Business Wire | Oct 22, 2020 05:15PM EDT

Hilltop Holdings Inc. Announces Financial Results for Third Quarter 2020

Oct. 22, 2020

DALLAS--(BUSINESS WIRE)--Oct. 22, 2020--Hilltop Holdings Inc. (NYSE: HTH) ("Hilltop") today announced financial results for the third quarter of 2020. Hilltop produced income from continuing operations to common stockholders of $152.5 million, or $1.69 per diluted share, for the third quarter of 2020, compared to $74.2 million, or $0.81 per diluted share, for the third quarter of 2019. Hilltop's financial results from continuing operations for the third quarter of 2020 reflect a significant increase in mortgage origination segment net gains from sale of loans and other mortgage production income. Including income from discontinued operations related to the insurance segment, income applicable to common stockholders was $153.3 million, or $1.70 per diluted share, for the third quarter of 2020, compared to $79.4 million, or $0.86 per diluted share, for the third quarter of 2019.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share, payable on November 30, 2020, to all common stockholders of record as of the close of business on November 16, 2020.

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, "Our results this quarter highlight the strength of our diversified operating model and the commitment of our team. I could not be more pleased with the performance of our businesses and our team for working tirelessly to serve customers in a safe and highly effective manner. Our focus on execution and delivering exceptional customer service will continue to provide the foundation for prudent growth in the future.

Hilltop's results this quarter reflect record performance from our mortgage origination franchise, enhanced performance in our securities businesses and stable credit performance at the bank. The mortgage business generated $6.5 billion of mortgage originations and $146 million of pre-tax income, as PrimeLending leveraged recent investments in technology and superior teamwork. HilltopSecurities generated $149 million of net revenue and a 24% pre-tax margin from improved results in its fixed income capital markets, structured finance and public banking business lines. PlainsCapital Bank generated $50 million of pre-tax income, representing a return to profitability as credit trends remained stable after the significant build in the allowance for credit losses during the second quarter. During the third quarter, the bank continued to support our customers facing adversity in the pandemic, resulting in approximately $291 million of active loan payment deferrals."

Third Quarter 2020 Highlights for Hilltop:

* For the third quarter of 2020, net gains from sale of loans and other mortgage production income within our mortgage origination segment was $307.9 million, compared to $157.1 million in the third quarter of 2019, a 96.0% increase; Mortgage loan origination production volume was $6.5 billion during the third quarter of 2020, compared to $4.8 billion in the third quarter of 2019. * The provision for (reversal of) credit losses was $(0.6) million during the third quarter of 2020, compared to $66.0 million in the second quarter of 2020; The significant 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 through June 2020. The reversal of credit losses during the third quarter of 2020 primarily reflected changes in reserves on margin loans within the broker-dealer segment given that the changes in the provision for credit losses associated with the Bank's loan portfolio composition and credit quality were offset by improvements in macroeconomic factor assumptions and qualitative factors from the prior quarter. * Hilltop's consolidated annualized return on average assets and return on average equity for the third quarter of 2020 were 3.71% and 25.94%, respectively, compared to 2.26% and 15.55%, respectively, for the third quarter of 2019; * Hilltop's book value per common share increased to $26.72 at September 30, 2020, compared to $25.08 at June 30, 2020; * Hilltop's total assets were $16.9 billion at both September 30, 2020 and June 30, 2020; * Loans1, net of allowance for credit losses, were $7.3 billion at both September 30, 2020 and June 30, 2020; Includes supporting our impacted banking clients through funding of over 2,800 loans through the Paycheck Protection Program, or PPP, which totaled approximately $671 million at September 30, 2020. * Non-performing loans were $82.1 million, or 0.78% of total loans, at September 30, 2020, compared to $68.3 million, or 0.65% of total loans, at June 30, 2020; * During the third quarter of 2020, we further supported our impacted banking clients through the approval of COVID-19 related loan modifications, resulting in active deferrals that have not reached the end of their deferral period of approximately $291 million as of September 30, 2020; As of June 30, 2020, active COVID-19 related loan modifications totaled approximately $968 million; During the third quarter of 2020, COVID-19 related loan modifications of approximately $662 million have made at least one payment pursuant to agreed-upon contractual terms; Extent of progression of these loans into non-performing loans during future periods is uncertain. * Loans held for sale decreased by 1.7% from June 30, 2020 to $2.5 billion at September 30, 2020; * Total deposits were $11.3 billion at September 30, 2020, compared to $11.6 billion at June 30, 2020; * Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 13.03% and a Common Equity Tier 1 Capital Ratio of 19.85% at September 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 2.56% for the third quarter of 2020, compared to 2.80% in the second quarter of 2020; * For the third quarter of 2020, noninterest income from continuing operations was $502.7 million, compared to $306.5 million in the third quarter of 2019, a 64.0% increase; * For the third quarter of 2020, noninterest expense from continuing operations was $399.3 million, compared to $321.2 million in the third quarter of 2019, a 24.3% increase; and * Hilltop's effective tax rate from continuing operations was 22.7% during the third quarter of 2020, compared to 21.9% 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 of corporate for the third quarter of 2020 is the recognition of a pre-tax post-closing adjustment gain of $0.7 million related to the finalization of the June 30, 2020 closing balance sheet, resulting in an aggregate gain on sale of NLC of $33.1 million. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules under the Internal Revenue Code. Income from discontinued operations, net of income taxes, was $0.7 million, or $0.01 per diluted share, for the third quarter of 2020, compared to $5.3 million, or $0.05 per diluted share, for the third 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.

