


1   “Non-covered loans” exclude broker-dealer margin loans.

2 “Covered loans” refer to loans acquired in the FNB Transaction that were subject to loss-share agreements with the FDIC as of September 30, 2018. 

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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Consolidated Financial and Other Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(in 000's)

    

2018

    

2018

    

2018

    

2017

    

2017

Cash and due from banks

 

$

405,682

 

$

353,432

 

$

470,127

 

$

486,977

 

$

354,569

Federal funds sold

 

 

468

 

 

403

 

 

400

 

 

405

 

 

400

Assets segregated for regulatory purposes

 

 

220,115

 

 

128,417

 

 

198,170

 

 

186,578

 

 

207,336

Securities purchased under agreements to resell

 

 

164,656

 

 

229,172

 

 

244,978

 

 

186,537

 

 

134,654

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading, at fair value

 

 

660,314

 

 

634,197

 

 

756,151

 

 

730,685

 

 

676,411

Available for sale, at fair value

 

 

874,496

 

 

811,218

 

 

806,583

 

 

744,319

 

 

744,559

Held to maturity, at amortized cost

 

 

348,163

 

 

353,192

 

 

356,452

 

 

355,849

 

 

368,031

Equity, at fair value

 

 

21,555

 

 

21,218

 

 

20,876

 

 

21,241

 

 

20,983

 

 

 

1,904,528

 

 

1,819,825

 

 

1,940,062

 

 

1,852,094

 

 

1,809,984

Loans held for sale

 

 

1,524,980

 

 

1,953,562

 

 

1,409,634

 

 

1,715,357

 

 

1,939,321

Non-covered loans, net of unearned income

 

 

6,796,278

 

 

6,384,660

 

 

6,216,809

 

 

6,273,669

 

 

6,148,813

Allowance for non-covered loan losses

 

 

(58,861)

 

 

(59,996)

 

 

(60,371)

 

 

(60,957)

 

 

(58,779)

Non-covered loans, net

 

 

6,737,417

 

 

6,324,664

 

 

6,156,438

 

 

6,212,712

 

 

6,090,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covered loans, net of allowance for covered loan losses

 

 

142,737

 

 

158,996

 

 

167,781

 

 

179,400

 

 

188,269

Broker-dealer and clearing organization receivables

 

 

1,491,507

 

 

1,614,951

 

 

1,660,720

 

 

1,464,378

 

 

1,672,123

Premises and equipment, net

 

 

236,172

 

 

172,911

 

 

173,637

 

 

177,577

 

 

176,281

FDIC indemnification asset

 

 

22,831

 

 

23,525

 

 

25,458

 

 

29,340

 

 

33,143

Covered other real estate owned

 

 

29,856

 

 

34,895

 

 

35,777

 

 

36,744

 

 

40,343

Other assets

 

 

551,758

 

 

589,897

 

 

576,567

 

 

549,447

 

 

596,095

Goodwill

 

 

291,435

 

 

251,808

 

 

251,808

 

 

251,808

 

 

251,808

Other intangible assets, net

 

 

40,394

 

 

32,716

 

 

34,569

 

 

36,432

 

 

38,440

Total assets

 

$

13,764,536

 

$

13,689,174

 

$

13,346,126

 

$

13,365,786

 

$

13,532,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non interest-bearing

 

$

2,525,677

 

$

2,468,332

 

$

2,565,825

 

$

2,411,849

 

$

2,279,633

Interest-bearing

 

 

5,764,556

 

 

5,345,290

 

 

5,393,897

 

 

5,566,270

 

 

5,383,814

Total deposits

 

 

8,290,233

 

 

7,813,622

 

 

7,959,722

 

 

7,978,119

 

 

7,663,447

Broker-dealer and clearing organization payables

 

 

1,396,401

 

 

1,409,904

 

 

1,504,172

 

 

1,287,563

 

 

1,517,698

Short-term borrowings

 

 

1,216,649

 

 

1,610,735

 

 

1,064,325

 

 

1,206,424

 

 

1,477,201

Securities sold, not yet purchased, at fair value

 

 

179,582

 

 

251,581

 

 

255,551

 

 

232,821

 

 

173,509

Notes payable

 

 

220,192

 

 

227,736

 

 

202,700

 

