Business Wire | Jul 22, 2021 05:15PM EDT

Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2021

Jul. 22, 2021

DALLAS--(BUSINESS WIRE)--Jul. 22, 2021--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.

___________________Note: "Consolidated" refers to our consolidated financial position andconsolidated results of operations, including discontinued operations andassets and liabilities of discontinued operations.^ "Loans" reflect loans held for investment excluding broker-dealer margin1 loans, net of allowance for credit losses, of $628.3 million and $519.9 million at June 30, 2021 and March 31, 2021, respectively.

Capital ratios reflect Hilltop's decision to elect the transition option as^ issued by the federal banking regulatory agencies in March 2020 that permits2 banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period.

^ Based on the end of period Tier 1 capital divided by total average assets3 during the quarter, excluding goodwill and intangible assets.

^ Net interest margin is defined as net interest income divided by average4 interest-earning assets.

Consolidated Financial and Other Information



Consolidated June 30, March 31, December 31, September 30, June 30,Balance Sheets

(in 000's) 2021 2021 2020 2020 2020

Cash and due from $ 1,372,818 $ 1,564,489 $ 1,062,560 $ 1,277,865 $ 1,655,492 banks

Federal funds sold 387 396 386 420 385

Assets segregatedfor regulatory 207,284 273,393 290,357 221,621 194,626 purposes

Securitiespurchased under 202,638 106,342 80,319 90,103 161,457 agreements toresell

Securities:

Trading, at fair 682,483 528,712 694,255 667,751 648,037 value

Available for sale, 1,817,807 1,715,406 1,462,205 1,310,240 1,091,348 at fair value, net

Held to maturity,at amortized cost, 288,776 300,088 311,944 323,299 343,198 net

Equity, at fair 193 189 140 117 122 value

2,789,259 2,544,395 2,468,544 2,301,407 2,082,705

Loans held for sale 2,885,458 2,538,986 2,788,386 2,547,975 2,592,307

Loans held forinvestment, net of 7,645,227 7,810,657 7,693,141 7,945,560 7,849,904 unearned income

Allowance for (115,269 ) (144,499 ) (149,044 ) (155,214 ) (156,383 )credit losses

Loans held for 7,529,958 7,666,158 7,544,097 7,790,346 7,693,521 investment, net



Broker-dealer andclearing 1,403,447 1,596,817 1,404,727 1,363,478 1,222,627 organizationreceivables

Premises and 212,402 213,304 211,595 208,078 210,975 equipment, net

Operating lease 115,698 101,055 105,757 109,354 119,954 right-of-use assets

Mortgage servicing 124,497 142,125 143,742 127,712 81,264 assets

Other assets 535,536 648,895 555,983 607,932 627,982

Goodwill 267,447 267,447 267,447 267,447 267,447

Other intangible 17,705 19,035 20,364 21,814 23,374 assets, net

Total assets $ 17,664,534 $ 17,682,837 $ 16,944,264 $ 16,935,552 $ 16,934,116



Deposits:

Noninterest-bearing $ 4,231,082 $ 4,031,181 $ 3,612,384 $ 3,557,603 $ 3,467,500

Interest-bearing 7,502,703 7,701,598 7,629,935 7,704,312 8,182,098

Total deposits 11,733,785 11,732,779 11,242,319 11,261,915 11,649,598

Broker-dealer andclearing 1,439,620 1,546,227 1,368,373 1,310,835 1,158,628 organizationpayables

Short-term 915,919 676,652 695,798 780,109 720,164 borrowings

Securities sold,not yet purchased, 132,950 97,055 79,789 56,023 55,340 at fair value

Notes payable 396,653 401,713 381,987 396,006 450,158

Operating lease 134,019 120,339 125,450 122,402 131,411 liabilities

Junior subordinated 67,012 67,012 67,012 67,012 67,012 debentures

Other liabilities 348,200 595,045 632,889 502,517 409,672

Total liabilities 15,168,158 15,236,822 14,593,617 14,496,819 14,641,983



Common stock 812 823 822 902 902

Additional paid-in 1,302,439 1,319,518 1,317,929 1,443,588 1,439,686 capital

Accumulated othercomprehensive 7,093 3,486 17,763 23,790 23,813 income

Retained earnings 1,159,304 1,094,727 986,792 942,461 797,331

Deferredcompensation 754 752 771 774 778 employee stocktrust, net

Employee stock (121 ) (121 ) (138 ) (143 ) (150 )trust

Total Hilltopstockholders' 2,470,281 2,419,185 2,323,939 2,411,372 2,262,360 equity