^ "Loans" reflect loans held for investment excluding broker-dealer margin1 loans, net of allowance for credit losses, of $502.1 million and $422.1 million at September 30, 2020 and June 30, 2020, respectively.

^ Based on the end of period Tier 1 capital divided by total average assets2 during the quarter, excluding goodwill and intangible assets.

^ Net interest margin is defined as net interest income divided by average3 interest-earning assets.

Consolidated Financial and Other Information

Consolidated Balance Sheets

September 30,

June 30,

March 31,

December 31,

September 30,

(in 000's)

2020

2020

2020

2019

2019

Cash and due from banks

$

1,277,865

$

1,655,492

$

524,370

$

433,626

$

281,445

Federal funds sold

420

385

401

394

423

Assets segregated for regulatory purposes

221,621

194,626

178,805

157,436

83,878

Securities purchased under agreements to resell

90,103

161,457

23,356

59,031

49,998

Securities:

Trading, at fair value

667,751

648,037

393,581

689,576

707,268

Available for sale, at fair value, net

1,310,240

1,091,348

972,318

911,493

915,334

Held to maturity, at amortized cost, net

323,299

343,198

355,110

386,326

371,361

Equity, at fair value

117

122

107

166

164

2,301,407

2,082,705

1,721,116

1,987,561

1,994,127

Loans held for sale

2,547,975

2,592,307

2,433,407

2,106,361

1,984,231

Loans held for investment, net of unearned income

7,945,560

7,849,904

7,345,250

7,381,400

7,321,208

Allowance for credit losses

(155,214

)

(156,383

)

(106,739

)

(61,136

)

(55,604

)

Loans held for investment, net

7,790,346

7,693,521

7,238,511

7,320,264

7,265,604

Broker-dealer and clearing organization receivables

1,363,478

1,222,627

1,838,789

1,780,280

1,731,979

Premises and equipment, net

208,078

210,975

215,261

210,375

203,601

Operating lease right-of-use assets

109,354

119,954

113,395

114,320

119,035

Mortgage servicing assets

127,712

81,264

30,299

55,504

51,297

Other assets

607,932

627,982

846,316

404,754

527,125

Goodwill

267,447

267,447

267,447

267,447

267,447

Other intangible assets, net

21,814

23,374

25,019

26,666

28,432

Assets of discontinued operations

-

-

249,758

248,429

248,407

Total assets

$

16,935,552

$

16,934,116

$

15,706,250

$

15,172,448

$

14,837,029

Deposits:

Noninterest-bearing

$

3,557,603

$

3,467,500

$

2,865,192

$

2,769,556

$

2,732,325

Interest-bearing

7,704,312

8,182,098

7,082,297

6,262,658

5,998,547

Total deposits

11,261,915

11,649,598

9,947,489

9,032,214

8,730,872

Broker-dealer and clearing organization payables

1,310,835

1,158,628

1,259,181

1,605,518

1,546,163

Short-term borrowings

780,109

720,164

1,329,948

1,424,010

1,502,755

Securities sold, not yet purchased, at fair value

56,023

55,340

22,768

43,817

59,249

Notes payable

396,006

450,158

244,042

256,269

217,841

Operating lease liabilities

122,402

131,411

124,123

125,619

128,295

Junior subordinated debentures

67,012

67,012

67,012

67,012

67,012

Other liabilities

502,517

409,672

408,224

348,519

355,629

Liabilities of discontinued operations

-

-

139,730

140,674

145,786

Total liabilities

14,496,819

14,641,983

13,542,517

13,043,652

12,753,602

Common stock

902

902

901

906

906

Additional paid-in capital

1,443,588

1,439,686

1,437,301

1,445,233

1,441,604

Accumulated other comprehensive income

23,790

23,813

20,939

11,419

12,305

Retained earnings

942,461

797,331

676,946

644,860

602,835

Deferred compensation employee stock trust, net

774

778

774

776

789

Employee stock trust

(143

)

(150

)

(150

)

(155

)

(170

)

Total Hilltop stockholders' equity

2,411,372

2,262,360

2,136,711

2,103,039

2,058,269

Noncontrolling interests

27,361

29,773

27,022

25,757

25,158

Total stockholders' equity

2,438,733

2,292,133

2,163,733

2,128,796

2,083,427

Total liabilities & stockholders' equity

$

16,935,552

$

16,934,116

$

15,706,250

$

15,172,448

$

14,837,029

Consolidated Financial and Other Information



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

(in 000's) 2020 2020 2020 2019 2019

Cash and due from $ 1,277,865 $ 1,655,492 $ 524,370 $ 433,626 $ 281,445 banks

Federal funds sold 420 385 401 394 423

Assets segregatedfor regulatory 221,621 194,626 178,805 157,436 83,878 purposes

Securitiespurchased under 90,103 161,457 23,356 59,031 49,998 agreements toresell

