HTH - Earnings call transcript Q1 2020

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Operator

Good day, and welcome to Hilltop Holdings First Quarter 2020 Earnings Conference Call and Webcast. All participants will be a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded.

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

Erik Yohe

good and morning. you Thank

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

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

statements may Our in a due quarterly actual SEC. those the these capital most materially results, and the our referenced annual filed our recent and to condition of statements differ including financial today, factors, included variety in with report report from and precautionary discussion

earlier statements a new extent of the as by information. to expressly required update disclaim we result Except to law, any obligation

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

I Jeremy With CEO, over our presentation to to the turn and like President Ford. would that,

Jeremy Ford

Thank as earnings We the that you, has and The morning. and you healthy families best pandemic call. you your are can. current hope our since COVID-XX Erik handling good changed and last world

the Before to pandemic to quarter, through and getting actions spend of have the organization's into taken. like our some the I a approach would results for going few minutes we the

to worked we operating onset, the business hard have the company. Hilltop continuity Since our ensure of and

the and and resources remainder need into execute highest our critical XX% customers and with safety employees, ensure working are employees and of X,XXX an from have and functions. they appointment offices home, nearly to ensure have still with to currently and families on to unique to customers challenging our meet the basis this Our their our during period. approximately coming branches priorities been access Of

presumptive Have families. any for monitoring COVID-XX extended and their employees procedures shared across all our positive maintenance cases We locations all to organization and enhanced across benefits our positive cleaning cover COVID-XX health are or testing locations. and have office any and

facing and We the am leaders have with lot current responded. their business proud of situation, I teams how of territory our are but a unchartered

like our employees for time. As would during and well, the to commitment I courage commend their stressful

Slide to Bank XXX XX Moving with for are of along mortgage all currently at drive-through XX our branches, Almost with lending are XXX service X, to still branches are of employees certain PlainsCapital functioning multiple our appointment those so not we have situations. clients branches open. introduced relief fee of capabilities branches are able still XXX% fully ATMs Bank their the and and associated remotely. for open

loan We are case supporting and deferment basis with modification a by case customers on different program.

or million senior with all payment requests deferment of require As and to with over restructurings a need have we in credit safe XX, April help more XXX deferral was the must officer at equating in the to loan $XXX least clients worked approval. pipeline. Notably be

in and protection SBA loan. registered to X,XXX over We equating with to million execute working the applications, program $XXX paycheck are the have

and employees $XXX for around X,XXX as working loans these bank last Our million. of clock that we nearly loans funded processed funded. they're get to to had the Friday, And

local our – small average for our bankers of that an funded the drive businesses that XXX,XXX the community. small Given size loans, our truly loan communities are supporting drive

close we that pipeline for an have $XX the as process of to aim we additional approved newly well. the program, With funds million to

position in a and the believe weather conservative into prior the made economy lending to strengthen capital Although, we a economic us a approach recession, decisions our preparations to scenario. our even entered and liquidity recent severe has strong alongside puts

to as of buffer. level, $XXX with including million million capital respectively This consolidated $XXX equates conservation respectively well-capitalized of and well-capitalized and million XX, $XXX Hilltop are capital approximately the million defined and Bank excess above $XXX XXXX. of PlainsCapital regulatory March

to bank's management our The for evaluating of Securities by has held-for-sale. increasing Hilltop From perspective, is is broker began liquidity then deposits, bank actions additional ratio our loans liquidity deposits further the funded February loan-to-deposit position a of and raised availability funds strengthen by which including and suite reflected our in starting since deposits. primarily in XX%

as at billion in XX, $X.X XXXX. with just utilization maintain was we only available of billion Bank Additionally, Home Federal under of of the $X.X borrowing which capacity X% a Loan March

is of immune pandemic a and the a bank Texas and position in today impacting impact rest than country. orders the are markets perspective, the to quarter. the stronger late began credit the liquidity be shelter-in-place issued from pandemic first when From We going no the this in of around

created Additionally, economic set the Texas. in of prices oil challenges has decline another in

and our are to a and these in unable level volumes we to and forecast the earnings, business do have anticipate trading higher While will the negative credit for our potential mortgage lending we portfolios. accurately impact future impact losses and reduction on overall purchase a of

