HTH - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Hilltop Holdings Second Quarter 2019 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Erik Yohe. ahead. go Please

Erik Yohe

Good morning.

this Will CEO; Furr, call are Ford, the Jeremy morning CFO. and on and President me Joining

Before we historical get business forward-looking during concerning today's statements. started, items strategy, please note that such financial not that future are plans statements conditions our of as fact, and statements presentation including outlook, certain are statements

These that, uncertainties. are nature, risks and by based subject management's expectations current on are their statements concerning events future to

a most to those the of report materially actual extent variety results, recent filed new disclaim in quarterly financial law, and to including by as these precautionary of Except a Our our expressly we SEC. due the update condition result may factors, annual from our required statements to and differ discussion included any information. with report capital obligation the statements statements earlier referenced today in and

equity taxable per be measures pre-purchase Additionally, nearest may interest found margin, certain at interest which this presentation GAAP this is appendix website to includes in common presentation, margin, tangible ir.hilltop-holdings.com. measures, including on net of posted of equivalent measure these net A equivalent reconciliation our and taxable book accounting the non-GAAP the tangible share. value

the And now, would presentation like over hand I to Ford. Jeremy to

Jeremy Ford

morning. Good

a a would time as to Investor for he Yohe have and I of get Before I started, I job. new long do our I will together like great worked Head welcome Erik Relations. and know Erik

the which last million, with a compared For same $X.XX the XX% second quarter share, during reported year. $X.XX of XXXX, of represents quarter reported the or income Hilltop per diluted net $XX.X increase

equity on XX.X%. X.XX% delivered a Hilltop return Additionally, of average assets of and return a average on

in growth. model bank, $XXX diversification loans loan or QX broker Bank were quarter Average XX% grew million, dealer Warehouse National or XXXX of its second business and Lending income by acquisition held significant from River The delivering our and increased large strength $XXX and This business, year-over-year investment for broker XXXX. of prior with pre-tax quarter Oaks the the to excluding the business by drivers which dealer our second quarter. all our compared balance average million, mortgage reflected of XX%

pipeline We our grow of valued portfolio relationships. prudently commitments a aim to healthy our and by maintain continue unfunded loan bank’s to fostering

This strategic net and first XXXX markets repurchases. compared we in the as to our was Credit remains operating and for million both a strong PrimeLending to Hilltop business. alignment six by remains stockholders structured with reflected share have million conditions at revenue Under returned from versus maintaining quarter capital market $XX continue the of and finance Also, high sale priority increase focus on to the a Through the January million optimal yielded we improvements share prior and repurchase underwriting business a margin dividends on costs. Securities program, XXXX, QX quality gain in $XX authorized months available our through board our XXXX. of year $XX discipline.

of XXXX. assets $XX slightly quarter compared $XX quarter linked non-performing down quarter, and second to down the For million were second million,

attributed income reduction in as a $XX.X X, amortization a in asset had by and XX% business. within partially to QX pre-tax increase indemnification $X.X million efficiencies Page to the well million Moving quarter driven non-interest the XXXX year. with prior of bank expense healthy by from fraud operational or a was This wire increasing as

quarter, balances underperforming growth closed In the net the million, on deliver interest resulting in branches. second the two Additionally, of lower higher higher yields XX $X.X during bank accretion despite loan branches full period. income service

implemented lower remain million by costs over XXXX. pricing $X result origination cost They'll during decline half from higher QX a Multiple fixed improvement an basis QX expense volume. the margins for fees. X% XX was XXXX sale in $X.X of XXXX pre-tax disciplined of increased of $X.X despite million $XX.X from and and Mortgage initiatives income resulted million stable the Gain points and the management the in closing million second trailing on origination quarter, of months. XX

focused margin on elevated second expect secondary strong XX-year The about the driven refinancing year. decline. through at compression build XXXX. on The increase With upon to We established broker reported are versus rates we revenues pre-tax persist volumes, profitable which feel and Winges, of net was production of and a levels margin delivering experienced on by quarter his path prior our business largely higher structured strong market team finance, very dealer leadership of CEO, a remain of to half XX% HilltopSecurities volume Brad the and good XX.X% margin with new line. increased

