Hilltop Holdings Inc. Announces Financial Results for Fourth Quarter and Full Year 2020

Rhea-AI Summary

Hilltop Holdings Inc. (NYSE: HTH) reported strong financial results for Q4 and full year 2020. Income from continuing operations for Q4 was $112.7 million ($1.30 per diluted share), rising from $43.7 million ($0.48 per diluted share) in Q4 2019. For the full year, income was $409.4 million ($4.58 per diluted share), up from $211.3 million ($2.29 per diluted share) in 2019. Key growth factors included an 88.9% increase in mortgage origination segment net gains and a 33% increase in quarterly dividend. A new $75 million stock repurchase program has been authorized, reflecting strong capital and liquidity.

Positive

• Q4 2020 income from continuing operations increased to $112.7 million, up 158% year-over-year.
• Full year 2020 income from continuing operations reached $409.4 million, a 93.6% increase.
• Mortgage origination segment net gains surged by 88.9% to $297.6 million in Q4 2020.
• Quarterly cash dividend raised by 33% to $0.12 per common share.
• New stock repurchase program authorized for up to $75.0 million.

Negative

• COVID-19 pandemic continues to impact financial markets and operational performance uncertainties.

Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the fourth quarter and full year 2020. Hilltop produced income from continuing operations to common stockholders of $112.7 million, or $1.30 per diluted share, for the fourth quarter of 2020, compared to $43.7 million, or $0.48 per diluted share, for the fourth quarter of 2019. Income from continuing operations to common stockholders for the full year 2020 was $409.4 million, or $4.58 per diluted share, compared to $211.3 million, or $2.29 per diluted share, for the full year 2019. Hilltop’s financial results from continuing operations for the fourth quarter and full year 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 business, income applicable to common stockholders was $116.4 million, or $1.35 per diluted share, for the fourth quarter of 2020, compared to $49.3 million, or $0.54 per diluted share, for the fourth quarter of 2019, and $447.8 million, or $5.01 per diluted share, for full year 2020, compared to $225.3 million, or $2.44 per diluted share, for full year 2019.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per common share, a 33% increase from the prior quarter, payable on February 26, 2021, to all common stockholders of record as of the close of business on February 15, 2021.

Additionally, during 2020, Hilltop paid $208.7 million to repurchase approximately 8.78 million shares of its common stock at a weighted average price of $23.76 pursuant to the 2020 stock repurchase program, and inclusive of the tender offer completed in November 2020. These shares were returned to the pool of authorized but unissued shares of common stock. The previously authorized stock repurchase program was active through April 2020 when, in light of the uncertain outlook for 2020 due to the COVID-19 pandemic, the Hilltop Board of Directors suspended the stock repurchase program. Based on Hilltop’s expected ability to maintain strong capital and liquidity to meet the needs of its customers and communities during this exceptional period of economic uncertainty, and given that the previously noted stock repurchase program expired in January 2021, the Hilltop Board of Directors authorized, subject to regulatory review, a new stock repurchase program through January 2022, under which Hilltop may repurchase, in the aggregate, up to $75.0 million of its outstanding common stock.

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 2021 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 B. Ford, President and CEO of Hilltop, said, “Hilltop’s strong fourth quarter caps off a remarkable, yet unprecedented year. 2020 was a record-breaking year for our company, as PrimeLending funded a record 84 thousand residential mortgage loans, HilltopSecurities generated record net revenue of over $530 million, and Hilltop produced record consolidated earnings. While the pandemic created unique challenges, I could not be prouder of our teammates across the franchise and how they responded to take care of our clients and the communities we serve. Notably, our team at PlainsCapital Bank originated approximately 2,800 PPP loans and deferred loan payments for their commercial and consumer clients that were most impacted by the pandemic.

“Although the pandemic caused Hilltop to change the way we work, it did not deter our team from making progress on large and complex initiatives. By leveraging shared services, the coordinated efforts of our technology, properties management and human resources groups enabled us to effectively transition to a work-from-home model for a majority of our employees since last March. Further, we completed the implementation of our new mortgage loan origination system at PrimeLending and the core operating system at HilltopSecurities, both of which are foundational for the future growth in these businesses.

“As we embark upon 2021, we believe Hilltop is well positioned with established businesses, synchronized leadership and robust capital. We also believe our dividend increase and share repurchase authorization demonstrate the strength and momentum of our franchise.”

