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

January 28, 2021 05:15 PM Eastern Standard Time

DALLAS--(BUSINESS WIRE)--Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the fourth quarter and full year 2020. Hilltop produced income from continuing operations to common stockholders of $112.7 million, or $1.30 per diluted share, for the fourth quarter of 2020, compared to $43.7 million, or $0.48 per diluted share, for the fourth quarter of 2019. Income from continuing operations to common stockholders for the full year 2020 was $409.4 million, or $4.58 per diluted share, compared to $211.3 million, or $2.29 per diluted share, for the full year 2019. Hilltop’s financial results from continuing operations for the fourth quarter and full year 2020 reflect a significant increase in mortgage origination segment net gains from sale of loans and other mortgage production income.

Including income from discontinued operations related to the insurance business, income applicable to common stockholders was $116.4 million, or $1.35 per diluted share, for the fourth quarter of 2020, compared to $49.3 million, or $0.54 per diluted share, for the fourth quarter of 2019, and $447.8 million, or $5.01 per diluted share, for full year 2020, compared to $225.3 million, or $2.44 per diluted share, for full year 2019.

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

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

The COVID-19 pandemic has negatively impacted financial markets and overall economic conditions, and is expected to continue to have implications on our business and operations. The extent of the impact of COVID-19 on our operational and financial performance for 2021 is dependent on certain developments, including, among others, the broader adverse implications of COVID-19 on our customers and clients, potential further disruption and deterioration in the financial services industry, including the mortgage servicing and commercial paper markets, and additional, or extended, federal, state and local government orders and regulations that might be imposed in response to the pandemic, all of which are uncertain.

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

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

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

Fourth Quarter 2020 Highlights for Hilltop:

For the fourth quarter of 2020, net gains from sale of loans and other mortgage production income and mortgage loan origination fees within our mortgage origination segment was $297.6 million, compared to $157.5 million in the fourth quarter of 2019, an 88.9% increase;
- Mortgage loan origination production volume was $6.8 billion during the fourth quarter of 2020, compared to $4.4 billion in the fourth quarter of 2019.
The reversal of credit losses was $3.5 million during the fourth quarter of 2020, compared to $0.6 million in the third quarter of 2020;
- The reversal of credit losses during the fourth quarter of 2020 primarily reflected improvements in Bank loan portfolio macroeconomic factor assumptions and qualitative factors from the prior quarter, partially offset by the identified changes in the loan portfolio composition and credit quality.
Hilltop’s consolidated annualized return on average assets and return on average equity for the fourth quarter of 2020 were 2.83% and 20.56%, respectively, compared to 1.40% and 9.43%, respectively, for the fourth quarter of 2019;
Hilltop’s book value per common share increased to $28.28 at December 31, 2020, compared to $26.72 at September 30, 2020;
Hilltop’s total assets were $16.9 billion at both December 31, 2020 and September 30, 2020;
Loans¹, net of allowance for credit losses, were $7.1 billion at December 31, 2020, compared to $7.3 billion September 30, 2020;
- Includes supporting our impacted banking clients through funding of over 2,800 loans through the Paycheck Protection Program, or PPP, with a remaining balance of approximately $487 million as of December 31, 2020, compared to approximately $671 million as of September 30, 2020.
Non-performing loans were $79.9 million, or 0.76% of total loans, at December 31, 2020, compared to $84.0 million, or 0.80% of total loans, at September 30, 2020;
During the fourth quarter of 2020, we further supported our impacted banking clients through the approval of COVID-19 related loan modifications, resulting in active deferrals that have not reached the end of their deferral period of approximately $240 million as of December 31, 2020;
- As of September 30, 2020 and June 30, 2020, active COVID-19 related loan modifications totaled approximately $291 million and $968 million, respectively;
- During the third and fourth quarters of 2020, COVID-19 related loan modifications of approximately $714 million have made at least one payment pursuant to agreed-upon contractual terms;
- The extent of these loans progressing into non-performing loans during future periods is uncertain.
Loans held for sale increased by 9.4% from September 30, 2020 to $2.8 billion at December 31, 2020;
Total deposits were $11.2 billion at December 31, 2020, compared to $11.3 billion at September 30, 2020;
Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio² of 12.64% and a Common Equity Tier 1 Capital Ratio of 18.97% at December 31, 2020;
- Capital ratios reflect Hilltop’s decision to elect the transition option as issued by the federal banking regulatory agencies in March 2020 that permits banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period.
Hilltop’s consolidated net interest margin³increased to 2.71% for the fourth quarter of 2020, compared to 2.56% in the third quarter of 2020;
For the fourth quarter of 2020, noninterest income from continuing operations was $447.9 million, compared to $263.6 million in the fourth quarter of 2019, a 69.9% increase;
For the fourth quarter of 2020, noninterest expense from continuing operations was $402.3 million, compared to $307.9 million in the fourth quarter of 2019, a 30.7% increase; and
Hilltop’s effective tax rate from continuing operations was 25.1% during the fourth quarter of 2020, compared to 22.8% during the same period in 2019.