Our the has of current quick businesses. across coordinated our well all been response to pandemic and

is and on people focused management priority. top make of borrowers at-risk mitigating later portfolios From and environment. sources with customers our on We our industries in excess this scoped our them taking during perspective, energy funds our challenging and a provide to of actively Financially, are and and we risk capital our are as our loan we additional those and are to that monitoring are well presentation. Will positioned going accessible. impacted this care work details and we'll continue diversified we with have

first the challenges our first were XXXX from million very an QX Now example the XXXX for $X.XX overview net the quarter diluted results per economy market, positive good the XXXX per for share. Hilltop moving model. increase We reported or a diluted $XX.X quarter of $XX.X business $X.XX consolidated share and million of our of first and of income Notwithstanding diversified quarter. in X, Slide in the provide to I'll for or

company, X.X%. are track HTH X.X% the these Return Lloyds, on equity our quarter. for consolidated on average period was we which and second in note discontinued we operations National results the Discontinued operations the called remains out to believe on insurance was assets average close have Please below. include and figures return

PrimeLending, volume $X.X At compared the billion, quarter increased to of XXXX. mortgage XX% first origination

volumes diversification Having is decline push in PrimeLending businesses advantage in strong fee environment for the and rates tremendous up. standpoint. refinance a a current earnings like As Hilltop and us Securities from of risk the

by the X% National Average the by to lower quarter loan of growth the market. Lending in refinance was and prior Warehouse positively was mortgage that year in driven rates impacted compared increases

has mix of grew with $XXX a adding non-interest from deposits QX $XXX X% average in interest-bearing $XXX deposits, QX in and or by million Additionally, deposits year-over-year interest-bearing XXXX. and XXXX. million Growth been million

the experience January At accounts. reduced limited positions pipeline. mark did the across mortgage from and and but valuations particularly and impact managed on of industry the strong Hilltop March, businesses, Securities, both high we In the as market a asset February TBA uncertainty proactively were increased, significant

offset the Overall, the Finance fixed income and business. quarter wealth declines management strong in businesses Structured that had

quarter, XXX,XXX $XX authorized $XX shares first total million of year repurchased the Hilltop the for million of XXXX. full a During for the board

notice. buyback we the will the fallout further until activity suspending from However, COVID-XX, be given

the where we continue a That credit said, there recommended CECL. and very prudent On of level the change monitoring been the and has rapidly the are the is is virus, management at at the market have we been maintained this year, resulting the no this of X do so to coming and beginning in a dividend volatile from Since dividend year, economic impacts, over time. changing quarters. to assumptions introduced January will while

much in assumptions XX, will Since XXXX are March of as project months losses later improvements out million. credit and many with over to like $XX next year. a of increase was deterioration coming a for scenario allowance new use significant coming Our the million, had model an accordingly. the we continue others $XXX few We

detail later and through process We and in presentation. further credit portfolios provide will talk this CECL on our loan

total Moving decline HTH loss to first consolidated with million for income The primarily quarter and is provisions. in bank's $XX pretax to $XX X, for the XX% over loan increase million the last year. Slide of attributed quarter income

efficiency a the Work quarter. within had optimization around NIM are and and continues bank the balances XX.X% branch progress Aside to a the income the done asset was from banks Though as declined XX.X% ago. from we under nice increased increased overhead ratio and net pressure, expense, seeing improvements. provision being interest year bank to meaningful

program his customers working to mentioned of PPP the on As demands from the and government’s and stressful overall time. the during of high. the bankers Gerry all the been has I'm very our very earlier, people leadership team support our placed introduction pandemic the proud and

quarter, PrimeLending decline past Compared volume in is March. unprecedented has quarter, of of weeks the people bank increased strong communities up what year end to volume our few the the the applications Texas. accelerating stepped PPP XX-year slow and over for throughout a historically mortgage The as to our support small businesses the have across and started been into

asset. Pretax income to products XXX of increased of certain margin standpoint, stable retaining servicing selectively loans the and basis gain-on-sale a from of points. long-term business focused originate first relatively a is XXXX, enabling driven From our by as million model mortgage higher $XX building quarter risk on us volume opposed mortgage to