Securities:

Trading, at fair 667,751 648,037 393,581 689,576 707,268 value

Available for sale, 1,310,240 1,091,348 972,318 911,493 915,334 at fair value, net

Held to maturity,at amortized cost, 323,299 343,198 355,110 386,326 371,361 net

Equity, at fair 117 122 107 166 164 value

2,301,407 2,082,705 1,721,116 1,987,561 1,994,127

Loans held for sale 2,547,975 2,592,307 2,433,407 2,106,361 1,984,231

Loans held forinvestment, net of 7,945,560 7,849,904 7,345,250 7,381,400 7,321,208 unearned income

Allowance for (155,214 ) (156,383 ) (106,739 ) (61,136 ) (55,604 )credit losses

Loans held for 7,790,346 7,693,521 7,238,511 7,320,264 7,265,604 investment, net



Broker-dealer andclearing 1,363,478 1,222,627 1,838,789 1,780,280 1,731,979 organizationreceivables

Premises and 208,078 210,975 215,261 210,375 203,601 equipment, net

Operating lease 109,354 119,954 113,395 114,320 119,035 right-of-use assets

Mortgage servicing 127,712 81,264 30,299 55,504 51,297 assets

Other assets 607,932 627,982 846,316 404,754 527,125

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

Other intangible 21,814 23,374 25,019 26,666 28,432 assets, net

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

Total assets $ 16,935,552 $ 16,934,116 $ 15,706,250 $ 15,172,448 $ 14,837,029



Deposits:

Noninterest-bearing $ 3,557,603 $ 3,467,500 $ 2,865,192 $ 2,769,556 $ 2,732,325

Interest-bearing 7,704,312 8,182,098 7,082,297 6,262,658 5,998,547

Total deposits 11,261,915 11,649,598 9,947,489 9,032,214 8,730,872

Broker-dealer andclearing 1,310,835 1,158,628 1,259,181 1,605,518 1,546,163 organizationpayables

Short-term 780,109 720,164 1,329,948 1,424,010 1,502,755 borrowings

Securities sold,not yet purchased, 56,023 55,340 22,768 43,817 59,249 at fair value

Notes payable 396,006 450,158 244,042 256,269 217,841

Operating lease 122,402 131,411 124,123 125,619 128,295 liabilities

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

Other liabilities 502,517 409,672 408,224 348,519 355,629

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

Total liabilities 14,496,819 14,641,983 13,542,517 13,043,652 12,753,602



Common stock 902 902 901 906 906

Additional paid-in 1,443,588 1,439,686 1,437,301 1,445,233 1,441,604 capital

Accumulated othercomprehensive 23,790 23,813 20,939 11,419 12,305 income

Retained earnings 942,461 797,331 676,946 644,860 602,835

Deferredcompensation 774 778 774 776 789 employee stocktrust, net

Employee stock (143 ) (150 ) (150 ) (155 ) (170 )trust

Total Hilltopstockholders' 2,411,372 2,262,360 2,136,711 2,103,039 2,058,269 equity

Noncontrolling 27,361 29,773 27,022 25,757 25,158 interests

Total stockholders' 2,438,733 2,292,133 2,163,733 2,128,796 2,083,427 equity

Total liabilities &stockholders' $ 16,935,552 $ 16,934,116 $ 15,706,250 $ 15,172,448 $ 14,837,029 equity

Three Months Ended

Consolidated Income Statements

September 30,

June 30,

March 31,

December 31,

September 30,

(in 000's, except per share data)

2020

2020

2020

2019

2019

Interest income:

Loans, including fees

$

104,955

$

107,860

$

111,168

$

115,696

$

119,580

Securities borrowed

10,705

12,883

13,327

16,196

21,010

Securities:

Taxable

11,035

11,698

15,695

15,174

14,885

Tax-exempt

1,687

1,539

1,610

1,572

1,576

Other

1,446

951

3,075

3,180

3,889

Total interest income

129,828

134,931

144,875

151,818

160,940

Interest expense:

Deposits

10,700

11,947

15,124

17,480

18,887

Securities loaned

8,729

10,796

11,277

13,989

17,889

Short-term borrowings

2,346

2,367

4,744

6,244

8,166

Notes payable

4,904

3,768

2,418

2,337

2,265

Junior subordinated debentures

608

705

850

909

955

Other

641

790

126

99

132

Total interest expense

27,928

30,373

34,539

41,058

48,294

Net interest income

101,900

104,558

110,336

110,760

112,646

Provision for (reversal of) credit losses

(602

)

66,026

34,549

6,880

47

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

102,502

38,532

75,787

103,880

112,599

Noninterest income:

Net gains from sale of loans and other mortgage production income

307,896

295,317

150,486

120,573

157,050

Mortgage loan origination fees

47,681

45,341

28,554

36,939

37,782

Securities commissions and fees

32,496

34,234

40,069

33,205

34,426

Investment and securities advisory fees and commissions

36,866

29,120

23,180

32,083

28,685

Other

77,772

64,113

29,424

40,846

48,562

Total noninterest income

502,711

468,125

271,713

263,646

306,505

Noninterest expense:

Employees' compensation and benefits

294,907

276,893

196,356

212,498

232,449

Occupancy and equipment, net

26,124

26,174

19,522

30,617

27,002

Professional services

17,522

15,737

14,798

17,211

15,472

Other

60,792

51,405

51,225

47,542

46,263

Total noninterest expense

399,345

370,209

281,901

307,868

321,186

Income from continuing operations before income taxes

205,868

136,448

65,599

59,658

97,918

Income tax expense

46,820

31,808

15,148

13,579

21,472

Income from continuing operations

159,048

104,640

50,451

46,079

76,446

Income from discontinued operations, net of income taxes

736

30,775

3,151

5,623

5,261

Net income

159,784

135,415

53,602

51,702

81,707

Less: Net income attributable to noncontrolling interest

6,505

6,939

3,966

2,426

2,289

Income attributable to Hilltop

$

153,279

$

128,476

$

49,636

$

49,276

$

79,418

Earnings per common share:

Basic:

Earnings from continuing operations

$

1.69

$

1.08

$

0.51

$

0.48

$

0.81

Earnings from discontinued operations

0.01

0.34

0.04

0.06

0.06

$

1.70

$

1.42

$

0.55

$

0.54

$

0.87

Diluted:

Earnings from continuing operations

$

1.69

$

1.08

$

0.51

$

0.48

$

0.81

Earnings from discontinued operations

0.01

0.34

0.04

0.06

0.05

$

1.70

$

1.42

$

0.55

$

0.54

$

0.86

Cash dividends declared per common share

$

0.09

$

0.09

$

0.09

$

0.08

$

0.08

Weighted average shares outstanding:

Basic

90,200

90,164

90,509

90,606

91,745

Diluted

90,200

90,164

90,550

90,711

91,824



Three Months Ended

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

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

Interest income:

Loans, including $ 104,955 $ 107,860 $ 111,168 $ 115,696 $ 119,580fees

Securities 10,705 12,883 13,327 16,196 21,010borrowed

Securities:

Taxable 11,035 11,698 15,695 15,174 14,885

Tax-exempt 1,687 1,539 1,610 1,572 1,576

Other 1,446 951 3,075 3,180 3,889

Total interest 129,828 134,931 144,875 151,818 160,940income



Interest expense:

Deposits 10,700 11,947 15,124 17,480 18,887

Securities loaned 8,729 10,796 11,277 13,989 17,889

Short-term 2,346 2,367 4,744 6,244 8,166borrowings

Notes payable 4,904 3,768 2,418 2,337 2,265

Juniorsubordinated 608 705 850 909 955debentures

Other 641 790 126 99 132

Total interest 27,928 30,373 34,539 41,058 48,294expense



Net interest 101,900 104,558 110,336 110,760 112,646income

Provision for(reversal of) (602 ) 66,026 34,549 6,880 47credit losses

Net interestincome afterprovision for 102,502 38,532 75,787 103,880 112,599(reversal of)credit losses



Noninterest income:

Net gains fromsale of loans and 307,896 295,317 150,486 120,573 157,050other mortgageproduction income

Mortgage loan 47,681 45,341 28,554 36,939 37,782origination fees

Securitiescommissions and 32,496 34,234 40,069 33,205 34,426fees

Investment andsecurities 36,866 29,120 23,180 32,083 28,685advisory fees andcommissions

Other 77,772 64,113 29,424 40,846 48,562

Total noninterest 502,711 468,125 271,713 263,646 306,505income



Noninterest expense:

Employees'compensation and 294,907 276,893 196,356 212,498 232,449benefits

Occupancy and 26,124 26,174 19,522 30,617 27,002equipment, net

Professional 17,522 15,737 14,798 17,211 15,472services

Other 60,792 51,405 51,225 47,542 46,263

Total noninterest 399,345 370,209 281,901 307,868 321,186expense



Income fromcontinuing 205,868 136,448 65,599 59,658 97,918operations beforeincome taxes

Income tax 46,820 31,808 15,148 13,579 21,472expense

Income fromcontinuing 159,048 104,640 50,451 46,079 76,446operations

Income fromdiscontinued 736 30,775 3,151 5,623 5,261operations, netof income taxes

Net income 159,784 135,415 53,602 51,702 81,707

Less: Net incomeattributable to 6,505 6,939 3,966 2,426 2,289noncontrollinginterest

Incomeattributable to $ 153,279 $ 128,476 $ 49,636 $ 49,276 $ 79,418Hilltop



Earnings per common share:

Basic:

Earnings fromcontinuing $ 1.69 $ 1.08 $ 0.51 $ 0.48 $ 0.81operations

Earnings fromdiscontinued 0.01 0.34 0.04 0.06 0.06operations

$ 1.70 $ 1.42 $ 0.55 $ 0.54 $ 0.87

Diluted:

Earnings fromcontinuing $ 1.69 $ 1.08 $ 0.51 $ 0.48 $ 0.81operations

Earnings fromdiscontinued 0.01 0.34 0.04 0.06 0.05operations

$ 1.70 $ 1.42 $ 0.55 $ 0.54 $ 0.86



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



Weighted averageshares outstanding:

Basic 90,200 90,164 90,509 90,606 91,745

Diluted 90,200 90,164 90,550 90,711 91,824

Three Months Ended September 30, 2020

Segment Results

Mortgage

All Other and

Hilltop

(in 000's)

Banking

Broker-Dealer

Origination

Insurance

Corporate

Eliminations

Consolidated

Net interest income (expense)

$

96,416

$

8,168

$

(2,349

)

$

-

$

(4,594

)

$

4,259

$

101,900

Provision for (reversal of) credit losses

-

(602

)

-

-

-

-

(602

)

Noninterest income

9,819

141,022

355,471

-

477

(4,078

)

502,711

Noninterest expense

55,980

114,393

207,176

-

21,999

(203

)

399,345

Income (loss) from continuing operations before taxes

50,255

35,399

145,946

-

(26,116

)

384

205,868

Income from discontinued operations before taxes

-

-

-

-

736

-

736

$

50,255

$

35,399

$

145,946

$

-

$

(25,380

)

$

384

$

206,604



Three Months Ended September 30, 2020

Segment Mortgage All Other HilltopResults and

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

Net interestincome $ 96,416 $ 8,168 $ (2,349 ) $ - $ (4,594 ) $ 4,259 $ 101,900 (expense)

Provisionfor(reversal - (602 ) - - - - (602 )of) creditlosses

Noninterest 9,819 141,022 355,471 - 477 (4,078 ) 502,711 income

Noninterest 55,980 114,393 207,176 - 21,999 (203 ) 399,345 expense

Income(loss) fromcontinuing 50,255 35,399 145,946 - (26,116 ) 384 205,868 operationsbefore taxes

Income fromdiscontinued - - - - 736 - 736 operationsbefore taxes

$ 50,255 $ 35,399 $ 145,946 $ - $ (25,380 ) $ 384 $ 206,604

Nine Months Ended September 30, 2020

Segment Results

Mortgage

All Other and

Hilltop

(in 000's)

Banking

Broker-Dealer

Origination

Insurance

Corporate

Eliminations

Consolidated

Net interest income (expense)

$

284,440

$

31,005

$

(3,647

)

$

-

$

(9,482

)

$

14,478

$

316,794

Provision for credit losses

99,875

98

-

-

-

-

99,973

Noninterest income

29,246

350,192

874,926

-

3,315

(15,130

)

1,242,549

Noninterest expense

169,569

299,743

547,222

-

35,741

(820

)

1,051,455

Income (loss) from continuing operations before taxes

44,242

81,356

324,057

-

(41,908

)

168

407,915

Income from discontinued operations before taxes

-

-

-

2,103

33,077

-

35,180

$

44,242

$

81,356

$

324,057

$

2,103

$

(8,831

)

$

168

$

443,095



Nine Months Ended September 30, 2020

Segment Mortgage All Other and HilltopResults

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

Net interestincome $ 284,440 $ 31,005 $ (3,647 ) $ - $ (9,482 ) $ 14,478 $ 316,794(expense)

Provisionfor credit 99,875 98 - - - - 99,973losses

Noninterest 29,246 350,192 874,926 - 3,315 (15,130 ) 1,242,549income

Noninterest 169,569 299,743 547,222 - 35,741 (820 ) 1,051,455expense

Income(loss) fromcontinuing 44,242 81,356 324,057 - (41,908 ) 168 407,915operationsbefore taxes

Income fromdiscontinued - - - 2,103 33,077 - 35,180operationsbefore taxes

$ 44,242 $ 81,356 $ 324,057 $ 2,103 $ (8,831 ) $ 168 $ 443,095

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Selected Financial Data

2020

2020

2020

2019

2019

Hilltop Consolidated (1):

Return on average stockholders' equity

25.94%

23.32%

9.38%

9.43%

15.55%

Return on average assets

3.71%

3.30%

1.47%

1.40%

2.26%

Net interest margin (2)

2.56%

2.80%

3.41%

3.30%

3.45%

Net interest margin (taxable equivalent) (3):

As reported

2.57%

2.81%

3.42%

3.31%

3.46%

Impact of purchase accounting

10 bps

10 bps

22 bps

19 bps

26 bps

Book value per common share ($)

26.72

25.08

23.71

23.20

22.71

Shares outstanding, end of period (000's)

90,238

90,222

90,108

90,641

90,629

Dividend payout ratio (4)

5.30%

6.32%

16.41%

14.71%

9.24%

Banking Segment:

Net interest margin (2)

3.03%

3.11%

3.81%

3.77%

3.97%

Net interest margin (taxable equivalent) (3):

As reported

3.03%

3.12%

3.82%

3.78%

3.98%

Impact of purchase accounting

13 bps

12 bps

30 bps

25 bps

35 bps

Accretion of discount on loans ($000's)

