Hilltop Holdings Inc. Announces Financial Results for Third Quarter 2020

Rhea-AI Summary

Hilltop Holdings reported a strong financial performance for Q3 2020, with net income from continuing operations reaching $152.5 million, or $1.69 per diluted share, up from $74.2 million or $0.81 in Q3 2019. The growth is driven by a 96% increase in mortgage origination net gains, totaling $307.9 million. The company declared a $0.09 dividend per share, payable November 30, 2020. However, ongoing implications from COVID-19 on operations remain a concern. Hilltop's returns on average assets and equity were 3.71% and 25.94%, respectively.

Positive

• Net income from continuing operations increased to $152.5 million (up 105% YoY).
• Significant growth in mortgage origination segment with net gains of $307.9 million (96% increase YoY).
• Return on average assets reached 3.71%, up from 2.26% YoY.
• Return on average equity improved to 25.94%, compared to 15.55% in Q3 2019.
• Declared quarterly cash dividend of $0.09 per share.

Negative

• COVID-19 continues to negatively impact financial markets and operations.
• Non-performing loans increased to $82.1 million (0.78% of total loans) from $68.3 million (0.65%) in the prior quarter.
• Total deposits decreased to $11.3 billion from $11.6 billion in the previous quarter.

DALLAS--(BUSINESS WIRE)--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.
1	“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $502.1 million and $422.1 million at September 30, 2020 and June 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.

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

		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 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

		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

		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

________________________________________
(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.

		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 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

________________________________________

(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.

		Three Months Ended September 30,
		2020									2019
Net Interest Margin (Taxable Equivalent) Details (1)		Average Outstanding Balance				Interest Earned or Paid			Annualized Yield or Rate		Average Outstanding Balance				Interest Earned or Paid			Annualized Yield or Rate
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	%

________________________________________
(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.