Hilltop Holdings Inc. (Form: 8-K, Received: 04/30/2020 17:23:03)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 30, 2020

Hilltop Holdings Inc.

(Exact name of registrant as specified in its charter)


Maryland	1-31987	84-1477939
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)


6565 Hillcrest Avenue
Dallas, Texas		75205
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (214) 855-2177

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HTH	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b–2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition.

On April 30, 2020, Hilltop Holdings Inc., or the Company, issued a press release announcing its results of operations and financial condition as of and for the three months ended March 31, 2020. The text of the release is set forth in Exhibit 99.1 attached to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Item (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth in such filing.

Section 8 – Other Events

Item 8.01 Other Events.

On April 30, 2020, the Board of Directors of the Company declared a quarterly cash dividend of $0.09 per common share, payable on May 29, 2020, to stockholders of record as of the close of business on May 15, 2020.

Additionally, in light of the uncertain outlook for 2020 due to the COVID-19 pandemic, and Hilltop’s commitment to maintaining 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 has 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. Under the program, the Company was authorized to repurchase, in the aggregate, up to $75.0 million of its outstanding common stock in open-market purchases or through privately negotiated transactions as permitted under Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, through January 2021.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(a)

Financial statements of businesses acquired.

Not applicable.

(b)

Pro forma financial information.

Not applicable.

(c)

Shell company transactions.

Not applicable.

(d)

Exhibits.

The following exhibit(s) are filed or furnished, depending on the relative item requiring such exhibit, in accordance with the provisions of Item 601 of Regulation S-K and Instruction B.2 to this form.


Exhibit Number		Description of Exhibit
99.1		Press Release issued April 30, 2020 (furnished pursuant to Item 2.02).

104		Cover Page Interactive File (formatted as Inline XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		Hilltop Holdings Inc.,
		a Maryland corporation


Date:	April 30, 2020	By:	/s/ COREY PRESTIDGE
		Name:	Corey G. Prestidge
		Title:	Executive Vice President,
			General Counsel & Secretary

Exhibit 99.1

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

Hilltop Holdings Inc. Announces Financial Results for First Quarter 2020

DALLAS — (BUSINESS WIRE) April 30, 2020 — Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter of 2020. Hilltop produced income from continuing operations to common stockholders of $46.5 million, or $0.51 per diluted share, for the first quarter of 2020, compared to $33.4 million, or $0.36 per diluted share, for the first quarter of 2019. After income from discontinued operations related to the insurance segment, income applicable to common stockholders was $49.6 million, or $0.55 per diluted share, for the first quarter of 2020, compared to $38.8 million, or $0.41 per diluted share, for the first quarter of 2019. Hilltop’s financial results from continuing operations for the first quarter of 2020 include a significant build in the allowance for credit losses associated with the impact of economic forecast modeling implications attributable to the market disruption and economic uncertainties caused by COVID-19, while the first quarter of 2019 results included the costs associated with the significant leadership changes and other efficiency initiative-related charges which, in the aggregate, totaled $8.7 million before income taxes.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share, payable on May 29, 2020, to all common stockholders of record as of the close of business on May 15, 2020. Additionally, under the stock repurchase program approved by the Hilltop Board of Directors in January 2020, Hilltop paid $15.0 million to repurchase 700,901 shares at a weighted average price of $21.32 during the first quarter of 2020. These shares were returned to the pool of authorized but unissued shares of common stock.

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 has 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, “In this unprecedented time, I am most proud of our teammates across our franchise as they have shown compassion, focus and certainly resilience during very stressful and challenging circumstances. We are focused first and foremost on the safety and well-being of our team and our clients. While most of our associates continue to work remotely, they remain committed to serving our clients. The mortgage origination team locked over $3.7 billion in new mortgages during March, a record month for our company, while our bank team will have processed and funded over 3,100 PPP loans during the month of April. Further, in our securities business we experienced near record ticket volumes in February and March as clients worked to reposition their portfolios given the volatility created from COVID-19. National Lloyds produced very strong underwriting results, with first quarter underwriting income up approximately 60% relative to the first quarter last year. Additionally, the sale of National Lloyds to Align Financial continues to progress, and we believe that it remains on track for a second quarter 2020 closing.