3,346

3,217

6,639

5,698

7,868

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

567

16,382

1,508

1,348

(380)

Return on average assets

1.14%

-0.42%

0.33%

1.17%

1.51%

Fee income ratio

9.2%

10.2%

8.5%

10.8%

8.3%

Efficiency ratio

52.7%

54.1%

55.5%

54.9%

50.5%

Employees' compensation and benefits ($000's)

29,808

31,583

32,347

31,455

31,309

Broker-Dealer Segment:

Net revenue ($000's) (5)

149,190

132,624

99,382

113,128

121,466

Employees' compensation and benefits ($000's)

88,063

79,697

56,550

64,301

69,954

Variable compensation expense ($000's)

60,774

52,372

32,024

39,505

44,921

Compensation as a % of net revenue

59.0%

60.1%

56.9%

56.8%

57.6%

Pre-tax margin (6)

23.7%

21.0%

18.3%

21.4%

22.2%

Mortgage Origination Segment:

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

Home purchases

4,183,560

3,204,573

2,341,847

2,958,176

3,380,812

Refinancings

2,266,793

2,894,486

1,280,741

1,442,329

1,390,989

Total mortgage loan originations - volume

6,450,353

6,099,059

3,622,588

4,400,505

4,771,801

Mortgage loan sales - volume ($000's)

6,521,773

5,934,914

3,486,249

4,226,425

4,316,118

Net gains from mortgage loan sales (basis points):

As reported

440

368

325

304

335

Impact of sales to banking segment

(1)

(1)

(13)

(8)

(1)

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

127,712

81,263

30,299

55,504

51,297

Employees' compensation and benefits ($000's)

161,738

160,824

100,328

109,753

123,890

Variable compensation expense ($000's)

116,275

113,826

58,280

67,224

81,287



Three Months Ended

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

SelectedFinancial 2020 2020 2020 2019 2019Data



HilltopConsolidated (1):

Return onaverage 25.94% 23.32% 9.38% 9.43% 15.55%stockholders'equity

Return onaverage 3.71% 3.30% 1.47% 1.40% 2.26%assets

Net interest 2.56% 2.80% 3.41% 3.30% 3.45%margin (2)

Net interestmargin(taxable equivalent)(3):

As reported 2.57% 2.81% 3.42% 3.31% 3.46%

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

Book valueper common 26.72 25.08 23.71 23.20 22.71share ($)

Sharesoutstanding, 90,238 90,222 90,108 90,641 90,629end of period(000's)

Dividendpayout ratio 5.30% 6.32% 16.41% 14.71% 9.24%(4)



Banking Segment:

Net interest 3.03% 3.11% 3.81% 3.77% 3.97%margin (2)

Net interestmargin(taxable equivalent)(3):

As reported 3.03% 3.12% 3.82% 3.78% 3.98%

Impact ofpurchase 13 bps 12 bps 30 bps 25 bps 35 bpsaccounting

Accretion ofdiscount on 3,346 3,217 6,639 5,698 7,868loans($000's)

Netcharge-offs 567 16,382 1,508 1,348 (380)(recoveries)($000's)

Return onaverage 1.14% -0.42% 0.33% 1.17% 1.51%assets

Fee income 9.2% 10.2% 8.5% 10.8% 8.3%ratio

Efficiency 52.7% 54.1% 55.5% 54.9% 50.5%ratio

Employees'compensation 29,808 31,583 32,347 31,455 31,309and benefits($000's)



Broker-Dealer Segment:

Net revenue 149,190 132,624 99,382 113,128 121,466($000's) (5)

Employees'compensation 88,063 79,697 56,550 64,301 69,954and benefits($000's)

Variablecompensation 60,774 52,372 32,024 39,505 44,921expense($000's)

Compensationas a % of net 59.0% 60.1% 56.9% 56.8% 57.6%revenue

Pre-tax 23.7% 21.0% 18.3% 21.4% 22.2%margin (6)



MortgageOrigination Segment:

Mortgage loanoriginations - volume($000's):

Home 4,183,560 3,204,573 2,341,847 2,958,176 3,380,812purchases

Refinancings 2,266,793 2,894,486 1,280,741 1,442,329 1,390,989

Totalmortgage loan 6,450,353 6,099,059 3,622,588 4,400,505 4,771,801originations- volume

Mortgage loansales - 6,521,773 5,934,914 3,486,249 4,226,425 4,316,118volume($000's)

Net gainsfrom mortgageloan sales (basispoints):

As reported 440 368 325 304 335

Impact ofsales to (1) (1) (13) (8) (1)bankingsegment

Mortgageservicing 127,712 81,263 30,299 55,504 51,297rights asset($000's) (7)

Employees'compensation 161,738 160,824 100,328 109,753 123,890and benefits($000's)

Variablecompensation 116,275 113,826 58,280 67,224 81,287expense($000's)

________________________________________

(1)

Ratios and financial data presented on a consolidated basis and includes 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.

(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 $0.3 million, $0.3 million, $0.3 million, $0.1 million, and $0.1 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.1 million, and $0.1 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.