________________________________________
Note: “Consolidated” refers to our consolidated financial position and consolidated results of operations, including discontinued operations and assets and liabilities of discontinued operations.
¹	“Loans” reflect loans held for investment excluding broker-dealer margin loans, net of allowance for credit losses, of $436.8 million and $502.1 million at December 31, 2020 and September 30, 2020, respectively.
²	Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets.
³	Net interest margin is defined as net interest income divided by average interest-earning assets.

Discontinued Operations

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

Consolidated Financial and Other Information


Consolidated Balance Sheets	December 31,			September 30,			June 30,			March 31,			December 31,
(in 000's)	2020			2020			2020			2020			2019
Cash and due from banks	$	1,062,560		$	1,277,865		$	1,655,492		$	524,370		$	433,626
Federal funds sold		386			420			385			401			394
Assets segregated for regulatory purposes		290,357			221,621			194,626			178,805			157,436
Securities purchased under agreements to resell		80,319			90,103			161,457			23,356			59,031
Securities:
Trading, at fair value		694,255			667,751			648,037			393,581			689,576
Available for sale, at fair value, net		1,462,205			1,310,240			1,091,348			972,318			911,493
Held to maturity, at amortized cost, net		311,944			323,299			343,198			355,110			386,326
Equity, at fair value		140			117			122			107			166
		2,468,544			2,301,407			2,082,705			1,721,116			1,987,561
Loans held for sale		2,788,386			2,547,975			2,592,307			2,433,407			2,106,361
Loans held for investment, net of unearned income		7,693,141			7,945,560			7,849,904			7,345,250			7,381,400
Allowance for credit losses		(149,044	)		(155,214	)		(156,383	)		(106,739	)		(61,136	)
Loans held for investment, net		7,544,097			7,790,346			7,693,521			7,238,511			7,320,264

Broker-dealer and clearing organization receivables		1,404,727			1,363,478			1,222,627			1,838,789			1,780,280
Premises and equipment, net		211,595			208,078			210,975			215,261			210,375
Operating lease right-of-use assets		105,757			109,354			119,954			113,395			114,320
Mortgage servicing assets		143,742			127,712			81,264			30,299			55,504
Other assets		555,983			607,932			627,982			846,316			404,754
Goodwill		267,447			267,447			267,447			267,447			267,447
Other intangible assets, net		20,364			21,814			23,374			25,019			26,666
Assets of discontinued operations		—			—			—			249,758			248,429
Total assets	$	16,944,264		$	16,935,552		$	16,934,116		$	15,706,250		$	15,172,448

Deposits:
Noninterest-bearing	$	3,612,384		$	3,557,603		$	3,467,500		$	2,865,192		$	2,769,556
Interest-bearing		7,629,935			7,704,312			8,182,098			7,082,297			6,262,658
Total deposits		11,242,319			11,261,915			11,649,598			9,947,489			9,032,214
Broker-dealer and clearing organization payables		1,368,373			1,310,835			1,158,628			1,259,181			1,605,518
Short-term borrowings		695,798			780,109			720,164			1,329,948			1,424,010
Securities sold, not yet purchased, at fair value		79,789			56,023			55,340			22,768			43,817
Notes payable		381,987			396,006			450,158			244,042			256,269
Operating lease liabilities		125,450			122,402			131,411			124,123			125,619
Junior subordinated debentures		67,012			67,012			67,012			67,012			67,012
Other liabilities		632,889			502,517			409,672			408,224			348,519
Liabilities of discontinued operations		—			—			—			139,730			140,674
Total liabilities		14,593,617			14,496,819			14,641,983			13,542,517			13,043,652