Market for XX% a million relatively increase the volume. and of XX% income $X.X The higher an volatility is the pretax portfolio or drove reflects dealer for by reported size annual lines. result, margin a small $X.X in multiple servicing our year. revenues prior an our billion our business broker and originated from As period approximately quarter across in

a continues good has job the daily liquidity been from arise the at been as risk months. leadership market past needs dynamic few do this to Securities Hilltop as that that has Our and a managing team of over

improved National led improved lower in experience an XX.X%. of loss LAE year-over-year as Lloyds loss income ratio underwriting to

portfolio of on in market take million, did NLC with losses equity its broader decline However, the mark-to-market consistent March. investment $X.X

are the quarter we our performance pleased facing first considering tough Overall, everyone. with conditions

a times And in We have a a have balance invest low business diversified have with conservative funding such strong these. we a that supported as sheet a and cost continued and model. diversified lending strong of foundation for to model we history by

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

Will Furr

Jeremy. you, Thank

to items started, during review few a the first our get I that impacted quarter. Before presentation have I want

First, moved of closing and discontinued towards that National operations business. sale of the pending Jeremy continue steady as progress we the the mentioned, Lloyds have we to make as

or continuing presentation, the consolidated footnotes refer Please references operations. for to on each the slide the to whether for basis

January over on accounting capital impact X, presentation. to as the is elected election five presented we we impact face reflected CECL, that this have years new Secondly, the any for credit losses. of standard this our adopted Further, throughout in XXXX, and adoption ratios

on start Now Page X. I'll

share. diluted for attributable from coming Income to of operations Hilltop reported income equating discussed Jeremy equated the first to million, to diluted of attributable $XX.X consolidated $X.XX net $XX.X common stockholders share. per stockholders to million or As quarter per XXXX, $X.XX common

quarter, $X.X versus or the the of Lloyds PPNR prior operations of pre-provision first $XXX originations. period. year versus which by Growth quarter, by generated and During strong revenue diversified XXX% National the our mortgage generated revenue Hilltop first $XX million the earnings net year increased continuing was streams prior period driven led for million. million during by

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

Tier pandemic, on equity strong X surrounding Hilltop’s and of capital As Tier phases of uncertainty remains leverage economic which XX.XX% the with XX.XX%. early ratio position the significant entered ratio has period-end a brought growth, common of X we

moving Page I'm X. to

CECL previously the of increased XXXX for into portion by our $XX.X the that allowance of credit Hilltop noted, that the one during purchase the first and million being portfolios remain of transfer allowance credit for a as with largest adopted losses. day to discount credit result losses increase quarter As adoption, on

reserves, impact our Houston with $X these in credits: during combination noted totaling capital other energy recognized real March contributed day day certain two of one to deterioration, as The in during deterioration was the approximately assessment quarter. one $XX.X The portfolio in portfolio. the the two the loans of specific X, Further, million Hilltop transition the the million. and

related portfolio, significant driven include economic all a the the by economy deterioration allowance credit Hilltop assessments acute related the during as quarter our recognized and losses portfolios. pandemic the and principle strength of of energy first for also the price building qualitative of the oil declines significant which factors, to our result Additionally, to in in

during into during the Further, the X% pass and XX% revalued assumed and assessment of then by during and to economic during stable quarter approximately to Our unemployment approximately approximately X% XXXX a third more grow rise begin second quarter that the the quarter XXXX. presume GDP the rebound fourth of second at quarter scenario fall would would would XXXX. would

our net for million during for investment the total, losses quarter. loans million of the expense in deteriorated. recognized our credit in $X.X portfolio, loans the to provision first for related off including investment estimates negative weeks, net impact In have allowance held of resulted increase of Hilltop a $XX.X charge of market held million. pandemic In $XX on the for recent economic This

