Business Wire | Jul 30, 2020 05:45PM EDT

Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2020

Jul. 30, 2020

DALLAS--(BUSINESS WIRE)--Jul. 30, 2020--Hilltop Holdings Inc. (NYSE: HTH) ("Hilltop") today announced financial results for the second quarter of 2020. Hilltop produced income from continuing operations to common stockholders of $97.7 million, or $1.08 per diluted share, for the second quarter of 2020, compared to $60.1 million, or $0.64 per diluted share, for the second quarter of 2019. Including income from discontinued operations related to the insurance segment, income applicable to common stockholders was $128.5 million, or $1.42 per diluted share, for the second quarter of 2020, compared to $57.8 million, or $0.62 per diluted share, for the second quarter of 2019. Hilltop's financial results from continuing operations for the second quarter of 2020 reflect both a significant increase in mortgage origination segment net gains from sales of loans and other mortgage production income and a significant build in the allowance for credit losses associated with the deterioration of the economic outlook from the first quarter of 2020 attributable to the market disruption and economic uncertainties caused by COVID-19.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share, payable on August 31, 2020, to all common stockholders of record as of the close of business on August 14, 2020.

As previously announced on April 30, 2020, in light of the uncertain outlook for 2020 due to the COVID-19 pandemic, and Hilltop's commitment to maintain strong capital and liquidity to meet the needs of its customers and communities during this exceptional period of economic uncertainty, Hilltop's Board of Directors suspended its stock repurchase program. Hilltop's Board of Directors has the ability to reinstate the share repurchase program at its discretion as circumstances warrant.

The COVID-19 pandemic has negatively impacted financial markets and overall economic conditions, and is expected to continue to have implications on our business and operations. The extent of the impact of COVID-19 on our operational and financial performance for the remainder of 2020 is dependent on certain developments, including, among others, the broader adverse implications of COVID-19 on our customers and clients, potential further disruption and deterioration in the financial services industry, including the mortgage servicing and commercial paper markets, and additional, or extended, federal, state and local government orders and regulations that might be imposed in response to the pandemic, all of which are uncertain.

Jeremy Ford, President and CEO of Hilltop, said, "While these remain very challenging times and there is significant uncertainty about the future impacts from the pandemic, I am very proud of our teammates across Hilltop as they continue to execute and display compassion for our clients and each other. Our results from the second quarter demonstrate the strength and durability of our operating model as the mortgage franchise delivered record pre-tax income of $138 million on $6 billion of mortgage originations, while the securities business grew pre-tax income by 26% to $28 million from strength in the fixed income capital markets and structured finance business lines. While the Bank incurred a pre-tax loss of $17 million, it generated pre-provision net revenue, or PPNR, of $48 million during the quarter driven by solid net interest income and lower operating expenses. The Bank also recognized approximately $66 million of provision expense related to significant deterioration in the economic outlook from the end of the first quarter through June. In addition to exceptional PPNR performance, we were also able to fortify our strong excess capital and liquidity positions during the quarter by executing a subordinated debt offering and closing the sale of National Lloyds."

___________________________ Note: Pre-provision net revenue, or PPNR, is a non-GAAP financial measure which represents pre-tax income (loss) plus provision for credit losses. We believe that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for credit losses.

Second Quarter 2020 Highlights for Hilltop:

* For the second quarter of 2020, net gains from sales of loans and other mortgage production income within our mortgage origination segment was $295.3 million, compared to $131.2 million in the second quarter of 2019, a 125.1% increase; Mortgage loan origination production volume was $6.1 billion during the second quarter of 2020, compared to $4.0 billion in the second quarter of 2019. * The provision for credit losses was $66.0 million during the second quarter of 2020, compared to $34.5 million in the first quarter of 2020; This significant increase in the provision for credit losses during the second quarter of 2020 was primarily associated with the increase in the expected lifetime credit losses under CECL on collectively evaluated loans within the portfolio attributable to the continued market disruption and related macroeconomic uncertainties caused by COVID-19. * Hilltop's consolidated annualized return on average assets and return on average equity for the second quarter of 2020 were 3.30% and 23.32%, respectively, compared to 1.74% and 11.63%, respectively, for the second quarter of 2019; * Hilltop's book value per common share increased to $25.08 at June 30, 2020, compared to $23.71 at March 31, 2020; * Hilltop's total assets were $16.9 billion at June 30, 2020 compared to $15.7 billion at March 31, 2020; Included $249.8 million in assets of discontinued operations associated with the insurance segment at March 31, 2020. * Loans1, net of allowance for credit losses, increased to $7.3 billion compared to $6.7 billion at March 31, 2020; Included supporting our impacted banking clients through funding of over 2,800 loans totaling approximately $672 million at June 30, 2020 through the Paycheck Protection Program, or PPP. * Non-performing loans were $68.3 million, or 0.65% of total loans at June 30, 2020, compared to $87.4 million, or 0.89% of total loans, at March 31, 2020; * As of June 30, 2020, we approved approximately $968 million in COVID-19 related loan modifications; Extent of progression of these loans into non-performing loans during future periods is uncertain. * Loans held for sale increased by 6.5% from March 31, 2020 to $2.6 billion at June 30, 2020; * Total deposits were $11.6 billion at June 30, 2020, compared to $9.9 billion at March 31, 2020; * On May 11, 2020, Hilltop completed the issuance and sale of $50 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes due May 2030 and $150 million aggregate principal amount of 6.125% fixed-to-floating rate subordinated notes due May 2035; * Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 12.60% and a Common Equity Tier 1 Capital Ratio of 18.46% at June 30, 2020; Ratios reflect Hilltop's decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period. * Hilltop's consolidated net interest margin3 decreased to 2.80% for the second quarter of 2020, compared to 3.41% in the first quarter of 2020; * For the second quarter of 2020, noninterest income from continuing operations was $468.1 million, compared to $276.7 million in the second quarter of 2019, a 69.2% increase; * For the second quarter of 2020, noninterest expense from continuing operations was $370.2 million, compared to $304.1 million in the second quarter of 2019, a 21.7% increase; and * Hilltop's effective tax rate from continuing operations was 23.3% during the second quarter of 2020, compared to 23.0% during the same period in 2019.

Discontinued Operations

On June 30, 2020, Hilltop completed the sale of its insurance segment, National Lloyds Corporation, for cash proceeds of $154.1 million. Insurance segment results and its assets and liabilities have been presented as discontinued operations. Included within discontinued operations for the second quarter of 2020 is the recognition of a gain associated with this transaction of $32.3 million, net of $5.1 million in transaction costs and subject to post-closing adjustments. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules under the Internal Revenue code. Income (loss) from discontinued operations, net of income taxes, was $30.8 million, or $0.34 per diluted share, for the second quarter of 2020, compared to ($2.3) million, or ($0.02) per diluted share, for the second quarter of 2019.

___________________________ Note: "Consolidated" refers to our consolidated financial position and consolidated results of operations, including discontinued operations and assets and liabilities classified as held for sale. 1 "Loans" reflect loans held for investment excluding broker-dealer loans, net of allowance for credit losses, of $422.1 million and $505.9 million at June 30, 2020 and March 31, 2020, respectively. 2 Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets. 3 Net interest margin is defined as net interest income divided by average interest-earning assets.