Noncontrolling 26,095 26,830 26,708 27,361 29,773 interests

Total stockholders' 2,496,376 2,446,015 2,350,647 2,438,733 2,292,133 equity

Total liabilities &stockholders' $ 17,664,534 $ 17,682,837 $ 16,944,264 $ 16,935,552 $ 16,934,116 equity

Three Months Ended

Consolidated Income Statements

June 30,

March 31,

December 31,

September 30,

June 30,

(in 000's, except per share data)

2021

2021

2020

2020

2020

Interest income:

Loans, including fees

$

104,162

$

104,277

$

109,328

$

104,955

$

107,860

Securities borrowed

15,586

28,972

14,445

10,705

12,883

Securities:

Taxable

11,125

10,251

9,845

11,035

11,698

Tax-exempt

2,338

2,102

1,862

1,687

1,539

Other

1,607

1,321

1,381

1,446

951

Total interest income

134,818

146,923

136,861

129,828

134,931

Interest expense:

Deposits

6,176

7,741

9,269

10,700

11,947

Securities loaned

12,345

25,486

12,014

8,729

10,796

Short-term borrowings

2,374

2,013

2,154

2,346

2,367

Notes payable

5,253

4,797

4,807

4,904

3,768

Junior subordinated debentures

577

562

609

608

705

Other

177

642

636

641

790

Total interest expense

26,902

41,241

29,489

27,928

30,373

Net interest income

107,916

105,682

107,372

101,900

104,558

Provision for (reversal of) credit losses

(28,720

)

(5,109

)

(3,482

)

(602

)

66,026

Net interest income after provision for (reversal of) credit losses

136,636

110,791

110,854

102,502

38,532

Noninterest income:

Net gains from sale of loans and other mortgage production income

199,625

267,080

247,360

307,896

295,317

Mortgage loan origination fees

42,146

43,155

50,193

47,681

45,341

Securities commissions and fees

38,300

38,314

35,921

32,496

34,234

Investment and securities advisory fees and commissions

32,268

27,695

42,161

36,866

29,120

Other

27,560

41,341

72,296

77,772

64,113

Total noninterest income

339,899

417,585

447,931

502,711

468,125

Noninterest expense:

Employees' compensation and benefits

248,486

270,353

291,489

294,907

276,893

Occupancy and equipment, net

25,004

24,429

27,596

26,124

26,174

Professional services

16,239

13,585

21,927

17,522

15,737

Other

53,639

58,295

61,336

60,792

51,405

Total noninterest expense

343,368

366,662

402,348

399,345

370,209

Income from continuing operations before income taxes

133,167

161,714

156,437

205,868

136,448

Income tax expense

31,234

37,770

39,295

46,820

31,808

Income from continuing operations

101,933

123,944

117,142

159,048

104,640

Income from discontinued operations, net of income taxes

-

-

3,734

736

30,775

Net income

101,933

123,944

120,876

159,784

135,415

Less: Net income attributable to noncontrolling interest

2,873

3,599

4,431

6,505

6,939

Income attributable to Hilltop

$

99,060

$

120,345

$

116,445

$

153,279

$

128,476

Earnings per common share:

Basic:

Earnings from continuing operations

$

1.21

$

1.46

$

1.31

$

1.69

$

1.08

Earnings from discontinued operations

-

-

0.04

0.01

0.34

$

1.21

$

1.46

$

1.35

$

1.70

$

1.42

Diluted:

Earnings from continuing operations

$

1.21

$

1.46

$

1.30

$

1.69

$

1.08

Earnings from discontinued operations

-

-

0.05

0.01

0.34

$

1.21

$

1.46

$

1.35

$

1.70

$

1.42

Cash dividends declared per common share

$

0.12

$

0.12

$

0.09

$

0.09

$

0.09

Weighted average shares outstanding:

Basic

81,663

82,169

86,269

90,200

90,164

Diluted

82,199

82,657

86,420

90,200

90,164



Three Months Ended

Consolidated December SeptemberIncome June 30, March 31, 31, 30, June 30, Statements

(in 000's,except per 2021 2021 2020 2020 2020 share data)