growth stable year business to relatively the insurance XXX%. foundation states. broad for combined efficiency core growth. we to initiatives, growth a includes we and written as of million – pretax prior future ratio a reported of January, were in Results introduced loss quarter for set operate a realize we of other have and begun compared our to to our and operating cost projects build Texas in premium for In a with platform $X.X lower which Notably,

as During referenced from our and and services alignment shared from we sourcing. previously well strategic efficiency benefited as the realized capital quarter, market consolidated mortgage the initiatives strategic savings

by and our quarter, benefits largely from past and lines the across This nationwide met are we materialize employees to with all in being Texas traveled leaders XXXX, markets businesses. business major encouraged of I profits our made. several to expect with the we in While of

the market. the field. is in seeing our It leadership the our gave about communities. roundtable discussions and in overwhelmed Hilltop people people people they in have the talented our opportunity us quality customers The strength by and candid are back have by of to our of what inspired on and our impact the I came learn and

will now over through the With Will to walk you the I presentation to that, turn financials.

Will Furr

Jeremy. on Thank I’m starting you, X. Page

million reported of XXXX, income per to attributable As common Jeremy Hilltop diluted second $XX.X quarter for to equating stockholders the discussed, share. of $X.XX

improvement provision gas reported quarter, Hilltop the significant oil and gas to oil principally in the loan. quarter, and of recovery recovery for a second and portfolio allowance $XXX,XXX previously loss, In losses. loan bank loan a classified and the ongoing for the from $X.X million recaptured related a During

The on points solid. quarter average approximately includes of annualized industries portfolio even Currently, are charge-offs strong with basis. Credit basis But recent an remains loans our $X bank exposures million during weakness. of quarter monitoring XX we experiencing concentrated see performance, net provision experiencing or that second material or are any quality deterioration. that may the do areas to be rigorously any we not evaluate the

million, purchase of accounting pretax expenses a accretion of purchase net to purchase During quarter. resulting in expenses revenue-related $X.X assets the million other quarter, second $X current accounting and and for intangible the prior largely impact the amortization deposits related was the million acquisitions. represent accounting period, $X.X were In

purchase decline, of for Related continued interest leverage and the strong to to a X accretion, the Tier expect income position capital portfolio purchase with purchase XXXX. ratio Equity related to we X Hilltop’s accretion Common average period loan and a scheduled per million between of balances as XX.XX% remainder $X to of ratio remains loan the quarter XX%. Tier million $X in

$XXX Net the million, income quarter Net $X equated or increased versus interest in quarter I’m X% million moving the X. interest accretion. to in to loan and of growth, including income purchased by the the including Page net $X.X million second the in growth The margin, acquired income in Houston net asset driven which period. basis points prior was by year. improvement in versus interest year X loans prior interest expanded same

which the declined accounting of the to basis yields XX points, the prior on and included prepurchase Net in basis purchase loans X.XX%, points from interest same held XX the net basis lower interest-bearing equivalent taxable resulting versus equivalent equated year. taxable deposit sale increase and net margin basis, interest quarter costs. X equated in accretion. interest by X point improved linked-quarter second to prepurchase On points accounting margin the X.XX% in basis The period a for by accounting margin

which quarter, direct the XX-year to During Hilltop’s rates a yield on that second yields, more in held-for-sale on directly basis. XX a the basis points, began decline by earlier has and Year-to-date, interest declined year. rates impact XX-year has albeit lag the approximately treasury long-term loans continued

loans to during XX quarter. pressure on by margin yield the held sale for dropped the points interest quarter average basis net on putting second the points, basis XXX Overall, during

Given the quarter, during XX-year decline second continue will third sale during we for declines held loans rates quarter. the in to the continued on expect the that further yields

renewed same loans. continues In the competitive addition, and bank compared on loan yields have period increased as the prior but new both to intensify to year, pressure