Consolidated Financial and Other Information



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

(in 000's) 2020 2020 2019 2019 2019

Cash and due from $ 1,655,492 $ 524,370 $ 433,626 $ 281,445 $ 303,424 banks

Federal funds sold 385 401 394 423 521

Assets segregatedfor regulatory 194,626 178,805 157,436 83,878 151,271 purposes

Securitiespurchased under 161,457 23,356 59,031 49,998 50,660 agreements toresell

Securities:

Trading, at fair 648,037 393,581 689,576 707,268 601,524 value

Available for sale, 1,091,348 972,318 911,493 915,334 916,519 at fair value, net

Held to maturity,at amortized cost, 343,198 355,110 386,326 371,361 365,905 net

Equity, at fair 122 107 166 164 150 value

2,082,705 1,721,116 1,987,561 1,994,127 1,884,098

Loans held for sale 2,592,307 2,433,407 2,106,361 1,984,231 1,609,477

Loans held forinvestment, net of 7,849,904 7,345,250 7,381,400 7,321,208 7,202,604 unearned income

Allowance for (156,383 ) (106,739 ) (61,136 ) (55,604 ) (55,177 )credit losses

Loans held for 7,693,521 7,238,511 7,320,264 7,265,604 7,147,427 investment, net



Broker-dealer andclearing 1,222,627 1,838,789 1,780,280 1,731,979 1,707,249 organizationreceivables

Premises and 210,975 215,261 210,375 203,601 198,266 equipment, net

Operating lease 119,954 113,395 114,320 119,035 120,965 right-of-use assets

Other assets 709,246 876,615 460,258 578,422 547,768

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

Other intangible 23,374 25,019 26,666 28,432 30,308 assets, net

Assets ofdiscontinued - 249,758 248,429 248,407 246,989 operations

Total assets $ 16,934,116 $ 15,706,250 $ 15,172,448 $ 14,837,029 $ 14,265,870



Deposits:

Noninterest-bearing $ 3,467,500 $ 2,865,192 $ 2,769,556 $ 2,732,325 $ 2,598,253

Interest-bearing 8,182,098 7,082,297 6,262,658 5,998,547 5,864,826

Total deposits 11,649,598 9,947,489 9,032,214 8,730,872 8,463,079

Broker-dealer andclearing 1,158,628 1,259,181 1,605,518 1,546,163 1,531,891 organizationpayables

Short-term 720,164 1,329,948 1,424,010 1,502,755 1,338,893 borrowings

Securities sold,not yet purchased, 55,340 22,768 43,817 59,249 45,447 at fair value

Notes payable 450,158 244,042 256,269 217,841 204,423

Operating lease 131,411 124,123 125,619 128,295 129,858 liabilities

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

Other liabilities 409,672 408,224 348,519 355,629 284,136

Liabilities ofdiscontinued - 139,730 140,674 145,786 149,326 operations

Total liabilities 14,641,983 13,542,517 13,043,652 12,753,602 12,214,065



Common stock 902 901 906 906 928

Additional paid-in 1,439,686 1,437,301 1,445,233 1,441,604 1,473,599 capital

Accumulated othercomprehensive 23,813 20,939 11,419 12,305 7,862 income

Retained earnings 797,331 676,946 644,860 602,835 544,275

Deferredcompensation 778 774 776 789 788 employee stocktrust, net

Employee stock (150 ) (150 ) (155 ) (170 ) (171 )trust

Total Hilltopstockholders' 2,262,360 2,136,711 2,103,039 2,058,269 2,027,281 equity

Noncontrolling 29,773 27,022 25,757 25,158 24,524 interests

Total stockholders' 2,292,133 2,163,733 2,128,796 2,083,427 2,051,805 equity

Total liabilities &stockholders' $ 16,934,116 $ 15,706,250 $ 15,172,448 $ 14,837,029 $ 14,265,870 equity



Three Months Ended

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

(in 000's,except per 2020 2020 2019 2019 2019 share data)

Interest income:

Loans, $ 107,860 $ 111,168 $ 115,696 $ 119,580 $ 114,325 including fees

Securities 12,883 13,327 16,196 21,010 15,517 borrowed

Securities:

Taxable 11,698 15,695 15,174 14,885 13,778

Tax-exempt 1,539 1,610 1,572 1,576 1,513

Other 951 3,075 3,180 3,889 3,867

Total interest 134,931 144,875 151,818 160,940 149,000 income



Interest expense:

Deposits 11,947 15,124 17,480 18,887 18,036

Securities 10,796 11,277 13,989 17,889 13,470 loaned

Short-term 2,367 4,744 6,244 8,166 6,897 borrowings

Notes payable 3,768 2,418 2,337 2,265 2,165

Juniorsubordinated 705 850 909 955 986 debentures

Other 790 126 99 132 162

Total interest 30,373 34,539 41,058 48,294 41,716 expense



Net interest 104,558 110,336 110,760 112,646 107,284 income

Provision for(reversal of) 66,026 34,549 6,880 47 (672 ) credit losses

Net interestincome afterprovision for 38,532 75,787 103,880 112,599 107,956 (reversal of)credit losses



Noninterest income:

Net gains fromsale of loansand other 295,317 150,486 120,573 157,050 131,173 mortgageproductionincome

Mortgage loanorigination 45,341 28,554 36,939 37,782 33,409 fees

Securitiescommissions and 34,234 40,069 33,205 34,426 34,142 fees

Investment andsecurities 29,120 23,180 32,083 28,685 22,859 advisory feesand commissions

Other 64,113 29,424 40,846 48,562 55,120

Totalnoninterest 468,125 271,713 263,646 306,505 276,703 income



Noninterest expense:

Employees'compensation 276,893 196,356 212,498 232,449 212,959 and benefits

Occupancy and 26,174 19,522 30,617 27,002 27,938 equipment, net

Professional 15,737 14,798 17,211 15,472 13,773 services

Other 51,405 51,225 47,542 46,263 49,418

Totalnoninterest 370,209 281,901 307,868 321,186 304,088 expense



Income fromcontinuingoperations 136,448 65,599 59,658 97,918 80,571 before incometaxes

Income tax 31,808 15,148 13,579 21,472 18,526 expense

Income fromcontinuing 104,640 50,451 46,079 76,446 62,045 operations

Income (loss)fromdiscontinued 30,775 3,151 5,623 5,261 (2,254 ) operations, netof income taxes

Net income 135,415 53,602 51,702 81,707 59,791

Less: Netincomeattributable to 6,939 3,966 2,426 2,289 1,980 noncontrollinginterest

Incomeattributable to $ 128,476 $ 49,636 $ 49,276 $ 79,418 $ 57,811 Hilltop



Earnings per common share:

Basic:

Earnings fromcontinuing $ 1.08 $ 0.51 $ 0.48 $ 0.81 $ 0.64 operations

Earnings(losses) from 0.34 0.04 0.06 0.06 (0.02 ) discontinuedoperations

$ 1.42 $ 0.55 $ 0.54 $ 0.87 $ 0.62

Diluted:

Earnings fromcontinuing $ 1.08 $ 0.51 $ 0.48 $ 0.81 $ 0.64 operations

Earnings(losses) from 0.34 0.04 0.06 0.05 (0.02 ) discontinuedoperations

$ 1.42 $ 0.55 $ 0.54 $ 0.86 $ 0.62



Cash dividendsdeclared per $ 0.09 $ 0.09 $ 0.08 $ 0.08 $ 0.08 common share



Weightedaverage shares outstanding:

Basic 90,164 90,509 90,606 91,745 93,399

Diluted 90,164 90,550 90,711 91,824 93,418



Three Months Ended June 30, 2020

Segment Mortgage All Other HilltopResults and

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

Net interestincome $ 94,102 $ 9,663 $ (1,667 ) $ - $ (3,232 ) $ 5,692 $ 104,558(expense)

Provisionfor credit 65,600 426 - - - - 66,026losses

Noninterest 10,656 122,961 340,487 - 550 (6,529 ) 468,125income

Noninterest 56,622 104,411 200,493 - 8,888 (205 ) 370,209expense

Income(loss) fromcontinuing (17,464 ) 27,787 138,327 - (11,570 ) (632 ) 136,448operationsbefore taxes

