Business Wire | Oct 28, 2021 05:15PM EDT

Hilltop Holdings Inc. Announces Financial Results for Third Quarter 2021

Oct. 28, 2021

DALLAS--(BUSINESS WIRE)--Oct. 28, 2021--Hilltop Holdings Inc. (NYSE: HTH) ("Hilltop") today announced financial results for the third quarter of 2021. Hilltop produced income from continuing operations to common stockholders of $92.9 million, or $1.15 per diluted share, for the third quarter of 2021, compared to $152.5 million, or $1.69 per diluted share, for the third quarter of 2020. Hilltop's financial results from continuing operations for the third quarter of 2021 included a decrease in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income as well as declines in net revenues within the broker-dealer segment's structured finance business and fixed income services lines, partially offset by improvements in the macroeconomic outlook and resulting beneficial impact on loan expected loss rates within the banking segment.

Including income from discontinued operations related to the former insurance business, income applicable to common stockholders was $92.9 million, or $1.15 per diluted share, for the third quarter of 2021, compared to $153.3 million, or $1.70 per diluted share, for the third quarter of 2020.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per common share, payable on November 30, 2021, to all common stockholders of record as of the close of business on November 15, 2021. Additionally, during the third quarter of 2021, Hilltop paid approximately $74 million to repurchase an aggregate of 2,241,761 shares of its common stock at a weighted average price of $33.06 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 October 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 $200.0 million, an increase of $50.0 million. As a result of share repurchases during 2021 and giving effect to such increase, Hilltop has approximately $76 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 and into 2022 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 happy to announce strong operating results for all three businesses at Hilltop. We have seen continued improvement in our asset quality, which is a reflection of both the sound lending practices employed by PlainsCapital Bank and the improving economic environment. The trend of increasing deposits remained steady in the quarter, and we are working diligently to deploy that excess liquidity through relationship-based lending and prudent management of our securities portfolio. At PrimeLending and the mortgage-centric businesses at Hilltop Securities, continued strength in the housing market and solid execution from our teams resulted in strong profitability. In addition, Hilltop continued to return a portion of our excess capital to shareholders through approximately $10 million of dividends paid and $74 million of share repurchases during the third quarter."

Third Quarter 2021 Highlights for Hilltop:

* The reversal of credit losses was $5.8 million during the third quarter of 2021, compared to a reversal of credit losses of $28.7 million in the second quarter of 2021; The reversal of credit losses during the third quarter of 2021 primarily reflected improvements in both macroeconomic forecast assumptions and credit quality metrics on COVID-19 impacted industry sector exposures; * For the third 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 $241.9 million, compared to $355.6 million in the third quarter of 2020, a 32.0% decrease; Mortgage loan origination production volume was $5.6 billion during the third quarter of 2021, compared to $6.5 billion in the third quarter of 2020; Net gains from mortgage loans sold to third parties declined to 359 basis points during the third quarter of 2021, compared to 376 basis points in the second quarter of 2021. * Hilltop's consolidated annualized return on average assets and return on average equity for the third quarter of 2021 were 2.13% and 14.96%, respectively, compared to 3.71% and 25.94%, respectively, for the third quarter of 2020; * Hilltop's book value per common share increased to $31.36 at September 30, 2021, compared to $30.44 at June 30, 2021; * Hilltop's total assets were $18.0 billion and $17.7 billion at September 30, 2021 and June 30, 2021, respectively; * Loans1, net of allowance for credit losses, decreased to $6.8 billion at September 30, 2021 compared to $6.9 billion at June 30, 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 $133 million as of September 30, 2021, compared to approximately $261 million as of June 30, 2021; Through October 22, 2021, the Small Business Administration, or SBA, had approved approximately 3,300 PPP forgiveness applications from the Bank totaling approximately $775 million, with PPP loans of approximately $12 million pending SBA review and approval. * Non-performing loans were $62.2 million, or 0.64% of total loans, at September 30, 2021, compared to $69.0 million, or 0.66% of total loans, at June 30, 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 $17 million as of September 30, 2021, compared to approximately $76 million in active deferment as of June 30, 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 decreased by 26.9% from June 30, 2021 to $2.1 billion at September 30, 2021; * Total deposits were $12.1 billion and $11.7 billion at September 30, 2021 and June 30, 2021, respectively; * Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 12.64% and a Common Equity Tier 1 Capital Ratio of 21.28% at September 30, 2021; * We redeemed in full all of our outstanding junior subordinated debentures of $67.0 million, which resulted in the full redemption to the holders of the associated preferred securities and common securities during the third quarter of 2021; * Hilltop's consolidated net interest margin4 decreased to 2.53% for the third quarter of 2021, compared to 2.62% in the second quarter of 2021; Includes previously deferred interest income of $4.6 million during the third quarter of 2021 related to PPP loan-related origination fees.

