Hilltop Holdings Inc. - FORM 8-K - EX-99.1

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8-K - 8-K - Hilltop Holdings Inc.	hth-20200730x8k.htm

Exhibit 99.1

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

Hilltop Holdings Inc. Announces Financial Results for Second Quarter 2020

DALLAS — (BUSINESS WIRE) July 30, 2020 — Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the second quarter of 2020. Hilltop produced income from continuing operations to common stockholders of $97.7 million, or $1.08 per diluted share, for the second quarter of 2020, compared to $60.1 million, or $0.64 per diluted share, for the second quarter of 2019. Including income from discontinued operations related to the insurance segment, income applicable to common stockholders was $128.5 million, or $1.42 per diluted share, for the second quarter of 2020, compared to $57.8 million, or $0.62 per diluted share, for the second quarter of 2019. Hilltop’s financial results from continuing operations for the second quarter of 2020 reflect both a significant increase in mortgage origination segment net gains from sales of loans and other mortgage production income and a significant build in the allowance for credit losses associated with the deterioration of the economic outlook from the first quarter of 2020 attributable to the market disruption and economic uncertainties caused by COVID-19.

Hilltop also announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share, payable on August 31, 2020, to all common stockholders of record as of the close of business on August 14, 2020.

As previously announced on April 30, 2020, 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 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, “While these remain very challenging times and there is significant uncertainty about the future impacts from the pandemic, I am very proud of our teammates across Hilltop as they continue to execute and display compassion for our clients and each other. Our results from the second quarter demonstrate the strength and durability of our operating model as the mortgage franchise delivered record pre-tax income of $138 million on $6 billion of mortgage originations, while the securities business grew pre-tax income by 26% to $28 million from strength in the fixed income capital markets and structured finance business lines. While the Bank incurred a pre-tax loss of $17 million, it generated pre-provision net revenue, or PPNR, of $48 million during the quarter driven by solid net interest income and lower operating expenses. The Bank also recognized approximately $66 million of provision expense related to significant deterioration in the economic outlook from the end of the first quarter through June. In addition to exceptional PPNR performance, we were also able to fortify our strong excess capital and liquidity positions during the quarter by executing a subordinated debt offering and closing the sale of National Lloyds.”

Second Quarter 2020 Highlights for Hilltop:

●

For the second quarter of 2020, net gains from sales of loans and other mortgage production income within our mortgage origination segment was $295.3 million, compared to $131.2 million in the second quarter of 2019, a 125.1% increase;

o

Mortgage loan origination production volume was $6.1 billion during the second quarter of 2020, compared to $4.0 billion in the second quarter of 2019.

Note: Pre-provision net revenue, or PPNR, is a non-GAAP financial measure which represents pre-tax income (loss) plus provision for credit losses. We believe that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for credit losses.

●

The provision for credit losses was $66.0 million during the second quarter of 2020, compared to $34.5 million in the first quarter of 2020;

o

This significant increase in the 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.

●

Hilltop’s consolidated annualized return on average assets and return on average equity for the second quarter of 2020 were 3.30% and 23.32%, respectively, compared to 1.74% and 11.63%, respectively, for the second quarter of 2019;

●

Hilltop’s book value per common share increased to $25.08 at June 30, 2020, compared to $23.71 at March 31, 2020;

●

Hilltop’s total assets were $16.9 billion at June 30, 2020 compared to $15.7 billion at March 31, 2020;

o

Included $249.8 million in assets of discontinued operations associated with the insurance segment at March 31, 2020.

●

Loans¹, net of allowance for credit losses, increased to $7.3 billion compared to $6.7 billion at March 31, 2020;

o

Included supporting our impacted banking clients through funding of over 2,800 loans totaling approximately $672 million at June 30, 2020 through the Paycheck Protection Program, or PPP.

●

Non-performing loans were $68.3 million, or 0.65% of total loans at June 30, 2020, compared to $87.4 million, or 0.89% of total loans, at March 31, 2020;

●

As of June 30, 2020, we approved approximately $968 million in COVID-19 related loan modifications;

o

Extent of progression of these loans into non-performing loans during future periods is uncertain.