XXXX we’ve remaining seen model Hilltop’s higher. rates beta did December increase below continue XX% even for deposits in ranges approximately not through-the-cycle move Federal has as of interest-bearing expected, to XX%. to been deposit Reserve betas the short-term cumulative XX%, our of As

expect of year. peak the markets and throughout sentiment change will the deposit Fed the reach cost reduce remainder that in we rates this the later could With market indication the XXXX, levels

lower and three average combination maintaining additional of X.XX% prepurchase With plus of net loan we yields expect full remainder deposit costs, year. are pressure year net accounting margin minus our of the margin interest the the for on interest we outlook or somewhat basis held-for-sale Therefore, higher points.

future our portfolios. curve to rate the flows outcome movements, shifts our Federal across We will on Reserve revisit asset assumptions yield of based and continue liability

prior million period earning $XXX Quarterly the average same gross assets year. the in by increased versus

Growth provides the growth in to by impacted was versus warehouse period. by acquisition lower declined business, loans asset for quarter companies. and was Second year Lending growth held driven earning sale, prior the million mortgage $XXX BRO which by Warehouse which financing average third-party National

$XXX X. I’m second noninterest XXXX the to equated moving to Page quarter income for Total of million.

$X.X quarter Second by second million quarter and fees the XXXX. related increased versus mortgage income of

in Hilltop volumes $XXX the quarter second the versus period mortgage intense origination same declined banking the remained the During prior X% or as environment year. million by competitive of XXXX, in mortgage

While mortgage basis the during quarter volumes XXX points. stable were remained margins second at relatively challenged, gain-on-sale

prior in recent the XX% the by volumes as decline market the the grew rate, mortgage experienced versus refinance the improvement With in year. business refinance primary

expect in production year improvements full XXXX the to related will we full origination the with line rates, lower in in year volume the market XXXX be levels. Given long-term

and margins, gain-on-sale rates, will the XXXX. basis gain-on-sale we projected dynamics, margins competitive mortgage the expect given on balance Regarding market lower of of our trend throughout origination current mix in the expectations

a by secondary improvements structured payment the income business and HilltopSecurities. and market since improved in to and increase XXXX. activities securities both structured of capital resulted conditions benefits the These our structuring volumes investments in million $XX the by increased and distribution Other markets spreads. third making driven been to finance in we've improve businesses in trading primarily Favorable XX% the at sales realize of mortgage-backed quarter continue capabilities

increase increased year driven million in an by variable I'm Noninterest increase expenses by same This the $X to strong growth in versus fee $XX of growth in X. linked to year variable quarter. The expenses was in the $XXX million period was revenue HilltopSecurities in to compensation in Page million. the prior moving prior and the at PrimeLending. compensation

Over and the continued current past five the conditions aligning across the in to make driving efficiencies quarters to businesses franchise. we progress have our market

efforts, these trend compensation, services progress development and non-variable lower headcount, against initiatives. our Through to marketing costs efficiency make we as continue professional expenses and

$X to enhancements, quarter, in that million these costs expenses do incurred remainder we the XXXX. During Hilltop increase related expect the core and for ongoing system will second the of related

on by growth driven HFI versus Moving prior by and Growth second quarter the was the of grew loans loans year the to we Page in XXXX third the acquired our X, Based versus of Houston scheduled XXXX. average grow XXXX. total during same between and mortgage average loans underwriting, period seasoned the in quarter focus XX% pay lending to and will seasonal downs, and current business. full on production our conservative high-quality current expect trends, X% the in X% year HFI continue competitive environment warehouse

