Hilltop (HTH) 8-K Hilltop Holdings Inc. Announces Financial Results for First Quarter 2019

Exhibit 99.1

Investor Relations Contact:

Erik Yohe

214-525-4634

eyohe@hilltop-holdings.com

Hilltop Holdings Inc. Announces Financial Results for First Quarter 2019

DALLAS — (BUSINESS WIRE) April 25, 2019 — Hilltop Holdings Inc. (NYSE: HTH) (“Hilltop”) today announced financial results for the first quarter of 2019. Hilltop produced income to common stockholders of $38.8 million, or $0.41 per diluted share, for the first quarter of 2019, compared to $24.4 million, or $0.25 per diluted share, for the first quarter of 2018. Hilltop’s financial results for the first quarter of 2019 include the impact of costs associated with 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 $0.08 per common share payable on May 31, 2019, to all common stockholders of record as of the close of business on May 15, 2019.  

Jeremy Ford, CEO of Hilltop, said,  “We are very pleased with the solid start to 2019 as revenues grew by 7% and noninterest expenses, including the impact of the previously announced leadership changes, remained in line with the prior year. We remain focused on executing against our ‘platform for growth’ initiatives, which we believe will continue to improve productivity, scalability and the services delivered to our clients. Our business continues to strengthen as we maintain strong capital levels and solid liquidity and credit quality, which will support our growth priorities in 2019 and beyond.”

· Banking revenues and income grew as net interest margin improved versus the prior year period;

· The broker-dealer segment’s capital markets and structured finance businesses performed well as the decline in market interest rates, combined with our ongoing investments in these businesses, yielded improved trading results in the quarter;

· While the mortgage industry remains challenging, our mortgage origination segment’s focus on profitable production and efficiency resulted in lower operating expenses and supported a profitable quarter even though origination volumes declined versus the first quarter of 2018; and

· Insurance generated improved profits versus the first quarter of 2018 as expenses declined and the investment portfolio performance improved

First Quarter 2019 Highlights for Hilltop:

· In January 2019, Hilltop adopted the new lease accounting standard which, among other things:

o Added operating lease liabilities of $118.5 million and right-of-use assets of $108.8 million to the consolidated balance sheet at March 31, 2019; and

o Negatively  impacted regulatory capital ratios, performance ratios and other measures dependent upon asset or liability balances;

· Hilltop’s annualized return on average assets and return on average equity for the first quarter of 2019 were 1.21% and 8.04%, respectively, compared to 0.77% and 5.19%, respectively, for the first quarter of 2018;

· Hilltop’s book value per common share increased to $21.23 at March 31, 2019, compared to $20.83 at December 31, 2018; 

· Hilltop’s total assets were $13.5 billion at March 31, 2019, compared to $13.7 billion at December 31, 2018;

· Loans1, net of allowance for loan losses, increased to $6.5 billion compared to $6.3 billion at December 31, 2018;

· Non-performing loans decreased to $30.9 million, or 0.38% of total loans at March 31, 2019, compared to $34.0 million, or 0.41% of total loans, at December 31, 2018;

· Loans held for sale  decreased by 24.0%  from  December 31, 2018 to $1.1 billion at March 31, 2019;

· Total deposits were $8.3 billion at March 31, 2019, compared to $8.5  billion at December 31, 2018;

· Hilltop maintained strong capital levels with a Tier 1 Leverage Ratio2 of 13.22% and a Common Equity Tier 1 Capital Ratio of 16.75% at March 31, 2019;

· Hilltop’s net interest margin3 decreased to 3.69% for the first quarter of 2019, compared to 3.75% in the fourth quarter of 2018;

· The provision for loan losses was $1.0 million during the first quarter of 2019, compared to $6.9 million in the fourth quarter of 2018;  

· For the first quarter of 2019, noninterest income was $252.5 million, compared to $235.1 million in the first quarter of 2018,  a 7.4%  increase;

· For the first quarter of 2019, noninterest expense was $309.1 million, compared to $308.2 million in the first quarter of 2018, a 0.3%  increase; and

· Hilltop’s effective tax rate decreased to 22.6% during the first quarter of 2019, compared to 23.3% during the same period in 2018