●

Loans held for sale increased by 6.5% from March 31, 2020 to $2.6 billion at June 30, 2020;

●

Total deposits were $11.6 billion at June 30, 2020, compared to $9.9 billion at March 31, 2020;

●

On May 11, 2020, Hilltop completed the issuance and sale of $50 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes due May 2030 and $150 million aggregate principal amount of 6.125% fixed-to-floating rate subordinated notes due May 2035;

●

Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio² of 12.60% and a Common Equity Tier 1 Capital Ratio of 18.46% at June 30, 2020;

o

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 margin³decreased to 2.80% for the second quarter of 2020, compared to 3.41% in the first quarter of 2020;

●

For the second quarter of 2020, noninterest income from continuing operations was $468.1 million, compared to $276.7 million in the second quarter of 2019, a 69.2% increase;

●

For the second quarter of 2020, noninterest expense from continuing operations was $370.2 million, compared to $304.1 million in the second quarter of 2019, a 21.7% increase; and

●

Hilltop’s effective tax rate from continuing operations was 23.3% during the second quarter of 2020, compared to 23.0% 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 for the second quarter of 2020 is the recognition of a gain associated with this transaction of $32.3 million, net of $5.1 million in transaction costs and subject to post-closing adjustments. The resulting book gain from this sale transaction was not recognized for tax purposes pursuant to the rules under the Internal Revenue code. Income (loss) from discontinued operations, net of income taxes, was $30.8 million, or $0.34 per diluted share, for the second quarter of 2020, compared to ($2.3) million, or ($0.02) per diluted share, for the second 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 $422.1 million and $505.9 million at June 30, 2020 and March 31, 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	June 30,		March 31,		December 31,		September 30,		June 30,
(in 000's)	2020		2020		2019		2019		2019
Cash and due from banks	$	1,655,492	$	524,370	$	433,626	$	281,445	$	303,424
Federal funds sold		385		401		394		423		521
Assets segregated for regulatory purposes		194,626		178,805		157,436		83,878		151,271
Securities purchased under agreements to resell		161,457		23,356		59,031		49,998		50,660
Securities:
Trading, at fair value		648,037		393,581		689,576		707,268		601,524
Available for sale, at fair value, net		1,091,348		972,318		911,493		915,334		916,519
Held to maturity, at amortized cost, net		343,198		355,110		386,326		371,361		365,905
Equity, at fair value		122		107		166		164		150
		2,082,705		1,721,116		1,987,561		1,994,127		1,884,098
Loans held for sale		2,592,307		2,433,407		2,106,361		1,984,231		1,609,477
Loans held for investment, net of unearned income		7,849,904		7,345,250		7,381,400		7,321,208		7,202,604
Allowance for credit losses		(156,383)		(106,739)		(61,136)		(55,604)		(55,177)
Loans held for investment, net		7,693,521		7,238,511		7,320,264		7,265,604		7,147,427

Broker-dealer and clearing organization receivables		1,222,627		1,838,789		1,780,280		1,731,979		1,707,249
Premises and equipment, net		210,975		215,261		210,375		203,601		198,266
Operating lease right-of-use assets		119,954		113,395		114,320		119,035		120,965
Other assets		709,246		876,615		460,258		578,422		547,768
Goodwill		267,447		267,447		267,447		267,447		267,447
Other intangible assets, net		23,374		25,019		26,666		28,432		30,308
Assets of discontinued operations		—		249,758		248,429		248,407		246,989
Total assets	$	16,934,116	$	15,706,250	$	15,172,448	$	14,837,029	$	14,265,870

Deposits:
Noninterest-bearing	$	3,467,500	$	2,865,192	$	2,769,556	$	2,732,325	$	2,598,253
Interest-bearing		8,182,098		7,082,297		6,262,658		5,998,547		5,864,826
Total deposits		11,649,598		9,947,489		9,032,214		8,730,872		8,463,079
Broker-dealer and clearing organization payables		1,158,628		1,259,181		1,605,518		1,546,163		1,531,891
Short-term borrowings		720,164		1,329,948		1,424,010		1,502,755		1,338,893
Securities sold, not yet purchased, at fair value		55,340		22,768		43,817		59,249		45,447
Notes payable		450,158		244,042		256,269		217,841		204,423
Operating lease liabilities		131,411		124,123		125,619		128,295		129,858
Junior subordinated debentures		67,012		67,012		67,012		67,012		67,012
Other liabilities		409,672		408,224		348,519		355,629		284,136
Liabilities of discontinued operations		—		139,730		140,674		145,786		149,326
Total liabilities		14,641,983		13,542,517		13,043,652		12,753,602		12,214,065

Common stock		902		901		906		906		928
Additional paid-in capital		1,439,686		1,437,301		1,445,233		1,441,604		1,473,599
Accumulated other comprehensive income		23,813		20,939		11,419		12,305		7,862
Retained earnings		797,331		676,946		644,860		602,835		544,275
Deferred compensation employee stock trust, net		778		774		776		789		788
Employee stock trust		(150)		(150)		(155)		(170)		(171)
Total Hilltop stockholders' equity		2,262,360		2,136,711		2,103,039		2,058,269		2,027,281
Noncontrolling interests		29,773		27,022		25,757		25,158		24,524
Total stockholders' equity		2,292,133		2,163,733		2,128,796		2,083,427		2,051,805
Total liabilities & stockholders' equity	$	16,934,116	$	15,706,250	$	15,172,448	$	14,837,029	$	14,265,870