Interest income:

Loans, $ 104,162 $ 104,277 $ 109,328 $ 104,955 $ 107,860 including fees

Securities 15,586 28,972 14,445 10,705 12,883 borrowed

Securities:

Taxable 11,125 10,251 9,845 11,035 11,698

Tax-exempt 2,338 2,102 1,862 1,687 1,539

Other 1,607 1,321 1,381 1,446 951

Total interest 134,818 146,923 136,861 129,828 134,931 income



Interest expense:

Deposits 6,176 7,741 9,269 10,700 11,947

Securities 12,345 25,486 12,014 8,729 10,796 loaned

Short-term 2,374 2,013 2,154 2,346 2,367 borrowings

Notes payable 5,253 4,797 4,807 4,904 3,768

Juniorsubordinated 577 562 609 608 705 debentures

Other 177 642 636 641 790

Total interest 26,902 41,241 29,489 27,928 30,373 expense



Net interest 107,916 105,682 107,372 101,900 104,558 income

Provision for(reversal of) (28,720 ) (5,109 ) (3,482 ) (602 ) 66,026 credit losses

Net interestincome afterprovision for 136,636 110,791 110,854 102,502 38,532 (reversal of)credit losses



Noninterest income:

Net gains fromsale of loansand other 199,625 267,080 247,360 307,896 295,317 mortgageproductionincome

Mortgage loanorigination 42,146 43,155 50,193 47,681 45,341 fees

Securitiescommissions 38,300 38,314 35,921 32,496 34,234 and fees

Investment andsecuritiesadvisory fees 32,268 27,695 42,161 36,866 29,120 andcommissions

Other 27,560 41,341 72,296 77,772 64,113

Totalnoninterest 339,899 417,585 447,931 502,711 468,125 income



Noninterest expense:

Employees'compensation 248,486 270,353 291,489 294,907 276,893 and benefits

Occupancy and 25,004 24,429 27,596 26,124 26,174 equipment, net

Professional 16,239 13,585 21,927 17,522 15,737 services

Other 53,639 58,295 61,336 60,792 51,405

Totalnoninterest 343,368 366,662 402,348 399,345 370,209 expense



Income fromcontinuingoperations 133,167 161,714 156,437 205,868 136,448 before incometaxes

Income tax 31,234 37,770 39,295 46,820 31,808 expense

Income fromcontinuing 101,933 123,944 117,142 159,048 104,640 operations

Income fromdiscontinuedoperations, - - 3,734 736 30,775 net of incometaxes

Net income 101,933 123,944 120,876 159,784 135,415

Less: Netincomeattributable 2,873 3,599 4,431 6,505 6,939 tononcontrollinginterest

Incomeattributable $ 99,060 $ 120,345 $ 116,445 $ 153,279 $ 128,476 to Hilltop



Earnings per common share:

Basic:

Earnings fromcontinuing $ 1.21 $ 1.46 $ 1.31 $ 1.69 $ 1.08 operations

Earnings fromdiscontinued - - 0.04 0.01 0.34 operations

$ 1.21 $ 1.46 $ 1.35 $ 1.70 $ 1.42

Diluted:

Earnings fromcontinuing $ 1.21 $ 1.46 $ 1.30 $ 1.69 $ 1.08 operations

Earnings fromdiscontinued - - 0.05 0.01 0.34 operations

$ 1.21 $ 1.46 $ 1.35 $ 1.70 $ 1.42



Cash dividendsdeclared per $ 0.12 $ 0.12 $ 0.09 $ 0.09 $ 0.09 common share



Weightedaverage shares outstanding:

Basic 81,663 82,169 86,269 90,200 90,164

Diluted 82,199 82,657 86,420 90,200 90,164

Three Months Ended June 30, 2021

Segment Results

Mortgage

All Other and

Continuing

(in 000's)

Banking

Broker-Dealer

Origination

Corporate

Eliminations

Operations

Net interest income (expense)

$

105,468

$

10,682

$

(5,953

)

$

(4,687

)

$

2,406

$

107,916

Provision for (reversal of) credit losses

(28,775

)

55

-

-

-

(28,720

)

Noninterest income

10,242

83,463

241,965

6,877

(2,648

)

339,899

Noninterest expense

57,514

87,234

186,963

12,072

(415

)