Common stock		822			902			902			901			906
Additional paid-in capital		1,317,929			1,443,588			1,439,686			1,437,301			1,445,233
Accumulated other comprehensive income		17,763			23,790			23,813			20,939			11,419
Retained earnings		986,792			942,461			797,331			676,946			644,860
Deferred compensation employee stock trust, net		771			774			778			774			776
Employee stock trust		(138	)		(143	)		(150	)		(150	)		(155	)
Total Hilltop stockholders' equity		2,323,939			2,411,372			2,262,360			2,136,711			2,103,039
Noncontrolling interests		26,708			27,361			29,773			27,022			25,757
Total stockholders' equity		2,350,647			2,438,733			2,292,133			2,163,733			2,128,796
Total liabilities & stockholders' equity	$	16,944,264		$	16,935,552		$	16,934,116		$	15,706,250		$	15,172,448


	Three Months Ended								Year Ended
Consolidated Income Statements	December 31,			September 30,			December 31,		December 31,		December 31,
(in 000's, except per share data)	2020			2020			2019		2020		2019
Interest income:
Loans, including fees	$	109,328		$	104,955		$	115,696	$	433,311	$	460,471
Securities borrowed		14,445			10,705			16,196		51,360		69,582
Securities:
Taxable		9,845			11,035			15,174		48,273		58,493
Tax-exempt		1,862			1,687			1,572		6,698		6,159
Other		1,381			1,446			3,180		6,853		15,991
Total interest income		136,861			129,828			151,818		546,495		610,696

Interest expense:
Deposits		9,269			10,700			17,480		47,040		71,509
Securities loaned		12,014			8,729			13,989		42,816		60,086
Short-term borrowings		2,154			2,346			6,244		11,611		26,778
Notes payable		4,807			4,904			2,337		15,897		8,948
Junior subordinated debentures		609			608			909		2,772		3,851
Other		636			641			99		2,193		545
Total interest expense		29,489			27,928			41,058		122,329		171,717

Net interest income		107,372			101,900			110,760		424,166		438,979
Provision for (reversal of) credit losses		(3,482	)		(602	)		6,880		96,491		7,206
Net interest income after provision for (reversal of) credit losses		110,854			102,502			103,880		327,675		431,773

Noninterest income:
Net gains from sale of loans and other mortgage production income		247,360			307,896			120,573		1,001,059		504,935
Mortgage loan origination fees		50,193			47,681			36,939		171,769		130,003
Securities commissions and fees		35,921			32,496			33,205		142,720		137,742
Investment and securities advisory fees and commissions		42,161			36,866			32,083		131,327		103,787
Other		72,296			77,772			40,846		243,605		186,350
Total noninterest income		447,931			502,711			263,646		1,690,480		1,062,817

Noninterest expense:
Employees' compensation and benefits		291,489			294,907			212,498		1,059,645		844,602
Occupancy and equipment, net		27,596			26,124			30,617		99,416		113,336
Professional services		21,927			17,522			17,211		69,984		60,565
Other		61,336			60,792			47,542		224,758		193,386
Total noninterest expense		402,348			399,345			307,868		1,453,803		1,211,889

Income from continuing operations before income taxes		156,437			205,868			59,658		564,352		282,701
Income tax expense		39,295			46,820			13,579		133,071		63,714
Income from continuing operations		117,142			159,048			46,079		431,281		218,987
Income from discontinued operations, net of income taxes		3,734			736			5,623		38,396		13,990
Net income		120,876			159,784			51,702		469,677		232,977
Less: Net income attributable to noncontrolling interest		4,431			6,505			2,426		21,841		7,686
Income attributable to Hilltop	$	116,445		$	153,279		$	49,276	$	447,836	$	225,291

Earnings per common share:
Basic:
Earnings from continuing operations	$	1.31		$	1.69		$	0.48	$	4.59	$	2.29
Earnings from discontinued operations		0.04			0.01			0.06		0.43		0.15
	$	1.35		$	1.70		$	0.54	$	5.02	$	2.44
Diluted:
Earnings from continuing operations	$	1.30		$	1.69		$	0.48	$	4.58	$	2.29
Earnings from discontinued operations		0.05			0.01			0.06		0.43		0.15
	$	1.35		$	1.70		$	0.54	$	5.01	$	2.44