* For the third quarter of 2021, noninterest income from continuing operations was $367.9 million, compared to $502.7 million in the third quarter of 2020, a 26.8% decrease; * For the third quarter of 2021, noninterest expense from continuing operations was $355.2 million, compared to $399.3 million in the third quarter of 2020, a 11.1% decrease; and * Hilltop's effective tax rate from continuing operations was 22.8% during the third quarter of 2021, compared to 22.7% 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 $645.6 million and $628.3 million at September 30, 2021 and June 30, 2021, respectively.

Capital ratios reflect Hilltop's decision to elect the transition option^ as issued by the federal banking regulatory agencies in March 2020 that2 permits 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.

ConsolidatedFinancial and OtherInformation



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

(in 000's) 2021 2021 2021 2020 2020

Cash and due from $ 2,463,111 $ 1,372,818 $ 1,564,489 $ 1,062,560 $ 1,277,865 banks

Federal funds sold 406 387 396 386 420

Assets segregatedfor regulatory 269,506 207,284 273,393 290,357 221,621 purposes

Securitiespurchased under 155,908 202,638 106,342 80,319 90,103 agreements toresell

Securities:

Trading, at fair 609,813 682,483 528,712 694,255 667,751 value

Available for sale, 1,994,183 1,817,807 1,715,406 1,462,205 1,310,240 at fair value, net

Held to maturity,at amortized cost, 277,419 288,776 300,088 311,944 323,299 net

Equity, at fair 221 193 189 140 117 value

2,881,636 2,789,259 2,544,395 2,468,544 2,301,407

Loans held for sale 2,108,878 2,885,458 2,538,986 2,788,386 2,547,975

Loans held forinvestment, net of 7,552,926 7,645,227 7,810,657 7,693,141 7,945,560 unearned income

Allowance for (109,512 ) (115,269 ) (144,499 ) (149,044 ) (155,214 )credit losses

Loans held for 7,443,414 7,529,958 7,666,158 7,544,097 7,790,346 investment, net



Broker-dealer andclearing 1,419,652 1,403,447 1,596,817 1,404,727 1,363,478 organizationreceivables

Premises and 210,026 212,402 213,304 211,595 208,078 equipment, net

Operating lease 115,942 115,698 101,055 105,757 109,354 right-of-use assets

Mortgage servicing 110,931 124,497 142,125 143,742 127,712 assets

Other assets 526,339 535,536 648,895 555,983 607,932

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

Other intangible 16,455 17,705 19,035 20,364 21,814 assets, net

Total assets $ 17,989,651 $ 17,664,534 $ 17,682,837 $ 16,944,264 $ 16,935,552



Deposits:

Noninterest-bearing $ 4,433,148 $ 4,231,082 $ 4,031,181 $ 3,612,384 $ 3,557,603

Interest-bearing 7,699,014 7,502,703 7,701,598 7,629,935 7,704,312

Total deposits 12,132,162 11,733,785 11,732,779 11,242,319 11,261,915

Broker-dealer andclearing 1,496,923 1,439,620 1,546,227 1,368,373 1,310,835 organizationpayables

Short-term 747,040 915,919 676,652 695,798 780,109 borrowings

Securities sold,not yet purchased, 113,064 132,950 97,055 79,789 56,023 at fair value

Notes payable 395,804 396,653 401,713 381,987 396,006

Operating lease 134,296 134,019 120,339 125,450 122,402 liabilities

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

Other liabilities 468,020 348,200 595,045 632,889 502,517

Total liabilities 15,487,309 15,168,158 15,236,822 14,593,617 14,496,819



Common stock 790 812 823 822 902

Additional paid-in 1,270,272 1,302,439 1,319,518 1,317,929 1,443,588 capital

Accumulated othercomprehensive 367 7,093 3,486 17,763 23,790 income

Retained earnings 1,204,307 1,159,304 1,094,727 986,792 942,461

Deferredcompensation 751 754 752 771 774 employee stocktrust, net

Employee stock (116 ) (121 ) (121 ) (138 ) (143 )trust

Total Hilltopstockholders' 2,476,371 2,470,281 2,419,185 2,323,939 2,411,372 equity