343,368

Income (loss) from continuing operations before taxes

$

86,971

$

6,856

$

49,049

$

(9,882

)

$

173

$

133,167



Three Months Ended June 30, 2021

Segment Mortgage All Other ContinuingResults and

(in 000's) Banking Broker-Dealer Origination Corporate Eliminations Operations

Netinterest $ 105,468 $ 10,682 $ (5,953 ) $ (4,687 ) $ 2,406 $ 107,916 income(expense)

Provisionfor(reversal (28,775 ) 55 - - - (28,720 )of) creditlosses

Noninterest 10,242 83,463 241,965 6,877 (2,648 ) 339,899 income

Noninterest 57,514 87,234 186,963 12,072 (415 ) 343,368 expense

Income(loss) fromcontinuing $ 86,971 $ 6,856 $ 49,049 $ (9,882 ) $ 173 $ 133,167 operationsbeforetaxes

Six Months Ended June 30, 2021

Segment Results

Mortgage

All Other and

Continuing

(in 000's)

Banking

Broker-Dealer

Origination

Corporate

Eliminations

Operations

Net interest income (expense)

$

209,352

$

21,196

$

(13,051

)

$

(9,379

)

$

5,480

$

213,598

Provision for (reversal of) credit losses

(33,950

)

121

-

-

-

(33,829

)

Noninterest income

21,566

182,086

552,409

7,383

(5,960

)

757,484

Noninterest expense

113,302

178,638

397,297

21,660

(867

)

710,030

Income (loss) from continuing operations before taxes

$

151,566

$

24,523

$

142,061

$

(23,656

)

$

387

$

294,881



Six Months Ended June 30, 2021

Segment Mortgage All Other ContinuingResults and

(in 000's) Banking Broker-Dealer Origination Corporate Eliminations Operations

Netinterest $ 209,352 $ 21,196 $ (13,051 ) $ (9,379 ) $ 5,480 $ 213,598 income(expense)

Provisionfor(reversal (33,950 ) 121 - - - (33,829 )of) creditlosses

Noninterest 21,566 182,086 552,409 7,383 (5,960 ) 757,484 income

Noninterest 113,302 178,638 397,297 21,660 (867 ) 710,030 expense

Income(loss) fromcontinuing $ 151,566 $ 24,523 $ 142,061 $ (23,656 ) $ 387 $ 294,881 operationsbeforetaxes

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Selected Financial Data

2021

2021

2020

2020

2020

Hilltop Consolidated (1):

Return on average stockholders' equity

16.42

%

20.58

%

20.56

%

25.94

%

23.32

%

Return on average assets

2.29

%

2.90

%

2.83

%

3.71

%

3.30

%

Net interest margin (2)

2.62

%

2.69

%

2.71

%

2.56

%

2.80

%

Net interest margin (taxable equivalent) (3):

As reported

2.63

%

2.69

%

2.72

%

2.57

%

2.81

%

Impact of purchase accounting

16 bps

13 bps

15 bps

10 bps

10 bps

Without purchase accounting impact

2.47

%

2.56

%

2.57

%

2.47

%

2.71

%

Book value per common share ($)

30.44

29.41

28.28

26.72

25.08

Shares outstanding, end of period (000's)

81,153

82,261

82,185

90,238

90,222

Dividend payout ratio (4)

9.92

%

8.19

%

6.67

%

5.30

%

6.32

%

Banking Segment:

Net interest margin (2)

3.19

%

3.30

%

3.37

%

3.03

%

3.11

%

Net interest margin (taxable equivalent) (3):

As reported

3.20

%

3.31

%

3.38

%

3.03

%

3.12

%

Impact of purchase accounting

20 bps

17 bps

20 bps

13 bps

12 bps

Accretion of discount on loans ($000's)

6,001

4,851

5,629

3,346

3,217

Net recoveries (charge-offs) ($000's)

(510

)

564

(2,688

)

(567

)

(16,382

)

Return on average assets

1.91

%

1.48

%

1.37

%

1.14

%

(0.42

)%

Fee income ratio

8.9

%

9.8

%

10.2

%

9.2

%

10.2

%

Efficiency ratio

49.7

%

48.4

%

53.0

%

52.7

%

54.1

%

Employees' compensation and benefits ($000's)

33,369

30,992

34,007

29,808

31,583

Broker-Dealer Segment:

Net revenue ($000's) (5)