Cash dividends declared per common share	$	0.09		$	0.09		$	0.08	$	0.36	$	0.32

Weighted average shares outstanding:
Basic		86,269			90,200			90,606		89,280		92,345
Diluted		86,420			90,200			90,711		89,304		92,394


	Three Months Ended December 31, 2020
Segment Results						Mortgage						All Other and			Continuing
(in 000's)	Banking			Broker-Dealer		Origination			Corporate			Eliminations			Operations
Net interest income (expense)	$	106,431		$	8,907	$	(6,842	)	$	(4,710	)	$	3,586		$	107,372
Provision for (reversal of) credit losses		(3,549	)		67		—			—			—			(3,482	)
Noninterest income		12,130			141,163		297,523			630			(3,515	)		447,931
Noninterest expense		62,878			115,719		206,695			17,299			(243	)		402,348
Income (loss) from continuing operations before taxes	$	59,232		$	34,284	$	83,986		$	(21,379	)	$	314		$	156,437


	Year Ended December 31, 2020
Segment Results					Mortgage						All Other and			Continuing
(in 000's)	Banking		Broker-Dealer		Origination			Corporate			Eliminations			Operations
Net interest income (expense)	$	390,871	$	39,912	$	(10,489	)	$	(14,192	)	$	18,064		$	424,166
Provision for credit losses		96,326		165		—			—			—			96,491
Noninterest income		41,376		491,355		1,172,450			3,945			(18,646	)		1,690,480
Noninterest expense		232,447		415,463		753,917			53,040			(1,064	)		1,453,803
Income (loss) from continuing operations before taxes	$	103,474	$	115,639	$	408,044		$	(63,287	)	$	482		$	564,352


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

Hilltop Consolidated (1):
Return on average stockholders' equity		20.56%			25.94%			9.43%			20.03%			11.18%
Return on average assets		2.83%			3.71%			1.40%			2.88%			1.66%
Net interest margin (2)		2.71%			2.56%			3.30%			2.85%			3.48%
Net interest margin (taxable equivalent) (3):
As reported		2.72%			2.57%			3.31%			2.85%			3.48%
Impact of purchase accounting		15 bps			10 bps			19 bps			14 bps			25 bps
Book value per common share ($)		28.28			26.72			23.20			28.28			23.20
Shares outstanding, end of period (000's)		82,185			90,238			90,641			82,185			90,641
Dividend payout ratio (4)		6.67%			5.30%			14.71%			7.18%			13.12%

Banking Segment:
Net interest margin (2)		3.37%			3.03%			3.77%			3.31%			4.00%
Net interest margin (taxable equivalent) (3):
As reported		3.38%			3.03%			3.78%			3.31%			4.01%
Impact of purchase accounting		20 bps			13 bps			25 bps			18 bps			33 bps
Accretion of discount on loans ($000's)		5,629			3,346			5,698			18,831			28,745
Net charge-offs ($000's)		2,688			567			1,348			21,145			5,556
Return on average assets		1.37%			1.14%			1.17%			0.63%			1.36%
Fee income ratio		10.2%			9.2%			10.8%			9.6%			9.9%
Efficiency ratio		53.0%			52.7%			54.9%			53.8%			55.0%
Employees' compensation and benefits ($000's)		34,007			29,808			31,455			127,745			127,985

Broker-Dealer Segment:
Net revenue ($000's) (5)		150,070			149,190			113,128			531,267			455,719
Employees' compensation and benefits ($000's)		87,469			88,063			64,301			311,778			267,663
Variable compensation expense ($000's)		60,295			60,774			39,505			205,464			163,840
Compensation as a % of net revenue		58.3%			59.0%			56.8%			58.7%			58.7%
Pre-tax margin (6)		22.8%			23.7%			21.4%			21.8%			19.7%

Mortgage Origination Segment:
Mortgage loan originations - volume ($000's):
Home purchases		3,683,564			4,183,560			2,958,176			13,413,545			11,718,772
Refinancings		3,114,630			2,266,793			1,442,329			9,556,649			3,860,665
Total mortgage loan originations - volume		6,798,194			6,450,353			4,400,505			22,970,194			15,579,437
Mortgage loan sales - volume ($000's)		6,571,234			6,521,773			4,226,425			22,514,170			14,591,727
Net gains from mortgage loan sales (basis points):
As reported		448			440			304			406			324
Impact of sales to banking segment		(3	)		(1	)		(8	)		(3	)		(3	)
Mortgage servicing rights asset ($000's) (7)		143,742			127,712			55,504			143,742			55,504
Employees' compensation and benefits ($000's)		163,822			161,738			109,753			586,713			419,135
Variable compensation expense ($000's)		116,736			116,275			67,224			405,116			252,956