1    “Loans” reflect loans held for investment excluding broker-dealer loans, net of allowance for loan losses, of $491.8 million and $578.2 million at March 31, 2019 and December 31, 2018, 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	March 31,		December 31,		September 30,		June 30,		March 31,
(in 000's)	2019		2018		2018		2018		2018
Cash and due from banks	$	313,192	$	644,073	$	405,682	$	353,432	$	470,127
Federal funds sold		438		400		468		403		400
Assets segregated for regulatory purposes		156,851		133,993		220,115		128,417		198,170
Securities purchased under agreements to resell		65,205		61,611		164,656		229,172		244,978
Securities:
Trading, at fair value		703,295		745,466		660,314		634,197		756,151
Available for sale, at fair value		1,019,851		875,658		874,496		811,218		806,583
Held to maturity, at amortized cost		369,865		351,012		348,163		353,192		356,452
Equity, at fair value		19,343		19,679		21,555		21,218		20,876
		2,112,354		1,991,815		1,904,528		1,819,825		1,940,062
Loans held for sale		1,059,280		1,393,246		1,524,980		1,953,562		1,409,634
Loans held for investment, net of unearned income		7,011,679		6,930,458		6,940,306		6,545,630		6,387,413
Allowance for loan losses		(58,809)		(59,486)		(60,152)		(61,970)		(63,194)
Loans held for investment, net		6,952,870		6,870,972		6,880,154		6,483,660		6,324,219
Broker-dealer and clearing organization receivables		1,651,199		1,440,287		1,491,507		1,614,951		1,660,720
Premises and equipment, net		210,333		237,373		236,172		172,911		173,637
Operating lease right-of-use assets		108,806		—		—		—		—
Other assets		591,442		580,362		604,445		648,317		637,802
Goodwill		291,435		291,435		291,435		251,808		251,808
Other intangible assets, net		35,965		38,005		40,394		32,716		34,569
Total assets	$	13,549,370	$	13,683,572	$	13,764,536	$	13,689,174	$	13,346,126
Deposits:
Non interest-bearing	$	2,490,144	$	2,560,750	$	2,525,677	$	2,468,332	$	2,565,825
Interest-bearing		5,807,975		5,975,406		5,764,556		5,345,290		5,393,897
Total deposits		8,298,119		8,536,156		8,290,233		7,813,622		7,959,722
Broker-dealer and clearing organization payables		1,490,227		1,294,925		1,396,401		1,409,904		1,504,172
Short-term borrowings		914,525		1,065,807		1,216,649		1,610,735		1,064,325
Securities sold, not yet purchased, at fair value		69,354		81,667		179,582		251,581		255,551
Notes payable		225,372		228,872		220,192		227,736		202,700
Operating lease liabilities		118,452		—		—		—		—
Junior subordinated debentures		67,012		67,012		67,012		67,012		67,012
Other liabilities		351,178		435,240		430,309		392,171		367,188
Total liabilities		11,534,239		11,709,679		11,800,378		11,772,761		11,420,670
Common stock		938		936		946		946		960
Additional paid-in capital		1,491,585		1,489,816		1,504,467		1,502,105		1,526,867
Accumulated other comprehensive loss		(1,062)		(8,627)		(14,722)		(11,846)		(9,698)
Retained earnings		499,452		466,737		448,923		419,683		404,260
Deferred compensation employee stock trust, net		827		825		860		857		857
Employee stock trust		(213)		(217)		(252)		(252)		(254)
Total Hilltop stockholders' equity		1,991,527		1,949,470		1,940,222		1,911,493		1,922,992
Noncontrolling interests		23,604		24,423		23,936		4,920		2,464
Total stockholders' equity		2,015,131		1,973,893		1,964,158		1,916,413		1,925,456
Total liabilities & stockholders' equity	$	13,549,370	$	13,683,572	$	13,764,536	$	13,689,174	$	13,346,126