Fourth Quarter 2020 Highlights for Hilltop:

• For the fourth quarter of 2020, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $297.6 million, compared to $157.5 million in the fourth quarter of 2019, an 88.9% increase;
  • Mortgage loan origination production volume was $6.8 billion during the fourth quarter of 2020, compared to $4.4 billion in the fourth quarter of 2019.
• The reversal of credit losses was $3.5 million during the fourth quarter of 2020, compared to $0.6 million in the third quarter of 2020;
  • The reversal of credit losses during the fourth quarter of 2020 primarily reflected improvements in Bank loan portfolio macroeconomic factor assumptions and qualitative factors from the prior quarter, partially offset by the identified changes in the loan portfolio composition and credit quality.
• Hilltop’s consolidated annualized return on average assets and return on average equity for the fourth quarter of 2020 were 2.83% and 20.56%, respectively, compared to 1.40% and 9.43%, respectively, for the fourth quarter of 2019;
• Hilltop’s book value per common share increased to $28.28 at December 31, 2020, compared to $26.72 at September 30, 2020;
• Hilltop’s total assets were $16.9 billion at both December 31, 2020 and September 30, 2020;
• Loans¹, net of allowance for credit losses, were $7.1 billion at December 31, 2020, compared to $7.3 billion September 30, 2020;
  • Includes supporting our impacted banking clients through funding of over 2,800 loans through the Paycheck Protection Program, or PPP, with a remaining balance of approximately $487 million as of December 31, 2020, compared to approximately $671 million as of September 30, 2020.
• Non-performing loans were $79.9 million, or 0.76% of total loans, at December 31, 2020, compared to $84.0 million, or 0.80% of total loans, at September 30, 2020;
• During the fourth 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 $240 million as of December 31, 2020;
  • As of September 30, 2020 and June 30, 2020, active COVID-19 related loan modifications totaled approximately $291 million and $968 million, respectively;
  • During the third and fourth quarters of 2020, COVID-19 related loan modifications of approximately $714 million have made at least one payment pursuant to agreed-upon contractual terms;
  • The extent of these loans progressing into non-performing loans during future periods is uncertain.
• Loans held for sale increased by 9.4% from September 30, 2020 to $2.8 billion at December 31, 2020;
• Total deposits were $11.2 billion at December 31, 2020, compared to $11.3 billion at September 30, 2020;
• Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio² of 12.64% and a Common Equity Tier 1 Capital Ratio of 18.97% at December 31, 2020;
  • Capital 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 increased to 2.71% for the fourth quarter of 2020, compared to 2.56% in the third quarter of 2020;
• For the fourth quarter of 2020, noninterest income from continuing operations was $447.9 million, compared to $263.6 million in the fourth quarter of 2019, a 69.9% increase;
• For the fourth quarter of 2020, noninterest expense from continuing operations was $402.3 million, compared to $307.9 million in the fourth quarter of 2019, a 30.7% increase; and
• Hilltop’s effective tax rate from continuing operations was 25.1% during the fourth quarter of 2020, compared to 22.8% during the same period in 2019.

________________________________________
Note: “Consolidated” refers to our consolidated financial position and consolidated results of operations, including discontinued operations and assets and liabilities of discontinued operations.
1	“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $436.8 million and $502.1 million at December 31, 2020 and September 30, 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.

Discontinued Operations

On June 30, 2020, Hilltop completed the sale of National Lloyds Corporation, or NLC, which comprised the operations of its former insurance segment, for cash proceeds of $154.1 million. Insurance segment results and its assets and liabilities have been presented as discontinued operations. Included within discontinued operations of corporate for the fourth quarter of 2020 is the recognition of a pre-tax post-closing adjustment gain of $3.7 million related to the finalization of the June 30, 2020 closing balance sheet, resulting in an aggregate gain on sale of NLC of $36.8 million, net of transaction costs. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules promulgated under the Internal Revenue Code.