economic of additional If case We our critical as continue a credit to the our that metrics economic the number data as portfolios quarters. in the both impact remains it the credit from reserves actual outlooks continue to the our the may outlook coming determine deteriorate, monitor to and well on performance require for sources, reserves. Hilltop of

future interest allowance $X.X quarter economic first shifts equated the one period the year reporting given to the losses As accounting including we've purchase to X%. be from in previously million or net by for million million, mentioned, I'm quarter prior income outlook income Page Net increased $X versus expect in credit turning noted, that of bald accretion to $XXX the the X. significant could in we do another. interest

income XXXX. average higher was quarter accounting offsetting decline including versus loans assets of first by Somewhat a driven of interest was held million for growth, the net accretion which in $X.X sale purchase

XX% and the XXXX loan These federal Fed competitive HFI expect previously as basis average to reserve decline the lowering accretion Federal to the ongoing We purchased target the have average the balances loan accounting the declines by XX quarter loan rates reduced respectively. the points, range will of pressures. fourth funds points. HFS basis decline. the has during in loans to of versus to reflect XX and yields X quarter declined basis continue yields the balance continue by both for yields throughout XXXX, Further, both points raise of purchase the X Reserve and The – of first

$X.X will of This their floor decline portfolio, loans portion additional or currently $X.X cycle. our a In loan rates do our these contractual or billion are expect to floor their balance help loans. We billion that the resulted rate loan and income floors. this provide in rate contractual loans falling our XX% at net in are rate stability throughout Of XX% levels. to contractual interest variable variable approximately value

points lower interest continue of lagged XX manage Overall have basis the bearing deposit this bearing deposit versus Interest the we quarter cycle quarters deposit costs through of to betas decreased early the fourth quarters. coming costs and over XXXX. rate to expect our

loss will held During do year. same elevated $XXX elevated second the levels. billion quarter period these March, average the balances mortgage were first by quarter, million versus increased the the seasonal We as of loans remain normal XXXX $X.X expect through prior loan of for versus sale substantially

of Moving first to quarter for $XXX XXXX million. non-interest equated Page XX. the Total income to

of billion, locked during XXXX, record a first the to equated quarter quarter $X.X first quarter First which $XX related mortgage PrimeLending. for and was as the increased by income versus fees million mortgage rate

refinance quarter volumes increased banking volumes, which first of driven our volumes the year and remained drove XXXX, both and the our of outperformed and or expectations million environment increased versus in demand million prior business and lower purchase XX% mortgage or mortgages, by $XXX During by refinance mortgage purchase for strong $XXX origination principally by rates, mortgage terms improved XXX%. quarter the

activity of the volumes the result strong, fees the higher in margins lowered structured our same and compressed marketplace, refinance a additional mark-to-market commissions the improved unrealized volatility the overall ticket income as X increased year $XX prior points, by million versus primarily period, year other loss by secondary the mix quarter the the margins. were related sale the Security during to driven and our as pipeline by prior mortgage million of finance and volumes versus of $X on declined basis period shift the volume $XX While million as by year business. gain approximately prior versus on percentage

functioning across for the liquidity during limited normally market particular, pricing period. If has been there portion moved In mortgage were including sectors few unrealized our are change the very mortgage certain funded, weeks, a dislocations pipeline loans in as significant present, of loss. to over While this significantly were were business. our last periods these causing value materially product stabilizes, we could the pricing more recoup

an versus to compared of Turning quarter, fee of in increased from the by year Non-interest the strong was were compensation period driven $XX the Page in variable XX. in approximately in growth prior prior PrimeLending increase $XXX Securities. $X.X compensation expenses and to growth the year year the period. expenses to by same Hilltop revenue million or in The linked million. variable increase million, This prior

Over continued progress driving market businesses to have the current and past efficiencies eight allotting quarters, and the make to conditions the across franchise. we our

efforts, head compensation, turn the we to count, services progress and professional initiatives. marketing these continue For lower efficiency non-variable and make costs our against as development expenses

During to million costs incurred million system ongoing of of $X.X on spending related quarter, core $X.X the first Hilltop improvements.

