Last10K.com

Hilltop Holdings Inc. (HTH) SEC Filing 8-K Material Event for the period ending Thursday, April 21, 2022

Hilltop Holdings Inc.

CIK: 1265131 Ticker: HTH

Exhibit 99.1

Investor Relations Contact:

Erik Yohe

214-525-4634

eyohe@hilltop-holdings.com

Hilltop Holdings Inc. Announces Financial Results for First Quarter 2022

DALLAS — (BUSINESS WIRE) April 21, 2022 — Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter of 2022. Hilltop produced income to common stockholders of $22.3 million, or $0.28 per diluted share, for the first quarter of 2022, compared to $120.3 million, or $1.46 per diluted share, for the first quarter of 2021. Hilltop’s financial results for the first quarter of 2022 included decreases in year-over-year mortgage origination segment net gains from sales of loans and other mortgage production income as well as declines in net revenues within the broker-dealer segment’s structured finance and fixed income services business lines.

Rising interest rates and inflationary pressures materially impacted our financial results during the first quarter of 2022. Additional headwinds during 2022 are expected to include tight housing inventories on mortgage volumes, a return to normalized credit losses and declining deposit balances. The COVID-19 pandemic may also continue to adversely impact financial markets and overall economic conditions. The extent of the impact of these expected headwinds and the pandemic on our operational and financial performance for the remainder of 2022 remains uncertain.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on May 27, 2022, to all common stockholders of record as of the close of business on May 13, 2022. During the three months ended March 31, 2022, there were no stock repurchases.

Jeremy B. Ford, President and CEO of Hilltop, said “Our results in the first quarter were driven primarily by the strength and stability of PlainsCapital Bank, which generated growth in its core loan portfolio while experiencing improvement in its asset quality. PrimeLending and HilltopSecurities, both primarily fee-based businesses, were pressured by the sharp rise in interest rates, lower housing inventories and lower trading volumes. Additionally, total noninterest expenses at Hilltop declined during the period as our team remains focused on expense management. Overall, we are adapting to the new mortgage and interest rate environments and believe we have the team and business model in place to drive improvement.”

First Quarter 2022 Highlights for Hilltop:

The provision for credit losses was $0.1 million during the first quarter of 2022, compared to a reversal of credit losses of $18.6 million in the fourth quarter of 2021;
oThe provision for credit losses during the first quarter of 2022 primarily reflected a slower U.S. economic outlook since the prior quarter, significantly offset by decreases in specific reserves and positive risk rating grade migration.
For the first quarter of 2022, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $143.0 million, compared to $310.2 million in the first quarter of 2021, a 53.9% decrease;
oMortgage loan origination production volume was $3.8 billion during the first quarter of 2022, compared to $6.2 billion in the first quarter of 2021;
oNet gains from mortgage loans sold to third parties decreased to 321 basis points during the first quarter of 2022, compared to 362 basis points in the fourth quarter of 2021.
Hilltop’s consolidated annualized return on average assets and return on average equity for the first quarter of 2022 were 0.53% and 3.60%, respectively, compared to 2.90% and 20.58%, respectively, for the first quarter of 2021;
Hilltop’s book value per common share decreased to $31.02 at March 31, 2022, compared to $31.95 at December 31, 2021;
oDecline in book value per common share during the first quarter of 2022 impacted by the significant increase of approximately $120 million in pre-tax net unrealized losses within our available for sale investment portfolio related to increases in market interest rates since purchase;
oCertain agency-issued securities were transferred from the available-for-sale to held-to-maturity portfolio on March 31, 2022 with pre-tax unrealized losses of approximately $74 million as of the date of transfer.