$XX on non-performing right top XX, prior XX The this to allowance the to allowance same and chart as discounts million have second reflects to Hilltop's loss points end for on pools, we is at slide, solid assets these the across Turning from in that as recapture. have the $XX.X XXXX important businesses loan provide of the afore future the million the the basis losses. previously ratio quality period as maintained HFI declined additional loans shown of noted Page quarter mentioned purchase loan maintain remaining of to XXXX against the decline credit discounts quarter the equates note It of from first year. coverage approximately and and the

market, points second $X.X have by deposits Interest-bearing XX, from clients deposit are versus remain products. Page XXXX that migrating CD of increased basis costs products billion to Moving as rates competitive the on their by investment from XXXX. have first and pressures non-interest-bearing higher-yielding of money are seeking and actively and into quarter deposits million sold return and approximately $XXX quarter of risen the six average higher savings monies by

deposits as as and competitive. existing our the expansion client We of possible growth continue while relationships through deposit growing managing remaining acquisition new to on focus while aggressive

XXXX, improvement to aforementioned allowance The versus to to Moving improvement benefits million pretax XX, prior of $XX which the quarter in of in income during driven in improvement revenue XX.X%. was Bank million recapture, of the the Houston continued prior quarter. the $X.X the the generating of the period reflect Page period. the in year the profitability, equated ratio results efficiency growth expenses efficiency the during growth PlainsCapital second and approximately demonstrate The solid market, quarter's lower and versus year both by ratio

great The expenses. the provide profile and at operating quarter revenue reported profitable maintaining risk Of $X leverage to wire of previously $X drive clients, fraud remains note, second the PlainsCapital growth delivering included while loss related balancing by positive expense consistent: service of a and related to and million growth expense our XXXX focus share efficiency. moderate million

PrimeLending turning has during continued a pre-tax fourth of of efforts team PrimeLending the Page in second quarter driven the XX. and I’m at the leadership executed that XXXX. to profit the and $XX third in efficiency generated XXXX by of quarters XXXX million the

the volumes million yielded approximately the management operating X% origination which same efficiencies back-office same period in the have year. While significant by $X expenses, in combination versus declined in declined of prior reduction prior branch and the year, performance versus the by period

focus fees on same versus profitable launch results and in origination have origination volumes operational generate basis year increase fees. the small The on declined. pricing mortgage points, successfully system. which the as prior for operating to year Further is period efficiencies Mortgage is fees new prior the our volume, PrimeLending supporting the even to focus continue in mortgage from loan XX focus increased a yielded by improved our and

and $XX profit which Turning to distribution and businesses, from for structured pre-tax both in have benefited investments of quarter Page second market capital XX. execution improved of the in million HilltopSecurities sales driven and finance solid delivered XXXX, a the conditions. by ongoing our markets structuring,

in period businesses from While these to and spreads market can results from volumes strong significantly can volatile activity change was quarter, as of period. rates, the be both

risk remainder business in client current market the marketing Based expect hiring HilltopSecurities Related of optimize to to deployment continue a liquidity risks by and the is acquisition. finalize of Public Finance, franchise bankers to focus are the to in throughout we period profitable while XXXX. versus The core to in revenues declined for system. investing the this support prior modestly improve strategically and revenue, the moderate our operating same growth grow manage results to operating year, support profile we expansion expenses, long-term within on activity, new

losses. for Moving seasonal storm Page the XX. reflects recorded to and pre-tax $X which Lloyds loss quarter, a increases National million in client-related activity

for our During premiums states. the second XXXX. the in states focus quarter, remains primary core written improvement in the business in Growth these core delivered modest

XX. Page to I’m moving

maintaining key sheet XXXX, our full the For balance and loans deposits. items, for we’re year outlook

changes and interest our expectation interest our year are to the deposit we position rates rates loan-held-for-sale lower Given impact of at reflect net over coming full for increasing the of in adjusting market rates PlainsCapital, asset-sensitive quarters, expectation market our range our income and the yields costs. on actual lower

in during results we XXXX the reflect market fee businesses, non-interest current the outlook strength in income and higher the reflect the to To of half are adjusting our our conditions. first improvement

expense higher Our correlated to variable slightly will revenue range to outlook be our businesses. fee non-interest as continue expenses is

overall of and Lastly, our performance range XXXX, provision full adjusting as are current our in of half This outlook remained a first year solid outlook as credit represents lower. quality the result we has and markets, however, remainder the the throughout and change the rates These, as with will expectations to year, going provide economic updates calls forward. may we quarterly activity. necessary of our respect on

prepared our over call of call. comments, for Operator, Q&A turn that we’ll the session to the concludes the and you

Operator

Thank you.