Income(loss) fromdiscontinued - - - (1,911 ) 32,341 - 30,430operationsbefore taxes

$ (17,464 ) $ 27,787 $ 138,327 $ (1,911 ) $ 20,771 $ (632 ) $ 166,878



Six Months Ended June 30, 2020

Segment Mortgage All Other and HilltopResults

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

Net interestincome $ 188,025 $ 22,836 $ (1,299 ) $ - $ (4,888 ) $ 10,220 $ 214,894(expense)

Provisionfor credit 99,875 700 - - - - 100,575losses

Noninterest 19,427 209,170 519,455 - 2,838 (11,052 ) 739,838income

Noninterest 113,589 185,350 340,045 - 13,741 (615 ) 652,110expense

Income(loss) fromcontinuing (6,012 ) 45,956 178,111 - (15,791 ) (217 ) 202,047operationsbefore taxes

Income fromdiscontinued - - - 2,103 32,341 - 34,444operationsbefore taxes

$ (6,012 ) $ 45,956 $ 178,111 $ 2,103 $ 16,550 $ (217 ) $ 236,491



Three Months Ended

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

SelectedFinancial 2020 2020 2019 2019 2019Data



HilltopConsolidated (1):

Return onaverage 23.32% 9.38% 9.43% 15.55% 11.63%stockholders'equity

Return onaverage 3.30% 1.47% 1.40% 2.26% 1.74%assets

Net interest 2.80% 3.41% 3.30% 3.45% 3.49%margin (2)

Net interestmargin(taxable equivalent)(3):

As reported 2.81% 3.42% 3.31% 3.46% 3.49%

Impact ofpurchase 10 bps 22 bps 19 bps 26 bps 23 bpsaccounting

Book valueper common 25.08 23.71 23.20 22.71 21.85share ($)

Sharesoutstanding, 90,222 90,108 90,641 90,629 92,775end of period(000's)

Dividendpayout ratio 6.32% 16.41% 14.71% 9.24% 12.92%(4)



Banking Segment:

Net interest 3.11% 3.81% 3.77% 3.97% 4.06%margin (2)

Net interestmargin(taxable equivalent)(3):

As reported 3.12% 3.82% 3.78% 3.98% 4.06%

Impact ofpurchase 12 bps 30 bps 25 bps 35 bps 31 bpsaccounting

Accretion ofdiscount on 3,217 6,639 5,698 7,868 6,444loans($000's)

Netcharge-offs 16,382 1,508 1,348 (380) 2,960(recoveries)($000's)

Return onaverage -0.42% 0.33% 1.17% 1.51% 1.43%assets

Fee income 10.2% 8.5% 10.8% 8.3% 10.3%ratio

Efficiency 54.1% 55.5% 54.9% 50.5% 55.9%ratio

Employees'compensation 31,583 32,347 31,455 31,309 33,050and benefits($000's)



Broker-Dealer Segment:

Net revenue 132,624 99,382 113,128 121,466 116,969($000's) (5)

Employees'compensation 79,697 56,550 64,301 69,954 70,333and benefits($000's)

Variablecompensation 52,372 32,024 39,505 44,921 44,833expense($000's)

Compensationas a % of net 60.1% 56.9% 56.8% 57.6% 60.1%revenue

Pre-tax 21.0% 18.3% 21.4% 22.2% 18.9%margin (6)



MortgageOrigination Segment:

Mortgage loanoriginations - volume($000's):

Home 3,204,573 2,341,847 2,958,176 3,380,812 3,329,024purchases

Refinancings 2,894,486 1,280,741 1,442,329 1,390,989 631,065

Totalmortgage loan 6,099,059 3,622,588 4,400,505 4,771,801 3,960,089originations- volume