 

208,809

 

 

300,196

Junior subordinated debentures

 

 

67,012

 

 

67,012

 

 

67,012

 

 

67,012

 

 

67,012

Other liabilities

 

 

430,309

 

 

392,171

 

 

367,188

 

 

470,231

 

 

424,381

Total liabilities

 

 

11,800,378

 

 

11,772,761

 

 

11,420,670

 

 

11,450,979

 

 

11,623,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

946

 

 

946

 

 

960

 

 

960

 

 

959

Additional paid-in capital

 

 

1,504,467

 

 

1,502,105

 

 

1,526,867

 

 

1,526,369

 

 

1,525,169

Accumulated other comprehensive income (loss)

 

 

(14,722)

 

 

(11,846)

 

 

(9,698)

 

 

(394)

 

 

2,585

Retained earnings

 

 

448,923

 

 

419,683

 

 

404,260

 

 

384,545

 

 

376,873

Deferred compensation employee stock trust, net

 

 

860

 

 

857

 

 

857

 

 

848

 

 

840

Employee stock trust

 

 

(252)

 

 

(252)

 

 

(254)

 

 

(247)

 

 

(241)

Total Hilltop stockholders' equity

 

 

1,940,222

 

 

1,911,493

 

 

1,922,992

 

 

1,912,081

 

 

1,906,185

Noncontrolling interests

 

 

23,936

 

 

4,920

 

 

2,464

 

 

2,726

 

 

3,171

Total stockholders' equity

 

 

1,964,158

 

 

1,916,413

 

 

1,925,456

 

 

1,914,807

 

 

1,909,356

Total liabilities & stockholders' equity

 

$

13,764,536

 

$

13,689,174

 

$

13,346,126

 

$

13,365,786

 

$

13,532,800

 

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Three Months Ended

 

Consolidated Income Statements

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

(in 000's, except per share data)

    

2018

    

2018

    

2018

    

2017

    

2017

    

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

113,535

 

$

103,924

 

$

99,944

 

$

105,658

 

$

102,546

 

Securities borrowed

 

 

16,346

 

 

17,486

 

 

16,300

 

 

11,994

 

 

11,404

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

11,994

 

 

12,516

 

 

10,953

 

 

10,824

 

 

10,214

 

Tax-exempt

 

 

1,717

 

 

1,697

 

 

1,772

 

 

1,717

 

 

1,471

 

Other

 

 

4,734

 

 

4,417

 

 

4,391

 

 

3,472

 

 

3,309

 

Total interest income

 

 

148,326

 

 

140,040

 

 

133,360

 

 

133,665

 

 

128,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

12,353

 

 

10,136

 

 

8,675

 

 

7,700

 

 

6,841

 

Securities loaned

 

 

13,984

 

 

15,075

 

 

13,739

 

 

9,581

 

 

8,935

 

Short-term borrowings

 

 

7,831

 

 

6,466

 

 

4,043

 

 

4,118

 

 

4,567

 

Notes payable

 

 

2,702

 

 

2,437

 

 

2,497

 

 

2,611

 

 

2,680

 

Junior subordinated debentures

 

 

955

 

 

918

 

 

822

 

 

787

 

 

774

 

Other

 

 

160

 

 

160

 

 

164

 

 

176

 

 

167

 

Total interest expense

 

 

37,985

 

 

35,192

 

 

29,940

 

 

24,973

 

 

23,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

110,341

 

 

104,848

 

 

103,420

 

 

108,692

 

 

104,980

 

Provision (recovery) for loan losses

 

 

(371)

 

 

340

 

 

(1,807)

 

 

5,453

 

 

1,260

 

Net interest income after provision (recovery) for loan losses

 

 

110,712

 

 

104,508

 

 

105,227

 

 

103,239

 

 

103,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gains from sale of loans and other mortgage production income

 

 

116,243

 

 

132,478

 

 

105,767

 

 

122,132

 

 

138,498

 

Mortgage loan origination fees

 

 

27,004

 

 

29,318

 

 

20,626

 

 

23,156

 

 

25,256

 

Securities commissions and fees

 

 

36,968

 

 

38,320

 

 

38,717

 

 

40,868

 

 

38,735

 

Investment and securities advisory fees and commissions

 

 