Noncontrolling 25,971 26,095 26,830 26,708 27,361 interests

Total stockholders' 2,502,342 2,496,376 2,446,015 2,350,647 2,438,733 equity

Total liabilities &stockholders' $ 17,989,651 $ 17,664,534 $ 17,682,837 $ 16,944,264 $ 16,935,552 equity

Three Months Ended

Consolidated Income Statements

September 30,

June 30,

March 31,

December 31,

September 30,

(in 000's, except per share data)

2021

2021

2021

2020

2020

Interest income:

Loans, including fees

$

99,769

$

104,162

$

104,277

$

109,328

$

104,955

Securities borrowed

8,585

15,586

28,972

14,445

10,705

Securities:

Taxable

12,341

11,125

10,251

9,845

11,035

Tax-exempt

2,687

2,338

2,102

1,862

1,687

Other

1,796

1,607

1,321

1,381

1,446

Total interest income

125,178

134,818

146,923

136,861

129,828

Interest expense:

Deposits

5,303

6,176

7,741

9,269

10,700

Securities loaned

6,519

12,345

25,486

12,014

8,729

Short-term borrowings

2,400

2,374

2,013

2,154

2,346

Notes payable

5,465

5,253

4,797

4,807

4,904

Junior subordinated debentures

419

577

562

609

608

Other

(18

)

177

642

636

641

Total interest expense

20,088

26,902

41,241

29,489

27,928

Net interest income

105,090

107,916

105,682

107,372

101,900

Provision for (reversal of) credit losses

(5,819

)

(28,720

)

(5,109

)

(3,482

)

(602

)

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

110,909

136,636

110,791

110,854

102,502

Noninterest income:

Net gains from sale of loans and other mortgage production income

203,152

199,625

267,080

247,360

307,896

Mortgage loan origination fees

38,780

42,146

43,155

50,193

47,681

Securities commissions and fees

34,412

38,300

38,314

35,921

32,496

Investment and securities advisory fees and commissions

49,646

32,268

27,695

42,161

36,866

Other

41,955

27,560

41,341

72,296

77,772

Total noninterest income

367,945

339,899

417,585

447,931

502,711

Noninterest expense:

Employees' compensation and benefits

258,679

248,486

270,353

291,489

294,907

Occupancy and equipment, net

25,428

25,004

24,429

27,596

26,124

Professional services

14,542

16,239

13,585

21,927

17,522

Other

56,525

53,639

58,295

61,336

60,792

Total noninterest expense

355,174

343,368

366,662

402,348

399,345

Income from continuing operations before income taxes

123,680

133,167

161,714

156,437

205,868

Income tax expense

28,257

31,234

37,770

39,295

46,820

Income from continuing operations

95,423

101,933

123,944

117,142

159,048

Income from discontinued operations, net of income taxes

-

-

-

3,734

736

Net income

95,423

101,933

123,944

120,876

159,784

Less: Net income attributable to noncontrolling interest

2,517

2,873

3,599

4,431

6,505

Income attributable to Hilltop

$

92,906

$

99,060

$

120,345

$

116,445

$

153,279

Earnings per common share:

Basic:

Earnings from continuing operations

$

1.16

$

1.21

$

1.46

$

1.31

$

1.69

Earnings from discontinued operations

-

-

-

0.04

0.01

$

1.16

$

1.21

$

1.46

$

1.35

$

1.70

Diluted:

Earnings from continuing operations

$

1.15

$

1.21

$

1.46

$

1.30

$

1.69

Earnings from discontinued operations

-

-

-

0.05

0.01

$

1.15

$

1.21

$

1.46

$

1.35

$

1.70

Cash dividends declared per common share

$

0.12

$

0.12

$

0.12

$

0.09

$

0.09

Weighted average shares outstanding:

Basic

80,109

81,663

82,169

86,269

90,200

Diluted

80,542

82,199

82,657

86,420

90,200



Three Months Ended

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

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

Interest income:

Loans, $ 99,769 $ 104,162 $ 104,277 $ 109,328 $ 104,955 including fees

Securities 8,585 15,586 28,972 14,445 10,705 borrowed

Securities:

Taxable 12,341 11,125 10,251 9,845 11,035

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

Other 1,796 1,607 1,321 1,381 1,446

Total interest 125,178 134,818 146,923 136,861 129,828 income



Interest expense:

Deposits 5,303 6,176 7,741 9,269 10,700

Securities 6,519 12,345 25,486 12,014 8,729 loaned

Short-term 2,400 2,374 2,013 2,154 2,346 borrowings

Notes payable 5,465 5,253 4,797 4,807 4,904

Juniorsubordinated 419 577 562 609 608 debentures

Other (18 ) 177 642 636 641

Total interest 20,088 26,902 41,241 29,489 27,928 expense



Net interest 105,090 107,916 105,682 107,372 101,900 income

Provision for(reversal of) (5,819 ) (28,720 ) (5,109 ) (3,482 ) (602 )credit losses

Net interestincome afterprovision for 110,909 136,636 110,791 110,854 102,502 (reversal of)credit losses



Noninterest income:

Net gains fromsale of loansand other 203,152 199,625 267,080 247,360 307,896 mortgageproductionincome

Mortgage loanorigination 38,780 42,146 43,155 50,193 47,681 fees

Securitiescommissions 34,412 38,300 38,314 35,921 32,496 and fees

Investment andsecuritiesadvisory fees 49,646 32,268 27,695 42,161 36,866 andcommissions

Other 41,955 27,560 41,341 72,296 77,772

Totalnoninterest 367,945 339,899 417,585 447,931 502,711 income



Noninterest expense:

Employees'compensation 258,679 248,486 270,353 291,489 294,907 and benefits

Occupancy and 25,428 25,004 24,429 27,596 26,124 equipment, net

Professional 14,542 16,239 13,585 21,927 17,522 services

Other 56,525 53,639 58,295 61,336 60,792

Totalnoninterest 355,174 343,368 366,662 402,348 399,345 expense



Income fromcontinuingoperations 123,680 133,167 161,714 156,437 205,868 before incometaxes

Income tax 28,257 31,234 37,770 39,295 46,820 expense

Income fromcontinuing 95,423 101,933 123,944 117,142 159,048 operations

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

Net income 95,423 101,933 123,944 120,876 159,784

Less: Netincomeattributable 2,517 2,873 3,599 4,431 6,505 tononcontrollinginterest

Incomeattributable $ 92,906 $ 99,060 $ 120,345 $ 116,445 $ 153,279 to Hilltop



Earnings per common share:

Basic:

Earnings fromcontinuing $ 1.16 $ 1.21 $ 1.46 $ 1.31 $ 1.69 operations

Earnings fromdiscontinued - - - 0.04 0.01 operations

$ 1.16 $ 1.21 $ 1.46 $ 1.35 $ 1.70

Diluted:

Earnings fromcontinuing $ 1.15 $ 1.21 $ 1.46 $ 1.30 $ 1.69 operations

Earnings fromdiscontinued - - - 0.05 0.01 operations

$ 1.15 $ 1.21 $ 1.46 $ 1.35 $ 1.70



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



Weightedaverage shares outstanding:

Basic 80,109 81,663 82,169 86,269 90,200

Diluted 80,542 82,199 82,657 86,420 90,200

Three Months Ended September 30, 2021

Segment Results

Mortgage

All Other and

Continuing

(in 000's)

Banking

Broker-Dealer

Origination

Corporate

Eliminations

Operations

Net interest income (expense)

$

99,978

$

10,427

$(3,503

)$(4,341

)$

2,529

$

105,090

Provision for (reversal of) credit losses

(5,775

)

(44

)

-

-

-

(5,819

)

Noninterest income

11,727

116,143

242,270

757

(2,952

)

367,945

Noninterest expense

54,567

109,193

176,587

15,355

(528

)

355,174

Income (loss) from continuing operations before taxes

$

62,913

$

17,421

$62,180

$(18,939

)$

105

$

123,680

Nine Months Ended September 30, 2021

Segment Results

Mortgage

All Other and

Continuing

(in 000's)

Banking

Broker-Dealer

Origination

Corporate

Eliminations

Operations

Net interest income (expense)

$309,330

$

31,623

$

(16,554

)

$

(13,720

)

$8,009

$318,688

Provision for (reversal of) credit losses

(39,725

)77

-

-

-

(39,648

)Noninterest income

33,293

298,229

794,679

8,140

(8,912

)1,125,429

Noninterest expense

167,869

287,831

573,884

37,015

(1,395

)1,065,204

Income (loss) from continuing operations before taxes

$214,479

$

41,944

$

204,241

$

(42,595

)

$492

$418,561



Three Months Ended September 30, 2021

Segment Mortgage All Other and ContinuingResults

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

Netinterest $ 99,978 $ 10,427 (3,503 (4,341 $ 2,529 $ 105,090 income $ ) $ ) (expense)