Graphic


Hilltop’s total assets were $18.4 billion and $18.7 billion at March 31, 2022 and December 31, 2021, respectively;
Loans1, net of allowance for credit losses, increased to $7.2 billion at March 31, 2022 compared to $7.1 billion at December 31, 2021;
Non-performing loans were $44.3 million, or 0.47% of total loans, at March 31, 2022, compared to $51.1 million, or 0.52% of total loans, at December 31, 2021;
Loans held for sale decreased by 12.5% from December 31, 2021 to $1.6 billion at March 31, 2022;
Total deposits were $12.7 billion and $12.8 billion at March 31, 2022 and December 31, 2021, respectively;
Hilltop maintained strong capital levels2 with a Tier 1 Leverage Ratio3 of 12.46% and a Common Equity Tier 1 Capital Ratio of 21.27% at March 31, 2022;
Hilltop’s consolidated net interest margin4 decreased to 2.36% for the first quarter of 2022, compared to 2.44% in the fourth quarter of 2021;
oIncludes previously deferred interest income of $1.6 million during the first quarter of 2022 related to PPP loan-related origination fees, compared to $7.5 million in the first quarter of 2021.
For the first quarter of 2022, noninterest income was $216.4 million, compared to $417.6 million in the first quarter of 2021, a 48.2% decrease;
For the first quarter 2022, noninterest expense was $286.4 million, compared to $366.7 million in the first quarter of 2021, a 21.9% decrease; and
Hilltop’s effective tax rate was 19.4% during the first quarter of 2022, compared to 23.4% during the same period in 2021.
oThe effective tax rate for the first quarter of 2022 was lower than the applicable statutory rate primarily due to the discrete impact of restricted stock vesting during the quarter.


1  “Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $506.2 million and $733.0 million at March 31, 2022 and December 31, 2021, respectively.

2  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.

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

4  Net interest margin is defined as net interest income divided by average interest-earning assets.

Graphic


Consolidated Financial and Other Information

Consolidated Balance Sheets

March 31,

December 31,

September 30,

June 30,

March 31,

(in 000's)

    

2022

    

2021

    

2021

    

2021

    

2021

Cash and due from banks

$

2,886,812

$

2,823,138

$

2,463,111

$

1,372,818

$

1,564,489

Federal funds sold

383

385

406

387

396

Assets segregated for regulatory purposes

128,408

221,740

269,506

207,284

273,393

Securities purchased under agreements to resell

256,991

118,262

155,908

202,638

106,342

Securities:

 

Trading, at fair value

471,763

647,998

609,813

682,483

528,712

Available for sale, at fair value, net

1,462,340

2,130,568

1,994,183

1,817,807

1,715,406

Held to maturity, at amortized cost, net

953,107

267,684

277,419

288,776

300,088

Equity, at fair value

225

250

221

193

189

2,887,435

3,046,500

2,881,636

2,789,259

2,544,395

Loans held for sale

 

1,643,994

1,878,190

2,108,878

2,885,458

2,538,986

Loans held for investment, net of unearned income

7,797,903

7,879,904

7,552,926

7,645,227

7,810,657

Allowance for credit losses

 

(91,185)

(91,352)

(109,512)

(115,269)

(144,499)

Loans held for investment, net

7,706,718

7,788,552

7,443,414

7,529,958

7,666,158

Broker-dealer and clearing organization receivables

1,610,352

1,672,946

1,419,652

1,403,447

1,596,817

Premises and equipment, net

 

198,906

204,438

210,026

212,402

213,304

Operating lease right-of-use assets

 

108,180

112,328

115,942

115,698

101,055

Mortgage servicing assets

100,475

86,990

110,931

124,497

142,125

Other assets

546,622

452,880

526,339

535,536

648,895

Goodwill

267,447

267,447

267,447

267,447

267,447

Other intangible assets, net

14,233

15,284

16,455

17,705

19,035

Total assets

$

18,356,956

$

18,689,080

$

17,989,651

$

17,664,534

$

17,682,837

Deposits:

Noninterest-bearing

$

4,694,592

$

4,577,183

$

4,433,148

$

4,231,082

$

4,031,181

Interest-bearing

 

7,972,110

8,240,894

7,699,014

7,502,703

7,701,598

Total deposits

12,666,702

12,818,077

12,132,162

11,733,785

11,732,779

Broker-dealer and clearing organization payables

 