Consolidated Financial and Other Information

Consolidated Balance Sheets		December 31,				September 30,				June 30,				March 31,				December 31,
(in 000's)		2020				2020				2020				2020				2019
Cash and due from banks		$	1,062,560			$	1,277,865			$	1,655,492			$	524,370			$	433,626
Federal funds sold			386				420				385				401				394
Assets segregated for regulatory purposes			290,357				221,621				194,626				178,805				157,436
Securities purchased under agreements to resell			80,319				90,103				161,457				23,356				59,031
Securities:
Trading, at fair value			694,255				667,751				648,037				393,581				689,576
Available for sale, at fair value, net			1,462,205				1,310,240				1,091,348				972,318				911,493
Held to maturity, at amortized cost, net			311,944				323,299				343,198				355,110				386,326
Equity, at fair value			140				117				122				107				166
			2,468,544				2,301,407				2,082,705				1,721,116				1,987,561
Loans held for sale			2,788,386				2,547,975				2,592,307				2,433,407				2,106,361
Loans held for investment, net of unearned income			7,693,141				7,945,560				7,849,904				7,345,250				7,381,400
Allowance for credit losses			(149,044	)			(155,214	)			(156,383	)			(106,739	)			(61,136	)
Loans held for investment, net			7,544,097				7,790,346				7,693,521				7,238,511				7,320,264
Broker-dealer and clearing organization receivables			1,404,727				1,363,478				1,222,627				1,838,789				1,780,280
Premises and equipment, net			211,595				208,078				210,975				215,261				210,375
Operating lease right-of-use assets			105,757				109,354				119,954				113,395				114,320
Mortgage servicing assets			143,742				127,712				81,264				30,299				55,504
Other assets			555,983				607,932				627,982				846,316				404,754
Goodwill			267,447				267,447				267,447				267,447				267,447
Other intangible assets, net			20,364				21,814				23,374				25,019				26,666
Assets of discontinued operations			—				—				—				249,758				248,429
Total assets		$	16,944,264			$	16,935,552			$	16,934,116			$	15,706,250			$	15,172,448
Deposits:
Noninterest-bearing		$	3,612,384			$	3,557,603			$	3,467,500			$	2,865,192			$	2,769,556
Interest-bearing			7,629,935				7,704,312				8,182,098				7,082,297				6,262,658
Total deposits			11,242,319				11,261,915				11,649,598				9,947,489				9,032,214
Broker-dealer and clearing organization payables			1,368,373				1,310,835				1,158,628				1,259,181				1,605,518
Short-term borrowings			695,798				780,109				720,164				1,329,948				1,424,010
Securities sold, not yet purchased, at fair value			79,789				56,023				55,340				22,768				43,817
Notes payable			381,987				396,006				450,158				244,042				256,269
Operating lease liabilities			125,450				122,402				131,411				124,123				125,619
Junior subordinated debentures			67,012				67,012				67,012				67,012				67,012
Other liabilities			632,889				502,517				409,672				408,224				348,519
Liabilities of discontinued operations			—				—				—				139,730				140,674
Total liabilities			14,593,617				14,496,819				14,641,983				13,542,517				13,043,652
Common stock			822				902				902				901				906
Additional paid-in capital			1,317,929				1,443,588				1,439,686				1,437,301				1,445,233
Accumulated other comprehensive income			17,763				23,790				23,813				20,939				11,419
Retained earnings			986,792				942,461				797,331				676,946				644,860
Deferred compensation employee stock trust, net			771				774				778				774				776
Employee stock trust			(138	)			(143	)			(150	)			(150	)			(155	)
Total Hilltop stockholders' equity			2,323,939				2,411,372				2,262,360				2,136,711				2,103,039
Noncontrolling interests			26,708				27,361				29,773				27,022				25,757
Total stockholders' equity			2,350,647				2,438,733				2,292,133				2,163,733				2,128,796
Total liabilities & stockholders' equity		$	16,944,264			$	16,935,552			$	16,934,116			$	15,706,250			$	15,172,448

		Three Months Ended											Year Ended
Consolidated Income Statements		December 31,				September 30,				December 31,			December 31,			December 31,
(in 000's, except per share data)		2020				2020				2019			2020			2019
Interest income:
Loans, including fees		$	109,328			$	104,955			$	115,696		$	433,311		$	460,471
Securities borrowed			14,445				10,705				16,196			51,360			69,582
Securities:
Taxable			9,845				11,035				15,174			48,273			58,493
Tax-exempt			1,862				1,687				1,572			6,698			6,159
Other			1,381				1,446				3,180			6,853			15,991
Total interest income			136,861				129,828				151,818			546,495			610,696
Interest expense:
Deposits			9,269				10,700				17,480			47,040			71,509
Securities loaned			12,014				8,729				13,989			42,816			60,086
Short-term borrowings			2,154				2,346				6,244			11,611			26,778
Notes payable			4,807				4,904				2,337			15,897			8,948
Junior subordinated debentures			609				608				909			2,772			3,851
Other			636				641				99			2,193			545
Total interest expense			29,489				27,928				41,058			122,329			171,717
Net interest income			107,372				101,900				110,760			424,166			438,979
Provision for (reversal of) credit losses			(3,482	)			(602	)			6,880			96,491			7,206
Net interest income after provision for (reversal of) credit losses			110,854				102,502				103,880			327,675			431,773
Noninterest income:
Net gains from sale of loans and other mortgage production income			247,360				307,896				120,573			1,001,059			504,935
Mortgage loan origination fees			50,193				47,681				36,939			171,769			130,003
Securities commissions and fees			35,921				32,496				33,205			142,720			137,742
Investment and securities advisory fees and commissions			42,161

FAQ

What were Hilltop Holdings' earnings for Q4 2020?

Hilltop Holdings reported earnings of $112.7 million, or $1.30 per diluted share for Q4 2020.

How much did Hilltop Holdings earn in 2020?

For the full year 2020, Hilltop Holdings earned $409.4 million, or $4.58 per diluted share.

What is the dividend increase announced by Hilltop Holdings?

Hilltop Holdings announced a 33% increase in its quarterly cash dividend to $0.12 per common share.

What impacts did COVID-19 have on Hilltop Holdings' financials?

COVID-19 has negatively affected financial markets and created uncertainties in operational performance for Hilltop Holdings.

What is Hilltop Holdings' stock symbol?

Hilltop Holdings trades under the stock symbol HTH.