94,145

109,137

150,070

149,190

132,624

Employees' compensation and benefits ($000's) (6)

62,289

66,157

87,622

88,211

79,847

Variable compensation expense ($000's)

34,409

37,412

60,295

60,774

52,372

Compensation as a % of net revenue (6)

66.2

%

60.6

%

58.4

%

59.1

%

60.2

%

Pre-tax margin (7)

7.3

%

16.2

%

22.8

%

23.7

%

21.0

%

Mortgage Origination Segment:

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

Home purchases

4,018,922

2,902,710

3,683,564

4,183,560

3,204,573

Refinancings

1,881,121

3,281,395

3,114,630

2,266,793

2,894,486

Total mortgage loan originations - volume

5,900,043

6,184,105

6,798,194

6,450,353

6,099,059

Mortgage loan sales - volume ($000's)

5,524,226

6,350,837

6,571,234

6,521,773

5,934,914

Net gains from mortgage loan sales (basis points):

Loans sold to third parties

376

398

451

441

369

Impact of loans retained by banking segment

(12

)

(10

)

(3

)

(1

)

(1

)

As reported

364

388

448

440

368

Mortgage servicing rights asset ($000's) (8)

124,497

142,125

143,742

127,712

81,263

Employees' compensation and benefits ($000's)

145,401

166,248

163,822

161,738

160,824

Variable compensation expense ($000's)

97,081

115,486

116,736

116,275

113,826



Three Months Ended

June 30, March 31, December 31, September 30, June 30,

SelectedFinancial 2021 2021 2020 2020 2020Data



HilltopConsolidated ^(1):

Return onaverage 16.42 % 20.58 % 20.56 % 25.94 % 23.32 %stockholders'equity

Return onaverage 2.29 % 2.90 % 2.83 % 3.71 % 3.30 %assets

Net interest 2.62 % 2.69 % 2.71 % 2.56 % 2.80 %margin ^(2)

Net interestmargin(taxable equivalent) ^(3):

As reported 2.63 % 2.69 % 2.72 % 2.57 % 2.81 %

Impact ofpurchase 16 bps 13 bps 15 bps 10 bps 10 bpsaccounting

Withoutpurchase 2.47 % 2.56 % 2.57 % 2.47 % 2.71 %accountingimpact

Book valueper common 30.44 29.41 28.28 26.72 25.08 share ($)

Sharesoutstanding, 81,153 82,261 82,185 90,238 90,222 end of period(000's)

Dividendpayout ratio 9.92 % 8.19 % 6.67 % 5.30 % 6.32 %^(4)



Banking Segment:

Net interest 3.19 % 3.30 % 3.37 % 3.03 % 3.11 %margin ^(2)

Net interestmargin(taxable equivalent)^(3):

As reported 3.20 % 3.31 % 3.38 % 3.03 % 3.12 %

Impact ofpurchase 20 bps 17 bps 20 bps 13 bps 12 bpsaccounting

Accretion ofdiscount on 6,001 4,851 5,629 3,346 3,217 loans($000's)

Netrecoveries (510 ) 564 (2,688 ) (567 ) (16,382 )(charge-offs)($000's)

Return on )average 1.91 % 1.48 % 1.37 % 1.14 % (0.42 %assets

Fee income 8.9 % 9.8 % 10.2 % 9.2 % 10.2 %ratio

Efficiency 49.7 % 48.4 % 53.0 % 52.7 % 54.1 %ratio

Employees'compensation 33,369 30,992 34,007 29,808 31,583 and benefits($000's)



Broker-Dealer Segment:

Net revenue 94,145 109,137 150,070 149,190 132,624 ($000's) ^(5)

Employees'compensation 62,289 66,157 87,622 88,211 79,847 and benefits($000's) ^(6)

Variablecompensation 34,409 37,412 60,295 60,774 52,372 expense($000's)

Compensationas a % of net 66.2 % 60.6 % 58.4 % 59.1 % 60.2 %revenue ^(6)

Pre-tax 7.3 % 16.2 % 22.8 % 23.7 % 21.0 %margin ^(7)



MortgageOrigination Segment:

Mortgage loanoriginations - volume($000's):

Home 4,018,922 2,902,710 3,683,564 4,183,560 3,204,573 purchases

Refinancings 1,881,121 3,281,395 3,114,630 2,266,793 2,894,486

Totalmortgage loan 5,900,043 6,184,105 6,798,194 6,450,353 6,099,059 originations- volume