	Three Months Ended
Consolidated Income Statements	June 30,		March 31,		December 31,		September 30,		June 30,
(in 000's, except per share data)	2020		2020		2019		2019		2019
Interest income:
Loans, including fees	$	107,860	$	111,168	$	115,696	$	119,580	$	114,325
Securities borrowed		12,883		13,327		16,196		21,010		15,517
Securities:
Taxable		11,698		15,695		15,174		14,885		13,778
Tax-exempt		1,539		1,610		1,572		1,576		1,513
Other		951		3,075		3,180		3,889		3,867
Total interest income		134,931		144,875		151,818		160,940		149,000

Interest expense:
Deposits		11,947		15,124		17,480		18,887		18,036
Securities loaned		10,796		11,277		13,989		17,889		13,470
Short-term borrowings		2,367		4,744		6,244		8,166		6,897
Notes payable		3,768		2,418		2,337		2,265		2,165
Junior subordinated debentures		705		850		909		955		986
Other		790		126		99		132		162
Total interest expense		30,373		34,539		41,058		48,294		41,716

Net interest income		104,558		110,336		110,760		112,646		107,284
Provision for (reversal of) credit losses		66,026		34,549		6,880		47		(672)
Net interest income after provision for (reversal of) credit losses		38,532		75,787		103,880		112,599		107,956

Noninterest income:
Net gains from sale of loans and other mortgage production income		295,317		150,486		120,573		157,050		131,173
Mortgage loan origination fees		45,341		28,554		36,939		37,782		33,409
Securities commissions and fees		34,234		40,069		33,205		34,426		34,142
Investment and securities advisory fees and commissions		29,120		23,180		32,083		28,685		22,859
Other		64,113		29,424		40,846		48,562		55,120
Total noninterest income		468,125		271,713		263,646		306,505		276,703

Noninterest expense:
Employees' compensation and benefits		276,893		196,356		212,498		232,449		212,959
Occupancy and equipment, net		26,174		19,522		30,617		27,002		27,938
Professional services		15,737		14,798		17,211		15,472		13,773
Other		51,405		51,225		47,542		46,263		49,418
Total noninterest expense		370,209		281,901		307,868		321,186		304,088

Income from continuing operations before income taxes		136,448		65,599		59,658		97,918		80,571
Income tax expense		31,808		15,148		13,579		21,472		18,526
Income from continuing operations		104,640		50,451		46,079		76,446		62,045
Income (loss) from discontinued operations, net of income taxes		30,775		3,151		5,623		5,261		(2,254)
Net income		135,415		53,602		51,702		81,707		59,791
Less: Net income attributable to noncontrolling interest		6,939		3,966		2,426		2,289		1,980
Income attributable to Hilltop	$	128,476	$	49,636	$	49,276	$	79,418	$	57,811

Earnings per common share:
Basic:
Earnings from continuing operations	$	1.08	$	0.51	$	0.48	$	0.81	$	0.64
Earnings (losses) from discontinued operations		0.34		0.04		0.06		0.06		(0.02)
	$	1.42	$	0.55	$	0.54	$	0.87	$	0.62
Diluted:
Earnings from continuing operations	$	1.08	$	0.51	$	0.48	$	0.81	$	0.64
Earnings (losses) from discontinued operations		0.34		0.04		0.06		0.05		(0.02)
	$	1.42	$	0.55	$	0.54	$	0.86	$	0.62

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

Weighted average shares outstanding:
Basic		90,164		90,509		90,606		91,745		93,399
Diluted		90,164		90,550		90,711		91,824		93,418


	Three Months Ended June 30, 2020
Segment Results					Mortgage						All Other and		Hilltop
(in 000's)	Banking		Broker-Dealer		Origination		Insurance		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	94,102	$	9,663	$	(1,667)	$	—	$	(3,232)	$	5,692	$	104,558
Provision for credit losses		65,600		426		—		—		—		—		66,026
Noninterest income		10,656		122,961		340,487		—		550		(6,529)		468,125
Noninterest expense		56,622		104,411		200,493		—		8,888		(205)		370,209
Income (loss) from continuing operations before taxes		(17,464)		27,787		138,327		—		(11,570)		(632)		136,448
Income (loss) from discontinued operations before taxes		—		—		—		(1,911)		32,341		—		30,430
	$	(17,464)	$	27,787	$	138,327	$	(1,911)	$	20,771	$	(632)	$	166,878