________________________________________
(1)	Ratios and financial data presented on a consolidated basis and includes discontinued operations and those assets and liabilities of discontinued operations.
(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, $1.2 million, and $0.6 million, respectively, for the periods presented and for the banking segment were $0.2 million, $0.2 million, $0.1 million, $0.8 million, and $0.6 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.


	December 31,		September 30,		June 30,		March 31,		December 31,
Capital Ratios	2020		2020		2020		2020		2019
Tier 1 capital (to average assets):
PlainsCapital		10.44%		10.19%		10.37%		12.06%		11.61%
Hilltop		12.64%		13.03%		12.60%		13.03%		12.71%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		14.40%		14.64%		14.03%		13.33%		13.45%
Hilltop		18.97%		19.85%		18.46%		15.96%		16.70%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		14.40%		14.64%		14.03%		13.33%		13.45%
Hilltop		19.57%		20.46%		19.06%		16.38%		17.13%
Total capital (to risk-weighted assets):
PlainsCapital		15.27%		15.49%		14.88%		14.26%		14.13%
Hilltop		22.34%		23.22%		21.82%		17.00%		17.55%


	December 31,		September 30,		June 30,		March 31,		December 31,
Non-Performing Assets Portfolio Data	2020		2020		2020		2020		2019
Loans accounted for on a non-accrual basis ($000's) (1):
Commercial real estate		11,133		14,079		13,743		23,352		7,308
Commercial and industrial		34,049		38,708		32,259		47,121		15,262
Construction and land development		507		528		1,404		1,402		1,316
1-4 family residential		32,263		28,707		20,552		15,237		12,204
Consumer		28		53		308		310		26
Broker-dealer		—		—		—		—		—
		77,980		82,075		68,266		87,422		36,116
Troubled debt restructurings included in accruing loans held for investment ($000's)		1,954		1,919		2,025		2,286		2,173
Non-performing loans ($000's)		79,934		83,994		70,291		89,708		38,289

Non-performing loans as a % of total loans (2)		0.76%		0.80%		0.67%		0.92%		0.40%

Other real estate owned ($000's)		21,289		25,387		26,602		15,429		18,202

Other repossessed assets ($000's)		101		239		315		315		—

Non-performing assets ($000's) (2)		101,324		109,620		97,208		105,452		56,491

Non-performing assets as a % of total assets (2)		0.60%		0.65%		0.57%		0.67%		0.37%

Loans past due 90 days or more and still accruing ($000's)		243,631		187,105		124,682		101,300		102,707

________________________________________
(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 fourth quarter of 2020, the Bank’s actions included approval of COVID-19 related loan modifications, resulting in active loan modifications of approximately $240 million as of December 31, 2020, down from approximately $291 million and $968 million as of September 30, 2020 and June 30, 2020, respectively. 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.
(2)	Noted balances and percentages during all prior periods reflect reclassifications to conform to current period presentation.


	Three Months Ended December 31,
	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	$	2,760,798		$	18,692	2.71	%	$	1,914,703		$	19,124	4.00	%
Loans held for investment, gross ⁽²⁾		7,732,754			90,636	4.62	%		7,258,086			96,572	5.24	%
Investment securities - taxable		2,132,863			9,823	1.84	%		1,871,993			16,011	3.42	%
Investment securities - non-taxable ⁽³⁾		258,644			2,188	3.38	%		244,378			1,763	2.89	%
Federal funds sold and securities purchased under agreements to resell		85,716			—	0.00	%		68,278			228	1.32	%
Interest-bearing deposits in other financial institutions		1,200,635			487	0.16	%		325,984			1,408	1.71	%
Securities borrowed		1,501,389			14,445	3.76	%		1,589,465			16,196	3.99	%
Other		49,648			913	7.31	%		87,188			1,654	7.55	%
Interest-earning assets, gross ⁽³⁾		15,722,447			137,184	3.45	%		13,360,075			152,956	4.52	%
Allowance for credit losses		(155,142	)						(56,124	)
Interest-earning assets, net		15,567,305							13,303,951
Noninterest-earning assets		1,420,479							1,367,068
Total assets	$	16,987,784						$	14,671,019