Gailey today from comes We the question-and-answer first with question begin go will Please [Operator Instructions] ahead. KBW. Brady Our now session.

Brady Gailey

guys. Hey good morning,

Jeremy Ford

Good morning.

Brady Gailey

broker-dealer XX%, know to well look we’ve XX% XX%. about Another pre-tax range longer-term year, the a that. you – really kind that but on quarter rate margin almost it this of of top and at from I you’re in strong a talked

– but Or great to business, for about So better? to maybe about XX% this is still your way pre-tax just could obviously, that margin that it? talk longer right the setup XX% is think term, be little a the

Jeremy Ford

I think from XX-year benefited finance business it I but the higher-margin of could was our the quarter, in lower real the the business. had throughout rate be better, And in a outperformance structured little think that’s market the some conditions. that favorable quarter,

the kind of is So XX% basis. pre-tax will other now kind there to are businesses XX% margin an over and we’re basis fluctuate margin some where I think a kind through, businesses so and have, at from – of we’ll I are ongoing lower on think, – of probably that

Brady Gailey

And a QX. to of We million is that that were that but expect of broker-dealer roughly for in quarter coming the you in second out kind then fees be I nice the wouldn't know forward, had nature of talked when you onetime number $XX what going about quarter? quarter last recurring really

Will Furr

of volatility at the in quarter, Second end little the first quarter. what million. of double-click quarter that declined of the et price pipeline end a the last $X of I at of so XX-year If very kind the a just of you approximately onetime saw had rally there cetera, March that or the created weeks think a we is materially bit, and couple marks, mark I

were securities smaller. kind portfolio was that more overall move when the the came declined balances through were more of at that volume through. so onetime to were of in that – and lower the During that the ratably quarter, the the second we've And period as from gains period XX-year were quarter, continued ratably nature, the through –

Brady Gailey

for then net unchanged, but down range Will, And bit. guidance kept spread a you left you right. finally All interest the little income me, margin

earning mortgage that for So about it? sale? the Is assets is the held right loans average offset just higher to think from way

Will Furr

I we're few lending having a times is national year. think noted which what expecting had business, is the a better-than-expected we warehouse

first benefit we to full to you then seeing are on provided. number on again X.XX% expecting the asset equivalent this dropped continue said, we that, to average year we it basis preprovision quarter. trend and expect do to average a some the NIM. lower year, continued X.XX% taxable pressure from an within that obviously remember, So That if while range earning through from We're but was perspective, quarter in be

Brady Gailey

Got it. Thanks guys.

Will Furr

Thank you.

Operator

Rose question next Michael ahead. James. go comes from Our with Raymond Please

Michael Rose

Hey guys.

Just look growth at is seemingly in I explain when drop outlook, the volumes? way loan mortgage imply the year what off the back half of the warehouse the a is would to

Will Furr

think about it. a to I think way that's

So we've got two things happening.

Houston come X, into asset, last that we the August period acquired the Houston the comparative business quarter. year, will in third First,

had we've have at of the later So occur impact. comparative And that have those is that seasonal loans business the do we from it we they $XXX an balances outperforming the naturally in will obviously expect close, bank, that declines will come as perspective. about in purchased flows national so When in quarters. business, average as and million said, warehouse and will then an fourth third

Michael Rose

you the helpful. pressure on margin What I guess, guys we rate to mean, then costs Okay. year? betas XXXX? get about into the perhaps And just do we back to half if for, think That’s Fed the assuming Thanks. of are or continued back deposit should cuts, I the And in going margin.