Mortgage loansales - 5,934,914 3,486,249 4,226,425 4,316,118 3,338,070volume($000's)

Net gainsfrom mortgageloan sales (basispoints):

As reported 368 325 304 335 333

Impact ofsales to (1 ) (13 ) (8 (1 0banking ) )segment

Mortgageservicing 81,263 30,298 55,504 51,297 53,695rights asset($000's) (7)

Employees'compensation 160,824 100,328 109,753 123,890 106,449and benefits($000's)

Variablecompensation 113,826 58,280 67,224 81,287 65,516expense($000's)



Insurance Segment:

Loss and LAE 78.5% 39.7% 43.6% 44.9% 74.6%ratio

Expense ratio 39.1% 38.0% 40.5% 38.3% 38.4%

Combined 117.6% 77.7% 84.1% 83.2% 113.0%ratio

Employees'compensation 3,220 2,777 2,929 2,748 2,784and benefits($000's)

____________________________________ Ratios and financial data presented on a consolidated basis and includes(1) discontinued operations and those assets and liabilities classified as held for sale.

(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 $0.3 million, $0.3 million, $0.1 million, $0.1 million, and $0.2 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.1 million, $0.1 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 plus total broker-dealer noninterest income.

(6) 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(7) servicing rights assets related to loans serviced for the banking segment, which are eliminated in consolidation.



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

Capital Ratios 2020 2020 2019 2019 2019

Tier 1 capital (to average assets):

PlainsCapital 10.37% 12.06% 11.61% 11.79% 12.53%

Hilltop 12.60% 13.03% 12.71% 12.67% 13.00%

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

PlainsCapital 14.03% 13.33% 13.45% 13.25% 13.84%

Hilltop 18.46% 15.96% 16.70% 16.15% 16.32%

Tier 1 capital (to risk-weighted assets):

PlainsCapital 14.03% 13.33% 13.45% 13.25% 13.84%

Hilltop 19.06% 16.38% 17.13% 16.58% 16.77%

Total capital (to risk-weighted assets):

PlainsCapital 14.88% 14.26% 14.13% 13.87% 14.48%

Hilltop 21.82% 17.00% 17.55% 16.95% 17.14%



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

Non-PerformingAssets Portfolio 2020 2020 2019 2019 2019Data

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

Commercial real 13,743 23,352 7,308 8,727 5,276estate

Commercial and 32,259 47,121 15,262 13,313 14,152industrial

Construction and 1,404 1,402 1,316 1,358 1,413land development

1-4 family 20,552 15,237 12,204 12,103 11,136residential

Consumer 308 310 26 30 34

Broker-dealer - - - - -

68,266 87,422 36,116 35,531 32,011



Non-performing loansas a % of total 0.65% 0.89% 0.38% 0.38% 0.36%loans



Other real estate 26,602 15,429 18,202 18,738 20,753owned ($000's)



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



Non-performing 95,183 103,166 54,318 54,269 52,764assets ($000's)



Non-performingassets as a % of 0.56% 0.66% 0.36% 0.37% 0.37%total assets



Loans past due 90days or more and 124,682 101,300 102,707 81,678 77,425still accruing($000's)



Troubled debtrestructuringsincluded in accruing 2,025 2,286 2,173 2,222 2,256loans held forinvestment ($000's)

____________________________________ 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 maturity date of the(1) existing loan. As of June 30, 2020, the Bank's actions included approval of approximately $968 million in COVID-19 related loan modifications. The extent to which these measures will impact with Bank is uncertain, and any progression of these loans into non-accrual status, during future periods is uncertain and will depend on future developments that cannot be predicted.