23,487

 

 

21,965

 

 

18,354

 

 

36,561

 

 

25,620

 

Net insurance premiums earned

 

 

34,185

 

 

34,105

 

 

34,315

 

 

35,645

 

 

34,493

 

Other

 

 

31,810

 

 

23,248

 

 

17,364

 

 

32,094

 

 

35,875

 

Total noninterest income

 

 

269,697

 

 

279,434

 

 

235,143

 

 

290,456

 

 

298,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees' compensation and benefits

 

 

205,575

 

 

200,632

 

 

182,600

 

 

205,642

 

 

209,747

 

Occupancy and equipment, net

 

 

29,015

 

 

27,893

 

 

27,830

 

 

29,658

 

 

29,073

 

Professional services

 

 

27,984

 

 

26,020

 

 

24,704

 

 

24,220

 

 

25,560

 

Loss and loss adjustment expenses

 

 

18,712

 

 

24,409

 

 

15,532

 

 

8,583

 

 

31,234

 

Other

 

 

54,425

 

 

59,563

 

 

57,536

 

 

60,567

 

 

58,228

 

Total noninterest expense

 

 

335,711

 

 

338,517

 

 

308,202

 

 

328,670

 

 

353,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

44,698

 

 

45,425

 

 

32,168

 

 

65,025

 

 

48,355

 

Income tax expense

 

 

7,600

 

 

11,034

 

 

7,488

 

 

51,350

 

 

18,003

 

Net income

 

 

37,098

 

 

34,391

 

 

24,680

 

 

13,675

 

 

30,352

 

Less: Net income attributable to noncontrolling interest

 

 

1,293

 

 

1,311

 

 

239

 

 

247

 

 

146

 

Income attributable to Hilltop

 

$

35,805

 

$

33,080

 

$

24,441

 

$

13,428

 

$

30,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.38

 

$

0.35

 

$

0.25

 

$

0.14

 

$

0.31

 

Diluted

 

$

0.38

 

$

0.35

 

$

0.25

 

$

0.14

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.06

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

94,554

 

 

95,270

 

 

95,985

 

 

95,903

 

 

96,096

 

Diluted

 

 

94,610

 

 

95,358

 

 

96,146

 

 

96,080

 

 

96,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2018

Segment Results

 

 

 

 

 

 

 

Mortgage

    

 

    

 

 

    

All Other and

    

Hilltop

(in 000's)

    

Banking

    

Broker-Dealer

    

Origination

    

Insurance

    

Corporate

    

Eliminations

    

Consolidated

Net interest income (expense)

 

$

94,921

 

$

12,432

 

$

363

 

$

733

 

$

(3,275)

 

$

5,167

 

$

110,341

Provision for loan losses

 

 

 —

 

 

(371)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(371)

Noninterest income

 

 

11,365

 

 

82,834

 

 

144,400

 

 

36,724

 

 

523

 

 

(6,149)

 

 

269,697

Noninterest expense

 

 

67,714

 

 

85,713

 

 

140,006

 

 

33,807

 

 

8,656

 

 

(185)

 

 

335,711

Income (loss) before income taxes

 

$

38,572

 

$

9,924

 

$

4,757

 

$

3,650

 

$

(11,408)

 

$

(797)

 

$

44,698

 

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Three Months Ended

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Selected Financial Data

    

2018

    

2018

    

2018

    

2017

    

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hilltop Consolidated:

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

Return on average stockholders' equity (1)

 

 

7.41%

 

 

6.95%

 

 

5.19%

 

 

2.78%

 

 

6.32%

Return on average assets (1)

 

 

1.07%

 

 

1.03%

 

 

0.77%

 

 

0.41%

 

 

0.90%

Net interest margin (2) (3)

 

 

3.48%

 

 

3.46%

 

 

3.52%

 

 

3.57%

 

 

3.44%

Net interest margin (taxable equivalent) (3) (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

 

3.49%

 

 

3.47%

 

 

3.53%

 

 

3.59%

 

 

3.46%

Impact of purchase accounting

 

 

28 bps

 

 

29 bps

 

 

36 bps

 

 

43 bps

 

 

37 bps

Book value per common share ($)

 

 

20.51

 

 

20.21

 

 

20.02

 

 

19.92

 