Provisionfor(reversal (5,775 ) (44 ) - - - (5,819 )of) creditlosses

Noninterest 11,727 116,143 242,270 757 (2,952 ) 367,945 income

Noninterest 54,567 109,193 176,587 15,355 (528 ) 355,174 expense

Income(loss) fromcontinuing $ 62,913 $ 17,421 62,180 (18,939 $ 105 $ 123,680 operations $ $ ) beforetaxes



Nine Months Ended September 30, 2021

Segment Mortgage All Other and ContinuingResults

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

Netinterest 309,330 $ 31,623 $ (16,554 ) $ (13,720 ) 8,009 318,688income $ $ $(expense)

Provisionfor(reversal (39,725 ) 77 - - - (39,648 )of) creditlosses

Noninterest 33,293 298,229 794,679 8,140 (8,912 1,125,429income )

Noninterest 167,869 287,831 573,884 37,015 (1,395 1,065,204expense )

Income(loss) fromcontinuing 214,479 $ 41,944 $ 204,241 $ (42,595 ) 492 418,561operations $ $ $beforetaxes

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Selected Financial Data

2021

2021

2021

2020

2020

Hilltop Consolidated (1):

Return on average stockholders' equity

14.96

%

16.42

%

20.58

%

20.56

%

25.94

%

Return on average assets

2.13

%

2.29

%

2.90

%

2.83

%

3.71

%

Net interest margin (2)

2.53

%

2.62

%

2.69

%

2.71

%

2.56

%

Net interest margin (taxable equivalent) (3):

As reported

2.54

%

2.63

%

2.69

%

2.72

%

2.57

%

Impact of purchase accounting

9 bps

16 bps

13 bps

15 bps

10 bps

Without purchase accounting impact

2.45

%

2.47

%

2.56

%

2.57

%

2.47

%

Book value per common share ($)

31.36

30.44

29.41

28.28

26.72

Shares outstanding, end of period (000's)

78,959

81,153

82,261

82,185

90,238

Dividend payout ratio (4)

10.34

%

9.92

%

8.19

%

6.67

%

5.30

%

Banking Segment:

Net interest margin (2)

2.99

%

3.19

%

3.30

%

3.37

%

3.03

%

Net interest margin (taxable equivalent) (3):

As reported

3.00

%

3.20

%

3.31

%

3.38

%

3.03

%

Impact of purchase accounting

11 bps

20 bps

17 bps

20 bps

13 bps

Accretion of discount on loans ($000's)

3,221

6,001

4,851

5,629

3,346

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

62

(510

)

564

(2,688

)

(567

)

Return on average assets

1.36

%

1.91

%

1.48

%

1.37

%

1.14

%

Fee income ratio

10.5

%

8.9

%

9.8

%

10.2

%

9.2

%

Efficiency ratio

48.8

%

49.7

%

48.4

%

53.0

%

52.7

%

Employees' compensation and benefits ($000's)

31,500

33,369

30,992

34,007

29,808

Broker-Dealer Segment:

Net revenue ($000's) (5)

126,570

94,145

109,137

150,070

149,190

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

82,429

62,289

66,157

87,622

88,211

Variable compensation expense ($000's)

53,505

34,409

37,412

60,295

60,774

Compensation as a % of net revenue (6)

65.1

%

66.2

%

60.6

%

58.4

%

59.1

%

Pre-tax margin (7)

13.8

%

7.3

%

16.2

%

22.8

%

23.7

%

Mortgage Origination Segment:

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

Home purchases

3,948,420

4,018,922

2,902,710

3,683,564

4,183,560

Refinancings

1,646,208

1,881,121

3,281,395

3,114,630

2,266,793

Total mortgage loan originations - volume

5,594,628

5,900,043

6,184,105

6,798,194

6,450,353

Mortgage loan sales - volume ($000's)

6,195,559

5,524,226

6,350,837

6,571,234

6,521,773

Net gains from mortgage loan sales (basis points):

Loans sold to third parties

359

376

398

451

441

Impact of loans retained by banking segment

(13

)

(12

)

(10

)

(3

)

(1

)

As reported

346

364

388

448

440

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

110,931

124,497

142,125

143,742

127,712

Employees' compensation and benefits ($000's)

134,814

145,401

166,248

163,822

161,738

Variable compensation expense ($000's)