Three Months Ended June 30,

2020 2019

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 Rate Equivalent) Details(1)

Assets

Interest-earning assets

Loans held for sale $ 2,308,368 $ 20,036 3.47 % $ 1,307,251 $ 15,041 4.60 %

Loans held forinvestment, gross ^ 7,744,395 87,823 4.50 % 7,078,807 99,284 5.57 %(2)

Investmentsecurities - 1,681,336 12,489 2.97 % 1,733,536 14,654 3.38 %taxable

Investmentsecurities - 215,645 1,822 3.38 % 227,953 1,687 2.96 %non-taxable ^(3)

Federal funds soldand securitiespurchased under 61,956 (7 ) (0.04 )% 69,369 369 2.13 %agreements toresell

Interest-bearingdeposits in other 1,569,277 541 0.14 % 325,130 1,982 2.44 %financialinstitutions

Securities borrowed 1,375,849 12,883 3.70 % 1,598,063 15,517 3.84 %

Other 59,917 439 2.95 % 68,990 1,682 9.77 %

Interest-earning 15,016,743 136,026 3.60 % 12,409,099 150,216 4.81 %assets, gross ^(3)

Allowance for (102,216 ) (59,437 ) credit losses

Interest-earning 14,914,527 12,349,662 assets, net

Noninterest-earning 1,603,791 1,414,227 assets

Total assets $ 16,518,318 $ 13,763,889



Liabilities andStockholders' Equity

Interest-bearing liabilities

Interest-bearing $ 7,925,031 $ 11,946 0.61 % $ 5,792,236 $ 18,036 1.25 %deposits

Securities loaned 1,280,958 10,797 3.39 % 1,462,370 13,470 3.69 %

Notes payable and 1,110,516 7,998 2.88 % 1,389,295 10,674 3.06 %other borrowings

Totalinterest-bearing 10,316,505 30,741 1.20 % 8,643,901 42,180 1.95 %liabilities

Noninterest-bearing liabilities

Noninterest-bearing 3,303,165 2,549,792 deposits

Other liabilities 658,416 551,333

Total liabilities 14,278,086 11,745,026

Stockholders' 2,215,538 1,995,811 equity

Noncontrolling 24,694 23,052 interest

Total liabilitiesand stockholders' $ 16,518,318 $ 13,763,889 equity



Net interest income $ 105,285 $ 108,036 ^(3)

Net interest spread 2.40 % 2.86 %^(3)

Net interest margin 2.81 % 3.49 %^(3)

_____________________________________(1) Information presented on a consolidated basis and includes discontinued operations and those assets and liabilities classified as held for sale.

(2) Average balance includes non-accrual loans.

Presented on a taxable-equivalent basis with annualized taxable equivalent adjustments based on the applicable 21% federal income tax rates for the(3) periods presented. The adjustment to interest income was $0.3 million and $0.2 million for the three months ended June 30, 2020 and 2019, 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 31, 2020. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second quarter 2020 financial results. Interested parties can access the conference call by dialing 1-877-508-9457 (domestic) or 1-412-317-0789 (international). The conference call also will be webcast simultaneously on Hilltop's Investor Relations website ( http://ir.hilltop-holdings.com).

About Hilltop

Hilltop Holdings is a Dallas-based financial holding company. Its primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank. PlainsCapital Bank's wholly owned subsidiary, PrimeLending, provides residential mortgage lending throughout the United States. Hilltop Holdings' broker-dealer subsidiaries, Hilltop Securities Inc. and Hilltop Securities Independent Network Inc., provide a full complement of securities brokerage, institutional and investment banking services in addition to clearing services and retail financial advisory. At June 30, 2020, Hilltop employed approximately 4,800 people and operated approximately 420 locations in 48 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," "forecasts," "goal," "guidance," "intends," "may," "might," "outlook," "plan," "probable," "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) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (ii) the COVID-19 pandemic and the response of governmental authorities to the pandemic, which have caused and are causing significant harm to the global economy and our business; (iii) 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; (iv) changes in the interest rate environment; and (v) risks associated with concentration in real estate related loans. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and other reports that are filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement.

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