1,397,836

1,477,300

1,496,923

1,439,620

1,546,227

Short-term borrowings

835,054

859,444

747,040

915,919

676,652

Securities sold, not yet purchased, at fair value

97,629

96,586

113,064

132,950

97,055

Notes payable

395,479

387,904

395,804

396,653

401,713

Operating lease liabilities

125,919

130,960

134,296

134,019

120,339

Junior subordinated debentures

67,012

67,012

Other liabilities

347,742

369,606

468,020

348,200

595,045

Total liabilities

15,866,361

16,139,877

15,487,309

15,168,158

15,236,822

Common stock

794

790

790

812

823

Additional paid-in capital

1,275,649

1,274,446

1,270,272

1,302,439

1,319,518

Accumulated other comprehensive income (loss)

(80,565)

(10,219)

367

7,093

3,486

Retained earnings

1,267,415

1,257,014

1,204,307

1,159,304

1,094,727

Deferred compensation employee stock trust, net

744

752

751

754

752

Employee stock trust

(104)

(115)

(116)

(121)

(121)

Total Hilltop stockholders' equity

2,463,933

2,522,668

2,476,371

2,470,281

2,419,185

Noncontrolling interests

26,662

26,535

25,971

26,095

26,830

Total stockholders' equity

2,490,595

2,549,203

2,502,342

2,496,376

2,446,015

Total liabilities & stockholders' equity

$

18,356,956

$

18,689,080

$

17,989,651

$

17,664,534

$

17,682,837

Graphic


Three Months Ended

Consolidated Income Statements

March 31,

December 31,

September 30,

June 30,

March 31,

(in 000's, except per share data)

    

2022

    

2021

    

2021

    

2021

    

2021

    

Interest income:

Loans, including fees

$

90,408

$

96,104

$

99,769

$

104,162

$

104,277

Securities borrowed

8,817

8,524

8,585

15,586

28,972

Securities:

Taxable

15,581

13,916

12,341

11,125

10,251

Tax-exempt

2,419

2,639

2,687

2,338

2,102

Other

2,312

1,872

1,796

1,607

1,321

Total interest income

119,537

123,055

125,178

134,818

146,923

Interest expense:

 

Deposits

4,193

4,404

5,303

6,176

7,741

Securities loaned

7,472

6,624

6,519

12,345

25,486

Short-term borrowings

2,045

2,279

2,400

2,374

2,013

Notes payable

4,437

5,871

5,465

5,253

4,797

Junior subordinated debentures

419

577

562

Other

1,399

(417)

(18)

177

642

Total interest expense

19,546

18,761

20,088

26,902

41,241

Net interest income

99,991

104,294

105,090

107,916

105,682

Provision for (reversal of) credit losses

115

(18,565)

(5,819)

(28,720)

(5,109)

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

99,876

122,859

110,909

136,636

110,791

Noninterest income:

 

Net gains from sale of loans and other mortgage production income

110,894

156,103

203,152

199,625

267,080

Mortgage loan origination fees

32,062

35,930

38,780

42,146

43,155

Securities commissions and fees

37,146

32,801

34,412

38,300

38,314

Investment and securities advisory fees and commissions

29,705

42,834

49,646

32,268

27,695

Other

6,621

17,178

41,955

27,560

41,341

Total noninterest income

216,428

284,846

367,945

339,899

417,585

Noninterest expense:

 

Employees' compensation and benefits

200,019

229,717

258,679

248,486

270,353

Occupancy and equipment, net

24,766

25,741

25,428

25,004

24,429

Professional services

10,063

9,904

14,542

16,239

13,585

Other

51,502

56,832

56,525

53,639

58,295

Total noninterest expense

286,350

322,194

355,174

343,368

366,662

Income before income taxes

29,954

85,511

123,680

133,167

161,714

Income tax expense

 

5,815

20,715

28,257

31,234

37,770

Net income

24,139

64,796

95,423

101,933

123,944

Less: Net income attributable to noncontrolling interest

 

1,889

2,611

2,517

2,873

3,599

Income attributable to Hilltop

$

22,250

$

62,185

$

92,906

$

99,060

$

120,345

Earnings per common share:

Basic

$

0.28

$

0.79

$

1.16

$

1.21

$

1.46

Diluted

$

0.28

$

0.78

$

1.15

$

1.21

$

1.46

Cash dividends declared per common share

$

0.15

$

0.12

$

0.12

$

0.12

$

0.12

Weighted average shares outstanding:

Basic

79,114

78,933

80,109

81,663

82,169

Diluted

79,356

79,427

80,542

82,199

82,657

Three Months Ended March 31, 2022

Segment Results

Mortgage

    

    

All Other and

    

Hilltop

(in 000's)

    

Banking

    

Broker-Dealer

    

Origination

    

Corporate

    

Eliminations

    

Consolidated

Net interest income (expense)

$

92,070

$

11,518

$

(1,835)

$

(3,389)

$

1,627

$

99,991

Provision for (reversal of) credit losses

 

(50)

 

165

 

 

 

 

115

Noninterest income

 

12,771

 

60,691

 

143,195

 

1,766

 

(1,995)

 

216,428

Noninterest expense

 

58,430

 

80,647

 

134,859

 

12,793

 

(379)

 

286,350

Income (loss) before taxes

$

46,461

$

(8,603)

$

6,501

$

(14,416)

$

11

$

29,954

Graphic


Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Selected Financial Data

2022

    

2021

    

2021

    

2021

    

2021

Hilltop Consolidated:

 

Return on average stockholders' equity

3.60%

9.93%

14.96%

16.42%

20.58%

Return on average assets

0.53%

1.41%

2.13%

2.29%

2.90%

Net interest margin (1)

2.36%

2.44%

2.53%

2.62%

2.69%

Net interest margin (taxable equivalent) (2):

As reported

2.37%

 

2.45%

2.54%

2.63%

2.69%

Impact of purchase accounting

 

7 bps

12 bps

9 bps

16 bps

13 bps

Book value per common share ($)

31.02

31.95

31.36

30.44

29.41

Shares outstanding, end of period (000's)

79,439

78,965

78,959

81,153

82,261

Dividend payout ratio (3)

53.57%

 

15.19%

10.34%

9.92%

8.19%

Banking Segment:

Net interest margin (1)

2.65%

2.81%

2.99%

3.19%

3.30%

Net interest margin (taxable equivalent) (2):

As reported

2.65%

2.82%

3.00%

3.20%

3.31%

Impact of purchase accounting

8 bps

15 bps

11 bps

20 bps

17 bps

Accretion of discount on loans ($000's)

2,510

4,716

3,221

6,001

4,851

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

(282)

405

62

(510)

564

Return on average assets

0.98%

1.44%

1.36%

1.91%

1.48%

Fee income ratio

12.2%

10.8%

10.5%

8.9%

9.8%

Efficiency ratio

55.7%

54.2%

48.8%

49.7%

48.4%

Employees' compensation and benefits ($000's)

33,517

34,415

31,500

33,369

30,992

Broker-Dealer Segment:

Net revenue ($000's) (4)

72,209

94,569

126,570

94,145

109,137

Employees' compensation and benefits ($000's) (5)

55,825

65,301

82,429

62,289

66,157

Variable compensation expense ($000's)

26,625

35,939

53,505

34,409

37,412

Compensation as a % of net revenue (5)

77.3%

69.1%

65.1%

66.2%

60.6%

Pre-tax margin (6)

(11.9)%

1.8%

13.8%

7.3%

16.2%

Mortgage Origination Segment:

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

Home purchases

2,753,031

3,559,137

3,948,420

4,018,922

2,902,710

Refinancings

1,011,452

1,430,369

1,646,208

1,881,121

3,281,395

Total mortgage loan originations - volume

3,764,483

4,989,506

5,594,628

5,900,043

6,184,105

Mortgage loan sales - volume ($000's)

3,868,596

4,988,538

6,195,559

5,524,226

6,350,837

Net gains from mortgage loan sales (basis points):

Loans sold to third parties

321

362

359

376

398

Impact of loans retained by banking segment

(9)

(15)

(13)

(12)

(10)

As reported

312

347

346

364

388

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

100,475

86,990

110,931

124,497

142,125

Employees' compensation and benefits ($000's)