Hilltop generated $100 million of pre-provision net revenue, or PPNR, from continuing operations for the quarter, demonstrating the strength of our business model in a very challenging environment. The mortgage origination business generated $40 million of pre-tax income for the quarter, as mortgage origination volumes surged and market rates declined. In the securities business, we successfully traded through periods of significant market volatility and illiquidity to produce $18 million of pre-tax income in the quarter, which highlights our strong risk management and our enhanced

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$

focus on hedging and inventory management. During the quarter, PlainsCapital Bank generated $46 million of PPNR which was largely offset by the impact of higher provision expense resulting both from credit migrations and the current economic outlook reflecting the impact of COVID-19.”

First Quarter 2020 Highlights for Hilltop:

In January 2020, Hilltop adopted the current expected credit loss (CECL) model which, among other things:

Increased credit reserves by $17.3 million, with net reduction to retained earnings by $5.7 million when adopted on January 1, 2020; and

Reflects expected credit losses over the expected life of the assessed portfolios and takes into account forecasts of expected future macroeconomic conditions.

The provision for credit losses was $34.5 million during the first quarter of 2020, compared to $6.9 million in the fourth quarter of 2019;

This significant increase in the provision for credit losses during the first quarter 2020 was primarily associated with the increase in the expected lifetime credit losses under CECL on both individually and collectively evaluated loans within the portfolio attributable to the market disruption and related economic uncertainties caused by COVID-19.

Hilltop’s consolidated annualized return on average assets and return on average equity for the first quarter of 2020 were 1.47% and 9.38%, respectively, compared to 1.21% and 8.04%, respectively, for the first quarter of 2019;

Hilltop’s book value per common share increased to $23.71 at March 31, 2020, compared to $23.20 at December 31, 2019;

Hilltop’s total assets were $15.7 billion at March 31, 2020, compared to $15.2 billion at December 31, 2019;

Included $249.8 million at March 31, 2020 and $248.4 million at December 31, 2019 of assets classified as held for sale associated with the insurance segment.

Loans1, net of allowance for credit losses, remained stable at $6.7 billion compared to December 31, 2019;

Non-performing loans were $87.4 million, or 0.89% of total loans at March 31, 2020, compared to $36.1 million, or 0.38% of total loans, at December 31, 2019;

Loans held for sale increased by 15.5% from December 31, 2019 to $2.4 billion at March 31, 2020;

Total deposits were $9.9 billion at March 31, 2020, compared to $9.0 billion at December 31, 2019;

Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 13.03% and a Common Equity Tier 1 Capital Ratio of 15.96% at March 31, 2020;

Ratios reflect Hilltop’s decision to elect the transition option as recently 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 increased to 3.41% for the first quarter of 2020, compared to 3.30% in the fourth quarter of 2019;

For the first quarter of 2020, noninterest income from continuing operations was $271.7 million, compared to $216.0 million in the first quarter of 2019, a 25.8% increase;

For the first quarter of 2020, noninterest expense from continuing operations was $281.9 million, compared to $278.7 million in the first quarter of 2019, a 1.1% increase; and

Hilltop’s effective tax rate from continuing operations was 23.1% during the first quarter of 2020, compared to 22.8% during the same period in 2019.

Discontinued Operations

In January 2020, Hilltop announced the pending sale of its insurance segment, National Lloyds Corporation, for a cash purchase price of $150.0 million, subject to post closing adjustment. The transaction is subject to customary closing conditions, including required regulatory approvals, and is expected to close during the second quarter of 2020. Insurance segment results have been presented as discontinued operations and its assets and liabilities have been classified as held for sale for all periods presented. Income from discontinued operations, net of income taxes, was $3.2 million, or $0.04 per diluted share, for the first quarter of 2020, compared to $5.4 million, or $0.05 per diluted share, for the first 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 $505.9 million and $576.5 million at March 31, 2020 and December 31, 2019, 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.