Mortgage loansales - 5,524,226 6,350,837 6,571,234 6,521,773 5,934,914 volume($000's)

Net gainsfrom mortgageloan sales (basispoints):

Loans sold to 376 398 451 441 369 third parties

Impact ofloansretained by (12 ) (10 ) (3 ) (1 ) (1 )bankingsegment

As reported 364 388 448 440 368

Mortgageservicing 124,497 142,125 143,742 127,712 81,263 rights asset($000's) ^(8)

Employees'compensation 145,401 166,248 163,822 161,738 160,824 and benefits($000's)

Variablecompensation 97,081 115,486 116,736 116,275 113,826expense($000's)

____________________(1)

Ratios and financial data presented on a consolidated basis. For all 2020 periods presented, information includes discontinued operations and as of June 30, 2020 those assets and liabilities of discontinued operations.

(2)

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

(3)

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 $0.4 million, $0.2 million, $0.3 million, $0.3 million, and $0.3 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.2 million, and $0.2 million, respectively, for the periods presented.

(4)

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

(5)

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

(6)

Noted balances and ratios during all prior periods reflect certain reclassifications to conform to current period presentation.

(7)

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

(8)

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.

____________________(1) Ratios and financial data presented on a consolidated basis. For all 2020 periods presented, information includes discontinued operations and as of June 30, 2020 those assets and liabilities of discontinued operations.

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

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(3) 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 $0.4 million, $0.2 million, $0.3 million, $0.3 million, and $0.3 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.2 million, and $0.2 million, respectively, for the periods presented.

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

(5) Net revenue is defined as the sum of total broker-dealer net interest income and total broker-dealer noninterest income.

(6) Noted balances and ratios during all prior periods reflect certain reclassifications to conform to current period presentation.

(7) Pre-tax margin is defined as income before income taxes divided by net revenue.

Reported on a consolidated basis and therefore does not include mortgage(8) servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation.

June 30,

March 31,

December 31,

September 30,

June 30,

Capital Ratios

2021

2021

2020

2020

2020

Tier 1 capital (to average assets):

PlainsCapital

10.22%

10.50%

10.44%

10.19%

10.37%

Hilltop

12.87%

13.01%

12.64%

13.03%

12.60%

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

PlainsCapital

15.00%

14.74%

14.40%

14.64%

14.03%

Hilltop

20.22%

19.63%

18.97%

19.85%

18.46%

Tier 1 capital (to risk-weighted assets):

PlainsCapital

15.00%

14.74%

14.40%

14.64%

14.03%

Hilltop

20.82%

20.22%

19.57%

20.46%

19.06%

Total capital (to risk-weighted assets):

PlainsCapital

15.95%

15.64%

15.27%

15.49%

14.88%

Hilltop

23.48%

22.96%

22.34%

23.22%

21.82%



June 30, March December September June 30, 31, 31, 30,

Capital Ratios 2021 2021 2020 2020 2020

Tier 1 capital (to average assets):

PlainsCapital 10.22% 10.50% 10.44% 10.19% 10.37%

Hilltop 12.87% 13.01% 12.64% 13.03% 12.60%

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

PlainsCapital 15.00% 14.74% 14.40% 14.64% 14.03%

Hilltop 20.22% 19.63% 18.97% 19.85% 18.46%

Tier 1 capital (to risk-weighted assets):

PlainsCapital 15.00% 14.74% 14.40% 14.64% 14.03%

Hilltop 20.82% 20.22% 19.57% 20.46% 19.06%

Total capital (to risk-weighted assets):

PlainsCapital 15.95% 15.64% 15.27% 15.49% 14.88%

Hilltop 23.48% 22.96% 22.34% 23.22% 21.82%

June 30,

March 31,

December 31,

September 30,

June 30,

Non-Performing Assets Portfolio Data

2021

2021

2020

2020

2020

Loans accounted for on a non-accrual basis ($000's) (1):

Commercial real estate

7,211

10,668

11,133

14,079

13,743

Commercial and industrial

33,033

36,144

34,049

38,708

32,259

Construction and land development

474

501

507

528

1,404

1-4 family residential

27,100

30,937

32,263

28,707

20,552

Consumer

26

26

28

53

308

Broker-dealer

-

-

-

-

-

67,844

78,276

77,980

82,075

68,266

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

1,139

1,584

1,954

1,919

2,025

Non-performing loans ($000's)