88,153

97,081

115,486

116,736

116,275



Three Months Ended

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

SelectedFinancial 2021 2021 2021 2020 2020Data



HilltopConsolidated ^(1):

Return onaverage 14.96 % 16.42 % 20.58 % 20.56 % 25.94 %stockholders'equity

Return onaverage 2.13 % 2.29 % 2.90 % 2.83 % 3.71 %assets

Net interest 2.53 % 2.62 % 2.69 % 2.71 % 2.56 %margin ^(2)

Net interestmargin(taxable equivalent) ^(3):

As reported 2.54 % 2.63 % 2.69 % 2.72 % 2.57 %

Impact ofpurchase 9 bps 16 bps 13 bps 15 bps 10 bpsaccounting

Withoutpurchase 2.45 % 2.47 % 2.56 % 2.57 % 2.47 %accountingimpact

Book valueper common 31.36 30.44 29.41 28.28 26.72 share ($)

Sharesoutstanding, 78,959 81,153 82,261 82,185 90,238 end of period(000's)

Dividendpayout ratio 10.34 % 9.92 % 8.19 % 6.67 % 5.30 %^(4)



Banking Segment:

Net interest 2.99 % 3.19 % 3.30 % 3.37 % 3.03 %margin ^(2)

Net interestmargin(taxable equivalent)^(3):

As reported 3.00 % 3.20 % 3.31 % 3.38 % 3.03 %

Impact ofpurchase 11 bps 20 bps 17 bps 20 bps 13 bpsaccounting

Accretion ofdiscount on 3,221 6,001 4,851 5,629 3,346 loans($000's)

Netrecoveries 62 (510 ) 564 (2,688 ) (567 )(charge-offs)($000's)

Return onaverage 1.36 % 1.91 % 1.48 % 1.37 % 1.14 %assets

Fee income 10.5 % 8.9 % 9.8 % 10.2 % 9.2 %ratio

Efficiency 48.8 % 49.7 % 48.4 % 53.0 % 52.7 %ratio

Employees'compensation 31,500 33,369 30,992 34,007 29,808 and benefits($000's)



Broker-Dealer Segment:

Net revenue 126,570 94,145 109,137 150,070 149,190 ($000's) ^(5)

Employees'compensation 82,429 62,289 66,157 87,622 88,211 and benefits($000's) ^(6)

Variablecompensation 53,505 34,409 37,412 60,295 60,774 expense($000's)

Compensationas a % of net 65.1 % 66.2 % 60.6 % 58.4 % 59.1 %revenue ^(6)

Pre-tax 13.8 % 7.3 % 16.2 % 22.8 % 23.7 %margin ^(7)



MortgageOrigination Segment:

Mortgage loanoriginations - volume($000's):

Home 3,948,420 4,018,922 2,902,710 3,683,564 4,183,560 purchases

Refinancings 1,646,208 1,881,121 3,281,395 3,114,630 2,266,793

Totalmortgage loan 5,594,628 5,900,043 6,184,105 6,798,194 6,450,353 originations- volume

Mortgage loansales - 6,195,559 5,524,226 6,350,837 6,571,234 6,521,773 volume($000's)

Net gainsfrom mortgageloan sales (basispoints):

Loans sold to 359 376 398 451 441 third parties

Impact ofloansretained by (13 ) (12 ) (10 ) (3 ) (1 )bankingsegment

As reported 346 364 388 448 440

Mortgageservicing 110,931 124,497 142,125 143,742 127,712 rights asset($000's) ^(8)

Employees'compensation 134,814 145,401 166,248 163,822 161,738 and benefits($000's)

Variablecompensation 88,153 97,081 115,486 116,736 116,275 expense($000's)

(1)

Ratios and financial data presented on a consolidated basis. For all 2020 periods presented, information includes 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 $0.6 million, $0.4 million, $0.2 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.

(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 comparisons of net interest margins for all(3) 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 $0.6 million, $0.4 million, $0.2 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(8) mortgage servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation.