(7)

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

________________________________________

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(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 $0.3 million, $0.3 million, $0.3 million, $0.1 million, and $0.1 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.1 million, and $0.1 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.

September 30,

June 30,

March 31,

December 31,

September 30,

Capital Ratios

2020

2020

2020

2019

2019

Tier 1 capital (to average assets):

PlainsCapital

10.19%

10.37%

12.06%

11.61%

11.79%

Hilltop

13.03%

12.60%

13.03%

12.71%

12.67%

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

PlainsCapital

14.64%

14.03%

13.33%

13.45%

13.25%

Hilltop

19.85%

18.46%

15.96%

16.70%

16.15%

Tier 1 capital (to risk-weighted assets):

PlainsCapital

14.64%

14.03%

13.33%

13.45%

13.25%

Hilltop

20.46%

19.06%

16.38%

17.13%

16.58%

Total capital (to risk-weighted assets):

PlainsCapital

15.49%

14.88%

14.26%

14.13%

13.87%

Hilltop

23.22%

21.82%

17.00%

17.55%

16.95%



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

Capital Ratios 2020 2020 2020 2019 2019

Tier 1 capital (to average assets):

PlainsCapital 10.19% 10.37% 12.06% 11.61% 11.79%

Hilltop 13.03% 12.60% 13.03% 12.71% 12.67%

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

PlainsCapital 14.64% 14.03% 13.33% 13.45% 13.25%

Hilltop 19.85% 18.46% 15.96% 16.70% 16.15%

Tier 1 capital (to risk-weighted assets):

PlainsCapital 14.64% 14.03% 13.33% 13.45% 13.25%

Hilltop 20.46% 19.06% 16.38% 17.13% 16.58%

Total capital (to risk-weighted assets):

PlainsCapital 15.49% 14.88% 14.26% 14.13% 13.87%

Hilltop 23.22% 21.82% 17.00% 17.55% 16.95%

September 30,

June 30,

March 31,

December 31,

September 30,

Non-Performing Assets Portfolio Data

2020

2020

2020

2019

2019

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

Commercial real estate

14,079

13,743

23,352

7,308

8,727

Commercial and industrial

38,708

32,259

47,121

15,262

13,313

Construction and land development

528

1,404

1,402

1,316

1,358

1-4 family residential

28,707

20,552

15,237

12,204

12,103

Consumer

53

308

310

26

30

Broker-dealer

-

-

-

-

-

82,075

68,266

87,422

36,116

35,531

Non-performing loans as a % of total loans

0.78%

0.65%

0.89%

0.38%

0.38%

Other real estate owned ($000's)

25,387

26,602

15,429

18,202

18,738

Other repossessed assets ($000's)

239

315

315

-

-

Non-performing assets ($000's)

107,701

95,183

103,166

54,318

54,269

Non-performing assets as a % of total assets

0.64%

0.56%

0.66%

0.36%

0.37%

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

187,105

124,682

101,300

102,707

81,678

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

1,919

2,025

2,286

2,173

2,222



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

Non-PerformingAssets Portfolio 2020 2020 2020 2019 2019Data

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

Commercial real 14,079 13,743 23,352 7,308 8,727estate

Commercial and 38,708 32,259 47,121 15,262 13,313industrial

Construction and 528 1,404 1,402 1,316 1,358land development

1-4 family 28,707 20,552 15,237 12,204 12,103residential

Consumer 53 308 310 26 30

Broker-dealer - - - - -

82,075 68,266 87,422 36,116 35,531



Non-performingloans as a % of 0.78% 0.65% 0.89% 0.38% 0.38%total loans



Other real estate 25,387 26,602 15,429 18,202 18,738owned ($000's)



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



Non-performing 107,701 95,183 103,166 54,318 54,269assets ($000's)



Non-performingassets as a % of 0.64% 0.56% 0.66% 0.36% 0.37%total assets



Loans past due 90days or more and 187,105 124,682 101,300 102,707 81,678still accruing($000's)



Troubled debtrestructuringsincluded in 1,919 2,025 2,286 2,173 2,222accruing loans heldfor investment($000's)

________________________________________

(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 maturity date of the existing loan. During the third quarter of 2020, the Bank's actions included approval of COVID-19 related loan modifications, resulting in active loan modificaitons of approximately $291 million as of September 30, 2020, down from approximately $968 million as of June 30, 2020. 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 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 existing loan. During the third quarter of 2020, the Bank's actions included approval of(1) COVID-19 related loan modifications, resulting in active loan modificaitons of approximately $291 million as of September 30, 2020, down from approximately $968 million as of June 30, 2020. 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.