and stages the to the moving PrimeLending bring new are and the implementation of We implementations final value into growth profitable significant loan will at implementation future. of Hilltop the Both these system Hilltop Securities. franchise origination in of positions new for our beginning platform of the and

to contributed Loan quarter, and including accretion declined coupled market continue rate of portfolio. with rates real XX. XXXX throughout X% and XXXX, average loans lending loan yield growth lower for by our first driven was decline. Page year versus but business the held the investment growth grew the lower prior the purchase rates, noted period that of Total in the in as LIBOR growth and versus Prime in warehouse to first yields Turning the by the estate mortgage previously quarter same to decline

the market and XXX as be quarters PPP sheet. will yields that basis that remain expect to in yield the do loan over $XXX rates pressured to million at coming we had continue We loans low balance points

but clients loan loan stable, greater of are commitments clarity new into remains funding delaying pandemic. our many the pipeline of Lastly, new impacts the economic until they pricing and have

to Turning XX. Page

we charge-offs and right During equated annualized X million the nonperforming total the remain low which net loans. loans basis. quarter, the that during loans an have HFI to the increase $X.X significantly quarter graph, of related In upper on assets of and impacted or increased points basis of The nonperforming the in first quarter. certain deterioration a to CECL quarter, is the adoption note during

of CECL were of prior as million increase impact grows the into $XX accounts the credit up and adopting were was credit for First, the moved with allowance loss. discounts loans discount associated

Secondly, credit we to transferred energy-related credits the moved decline and prices the during X.XX% these combination, pandemic increase. million deterioration significant the significant In in from Houston real non-performing the nonperforming. of in accounted losses $XX bank for Hilltop’s for combination allowance the on estate held the credits during an to properties bottom that quarter. the increased for to investment the experienced credit In into graph were to of oil right, quarter. loans The

response end March. market. $X.X from and balances the February market Further, billion Securities takes suite million during our brokered Page its liquidity from activity brokered of the in the as and March, increased month expand of CD I’m Hilltop again implications the wholesale to series of to XX. money during to the to turning pandemic, mortgage steps PlainsCapital to funds position $XXX the was strong secure In quarter. our well able of to treasury team uncertain prior as Hilltop the

increase are have through It the now notable of the These cause deposits and early weighted for cost XXXX. points, the while that market deposits brokered nine average have basis a equate and the interest-bearing billion. month average across and bearing pandemic of XX a XXX first non-interest during approximately money time in to grow The six, points continued approximately to of mature of basis funds actions the is substantial the quarter horizon. XX is weighted three, CDs stages $X.X cost

XX. Page to Moving

those steps quarter Hilltop substantial and As into increase continued noted steps took earlier, the liquidity during to April. first

or As approximately to and equated PlainsCapital’s total $X.X billion assets. XXst, XX% cash borrowing of that of securities March secured capacity

our improve flows. During April, and deposits liquidity we experienced to by additional deposit securing have positive worker client position continue

I'm XX. moving to Page

as The PlainsCapital benefits During the the pre-tax results income first Bank reflect as of warehouse quarter XXXX, during the of $XX.X generated million well lending, versus growth solid expense national the in quarter’s prior reductions quarter. of year.

by reserves the time. credits previously two unknown with and benefits to the we the impacts, In noted at response single deterioration of these the related the by associated credit However, PlainsCapital Bank CECL to offset retention were suspended substantially as of impact adoption. have mortgages family and economic this the the pandemic

loans clear, $X.X our most To as outstanding. provide further In pandemic. represent XX. segments XX.X% an that may additional Page segments clarity could portfolio table loan the the loan enhanced the provides becomes time, in Over pandemic PlainsCapital, Turning of total, believe be we portfolios non-energy of with these add the assessment by overview the or billion this we the of reviews. to rest impacted

or in other our exposures, pandemic, any to while principle Hilltop’s is challenges and balance capital them prices outstanding protect challenging as these managing well to working circumstances. through these unforeseen the priority as related help with stress loans other customers come Our oil that to the under

are to may healthcare stand have in. and Act, and alternatives they supporting that to we they've Cares assess to other enhancement whether as worked our act Further, clients PPP

the provided with of Further, and in As to as balances payment of payment coming processed number in Jeremy of forbearance approximately continue PPP with million mentioned deferrals deferrals earlier, we loan $XXX it do million we approximately the April expect have will requests $XXX XXrd. borrowers rise of quarters.