Will Furr

I again under on than deposit some think on the in will pressure asset the back side. side so the more margin year, of half the we be expect

we second costs in my the in expect peak half. I noted deposit As comments, will

that, this, reduce costs – our that competitors two Federal because, – lag we've reductions to a we're expect we'll market, our a deposit deposit – really Reserve rate as rates to ratios. current result competitive between especially the seeing peak There again, reserve moves clients will our within And internally. that is of we lag. We said loan and for actually ability have deposit for those will be what we and then are higher whenever will on forecast expecting and Fed a that's

their costs keeping They cause by growing remain deposits focused of that's will that, and lag to on a virtue higher bit. and need us deposit to

Michael Rose

capital banks to It we half a just How few in looks loan a pace deposit authorization just with the level. forward, of Maybe given higher should There's of on one like Texas. those me, repurchase. about of quarter. the used still think final Yes. this for you Thanks. share strong the buybacks ratios going guys pretty

Will Furr

$XX and be mean. I period. still through have open-market the to during run We we active Yes, they're authorization the going – million

Michael Rose

taking my Okay, questions. thanks for

Will Furr

you. Thank

Operator

question go next Please comes with from Michael ahead. Our SunTrust. Young

Michael Young

quarter Good morning. also underlying revenue good Congrats was the strong all that, across Wanted businesses, strong. to the looked expense very on a quarter. Obviously, was – off. pretty this growth the start but curtailment

of It start So can I wanted run rate color pretty dropped standpoint? like the more from to an should maybe that efficiency you about the non-comp-related provide good or it there? Any on expenses side. Is bank just a significantly. think looked forward, kind we down going ratio

Will Furr

is perspective place to are rate our expenses solid we efficiencies. on a the quarter in run Obviously, from continue perspective. start driving focus to think a I the that

we some rate. expenses of loss was in that significant pretty base are our again, the As we as fraud well expense quarter a But an noted we share kind that prepared run the loss two that of quarter from XXXX have both related as the no which perspective. items whether did noted line have second in the longer comments, clean

Michael Young

Okay.

talking you about? stay maybe decline see cuts expense Or of and think XX% will in on some accounting we do mean, of accretion I this NIM that forward, sort ratio moving the pressure with some paradigm? So pressure you offset could purchase efficiency the could are we

Will Furr

be not in, grow management with capital revenue accretive support – revenue about that. to at albeit the are be efforts to level will overall, NIM are putting that are will pressure expense efficiency expect think bank guide I is pressure, to talking and focus be the we do prudently, Well, we growth to but we under help some efficiency ratio, going segment our – but we don’t we to the continue

Michael Young

side, talk Okay. on switching fair like And of expenses broker dealer. you sustainable. looks expense the then, It Same bit And initiatives in maybe implemented fixed could that behind color just save there. about, to some of give systems? implementation just or that’s driving kind that what’s there? the the is that cost decline expenses question of maybe little the is the you’ve a dropped Maybe the a

Jeremy Ford

a Well, non-comp but probably as compensation. at a that I’d good other look elevated then our proxy is run the And expenses expense, were that rate. variable for pretty obviously related to

Michael Young

Okay. as you your there But XXXX, beta bearing there, And ability lower expected is horizon? deposit maybe of anything have cuts move that the the out we rate like interest kind seeing that on that or get It there. lastly of improvement funding you kind to if into are offset then in XX% on just structurally see some guys would we lag the of terms or a a deposit of had the side, XX% on you kind of side. sounded costs

Will Furr

No.

pressure I is the think that competitive continuing we as I items watch. tried say, really to to the are

perspective. But And footprint of of the deposits through in very to deposit is We the are of of cost landscape going what and and existing We’ve solid clients. banking overall very deposits are pricing we across new pursuing. our prudently a are so grow aggressive fundamentally market and in going position from are of competitive liquidity and acquisition looking to we cost relationships we a got the market. prudently kind terms expansion our to

deposit a slower a of of to costs lagged or provide some that Fed when extent will reduction versus the So moves. kind kind in

Michael Young

Okay. Thanks.

