DALLAS–(BUSINESS WIRE)– 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 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.
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.
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.hilltopholdingsmulti.wpxnew.riefmedia.com).
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.
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.
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Source: Hilltop Holdings Inc.