 

19.88

Shares outstanding, end of period (000's)

 

 

94,594

 

 

94,571

 

 

96,048

 

 

95,982

 

 

95,904

Dividend payout ratio (1) (5)

 

 

18.48%

 

 

20.16%

 

 

27.49%

 

 

42.86%

 

 

19.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (2)

 

 

4.13%

 

 

4.11%

 

 

4.15%

 

 

4.23%

 

 

4.03%

Net interest margin (taxable equivalent) (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As reported

 

 

4.14%

 

 

4.12%

 

 

4.16%

 

 

4.24%

 

 

4.05%

Impact of purchase accounting

 

 

39 bps

 

 

42 bps

 

 

51 bps

 

 

60 bps

 

 

51 bps

Accretion of discount on loans ($000's)

 

 

8,147

 

 

8,343

 

 

9,867

 

 

12,642

 

 

10,541

Non-covered net charge-offs (recoveries) ($000's)

 

 

1,442

 

 

1,510

 

 

(1,312)

 

 

2,646

 

 

908

Return on average assets (1)

 

 

1.19%

 

 

1.09%

 

 

1.31%

 

 

-0.08%

 

 

0.94%

Fee income ratio

 

 

10.69%

 

 

10.79%

 

 

10.51%

 

 

10.22%

 

 

11.33%

Efficiency ratio

 

 

63.71%

 

 

66.47%

 

 

61.32%

 

 

60.18%

 

 

62.29%

Employees' compensation and benefits ($000's)

 

 

36,878

 

 

32,442

 

 

30,811

 

 

31,159

 

 

30,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broker-Dealer Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue (6)

 

 

95,266

 

 

86,479

 

 

81,097

 

 

114,326

 

 

103,633

Employees' compensation and benefits ($000's)

 

 

59,535

 

 

52,418

 

 

52,265

 

 

70,169

 

 

60,365

Variable compensation expense ($000's)

 

 

33,574

 

 

26,036

 

 

24,594

 

 

41,239

 

 

35,085

Compensation as a % of net revenue

 

 

62.5%

 

 

60.6%

 

 

64.4%

 

 

61.4%

 

 

58.2%

Pre-tax margin

 

 

10.42%

 

 

9.45%

 

 

4.44%

 

 

16.73%

 

 

19.49%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Origination Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home purchases

 

 

3,237,444

 

 

3,615,991

 

 

2,358,692

 

 

2,870,864

 

 

3,332,441

Refinancings

 

 

416,201

 

 

491,384

 

 

601,105

 

 

732,129

 

 

640,064

Total mortgage loan originations - volume

 

 

3,653,645

 

 

4,107,375

 

 

2,959,797

 

 

3,602,993

 

 

3,972,505

Mortgage loan sales - volume ($000's)

 

 

4,015,051

 

 

3,526,603

 

 

3,185,438

 

 

3,791,638

 

 

4,002,195

Net gains from mortgage loan sales (basis points)

 

 

330

 

 

317

 

 

333

 

 

380

 

 

375

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

 

 

68,804

 

 

57,373

 

 

63,957

 

 

54,714

 

 

47,766

Employees' compensation and benefits ($000's)

 

 

102,025

 

 

111,713

 

 

91,059

 

 

96,257

 

 

111,133

Variable compensation expense ($000's) (8)

 

 

58,686

 

 

66,531

 

 

46,292

 

 

57,434

 

 

64,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

 

54.7%

 

 

71.6%

 

 

45.3%

 

 

24.1%

 

 

90.6%

Expense ratio

 

 

38.8%

 

 

39.5%

 

 

39.9%

 

 

41.0%

 

 

40.4%

Combined ratio

 

 

93.5%

 

 

111.1%

 

 

85.2%

 

 

65.1%

 

 

131.0%

Employees' compensation and benefits ($000's)

 

 

2,595

 

 

2,954

 

 

3,255

 

 

3,418

 

 

2,578

 


(1)

Noted measures during the three months ended December 31, 2017 include estimated non-cash, non-recurring charges to Hilltop Consolidated and Banking Segment results of $28.4 million and $25.7 million, respectively, primarily attributable to the revaluation of deferred tax assets as a result of the enactment of the Tax Legislation. Deferred tax asset amounts recorded in December 2017 are final as of September 30, 2018.  