Will Furr

Thank you.

Operator

with next comes Our from Olney . go Please question Matt ahead.

Matt Olney

gain-on-sale back good I that for XQ. be morning mentioned I I the hear Will XXX Did And the XQ, a of discussion. baseline remainder year. and pressured XQ. margin the based It margin question. from off correctly? Hey, believe improved like looks wanted thanks in circle in taking could it to mortgage the bottomed for my that on that is

want outlook there. Just appreciate to your

Will Furr

Yes.

think in been XXX perspective, So we’ve QX, XXX. obviously from I troughed – last a XXX, reasonably a of and gain-on-sale margin range year to we

in of XXX, lower that and I pick so, with portfolio our spot. start to the quarter. are That the oversupply And single to if XXX are seeing we we rates an which in the marketing basis have what the as point in are something abated volume wouldn’t refinance the a increase and in or pressures that will percentages starting context moves as you impact then and mortgage in is, competitive officers seeing mortgage will just market, higher refinanced we the did yields in of materially. market see bankers not we second and marketplace the on that But a loan

to under through continuing pressure gain-on-sale mix are that we price origination call so really And see but we'll half. there, the margin that be our it's overall a of second to pressure

Matt Olney

onetime in it that And that, back it. could then considered Okay, quarter. got nature, benefit finance million $X as you looks had really like the noted, I to going structured be a business business, good even if still strip out that

how we Just million. that? the seasonal x forecast should to how be business the Just $X color year-over-year? about trying to understand sustainable that Thanks. that Is results a at are XQ looking any

Jeremy Ford

inherent million just But lower $X it's XX% so the gain. the a is mortgage quarters. the seasonally higher environment rate in it and had volume. increase mortgage-related second and the kind third an in a of business, is given second business, quarter And Well year-over-year,

and payment to good continue I that where the interest down year. housing will a pretty would think and rates assistant programs, have today I market this assume are

Matt Olney

it. Got

guys. thank Okay, you

Jeremy Ford

Thank you.

Operator

go comes question next Please Chris ahead. from Point. Compass with Gamaitoni The

Chris Gamaitoni

morning Hi, everyone. good

Jeremy Ford

morning. Good

Chris Gamaitoni

run kind of sense – the is start, you I a give of in us is today? Can rate target? improvement wanted kind there PPNR efficiency to much your current of how

Jeremy Ford

will throughout end that we review updates disclosed towards – every of at haven't provide – as that kind call. and of will on as We this fulsome make of we is a will year, top have noted, more everything progress. we day the those but with progress mind are it single of and our But do. we year in making endeavors Jeremy January We the

Chris Gamaitoni

seeing get where the maybe little Okay. sale X%; employment improvement, Generally I'm commentary. gain up banks seeing I'm seeing down last still me just across, that are not so a understand on to anywhere more. on sale pressure, are else help is apps mark, XX%. And pressure. gain on the back by was confused most year-over-year maybe there

Will Furr

I think shifts, hundred without XX% purchase volume speaking franchise refinance solid And that. within we market market, versus which as is and been what dollars. the declined seeing volume a can to the government kind origination our million we're – increased of of I business, a others have $XXX got see perspective, that, results, prior from historically million the and in has noted by that our as purchase the approximately couple you earlier, year we

and So mix that result you of bigger if percentage we under mix pressure see try of volumes The if call a mix, that, lower And which for by us. volume volume's that to as might a and again. then to we increase, government lower margin the expect virtue be the is that's and business even volume it's out. origination driver of volume refinance increasing,

Chris Gamaitoni

Okay. Thank you.

Operator

question next from Piper Brett with Please ahead. The comes Jaffray. go Rabatin

Brett Rabatin

good Hey morning.

Will Furr

Hey, Brett.