September 30,

June 30,

March 31,

December 31,

September 30,

Capital Ratios

2021

2021

2021

2020

2020

Tier 1 capital (to average assets):

PlainsCapital

10.02

%

10.22

%

10.50

%

10.44

%

10.19

%

Hilltop

12.64

%

12.87

%

13.01

%

12.64

%

13.03

%

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

PlainsCapital

15.40

%

15.00

%

14.74

%

14.40

%

14.64

%

Hilltop

21.28

%

20.22

%

19.63

%

18.97

%

19.85

%

Tier 1 capital (to risk-weighted assets):

PlainsCapital

15.40

%

15.00

%

14.74

%

14.40

%

14.64

%

Hilltop

21.28

%

20.82

%

20.22

%

19.57

%

20.46

%

Total capital (to risk-weighted assets):

PlainsCapital

16.32

%

15.95

%

15.64

%

15.27

%

15.49

%

Hilltop

24.00

%

23.48

%

22.96

%

22.34

%

23.22

%



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

Capital Ratios 2021 2021 2021 2020 2020

Tier 1 capital (to average assets):

PlainsCapital 10.02 % 10.22 % 10.50 % 10.44 % 10.19 %

Hilltop 12.64 % 12.87 % 13.01 % 12.64 % 13.03 %

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

PlainsCapital 15.40 % 15.00 % 14.74 % 14.40 % 14.64 %

Hilltop 21.28 % 20.22 % 19.63 % 18.97 % 19.85 %

Tier 1 capital (to risk-weighted assets):

PlainsCapital 15.40 % 15.00 % 14.74 % 14.40 % 14.64 %

Hilltop 21.28 % 20.82 % 20.22 % 19.57 % 20.46 %

Total capital (to risk-weighted assets):

PlainsCapital 16.32 % 15.95 % 15.64 % 15.27 % 15.49 %

Hilltop 24.00 % 23.48 % 22.96 % 22.34 % 23.22 %

September 30,

June 30,

March 31,

December 31,

September 30,

Non-Performing Assets Portfolio Data

2021

2021

2021

2020

2020

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

Commercial real estate

5,705

7,211

10,668

11,133

14,079

Commercial and industrial

29,808

33,033

36,144

34,049

38,708

Construction and land development

366

474

501

507

528

1-4 family residential

25,255

27,100

30,937

32,263

28,707

Consumer

24

26

26

28

53

Broker-dealer

-

-

-

-

-

61,158

67,844

78,276

77,980

82,075

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

1,038

1,139

1,584

1,954

1,919

Non-performing loans ($000's)

62,196

68,983

79,860

79,934

83,994

Non-performing loans as a % of total loans

0.64%

0.66%

0.77%

0.76%

0.80%

Other real estate owned ($000's)

21,605

21,078

19,899

21,289

25,387

Other repossessed assets ($000's)

-

-

-

101

239

Non-performing assets ($000's)

83,801

90,061

99,759

101,324

109,620

Non-performing assets as a % of total assets

0.47%

0.51%

0.56%

0.60%

0.65%

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

175,734

245,828

265,230

243,630

187,105



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

Non-PerformingAssets Portfolio 2021 2021 2021 2020 2020Data

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

Commercial real 5,705 7,211 10,668 11,133 14,079estate

Commercial and 29,808 33,033 36,144 34,049 38,708industrial

Construction and 366 474 501 507 528land development

1-4 family 25,255 27,100 30,937 32,263 28,707residential

Consumer 24 26 26 28 53

Broker-dealer - - - - -

61,158 67,844 78,276 77,980 82,075

Troubled debtrestructuringsincluded in 1,038 1,139 1,584 1,954 1,919accruing loans heldfor investment($000's)

Non-performing 62,196 68,983 79,860 79,934 83,994loans ($000's)



Non-performingloans as a % of 0.64% 0.66% 0.77% 0.76% 0.80%total loans



Other real estate 21,605 21,078 19,899 21,289 25,387owned ($000's)



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



Non-performing 83,801 90,061 99,759 101,324 109,620assets ($000's)



Non-performingassets as a % of 0.47% 0.51% 0.56% 0.60% 0.65%total assets



Loans past due 90days or more and 175,734 245,828 265,230 243,630 187,105still 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 $17 million as of September 30, 2021, down from approximately $76 million as of June 30, 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 approval of COVID-19 related loan modifications,(1) resulting in active loan modifications of approximately $17 million as of September 30, 2021, down from approximately $76 million as of June 30, 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(2) 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.