68,983

79,860

79,934

83,994

70,291

Non-performing loans as a % of total loans

0.66%

0.77%

0.76%

0.80%

0.67%

Other real estate owned ($000's)

21,078

19,899

21,289

25,387

26,602

Other repossessed assets ($000's)

-

-

101

239

315

Non-performing assets ($000's)

90,061

99,759

101,324

109,620

97,208

Non-performing assets as a % of total assets

0.51%

0.56%

0.60%

0.65%

0.57%

Loans past due 90 days or more and still accruing ($000's) (2):

245,828

265,230

243,630

187,105

124,682



June 30, March 31, December September June 30, 31, 30,

Non-PerformingAssets Portfolio 2021 2021 2020 2020 2020Data

Loans accounted foron a non-accrual basis ($000's) ^(1):

Commercial real 7,211 10,668 11,133 14,079 13,743estate

Commercial and 33,033 36,144 34,049 38,708 32,259industrial

Construction and 474 501 507 528 1,404land development

1-4 family 27,100 30,937 32,263 28,707 20,552residential

Consumer 26 26 28 53 308

Broker-dealer - - - - -

67,844 78,276 77,980 82,075 68,266

Troubled debtrestructuringsincluded in 1,139 1,584 1,954 1,919 2,025accruing loans heldfor investment($000's)

Non-performing 68,983 79,860 79,934 83,994 70,291loans ($000's)



Non-performingloans as a % of 0.66% 0.77% 0.76% 0.80% 0.67%total loans



Other real estate 21,078 19,899 21,289 25,387 26,602owned ($000's)



Other repossessed - - 101 239 315assets ($000's)



Non-performing 90,061 99,759 101,324 109,620 97,208assets ($000's)



Non-performingassets as a % of 0.51% 0.56% 0.60% 0.65% 0.57%total assets



Loans past due 90days or more and 245,828 265,230 243,630 187,105 124,682still accruing($000's) ^(2):

____________________(1)

Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications. The Bank's COVID-19 payment deferral programs allow for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. Since the second quarter of 2020, the Bank's actions included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $76 million as of June 30, 2021, down from approximately $130 million as of March 31, 2021. The extent to which these measures will impact the Bank is uncertain, and any progression of loans, whether receiving COVID-19 payment deferrals or not, into non-accrual status, during future periods is uncertain and will depend on future developments that cannot be predicted.

(2)

Loans past due 90 days or more and still accruing were primarily comprised of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending.

____________________ Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications. The Bank's COVID-19 payment deferral programs allow for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. Since the second quarter of 2020, the Bank's actions included(1) approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $76 million as of June 30, 2021, down from approximately $130 million as of March 31, 2021. The extent to which these measures will impact the Bank is uncertain, and any progression of loans, whether receiving COVID-19 payment deferrals or not, into non-accrual status, during future periods is uncertain and will depend on future developments that cannot be predicted.

Loans past due 90 days or more and still accruing were primarily comprised(2) of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending.

Three Months Ended June 30,

2021

2020

Average

Interest

Annualized

Average

Interest

Annualized

Outstanding

Earned or

Yield or

Outstanding

Earned or

Yield or

Net Interest Margin (Taxable Equivalent) Details (1)

Balance

Paid

Rate

Balance

Paid

Rate

Assets

Interest-earning assets

Loans held for sale

$

2,450,897

$

17,128

2.80

%

$

2,308,368

$

20,036

3.47

%

Loans held for investment, gross (2)

7,725,906

87,034

4.48

%

7,744,395

87,823

4.50

%

Investment securities - taxable

2,443,486

11,106

1.82

%

1,681,336

12,489

2.97

%

Investment securities - non-taxable (3)

320,685

2,731

3.41

%

215,645

1,822

3.38

%

Federal funds sold and securities purchased under agreements to resell

159,400

-

0.00

%

61,956

(7

)

(0.04

)%

Interest-bearing deposits in other financial institutions

1,861,861

628

0.14

%

1,569,277

541

0.14

%

Securities borrowed

1,490,097

15,586

4.14

%

1,375,849

12,883

3.70

%

Other

49,579

994

8.04

%

59,917

439

2.95

%

Interest-earning assets, gross (3)