(2)

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

(3)

Noted measures during the 2017 periods presented reflect certain category reclassifications within the detailed calculations to conform with the current period presentation.

(4)

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 the 2018 periods and 35% federal income tax rate for the 2017 periods. 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. For the periods presented, the taxable equivalent adjustments to interest income for Hilltop Consolidated were $0.2 million, $0.2 million, $0.3 million, $0.6 million, and  $0.6 million, respectively, and for the Banking Segment were $0.2 million, $0.2  million, $0.2 million, $0.4 million, and $0.4 million, respectively.

(5)

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

(6)

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

(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.

(8)

Noted measure during the 2017 periods presented reflects certain category reclassifications that affect variable compensation expense to conform with the current period presentation.

 

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September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Capital Ratios

   

2018

   

2018

    

2018

    

2017

    

2017

Tier 1 capital (to average assets):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

11.86%

 

 

12.80%

 

 

13.01%

 

 

12.32%

 

 

12.18%

Hilltop

 

 

12.40%

 

 

12.90%

 

 

13.26%

 

 

12.94%

 

 

12.87%

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

13.88%

 

 

14.59%

 

 

15.39%

 

 

14.47%

 

 

14.44%

Hilltop

 

 

16.95%

 

 

17.61%

 

 

18.60%

 

 

17.71%

 

 

17.66%

Tier 1 capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

13.88%

 

 

14.59%

 

 

15.39%

 

 

14.47%

 

 

14.44%

Hilltop

 

 

17.42%

 

 

18.10%

 

 

19.11%

 

 

18.24%

 

 

18.20%

Total capital (to risk-weighted assets):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PlainsCapital

 

 

14.63%

 

 

15.38%

 

 

16.25%

 

 

15.29%

 

 

15.23%

Hilltop

 

 

17.87%

 

 

18.58%

 

 

19.63%

 

 

18.78%

 

 

18.71%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

Non-Covered Non-Performing Loans Portfolio Data

    

2018

    

2018

    

2018

    

2017

    

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered loans accounted for on a non-accrual basis ($000's):

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

21,323

 

 

22,815

 

 

20,768

 

 

20,878

 

 

21,434

Real estate

 

 

11,982

 

 

18,529

 

 

17,971

 

 

18,978

 

 

17,996

Construction and land development

 

 

3,402

 

 

569

 

 

595

 

 

611

 

 

626

Consumer

 

 

45

 

 

49

 

 

52

 

 

56

 

 

63

Broker-dealer

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

36,752

 

 

41,962

 

 

39,386

 

 

40,523

 

 

40,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered non-performing loans as a % of total non-covered loans

 

 

0.44%

 

 

0.50%

 

 

0.52%

 

 

0.51%

 

 

0.50%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered other real estate owned ($000's)

 

 

2,662

 

 

2,929

 

 

2,577

 

 

3,883

 

 

4,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other repossessed assets ($000's)

 

 

99

 

 

168

 

 

246

 

 

323

 

 

437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered non-performing assets ($000's)

 

 

39,513

 

 

45,059

 

 

42,209

 

 

44,729

 

 

45,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered non-performing assets as a % of total assets

 

 

0.29%

 

 

0.33%

 

 

0.32%

 

 

0.33%

 

 

0.34%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

80,664

 

 

74,060

 

 

77,590

 

 

85,113

 

 

45,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Troubled debt restructurings included in accruing non-covered loans ($000's)

 

 

1,086

 

 

1,111

 

 

1,123

 

 

1,150

 

 

1,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

2018

 

2017

 

 

    

Average

    

Interest

    

Annualized

    

Average

    

Interest

    

Annualized

    

 

 

Outstanding

 

Earned or

 

Yield or

 

Outstanding

 

Earned or

 

Yield or

 

Net Interest Margin (Taxable Equivalent) Details

 

Balance

 

Paid

 

Rate

 

Balance

 

Paid

 

Rate

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

1,718,410

 

$

20,409

 

4.75

%  

$

1,787,119

 

$

18,469

 

4.13

%  

Loans held for investment, gross (1)

 

 

6,767,004

 

 

93,126

 

5.41

%  

 

6,290,685

 

 