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$

Consolidated Financial and Other Information


Consolidated Balance Sheets	March 31,		December 31,		September 30,		June 30,		March 31,
(in 000's)	2020		2019		2019		2019		2019
Cash and due from banks	$	524,370	$	433,626	$	281,445	$	303,424	$	273,589
Federal funds sold		401		394		423		521		438
Assets segregated for regulatory purposes		178,805		157,436		83,878		151,271		156,851
Securities purchased under agreements to resell		23,356		59,031		49,998		50,660		65,205
Securities:
Trading, at fair value		393,581		689,576		707,268		601,524		703,295
Available for sale, at fair value, net		972,318		911,493		915,334		916,519		924,699
Held to maturity, at amortized cost, net		355,110		386,326		371,361		365,905		369,865
Equity, at fair value		107		166		164		150		158
		1,721,116		1,987,561		1,994,127		1,884,098		1,998,017
Loans held for sale		2,433,407		2,106,361		1,984,231		1,609,477		1,059,280
Loans held for investment, net of unearned income		7,345,250		7,381,400		7,321,208		7,202,604		7,011,679
Allowance for credit losses		(106,739)		(61,136)		(55,604)		(55,177)		(58,809)
Loans held for investment, net		7,238,511		7,320,264		7,265,604		7,147,427		6,952,870

Broker-dealer and clearing organization receivables		1,838,789		1,780,280		1,731,979		1,707,249		1,651,199
Premises and equipment, net		215,261		210,375		203,601		198,266		199,066
Operating lease right-of-use assets		113,395		114,320		119,035		120,965		105,877
Other assets		876,615		460,258		578,422		547,768		540,353
Goodwill		267,447		267,447		267,447		267,447		267,447
Other intangible assets, net		25,019		26,666		28,432		30,308		32,271
Assets held for sale		249,758		248,429		248,407		246,989		246,907
Total assets	$	15,706,250	$	15,172,448	$	14,837,029	$	14,265,870	$	13,549,370

Deposits:
Noninterest-bearing	$	2,865,192	$	2,769,556	$	2,732,325	$	2,598,253	$	2,490,144
Interest-bearing		7,082,297		6,262,658		5,998,547		5,864,826		5,807,975
Total deposits		9,947,489		9,032,214		8,730,872		8,463,079		8,298,119
Broker-dealer and clearing organization payables		1,259,181		1,605,518		1,546,163		1,531,891		1,490,227
Short-term borrowings		1,329,948		1,424,010		1,502,755		1,338,893		914,525
Securities sold, not yet purchased, at fair value		22,768		43,817		59,249		45,447		69,354
Notes payable		244,042		256,269		217,841		204,423		197,872
Operating lease liabilities		124,123		125,619		128,295		129,858		115,508
Junior subordinated debentures		67,012		67,012		67,012		67,012		67,012
Other liabilities		408,224		348,519		355,629		284,136		236,551
Liabilities held for sale		139,730		140,674		145,786		149,326		145,071
Total liabilities		13,542,517		13,043,652		12,753,602		12,214,065		11,534,239

Common stock		901		906		906		928		938
Additional paid-in capital		1,437,301		1,445,233		1,441,604		1,473,599		1,491,585
Accumulated other comprehensive income (loss)		20,939		11,419		12,305		7,862		(1,062)
Retained earnings		676,946		644,860		602,835		544,275		499,452
Deferred compensation employee stock trust, net		774		776		789		788		827
Employee stock trust		(150)		(155)		(170)		(171)		(213)
Total Hilltop stockholders' equity		2,136,711		2,103,039		2,058,269		2,027,281		1,991,527
Noncontrolling interests		27,022		25,757		25,158		24,524		23,604
Total stockholders' equity		2,163,733		2,128,796		2,083,427		2,051,805		2,015,131
Total liabilities & stockholders' equity	$	15,706,250	$	15,172,448	$	14,837,029	$	14,265,870	$	13,549,370

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$


	Three Months Ended
Consolidated Income Statements	March 31,		December 31,		September 30,		June 30,		March 31,
(in 000's, except per share data)	2020		2019		2019		2019		2019
Interest income:
Loans, including fees	$	111,168	$	115,696	$	119,580	$	114,325	$	110,870
Securities borrowed		13,327		16,196		21,010		15,517		16,859
Securities:
Taxable		15,695		15,174		14,885		13,778		14,656
Tax-exempt		1,610		1,572		1,576		1,513		1,498
Other		3,075		3,180		3,889		3,867		5,055
Total interest income		144,875		151,818		160,940		149,000		148,938