Brett Rabatin

thinking of because as – kind half part conservative on would terms would NII margin to like basically of it seem half like Wanted the margin. book get that, would you're balance the assuming half for the talk year, little the the of sheet that seem guidance the in second it go be you're conservative. of and like given tough? Can much loan and yields the the what a number back the half the is, back in of is you the then of loan pressure NII really guide terms the but and seems in the how of reasons expecting quarter on back about securities of it the on back the year and portfolio just deposits the the It just guidance back balance of about particularly we to is kind year assumes and top growth that, would given

Will Furr

obviously a say, acquisition change the note growth remember, bank August I’d from again in Well, in Houston a second of just the the reference half. period again the to will as rate perspective

expecting loan to just any. held travel the second yields, there around sale if XX-year materially your points. that's the half XXX here second and to in where are lower basis the leg, at has there's the point, first So for rallied Then we or given piece to so

to they trajectory – with in through half second of so trajectory year, expect continue. peaking we of are maintain balance their expecting see would on, are that and increase We deposit to the that costs that the the

portfolio, reset we do then benefit able related to the that's be that's that those LIBOR the – short-term Federal be a decline. to. within loan said, set discussion, from going as That to immediately. to noted there, from that lag the We or And as to come of to moves, expect see there's benefits adjustable, impact They expect we a for reap on rates. will to don't prior they of necessarily Reserve's kind Fed any month are

pressure. yield of have So we'll kind asset

We sale, deposit up we really lag and will going just more market for held is than and have yield implication, think loans then there, which then anything. lag the again function a

Brett Rabatin

had broker-dealer pointed again everyone part has obviously out good a really that. a and then Okay. conditions the market Fair are of that enough. And quarter

other we forward, over talked about that about to versus the period you around the business emphasize you priority time guess, about give As as want bank? you some think versus Jeremy, to about of the Hilltop? us I Or of pieces going can but over and is continue that color longer that margins some how the a think we commercial you of business something that think time, business

Jeremy Ford

And a all suite amount I'm and tremendous deposits Winges for him has with continued the provides growth. fee what And I similar income. of the diversified on $X the excited think It team. way it bank. about works business we're leadership billion I to provides that think really they're of model about prospects in also do working of Brad the importance is the

Brett Rabatin

Okay, Appreciate great. the color.

Jeremy Ford

Thanks.

Will Furr

Thank you.

Operator

next Please go ahead. a question question The SunTrust. from is Michael Young follow-up with

Michael Young

Hey, thanks.

similar loss in Just on last pretty to good to quarter, saw of follow-up insurance what the Obviously, business. we wanted experience more terms year.

the ratio? expect into in similar trend in have quarter third may there? losses should a an terms kind of what thus quarter on picked wanted Just to a outlook terms at of combined get be in all of or up those we If the far year-over-year third happened

Jeremy Ford

had with hit thing, the we well But it of me, in you think it. and can reinsured that's you for that similar historically We so comment it kind I far – we're we patterns – third would July. in the for can’t as the hurricane, loss well overall expect anything similar excuse quarter happened but reserved on know,

income. year So I – when and think for half pleased and were that its is profitable we the year perspective year-to-date makes second in this and business, it typically midway of at the from the through,

Michael Young

kind either you've I look back picture bank whole there? think a opportunities then there, your And before question just part out smaller at big or willingness you're the seeing lot more shift M&A, just Okay. one on any larger deals. if that in not of more on or to commented conversations Any any curious of environment

Jeremy Ford

Sure.

I it's up we the deals this has think, if that was on are getting quarter are deal getting week, we than for of that, franchise announced trying will on patient. and some they we're Legacy. so anything Other since enhancing. be do calls obviously, smaller were better big what some and our positioned for see focus deals earnings that inbound past that, the and evaluate been and couple to we'll and Otherwise, our Prosperity that's

Michael Young

Thanks. Okay.

Operator

now is Thank our The question-and-answer session. for concludes also This presentation. today's concluded. you attending conference

You may disconnect.

Hilltop (HTH) 26 Jul 192019 Q2 Earnings call transcript