Three Months Ended September 30,

2020

2019

Net Interest Margin (Taxable Equivalent) Details (1)

AverageOutstandingBalance

InterestEarned orPaid

AnnualizedYield orRate

AverageOutstandingBalance

InterestEarned orPaid

AnnualizedYield orRate

Assets

Interest-earning assets

Loans held for sale

$

2,530,805

$

20,108

3.18

%

$

1,754,975

$

18,178

4.14

%

Loans held for investment, gross (2)

7,730,711

84,847

4.32

%

7,167,169

101,402

5.57

%

Investment securities - taxable

1,974,911

11,017

2.23

%

1,815,454

15,733

3.47

%

Investment securities - non-taxable (3)

243,716

2,011

3.30

%

240,595

1,694

2.82

%

Federal funds sold and securities purchased under agreements to resell

154,588

10

0.03

%

50,522

251

1.97

%

Interest-bearing deposits in other financial institutions

1,794,652

626

0.14

%

330,968

1,928

2.31

%

Securities borrowed

1,297,112

10,705

3.23

%

1,565,608

21,010

5.25

%

Other

49,701

823

6.59

%

83,379

1,862

8.89

%

Interest-earning assets, gross (3)

15,776,196

130,147

3.26

%

13,008,670

162,058

4.92

%

Allowance for credit losses

(156,071

)

(55,710

)

Interest-earning assets, net

15,620,125

12,952,960

Noninterest-earning assets

1,493,194

1,389,963

Total assets

$

17,113,319

$

14,342,923

Liabilities and Stockholders' Equity

Interest-bearing liabilities

Interest-bearing deposits

$

7,868,100

$

10,700

0.54

%

$

5,943,901

$

18,887

1.26

%

Securities loaned

1,193,497

8,729

2.91

%

1,448,345

17,889

4.90

%

Notes payable and other borrowings

1,259,559

8,500

2.69

%

1,605,598

11,968

2.94

%

Total interest-bearing liabilities

10,321,156

27,929

1.08

%

8,997,844

48,744

2.15

%

Noninterest-bearing liabilities

Noninterest-bearing deposits

3,508,282

2,680,729

Other liabilities

903,571

611,337

Total liabilities

14,733,009

12,289,910

Stockholders' equity

2,350,900

2,029,511

Noncontrolling interest

29,410

23,502

Total liabilities and stockholders' equity

$

17,113,319

$

14,342,923

Net interest income (3)

$

102,218

$

113,314

Net interest spread (3)

2.18

%

2.77

%

Net interest margin (3)

2.57

%

3.46

%



Three Months Ended September 30,

2020 2019

Net Interest Margin Average Interest Annualized Average Interest Annualized(Taxable Outstanding Earned or Yield or Outstanding Earned or Yield or Equivalent) Details Balance Paid Rate Balance Paid Rate(1)

Assets

Interest-earning assets

Loans held for sale $ 2,530,805 $ 20,108 3.18 % $ 1,754,975 $ 18,178 4.14 %

Loans held forinvestment, gross ^ 7,730,711 84,847 4.32 % 7,167,169 101,402 5.57 %(2)

Investmentsecurities - 1,974,911 11,017 2.23 % 1,815,454 15,733 3.47 %taxable

Investmentsecurities - 243,716 2,011 3.30 % 240,595 1,694 2.82 %non-taxable ^(3)

Federal funds soldand securitiespurchased under 154,588 10 0.03 % 50,522 251 1.97 %agreements toresell

Interest-bearingdeposits in other 1,794,652 626 0.14 % 330,968 1,928 2.31 %financialinstitutions

Securities borrowed 1,297,112 10,705 3.23 % 1,565,608 21,010 5.25 %

Other 49,701 823 6.59 % 83,379 1,862 8.89 %

Interest-earning 15,776,196 130,147 3.26 % 13,008,670 162,058 4.92 %assets, gross ^(3)

Allowance for (156,071 ) (55,710 ) credit losses

Interest-earning 15,620,125 12,952,960 assets, net

Noninterest-earning 1,493,194 1,389,963 assets

Total assets $ 17,113,319 $ 14,342,923



Liabilities andStockholders' Equity

Interest-bearing liabilities

Interest-bearing $ 7,868,100 $ 10,700 0.54 % $ 5,943,901 $ 18,887 1.26 %deposits

Securities loaned 1,193,497 8,729 2.91 % 1,448,345 17,889 4.90 %

Notes payable and 1,259,559 8,500 2.69 % 1,605,598 11,968 2.94 %other borrowings

Totalinterest-bearing 10,321,156 27,929 1.08 % 8,997,844 48,744 2.15 %liabilities

Noninterest-bearing liabilities

Noninterest-bearing 3,508,282 2,680,729 deposits

Other liabilities 903,571 611,337

Total liabilities 14,733,009 12,289,910

Stockholders' 2,350,900 2,029,511 equity

Noncontrolling 29,410 23,502 interest

Total liabilitiesand stockholders' $ 17,113,319 $ 14,342,923 equity



Net interest income $ 102,218 $ 113,314 ^(3)

Net interest spread 2.18 % 2.77 %^(3)

Net interest margin 2.57 % 3.46 %^(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.

(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 $0.3 million and $0.1 million for the three months ended September 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, October 23, 2020. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review third 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 September 30, 2020, Hilltop employed approximately 4,800 people and operated approximately 430 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) risks of participation as a lender in the PPP; (v) changes in the interest rate environment and transitions away from London Interbank Offered Rate; and (vi) 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