Liabilities and Stockholders' Equity
Interest-bearing liabilities
Interest-bearing deposits	$	7,523,955		$	9,269	0.49	%	$	6,100,621		$	17,480	1.14	%
Securities loaned		1,398,943			12,014	3.42	%		1,487,288			13,989	3.73	%
Notes payable and other borrowings		1,150,439			8,206	2.84	%		1,526,567			10,021	2.59	%
Total interest-bearing liabilities		10,073,337			29,489	1.17	%		9,114,476			41,490	1.80	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		3,669,230							2,789,662
Other liabilities		965,150							669,798
Total liabilities		14,707,717							12,573,936
Stockholders’ equity		2,252,989							2,072,865
Noncontrolling interest		27,078							24,218
Total liabilities and stockholders' equity	$	16,987,784						$	14,671,019

Net interest income ⁽³⁾				$	107,695						$	111,466
Net interest spread ⁽³⁾						2.28	%						2.72	%
Net interest margin ⁽³⁾						2.72	%						3.31	%


	Year Ended December 31,
	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	$	2,306,203		$	74,467	3.23	%	$	1,501,154		$	64,830	4.32	%
Loans held for investment, gross ⁽²⁾		7,618,723			358,844	4.71	%		7,088,208			395,641	5.58	%
Investment securities - taxable		1,897,859			49,936	2.63	%		1,803,622			61,983	3.44	%
Investment securities - non-taxable ⁽³⁾		231,824			7,918	3.42	%		233,713			6,803	2.91	%
Federal funds sold and securities purchased under agreements to resell		90,961			138	0.15	%		63,598			1,236	1.94	%
Interest-bearing deposits in other financial institutions		1,257,902			3,165	0.25	%		371,312			8,469	2.28	%
Securities borrowed		1,435,572			51,360	3.58	%		1,550,322			69,582	4.49	%
Other		59,412			3,687	6.21	%		75,298			6,869	9.12	%
Interest-earning assets, gross ⁽³⁾		14,898,456			549,515	3.69	%		12,687,227			615,413	4.85	%
Allowance for credit losses		(122,148	)						(57,690	)
Interest-earning assets, net		14,776,308							12,629,537
Noninterest-earning assets		1,537,269							1,397,420
Total assets	$	16,313,577						$	14,026,957

Liabilities and Stockholders' Equity
Interest-bearing liabilities
Interest-bearing deposits	$	7,397,121		$	47,040	0.64	%	$	5,916,491		$	71,509	1.21	%
Securities loaned		1,336,873			42,817	3.20	%		1,423,847			60,086	4.22	%
Notes payable and other borrowings		1,222,044			33,249	2.72	%		1,398,559			41,928	3.00	%
Total interest-bearing liabilities		9,956,038			123,106	1.24	%		8,738,897			173,523	1.99	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		3,304,475							2,635,924
Other liabilities		791,002							614,164
Total liabilities		14,051,515							11,988,985
Stockholders’ equity		2,235,690							2,014,535
Noncontrolling interest		26,372							23,437
Total liabilities and stockholders' equity	$	16,313,577						$	14,026,957

Net interest income ⁽³⁾				$	426,409						$	441,890
Net interest spread ⁽³⁾						2.45	%						2.86	%
Net interest margin ⁽³⁾						2.85	%						3.48	%

________________________________________
(1)	Information presented on a consolidated basis and includes discontinued operations and those assets and liabilities classified of discontinued operations.
(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 December 31, 2020 and 2019, respectively, and $1.2 million and $0.6 million for the year ended December 31, 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, January 29, 2021. Hilltop President and CEO Jeremy B. Ford and Hilltop CFO William B. Furr will review fourth quarter and full year 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 December 31, 2020, Hilltop employed approximately 4,900 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,” “extent,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “outlook,” “plan,” “probable,” “progressing,” “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) 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; (ii) 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; (iii) effectiveness of our data security controls in the face of cyber attacks; (iv) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (v) risks associated with concentration in real estate related loans; and (vi) changes in the interest rate environment and transitions away from the London Interbank Offered Rate. 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.

Contacts

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

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