	Three Months Ended
Consolidated Income Statements	March 31,		December 31,		September 30,			June 30,		March 31,
(in 000's, except per share data)	2019		2018		2018			2018		2018
Interest income:
Loans, including fees	$	110,870	$	119,322	$	113,535		$	103,924	$	99,944
Securities borrowed		16,859		16,782		16,346			17,486		16,300
Securities:
Taxable		15,616		15,512		11,994			12,516		10,953
Tax-exempt		1,498		1,648		1,717			1,697		1,772
Other		5,197		4,438		4,734			4,417		4,391
Total interest income		150,040		157,702		148,326			140,040		133,360
Interest expense:
Deposits		17,106		14,838		12,353			10,136		8,675
Securities loaned		14,738		13,935		13,984			15,075		13,739
Short-term borrowings		5,471		7,476		7,831			6,466		4,043
Notes payable		2,641		2,627		2,702			2,437		2,497
Junior subordinated debentures		1,001		968		955			918		822
Other		152		143		160			160		164
Total interest expense		41,109		39,987		37,985			35,192		29,940
Net interest income		108,931		117,715		110,341			104,848		103,420
Provision (recovery) for loan losses		951		6,926		(371)			340		(1,807)
Net interest income after provision (recovery) for loan losses		107,980		110,789		110,712			104,508		105,227
Noninterest income:
Net gains from sale of loans and other mortgage production income		96,139		90,628		116,243			132,478		105,767
Mortgage loan origination fees		21,873		26,615		27,004			29,318		20,626
Securities commissions and fees		35,969		36,984		36,968			38,320		38,717
Investment and securities advisory fees and commissions		20,160		26,260		23,487			21,965		18,354
Net insurance premiums earned		33,203		34,146		34,185			34,105		34,315
Other		45,124		23,883		31,810			23,248		17,364
Total noninterest income		252,468		238,516		269,697			279,434		235,143
Noninterest expense:
Employees' compensation and benefits		189,898		179,881		205,575			200,632		182,600
Occupancy and equipment, net		28,023		30,512		29,015	��		27,893		27,830
Professional services		22,942		26,793		27,984			26,020		24,704
Loss and loss adjustment expenses		14,926		20,694		18,712			24,409		15,532
Other		53,296		52,939		54,425			59,563		57,536
Total noninterest expense		309,085		310,819		335,711			338,517		308,202
Income before income taxes		51,363		38,486		44,698			45,425		32,168
Income tax expense		11,586		8,928		7,600			11,034		7,488
Net income		39,777		29,558		37,098			34,391		24,680
Less: Net income attributable to noncontrolling interest		991		1,443		1,293			1,311		239
Income attributable to Hilltop	$	38,786	$	28,115	$	35,805		$	33,080	$	24,441
Earnings per common share:
Basic	$	0.41	$	0.30	$	0.38		$	0.35	$	0.25
Diluted	$	0.41	$	0.30	$	0.38		$	0.35	$	0.25
Cash dividends declared per common share	$	0.08	$	0.07	$	0.07		$	0.07	$	0.07
Weighted average shares outstanding:
Basic		93,669		94,092		94,554			95,270		95,985
Diluted		93,669		94,130		94,610			95,358		96,146

	Three Months Ended March 31, 2019
Segment Results					Mortgage						All Other and		Hilltop
(in 000's)	Banking		Broker-Dealer		Origination		Insurance		Corporate		Eliminations		Consolidated
Net interest income (expense)	$	92,690	$	12,850	$	(467)	$	642	$	(1,330)	$	4,546	$	108,931
Provision (recovery) for loan losses		1,025		(74)		—		—		—		—		951
Noninterest income		10,621		91,307		118,033		36,492		538		(4,523)		252,468
Noninterest expense		60,726		87,807		114,677		30,338		15,562		(25)		309,085
Income (loss) before income taxes	$	41,560	$	16,424	$	2,889	$	6,796	$	(16,354)	$	48	$	51,363