102,748

121,758

134,814

145,401

166,248

Variable compensation expense ($000's)

56,243

73,208

88,153

97,081

115,486


(1)Net interest margin is defined as net interest income divided by average interest-earning assets.
(2)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 $0.5 million, $0.5 million, $0.6 million, $0.4 million, and $0.2 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.2 million, $0.2 million, and $0.2 million, respectively, for the periods presented.
(3)Dividend payout ratio is defined as cash dividends declared per common share divided by basic earnings per common share.
(4)Net revenue is defined as the sum of total broker-dealer net interest income and total broker-dealer noninterest income.
(5)Noted balances and ratios during all prior periods reflect certain reclassifications to conform to current period presentation.
(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

    

2022

    

2021

    

2021

    

2021

    

2021

Tier 1 capital (to average assets):

PlainsCapital

 

9.74%

 

10.20%

10.02%

10.22%

10.50%

Hilltop

12.46%

 

12.58%

12.64%

12.87%

13.01%

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

PlainsCapital

15.37%

 

16.00%

15.40%

15.00%

14.74%

Hilltop

 

21.27%

 

21.22%

21.28%

20.22%

19.63%

Tier 1 capital (to risk-weighted assets):

 

 

PlainsCapital

15.37%

 

16.00%

15.40%

15.00%

14.74%

Hilltop

 

21.27%

 

21.22%

21.28%

20.82%

20.22%

Total capital (to risk-weighted assets):

PlainsCapital

 

16.18%

 

16.77%

16.32%

15.95%

15.64%

Hilltop

23.85%

 

23.75%

24.00%

23.48%

22.96%

Graphic


March 31,

December 31,

September 30,

June 30,

March 31,

Non-Performing Assets Portfolio Data

    

2022

    

2021

    

2021

    

2021

    

2021

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

 

Commercial real estate

6,153

6,601

5,705

7,211

10,668

Commercial and industrial

18,486

22,478

29,808

33,033

36,144

Construction and land development

1

2

366

474

501

1-4 family residential

18,723

21,123

25,255

27,100

30,937

Consumer

21

23

24

26

26

Broker-dealer

43,384

50,227

61,158

67,844

78,276

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

890

922

1,038

1,139

1,584

Non-performing loans ($000's)

44,274

51,149

62,196

68,983

79,860

Non-performing loans as a % of total loans

 

0.47%

 

0.52%

0.64%

0.66%

0.77%

Other real estate owned ($000's)

2,175

2,833

21,605

21,078

19,899

Other repossessed assets ($000's)

Non-performing assets ($000's)

46,449

53,982

83,801

90,061

99,759

Non-performing assets as a % of total assets

0.25%

 

0.29%

0.47%

0.51%

0.56%

Loans past due 90 days or more and still accruing ($000's) (2):

87,489

60,775

175,734

245,828

265,230


(1)Loans accounted for on a non-accrual basis do not include COVID-19 related loan modifications through January 1, 2022. The Bank’s COVID-19 payment deferral programs since the second quarter of 2020 allowed for a deferral of principal and/or interest payments with such deferred principal payments due and payable on the maturity date of the existing loan. The Bank’s actions through 2021 included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $4 million, $17 million, $76 million, and $130 million as of December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively.
(2)Loans past due 90 days or more and still accruing were primarily comprised of loans held for sale and guaranteed by U.S. government agencies, including loans that are subject to repurchase, or have been repurchased, by PrimeLending.

Three Months Ended March 31,

2022

2021

    

Average

    

Interest

    

Annualized

    

Average

    

Interest

    

Annualized

    

Outstanding

Earned

Yield or

Outstanding

Earned

Yield or

Net Interest Margin (Taxable Equivalent) Details (1)

Balance

or Paid

Rate

Balance

or Paid

Rate

Assets

Interest-earning assets

Loans held for sale

$

1,467,998

$

11,966

 

3.26

%  

$

2,573,085

$

16,233

 

2.52

%  

Loans held for investment, gross (2)

7,839,047

78,442

 

4.06

%  

7,645,883

88,044

 

4.62

%