84,077

 

5.26

%  

Investment securities - taxable

 

 

1,625,368

 

 

11,964

 

2.94

%  

 

1,538,890

 

 

10,191

 

2.65

%  

Investment securities - non-taxable (2)

 

 

250,042

 

 

1,950

 

3.12

%  

 

229,089

 

 

2,032

 

3.54

%  

Federal funds sold and securities purchased under agreements to resell

 

 

202,274

 

 

956

 

1.87

%  

 

139,398

 

 

284

 

0.81

%  

Interest-bearing deposits in other financial institutions

 

 

379,160

 

 

1,915

 

2.00

%  

 

477,904

 

 

1,514

 

1.26

%  

Securities borrowed

 

 

1,550,902

 

 

16,346

 

4.12

%  

 

1,548,039

 

 

11,404

 

2.88

%  

Other

 

 

89,718

 

 

1,879

 

8.33

%  

 

87,281

 

 

1,536

 

7.00

%  

Interest-earning assets, gross (2)

 

 

12,582,878

 

 

148,545

 

4.66

%  

 

12,098,405

 

 

129,507

 

4.23

%  

Allowance for loan losses

 

 

(61,736)

 

 

 

 

 

 

 

(61,243)

 

 

 

 

 

 

Interest-earning assets, net

 

 

12,521,142

 

 

 

 

 

 

 

12,037,162

 

 

 

 

 

 

Noninterest-earning assets

 

 

1,299,974

 

 

 

 

 

 

 

1,311,454

 

 

 

 

 

 

Total assets

 

$

13,821,116

 

 

 

 

 

 

$

13,348,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

5,608,748

 

$

12,353

 

0.87

%  

$

5,350,959

 

$

6,841

 

0.51

%  

Securities loaned

 

 

1,415,231

 

 

13,984

 

3.92

%  

 

1,398,922

 

 

8,935

 

2.53

%  

Notes payable and other borrowings

 

 

1,720,823

 

 

11,648

 

2.68

%  

 

1,781,498

 

 

8,188

 

1.81

%  

Total interest-bearing liabilities

 

 

8,744,802

 

 

37,985

 

1.72

%  

 

8,531,379

 

 

23,964

 

1.11

%  

Noninterest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

2,538,833

 

 

 

 

 

 

 

2,290,151

 

 

 

 

 

 

Other liabilities

 

 

602,983

 

 

 

 

 

 

 

627,907

 

 

 

 

 

 

Total liabilities

 

 

11,886,618

 

 

 

 

 

 

 

11,449,437

 

 

 

 

 

 

Stockholders’ equity

 

 

1,918,977

 

 

 

 

 

 

 

1,896,838

 

 

 

 

 

 

Noncontrolling interest

 

 

15,521

 

 

 

 

 

 

 

2,341

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

13,821,116

 

 

 

 

 

 

$

13,348,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (2)

 

 

 

 

$

110,560

 

 

 

 

 

 

$

105,543

 

 

 

Net interest spread (2)

 

 

 

 

 

 

 

2.94

%  

 

 

 

 

 

 

3.12

%  

Net interest margin (2)

 

 

 

 

 

 

 

3.49

%  

 

 

 

 

 

 

3.46

%  


(1)

Average balance includes non-accrual loans.

(2)

Presented on a taxable equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rate for the three months ended September 30, 2018 and 35% federal income tax rate for the three months ended September 30, 2017. The adjustment to interest income was $0.2 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively.

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Conference Call Information

Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday,  October 26, 2018. Hilltop Co-CEOs Jeremy B. Ford and Alan B. White and other key management members will review third quarter 2018 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. Through Hilltop Holdings’ other wholly owned subsidiary, National Lloyds Corporation, it provides property and casualty insurance through two insurance companies, National Lloyds Insurance Company and American Summit Insurance Company. At September 30, 2018, Hilltop employed approximately 5,300 people and operated approximately 450 locations in 44 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, Nationallloydsinsurance.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, expected tax impacts, strategic acquisitions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “might,” “plan,” “probable,” “projects,” “seeks,” “should,” “target,” “view” or “would” or the negative of these words and phrases or similar words or phrases.  For a discussion of certain factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed 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.

 

Source: Hilltop Holdings Inc.

 

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