16,501,911

135,207

3.26

%

15,016,743

136,026

3.60

%

Allowance for credit losses

(144,105

)

(102,216

)

Interest-earning assets, net

16,357,806

14,914,527

Noninterest-earning assets

1,475,422

1,603,791

Total assets

$

17,833,228

$

16,518,318

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

7,740,066

$

6,176

0.32

%

$

7,925,031

$

11,946

0.61

%

Securities loaned

1,411,961

12,345

3.51

%

1,280,958

10,797

3.39

%

Notes payable and other borrowings

1,271,609

8,381

2.64

%

1,110,516

7,998

2.88

%

Total interest-bearing liabilities

10,423,636

26,902

1.03

%

10,316,505

30,741

1.20

%

Noninterest-bearing liabilities

Noninterest-bearing deposits

4,090,425

3,303,165

Other liabilities

872,916

658,416

Total liabilities

15,386,977

14,278,086

Stockholders' equity

2,420,436

2,215,538

Noncontrolling interest

25,815

24,694

Total liabilities and stockholders' equity

$

17,833,228

$

16,518,318

Net interest income (3)

$

108,305

$

105,285

Net interest spread (3)

2.23

%

2.40

%

Net interest margin (3)

2.63

%

2.81

%



Three Months Ended June 30,

2021 2020

Average Interest Annualized Average Interest Annualized

Outstanding Earned or Yield or Outstanding Earned or Yield or

Net Interest Margin(Taxable Balance Paid Rate Balance Paid RateEquivalent) Details^(1)

Assets

Interest-earning assets

Loans held for sale $ 2,450,897 $ 17,128 2.80 % $ 2,308,368 $ 20,036 3.47 %

Loans held forinvestment, gross ^ 7,725,906 87,034 4.48 % 7,744,395 87,823 4.50 %(2)

Investmentsecurities - 2,443,486 11,106 1.82 % 1,681,336 12,489 2.97 %taxable

Investmentsecurities - 320,685 2,731 3.41 % 215,645 1,822 3.38 %non-taxable ^(3)

Federal funds soldand securitiespurchased under 159,400 - 0.00 % 61,956 (7 ) (0.04 )%agreements toresell

Interest-bearingdeposits in other 1,861,861 628 0.14 % 1,569,277 541 0.14 %financialinstitutions

Securities borrowed 1,490,097 15,586 4.14 % 1,375,849 12,883 3.70 %

Other 49,579 994 8.04 % 59,917 439 2.95 %

Interest-earning 16,501,911 135,207 3.26 % 15,016,743 136,026 3.60 %assets, gross ^(3)

Allowance for (144,105 ) (102,216 ) credit losses

Interest-earning 16,357,806 14,914,527 assets, net

Noninterest-earning 1,475,422 1,603,791 assets

Total assets $ 17,833,228 $ 16,518,318



Liabilities andStockholders' Equity

Interest-bearing liabilities

Interest-bearing $ 7,740,066 $ 6,176 0.32 % $ 7,925,031 $ 11,946 0.61 %deposits

Securities loaned 1,411,961 12,345 3.51 % 1,280,958 10,797 3.39 %

Notes payable and 1,271,609 8,381 2.64 % 1,110,516 7,998 2.88 %other borrowings

Totalinterest-bearing 10,423,636 26,902 1.03 % 10,316,505 30,741 1.20 %liabilities

Noninterest-bearing liabilities

Noninterest-bearing 4,090,425 3,303,165 deposits

Other liabilities 872,916 658,416

Total liabilities 15,386,977 14,278,086

Stockholders' 2,420,436 2,215,538 equity

Noncontrolling 25,815 24,694 interest

Total liabilitiesand stockholders' $ 17,833,228 $ 16,518,318 equity



Net interest income $ 108,305 $ 105,285 ^(3)

Net interest spread 2.23 % 2.40 %^(3)

Net interest margin 2.63 % 2.81 %^(3)

____________________(1)Information presented on a consolidated basis. For the three months ended June 30, 2020, information includes discontinued operations and those assets and liabilities classified as discontinued operations.

(2)Average balance includes non-accrual loans.

(3)Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rates for the periods presented. The adjustment to interest income was $0.4 million and $0.3 million for the three months ended June 30, 2021 and 2020, respectively.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210722005978/en/

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