	Three Months Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
Selected Financial Data	2019		2018		2018		2018		2018
Hilltop Consolidated:
Return on average stockholders' equity		8.04%		5.76%		7.41%		6.95%		5.19%
Return on average assets		1.21%		0.86%		1.07%		1.03%		0.77%
Net interest margin (1)		3.69%		3.75%		3.48%		3.46%		3.52%
Net interest margin (taxable equivalent) (2):
As reported		3.70%		3.76%		3.49%		3.47%		3.53%
Impact of purchase accounting		32 bps		43 bps		28 bps		29 bps		36 bps
Book value per common share ($)		21.23		20.83		20.51		20.21		20.02
Shares outstanding, end of period (000's)		93,821		93,610		94,594		94,571		96,048
Dividend payout ratio (3)		19.32%		23.43%		18.48%		20.16%		27.49%
Banking Segment:
Net interest margin (1)		4.24%		4.50%		4.13%		4.11%		4.15%
Net interest margin (taxable equivalent) (2):
As reported		4.25%		4.51%		4.14%		4.12%		4.16%
Impact of purchase accounting		44 bps		61 bps		39 bps		42 bps		51 bps
Accretion of discount on loans ($000's)		8,735		12,737		8,147		8,343		9,867
Net charge-offs (recoveries) ($000's)		1,628		7,592		1,447		1,564		(1,315)
Return on average assets		1.34%		1.31%		1.19%		1.09%		1.31%
Fee income ratio		10.28%		10.12%		10.69%		10.79%		10.51%
Efficiency ratio		58.78%		56.79%		63.71%		66.47%		61.32%
Employees' compensation and benefits ($000's)		32,171		31,955		36,878		32,442		30,811
Broker-Dealer Segment:
Net revenue ($000's) (4)		104,157		89,750		95,266		86,479		81,097
Employees' compensation and benefits ($000's)		63,075		54,249		59,535		52,418		52,265
Variable compensation expense ($000's)		34,581		31,744		33,574		26,036		24,594
Compensation as a % of net revenue		60.6%		60.4%		62.5%		60.6%		64.4%
Pre-tax margin (5)		15.77%		12.13%		10.42%		9.45%		4.44%
Mortgage Origination Segment:
Mortgage loan originations - volume ($000's):
Home purchases		2,050,760		2,586,677		3,237,444		3,615,991		2,358,692
Refinancings		396,282		384,990		416,201		491,384		601,105
Total mortgage loan originations - volume		2,447,042		2,971,667		3,653,645		4,107,375		2,959,797
Mortgage loan sales - volume ($000's)		2,711,114		3,008,793		4,015,051		3,526,603		3,185,438
Net gains from mortgage loan sales (basis points)		330		334		330		317		333
Mortgage servicing rights asset ($000's) (6)		62,049		66,102		68,804		57,373		63,957
Employees' compensation and benefits ($000's)		79,043		84,334		102,025		111,713		91,059
Variable compensation expense ($000's)		38,929		44,529		58,686		66,531		46,292
Insurance Segment:
Loss and LAE ratio		45.0%		60.6%		54.7%		71.6%		45.3%
Expense ratio		41.5%		37.9%		38.8%		39.5%		39.9%
Combined ratio		86.5%		98.5%		93.5%		111.1%		85.2%
Employees' compensation and benefits ($000's)		3,202		2,670		2,595		2,954		3,255

(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 $0.2 million, $0.3 million, $0.2 million, $0.2 million, and  $0.3 million, respectively, for the periods presented and for the banking segment were $0.2 million for each of 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 plus total broker-dealer noninterest income.

(5) Pre-tax margin is defined as income before income taxes divided by net revenue

(6) 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	2019		2018		2018		2018		2018
Tier 1 capital (to average assets):
PlainsCapital		12.61%		12.47%		11.86%		12.80%		13.01%
Hilltop		13.22%		12.53%		12.40%		12.90%		13.26%
Common equity Tier 1 capital (to risk-weighted assets):
PlainsCapital		13.89%		13.90%		13.88%		14.59%		15.39%
Hilltop		16.75%		16.58%		16.95%		17.61%		18.60%
Tier 1 capital (to risk-weighted assets):
PlainsCapital		13.89%		13.90%		13.88%		14.59%		15.39%
Hilltop		17.22%		17.04%		17.42%		18.10%		19.11%
Total capital (to risk-weighted assets):
PlainsCapital		14.60%		14.63%		14.63%		15.38%		16.25%
Hilltop		17.64%		17.47%		17.87%		18.58%		19.63%