Three Months Ended September 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

$

2,300,939

$

17,696

3.08

%

$

2,530,805

$

20,108

3.18

%

Loans held for investment, gross (2)

7,514,392

82,073

4.33

%

7,730,711

84,847

4.32

%

Investment securities - taxable

2,585,362

12,328

1.91

%

1,974,911

11,017

2.23

%

Investment securities - non-taxable (3)

318,408

3,252

4.09

%

243,716

2,011

3.30

%

Federal funds sold and securities purchased under agreements to resell

161,577

207

-

%

154,588

10

0.03

%

Interest-bearing deposits in other financial institutions

2,197,478

788

0.14

%

1,794,652

626

0.14

%

Securities borrowed

1,364,726

8,585

2.46

%

1,297,112

10,705

3.23

%

Other

51,350

813

6.28

%

49,701

823

6.59

%

Interest-earning assets, gross (3)

16,494,232

125,742

3.02

%

15,776,196

130,147

3.26

%

Allowance for credit losses

(115,688

)

(156,071

)

Interest-earning assets, net

16,378,544

15,620,125

Noninterest-earning assets

1,371,207

1,493,194

Total assets

$

17,749,751

$

17,113,319

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

7,622,748

$

5,303

0.28

%

$

7,868,100

$

10,700

0.54

%

Securities loaned

1,306,314

6,519

1.98

%

1,193,497

8,729

2.91

%

Notes payable and other borrowings

1,231,545

8,266

2.66

%

1,259,559

8,500

2.69

%

Total interest-bearing liabilities

10,160,607

20,088

0.78

%

10,321,156

27,929

1.08

%

Noninterest-bearing liabilities

Noninterest-bearing deposits

4,299,987

3,508,282

Other liabilities

800,225

903,571

Total liabilities

15,260,819

14,733,009

Stockholders' equity

2,463,821

2,350,900

Noncontrolling interest

25,111

29,410

Total liabilities and stockholders' equity

$

17,749,751

$

17,113,319

Net interest income (3)

$

105,654

$

102,218

Net interest spread (3)

2.24

%

2.18

%

Net interest margin (3)

2.54

%

2.57

%



Three Months Ended September 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 $ 2,300,939 $ 17,696 3.08 % $ 2,530,805 $ 20,108 3.18 %

Loans held forinvestment, gross ^ 7,514,392 82,073 4.33 % 7,730,711 84,847 4.32 %(2)

Investmentsecurities - 2,585,362 12,328 1.91 % 1,974,911 11,017 2.23 %taxable

Investmentsecurities - 318,408 3,252 4.09 % 243,716 2,011 3.30 %non-taxable ^(3)

Federal funds soldand securitiespurchased under 161,577 207 - % 154,588 10 0.03 %agreements toresell

Interest-bearingdeposits in other 2,197,478 788 0.14 % 1,794,652 626 0.14 %financial institutions

Securities borrowed 1,364,726 8,585 2.46 % 1,297,112 10,705 3.23 %

Other 51,350 813 6.28 % 49,701 823 6.59 %

Interest-earning 16,494,232 125,742 3.02 % 15,776,196 130,147 3.26 %assets, gross ^(3)

Allowance for (115,688 ) (156,071 ) credit losses

Interest-earning 16,378,544 15,620,125 assets, net

Noninterest-earning 1,371,207 1,493,194 assets

Total assets $ 17,749,751 $ 17,113,319



Liabilities andStockholders' Equity

Interest-bearing liabilities

Interest-bearing $ 7,622,748 $ 5,303 0.28 % $ 7,868,100 $ 10,700 0.54 %deposits

Securities loaned 1,306,314 6,519 1.98 % 1,193,497 8,729 2.91 %

Notes payable and 1,231,545 8,266 2.66 % 1,259,559 8,500 2.69 %other borrowings

Totalinterest-bearing 10,160,607 20,088 0.78 % 10,321,156 27,929 1.08 %liabilities

Noninterest-bearing liabilities

Noninterest-bearing 4,299,987 3,508,282 deposits

Other liabilities 800,225 903,571

Total liabilities 15,260,819 14,733,009

Stockholders' 2,463,821 2,350,900 equity

Noncontrolling 25,111 29,410 interest

Total liabilitiesand stockholders' $ 17,749,751 $ 17,113,319 equity



Net interest income $ 105,654 $ 102,218 ^(3)

Net interest spread 2.24 % 2.18 %^(3)

Net interest margin 2.54 % 2.57 %^(3)

(1)

Information presented on a consolidated basis. For the three months ended September 30, 2020, information includes 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 $0.6 million and $0.3 million for the three months ended September 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, October 29, 2021. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third quarter 2021 financial results. Interested parties can access the conference call by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada) or 1-929-526-1599 (all other locations) and then using the access code 343796. 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 September 30, 2021, Hilltop employed approximately 5,000 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 and the allowance for credit losses, as well as the effects of changes in the level 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/20211028006171/en/

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