	Six Months Ended June 30, 2020
Segment Results					Mortgage						All Other and		Hilltop
(in 000's)	Banking		Broker-Dealer		Origination		Insurance		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	188,025	$	22,836	$	(1,299)	$	—	$	(4,888)	$	10,220	$	214,894
Provision for credit losses		99,875		700		—		—		—		—		100,575
Noninterest income		19,427		209,170		519,455		—		2,838		(11,052)		739,838
Noninterest expense		113,589		185,350		340,045		—		13,741		(615)		652,110
Income (loss) from continuing operations before taxes		(6,012)		45,956		178,111		—		(15,791)		(217)		202,047
Income from discontinued operations before taxes		—		—		—		2,103		32,341		—		34,444
	$	(6,012)	$	45,956	$	178,111	$	2,103	$	16,550	$	(217)	$	236,491


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

Hilltop Consolidated (1):
Return on average stockholders' equity		23.32%		9.38%		9.43%		15.55%		11.63%
Return on average assets		3.30%		1.47%		1.40%		2.26%		1.74%
Net interest margin (2)		2.80%		3.41%		3.30%		3.45%		3.49%
Net interest margin (taxable equivalent) (3):
As reported		2.81%		3.42%		3.31%		3.46%		3.49%
Impact of purchase accounting		10 bps		22 bps		19 bps		26 bps		23 bps
Book value per common share ($)		25.08		23.71		23.20		22.71		21.85
Shares outstanding, end of period (000's)		90,222		90,108		90,641		90,629		92,775
Dividend payout ratio (4)		6.32%		16.41%		14.71%		9.24%		12.92%

Banking Segment:
Net interest margin (2)		3.11%		3.81%		3.77%		3.97%		4.06%
Net interest margin (taxable equivalent) (3):
As reported		3.12%		3.82%		3.78%		3.98%		4.06%
Impact of purchase accounting		12 bps		30 bps		25 bps		35 bps		31 bps
Accretion of discount on loans ($000's)		3,217		6,639		5,698		7,868		6,444
Net charge-offs (recoveries) ($000's)		16,382		1,508		1,348		(380)		2,960
Return on average assets		-0.42%		0.33%		1.17%		1.51%		1.43%
Fee income ratio		10.2%		8.5%		10.8%		8.3%		10.3%
Efficiency ratio		54.1%		55.5%		54.9%		50.5%		55.9%
Employees' compensation and benefits ($000's)		31,583		32,347		31,455		31,309		33,050

Broker-Dealer Segment:
Net revenue ($000's) (5)		132,624		99,382		113,128		121,466		116,969
Employees' compensation and benefits ($000's)		79,697		56,550		64,301		69,954		70,333
Variable compensation expense ($000's)		52,372		32,024		39,505		44,921		44,833
Compensation as a % of net revenue		60.1%		56.9%		56.8%		57.6%		60.1%
Pre-tax margin (6)		21.0%		18.3%		21.4%		22.2%		18.9%

Mortgage Origination Segment:
Mortgage loan originations - volume ($000's):
Home purchases		3,204,573		2,341,847		2,958,176		3,380,812		3,329,024
Refinancings		2,894,486		1,280,741		1,442,329		1,390,989		631,065
Total mortgage loan originations - volume		6,099,059		3,622,588		4,400,505		4,771,801		3,960,089
Mortgage loan sales - volume ($000's)		5,934,914		3,486,249		4,226,425		4,316,118		3,338,070
Net gains from mortgage loan sales (basis points):
As reported		368		325		304		335		333
Impact of sales to banking segment		(1)		(13)		(8)		(1)		0
Mortgage servicing rights asset ($000's) (7)		81,263		30,298		55,504		51,297		53,695
Employees' compensation and benefits ($000's)		160,824		100,328		109,753		123,890		106,449
Variable compensation expense ($000's)		113,826		58,280		67,224		81,287		65,516

Insurance Segment:
Loss and LAE ratio		78.5%		39.7%		43.6%		44.9%		74.6%
Expense ratio		39.1%		38.0%		40.5%		38.3%		38.4%
Combined ratio		117.6%		77.7%		84.1%		83.2%		113.0%
Employees' compensation and benefits ($000's)		3,220		2,777		2,929		2,748		2,784