Interest expense:
Deposits		15,124		17,480		18,887		18,036		17,106
Securities loaned		11,277		13,989		17,889		13,470		14,738
Short-term borrowings		4,744		6,244		8,166		6,897		5,471
Notes payable		2,418		2,337		2,265		2,165		2,181
Junior subordinated debentures		850		909		955		986		1,001
Other		126		99		132		162		152
Total interest expense		34,539		41,058		48,294		41,716		40,649

Net interest income		110,336		110,760		112,646		107,284		108,289
Provision for (reversal of) credit losses		34,549		6,880		47		(672)		951
Net interest income after provision for (reversal of) credit losses		75,787		103,880		112,599		107,956		107,338

Noninterest income:
Net gains from sale of loans and other mortgage production income		150,486		120,573		157,050		131,173		96,139
Mortgage loan origination fees		28,554		36,939		37,782		33,409		21,873
Securities commissions and fees		40,069		33,205		34,426		34,142		35,969
Investment and securities advisory fees and commissions		23,180		32,083		28,685		22,859		20,160
Other		29,424		40,846		48,562		55,120		41,822
Total noninterest income		271,713		263,646		306,505		276,703		215,963

Noninterest expense:
Employees' compensation and benefits		196,356		212,498		232,449		212,959		186,696
Occupancy and equipment, net		19,522		30,617		27,002		27,938		27,779
Professional services		14,798		17,211		15,472		13,773		14,109
Other		51,225		47,542		46,263		49,418		50,163
Total noninterest expense		281,901		307,868		321,186		304,088		278,747

Income from continuing operations before income taxes		65,599		59,658		97,918		80,571		44,554
Income tax expense		15,148		13,579		21,472		18,526		10,137
Income from continuing operations		50,451		46,079		76,446		62,045		34,417
Income (loss) from discontinued operations, net of income taxes		3,151		5,623		5,261		(2,254)		5,360
Net income		53,602		51,702		81,707		59,791		39,777
Less: Net income attributable to noncontrolling interest		3,966		2,426		2,289		1,980		991
Income attributable to Hilltop	$	49,636	$	49,276	$	79,418	$	57,811	$	38,786

Earnings per common share:
Basic:
Earnings from continuing operations	$	0.51	$	0.48	$	0.81	$	0.64	$	0.36
Earnings (losses) from discontinued operations		0.04		0.06		0.06		(0.02)		0.05
	$	0.55	$	0.54	$	0.87	$	0.62	$	0.41
Diluted:
Earnings from continuing operations	$	0.51	$	0.48	$	0.81	$	0.64	$	0.36
Earnings (losses) from discontinued operations		0.04		0.06		0.05		(0.02)		0.05
	$	0.55	$	0.54	$	0.86	$	0.62	$	0.41

Cash dividends declared per common share	$	0.09	$	0.08	$	0.08	$	0.08	$	0.08

Weighted average shares outstanding:
Basic		90,509		90,606		91,745		93,399		93,669
Diluted		90,550		90,711		91,824		93,418		93,669


	Three Months Ended March 31, 2020
Segment Results					Mortgage						All Other and		Hilltop
(in 000's)	Banking		Broker-Dealer		Origination		Insurance		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	93,923	$	13,173	$	368	$	—	$	(1,656)	$	4,528	$	110,336
Provision for credit losses		34,275		274		—		—		—		—		34,549
Noninterest income		8,771		86,209		178,968		—		2,309		(4,544)		271,713
Noninterest expense		56,967		80,939		139,552		—		4,853		(410)		281,901
Income (loss) before taxes from continuing operations		11,452		18,169		39,784		—		(4,200)		394		65,599
Income before taxes from discontinued operations		—		—		—		4,014		—		—		4,014
	$	11,452	$	18,169	$	39,784	$	4,014	$	(4,200)	$	394	$	69,613

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$


	Three Months Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
Selected Financial Data	2020		2019		2019		2019		2019