	March 31,		December 31,		September 30,		June 30,		March 31,
Non-Performing Loans Portfolio Data	2019		2018		2018		2018		2018
Loans accounted for on a non-accrual basis ($000's):
Commercial real estate		5,332		5,324		7,506		14,256		13,674
Commercial and industrial		13,350		14,870		21,323		22,815		20,768
Construction and land development		1,473		3,278		3,402		569		595
1-4 family residential		10,662		10,437		4,476		4,273		4,297
Mortgage warehouse		—		—		—		—		—
Consumer		38		41		45		49		52
Broker-dealer		—		—		—		—		—
Covered		—		—		5,777		5,277		5,849
		30,855		33,950		42,529		47,239		45,235
Non-performing loans as a % of total loans		0.38%		0.41%		0.50%		0.56%		0.58%
Other real estate owned ($000's)		23,066		27,578		32,518		37,824		38,354
Other repossessed assets ($000's)		30		68		99		168		246
Non-performing assets ($000's)		53,951		61,596		75,146		85,231		83,835
Non-performing assets as a % of total assets		0.40%		0.45%		0.55%		0.62%		0.63%
Non-PCI loans past due 90 days or more and still accruing ($000's)		77,045		83,131		80,664		74,060		77,590
Troubled debt restructurings included in accruing loans held for investment ($000's)		1,313		1,339		1,362		1,389		1,404

	Three Months Ended March 31,
	2019						2018
	Average		Interest		Annualized		Average		Interest		Annualized
	Outstanding		Earned or		Yield or		Outstanding		Earned or		Yield or
Net Interest Margin (Taxable Equivalent) Details	Balance		Paid		Rate		Balance		Paid		Rate
Assets
Interest-earning assets
Loans held for sale	$	1,015,010	$	12,487	4.92	%	$	1,294,245	$	14,613	4.52	%
Loans held for investment, gross (1)		6,843,343		98,383	5.76	%		6,308,756		85,331	5.42	%
Investment securities - taxable		1,792,501		15,584	3.48	%		1,613,608		10,928	2.71	%
Investment securities - non-taxable (2)		221,602		1,658	2.99	%		258,732		2,030	3.14	%
Federal funds sold and securities purchased under agreements to resell		66,346		388	2.37	%		189,623		481	1.03	%
Interest-bearing deposits in other financial institutions		505,582		3,151	2.53	%		632,727		2,478	1.59	%
Securities borrowed		1,446,412		16,859	4.66	%		1,537,306		16,300	4.24	%
Other		61,263		1,671	11.01	%		70,854		1,452	8.27	%
Interest-earning assets, gross (2)		11,952,059		150,181	5.03	%		11,905,851		133,613	4.50	%
Allowance for loan losses		(59,549)						(65,202)
Interest-earning assets, net		11,892,510						11,840,649
Noninterest-earning assets		1,419,075						1,228,058
Total assets	$	13,311,585					$	13,068,707
Liabilities and Stockholders' Equity
Interest-bearing liabilities
Interest-bearing deposits	$	5,825,886	$	17,106	1.19	%	$	5,494,657	$	8,675	0.64	%
Securities loaned		1,295,002		14,738	4.62	%		1,365,081		13,739	4.08	%
Notes payable and other borrowings		1,065,432		9,265	3.51	%		1,195,993		7,526	2.54	%
Total interest-bearing liabilities		8,186,320		41,109	2.03	%		8,055,731		29,940	1.50	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		2,520,057						2,419,725
Other liabilities		623,710						680,543
Total liabilities		11,330,087						11,155,999
Stockholders’ equity		1,958,531						1,911,160
Noncontrolling interest		22,967						1,548
Total liabilities and stockholders' equity	$	13,311,585					$	13,068,707
Net interest income (2)			$	109,072					$	103,673
Net interest spread (2)					3.00	%					2.99	%
Net interest margin (2)					3.70	%					3.53	%

(1) Average balance includes non-accrual loans.

(2) 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 $0.2 million and $0.3 million for the three months March 31, 2019 and 2018.

Conference Call Information

Hilltop will host a live webcast and conference call at 8:00 AM Central (9:00 AM Eastern) on Friday,  April 26, 2019. Hilltop President and CEO, Jeremy B. Ford, and Hilltop CFO, William B. Furr, will review first quarter 2019 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. 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, 2019, Hilltop employed approximately 5,100 people and operated approximately 450 locations in 44 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.

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,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “might,” “plan,” “probable,” “projects,” “seeks,” “should,” “target,” “view” or “would” or the negative of these words and phrases or similar words or phrases.  For a discussion of certain factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed 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.