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


	June 30,		March 31,		December 31,		September 30,		June 30,
Capital Ratios	2020		2020		2019		2019		2019
Tier 1 capital (to average assets):
PlainsCapital		10.37%		12.06%		11.61%		11.79%		12.53%
Hilltop		12.60%		13.03%		12.71%		12.67%		13.00%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		14.03%		13.33%		13.45%		13.25%		13.84%
Hilltop		18.46%		15.96%		16.70%		16.15%		16.32%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		14.03%		13.33%		13.45%		13.25%		13.84%
Hilltop		19.06%		16.38%		17.13%		16.58%		16.77%
Total capital (to risk-weighted assets):
PlainsCapital		14.88%		14.26%		14.13%		13.87%		14.48%
Hilltop		21.82%		17.00%		17.55%		16.95%		17.14%


	June 30,		March 31,		December 31,		September 30,		June 30,
Non-Performing Assets Portfolio Data	2020		2020		2019		2019		2019
Loans accounted for on a non-accrual basis ($000's) (1):
Commercial real estate		13,743		23,352		7,308		8,727		5,276
Commercial and industrial		32,259		47,121		15,262		13,313		14,152
Construction and land development		1,404		1,402		1,316		1,358		1,413
1-4 family residential		20,552		15,237		12,204		12,103		11,136
Consumer		308		310		26		30		34
Broker-dealer		—		—		—		—		—
		68,266		87,422		36,116		35,531		32,011

Non-performing loans as a % of total loans		0.65%		0.89%		0.38%		0.38%		0.36%

Other real estate owned ($000's)		26,602		15,429		18,202		18,738		20,753

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

Non-performing assets ($000's)		95,183		103,166		54,318		54,269		52,764

Non-performing assets as a % of total assets		0.56%		0.66%		0.36%		0.37%		0.37%

Loans past due 90 days or more and still accruing ($000's)		124,682		101,300		102,707		81,678		77,425

Troubled debt restructurings included in accruing loans held for investment ($000's)		2,025		2,286		2,173		2,222		2,256

(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. As of June 30, 2020, the Bank’s actions included approval of approximately $968 million in COVID-19 related loan modifications. The extent to which these measures will impact with Bank is uncertain, and any progression of these loans into non-accrual status, during future periods is uncertain and will depend on future developments that cannot be predicted.


	Three Months Ended June 30,
	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	$	2,308,368	$	20,036	3.47	%	$	1,307,251	$	15,041	4.60	%
Loans held for investment, gross ⁽²⁾		7,744,395		87,823	4.50	%		7,078,807		99,284	5.57	%
Investment securities - taxable		1,681,336		12,489	2.97	%		1,733,536		14,654	3.38	%
Investment securities - non-taxable ⁽³⁾		215,645		1,822	3.38	%		227,953		1,687	2.96	%
Federal funds sold and securities purchased under agreements to resell		61,956		(7)	(0.04)	%		69,369		369	2.13	%
Interest-bearing deposits in other financial institutions		1,569,277		541	0.14	%		325,130		1,982	2.44	%
Securities borrowed		1,375,849		12,883	3.70	%		1,598,063		15,517	3.84	%
Other		59,917		439	2.95	%		68,990		1,682	9.77	%
Interest-earning assets, gross ⁽³⁾		15,016,743		136,026	3.60	%		12,409,099		150,216	4.81	%
Allowance for credit losses		(102,216)						(59,437)
Interest-earning assets, net		14,914,527						12,349,662
Noninterest-earning assets		1,603,791						1,414,227
Total assets	$	16,518,318					$	13,763,889

Liabilities and Stockholders' Equity
Interest-bearing liabilities
Interest-bearing deposits	$	7,925,031	$	11,946	0.61	%	$	5,792,236	$	18,036	1.25	%
Securities loaned		1,280,958		10,797	3.39	%		1,462,370		13,470	3.69	%
Notes payable and other borrowings		1,110,516		7,998	2.88	%		1,389,295		10,674	3.06	%
Total interest-bearing liabilities		10,316,505		30,741	1.20	%		8,643,901		42,180	1.95	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		3,303,165						2,549,792
Other liabilities		658,416						551,333
Total liabilities		14,278,086						11,745,026
Stockholders’ equity		2,215,538						1,995,811
Noncontrolling interest		24,694						23,052
Total liabilities and stockholders' equity	$	16,518,318					$	13,763,889

Net interest income ⁽³⁾			$	105,285					$	108,036
Net interest spread ⁽³⁾					2.40	%					2.86	%
Net interest margin ⁽³⁾					2.81	%					3.49	%

(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 June 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, July 31, 2020. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review second 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 June 30, 2020, Hilltop employed approximately 4,800 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 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) changes in the interest rate environment; and (v) 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.

Source: Hilltop Holdings Inc.

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