Hilltop Consolidated (1):
Return on average stockholders' equity		9.38%		9.43%		15.55%		11.63%		8.04%
Return on average assets		1.47%		1.40%		2.26%		1.74%		1.21%
Net interest margin (2)		3.41%		3.30%		3.45%		3.49%		3.69%
Net interest margin (taxable equivalent) (3):
As reported		3.42%		3.31%		3.46%		3.49%		3.70%
Impact of purchase accounting		22 bps		19 bps		26 bps		23 bps		32 bps
Book value per common share ($)		23.71		23.20		22.71		21.85		21.23
Shares outstanding, end of period (000's)		90,108		90,641		90,629		92,775		93,821
Dividend payout ratio (4)		16.41%		14.71%		9.24%		12.92%		19.32%

Banking Segment:
Net interest margin (2)		3.81%		3.77%		3.97%		4.06%		4.24%
Net interest margin (taxable equivalent) (3):
As reported		3.82%		3.78%		3.98%		4.06%		4.25%
Impact of purchase accounting		30 bps		25 bps		35 bps		31 bps		44 bps
Accretion of discount on loans ($000's)		6,639		5,698		7,868		6,444		8,735
Net charge-offs (recoveries) ($000's)		1,508		1,348		(380)		2,960		1,628
Return on average assets		0.33%		1.17%		1.51%		1.43%		1.34%
Fee income ratio		8.5%		10.8%		8.3%		10.3%		10.3%
Efficiency ratio		55.5%		54.9%		50.5%		55.9%		58.8%
Employees' compensation and benefits ($000's)		32,347		31,455		31,309		33,050		32,171

Broker-Dealer Segment:
Net revenue ($000's) (5)		99,382		113,128		121,466		116,969		104,157
Employees' compensation and benefits ($000's)		56,550		64,301		69,954		70,333		63,075
Variable compensation expense ($000's)		32,024		39,505		44,921		44,833		34,581
Compensation as a % of net revenue		56.9%		56.8%		57.6%		60.1%		60.6%
Pre-tax margin (6)		18.3%		21.4%		22.2%		18.9%		15.8%

Mortgage Origination Segment:
Mortgage loan originations - volume ($000's):
Home purchases		2,341,847		2,958,176		3,380,812		3,329,024		2,050,760
Refinancings		1,280,741		1,442,329		1,390,989		631,065		396,282
Total mortgage loan originations - volume		3,622,588		4,400,505		4,771,801		3,960,089		2,447,042
Mortgage loan sales - volume ($000's)		3,486,249		4,226,425		4,316,118		3,338,070		2,711,114
Net gains from mortgage loan sales (basis points):
As reported		325		304		335		333		330
Impact of sales to banking segment		(13)		(8)		(1)		0		0
Mortgage servicing rights asset ($000's) (7)		30,298		55,504		51,297		53,695		62,049
Employees' compensation and benefits ($000's)		100,328		109,753		123,890		106,449		79,043
Variable compensation expense ($000's)		58,280		67,224		81,287		65,516		38,929

Insurance Segment:
Loss and LAE ratio		39.7%		43.6%		44.9%		74.6%		45.0%
Expense ratio		38.0%		40.5%		38.3%		38.4%		41.5%
Combined ratio		77.7%		84.1%		83.2%		113.0%		86.5%
Employees' compensation and benefits ($000's)		2,777		2,929		2,748		2,784		3,202

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


	March 31,		December 31,		September 30,		June 30,		March 31,
Capital Ratios	2020		2019		2019		2019		2019
Tier 1 capital (to average assets):
PlainsCapital		12.06%		11.61%		11.79%		12.53%		12.61%
Hilltop		13.03%		12.71%		12.67%		13.00%		13.22%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		13.33%		13.45%		13.25%		13.84%		13.89%
Hilltop		15.96%		16.70%		16.15%		16.32%		16.75%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		13.33%		13.45%		13.25%		13.84%		13.89%
Hilltop		16.38%		17.13%		16.58%		16.77%		17.22%
Total capital (to risk-weighted assets):
PlainsCapital		14.26%		14.13%		13.87%		14.48%		14.60%
Hilltop		17.00%		17.55%		16.95%		17.14%		17.64%

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$


	March 31,		December 31,		September 30,		June 30,		March 31,
Non-Performing Assets Portfolio Data	2020		2019		2019		2019		2019
Loans accounted for on a non-accrual basis ($000's):
Commercial real estate		23,352		7,308		8,727		5,276		5,332
Commercial and industrial		47,121		15,262		13,313		14,152		13,350
Construction and land development		1,402		1,316		1,358		1,413		1,473
1-4 family residential		15,237		12,204		12,103		11,136		10,662
Consumer		310		26		30		34		38
Broker-dealer		—		—		—		—		—
		87,422		36,116		35,531		32,011		30,855

Non-performing loans as a % of total loans		0.89%		0.38%		0.38%		0.36%		0.38%

Other real estate owned ($000's)		15,429		18,202		18,738		20,753		23,066

Other repossessed assets ($000's)		315		—		—		—		30

Non-performing assets ($000's)		103,166		54,318		54,269		52,764		53,951

Non-performing assets as a % of total assets		0.66%		0.36%		0.37%		0.37%		0.40%

Loans past due 90 days or more and still accruing ($000's)		101,300		102,707		81,678		77,425		77,045

Troubled debt restructurings included in accruing loans held for investment ($000's)		2,286		2,173		2,222		2,256		1,313


	Three Months Ended March 31,
	2020						2019
	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	$	1,619,644	$	15,631	3.86	%	$	1,015,010	$	12,487	4.92	%
Loans held for investment, gross (2)		7,262,282		95,537	5.23	%		6,843,343		98,383	5.76	%
Investment securities - taxable		1,798,897		16,606	3.69	%		1,792,501		15,584	3.48	%
Investment securities - non-taxable (3)		208,863		1,902	3.64	%		221,602		1,658	2.99	%
Federal funds sold and securities purchased under agreements to resell		60,943		134	0.89	%		66,346		388	2.37	%
Interest-bearing deposits in other financial institutions		461,775		1,512	1.32	%		505,582		3,151	2.53	%
Securities borrowed		1,568,737		13,327	3.36	%		1,446,412		16,859	4.66	%
Other		78,595		1,512	7.72	%		61,263		1,671	11.01	%
Interest-earning assets, gross (3)		13,059,736		146,161	4.45	%		11,952,059		150,181	5.03	%
Allowance for credit losses		(74,430)						(59,549)
Interest-earning assets, net		12,985,306						11,892,510
Noninterest-earning assets		1,633,387						1,419,075
Total assets	$	14,618,693					$	13,311,585

Liabilities and Stockholders' Equity
Interest-bearing liabilities
Interest-bearing deposits	$	6,264,827	$	15,124	0.97	%	$	5,825,886	$	17,106	1.19	%
Securities loaned		1,474,988		11,277	3.07	%		1,295,002		14,738	4.62	%
Notes payable and other borrowings		1,368,038		8,544	2.50	%		1,065,432		9,265	3.51	%
Total interest-bearing liabilities		9,107,853		34,945	1.54	%		8,186,320		41,109	2.03	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		2,730,975						2,520,057
Other liabilities		633,722						623,710
Total liabilities		12,472,550						11,330,087
Stockholders’ equity		2,121,877						1,958,531
Noncontrolling interest		24,266						22,967
Total liabilities and stockholders' equity	$	14,618,693					$	13,311,585

Net interest income (3)			$	111,216					$	109,072
Net interest spread (3)					2.91	%					3.00	%
Net interest margin (3)					3.42	%					3.70	%

(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 $0.2 million for the three months ended March 31, 2020 and 2019, respectively.

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$

Conference Call Information

Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday, May 1, 2020. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review first 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. Through Hilltop Holdings’ other wholly owned subsidiary, National Lloyds Corporation, it provides property and casualty insurance through two insurance companies, National Lloyds Insurance Company and American Summit Insurance Company. At March 31, 2020, Hilltop employed approximately 4,850 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, Nationallloydsinsurance.com and Hilltopsecurities.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our plans, objectives, strategies, expectations, intentions 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 loan losses and increases to the allowance for credit losses as a result of the implementation of CECL, as well as the effects of, and trends in, loan delinquencies and write-offs; (iv) changes in the interest rate environment; (v) the failure of the National Lloyds Corporation sale transaction to close on the expected timeline or at all; (vi) risks associated with concentration in real estate related loans; and (v) severe catastrophic events in Texas and other areas of the southern United States. 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.

Source: Hilltop Holdings Inc.

$Y:\HTH BRANDING-LOGO\HTH VERTICAL LOGO - COLOR.JPG$