XXst million allowance Hilltop these for X.XX% or credit the $XX of loss maintains an on outstanding balance. of March portfolios of As

I'm Page moving to XX.

periods, prior had experiencing the energy the pandemic otherwise well United the States. challenges been the While sector struck pandemic that before impacted portfolios of performing were the in has number

$XXX In XX represents of the energy and current million of $XX As $XXX provides outstanding Hilltop's such, exposure of balances total, of million million. total commitments portfolio Page portfolio. unfunded an energy overview with

concentration credit with Hilltop four X.X% the the energy last to bottom the has exposure Noted the progressively to reduced of sector in the of years left graph the X.X%. over page, at

$XX.X million reserve, earlier, a As quarter. we we the noted large services credit during specific a incurred

March XXst, to as credit losses the balances allowance As these outstanding or portfolio. on equate for of X.X our $XX.X million

to increased Turning by driven XX. XX%. prior from billion profit or first million $XX.X PrimeLending of the a strong the volumes origination year XXXX, $X.X Page quarter of generated pre-tax for that by

on during gain the refinance. margins earlier, quarter sale driven compressed the towards noted first versus shift origination by year, As the prior in

During activity the XX% total expect levels. Further, that refinanced of the refinanced originations. remain that the second period, portion are originations transactions represented will we of historical quarter, during elevated from our

While focus consistent and overall expenses were operating back staffing the middle in waned not volumes has elevated on around the PrimeLending platform. has order, efficiencies first the as rigor office across maintained other and

challenging origination team some has growth during quarter. the circumstances delivered Our under very executed profitable and first mortgage well

as month progress the on Moving in in performance made March. improving in a the of of hedging of both the generated The markets able Page solid team as our risk negotiate conditions years dislocated. profit to last In specifically million the in our XX. capabilities, revenue were liquidity, the $XX pricing management quarter, quarter Hilltop fixed pre-tax over this and we've aptly management, terms to demonstrates income as focus Securities services of first challenging our become exposure XXXX. well of delivered when traders and few growth

to and volatility debt was and the reposition net Also, revenue the retail trying their equity grew quarter. wealth business the as delivered markets portfolios, growth management during

incur pricing March. interest quarter did during net and in business negative As pipeline million $XX substantially moved unrealized rates we’ve as structured of finance earlier, mark our the noted

structured $X be volatile While our can remain can remains It important this significantly clients disappointing, negative results and very structured from market our loans period. volumes the spreads of and and during approximately to supporting fixed business active supporting was billion of to as mark their origination note businesses quarter. the rates, from period the finance income finance mortgage change

severity introduced that Underwriting moving which million of versus losses. the in and frequency securities substantially lower claim-related activity underway. as Page in million on excludes well $X.X to the optimization been $X both investment the as the offering the storm reflecting equity as and in year certain mark-to-market National its pre-tax XX. product efforts of held portfolio impact income, quarter, losses the losses of the Lloyds recorded portfolio, and of Now streamlined business period, completed prior improved have profit

XX. Page to Moving

of related And the the economy, how to pandemic, uncertainties be linked success that we focused XXXX control. guidance year rebound managing while Given or economy we the delivering our specifically on the exactly to clear which timeline time. rebound, will full outbreaks. We it the virus are those believe the surrounding will is directly at the in we withdrawing subsequent against that this can not remain and items

We delivering our XXXX the We are clients committed to the our growth the has all. ongoing and our that through unprecedented to our against of executing well commitments. presented as work us safety helping initiatives associates and clients, remain pandemic committed as challenges platform our efficiency and

are business a risk focused profile our improved growth lines, while on we long-term shareholder delivering value. maintaining and Lastly, most across moderate important, delivering and

and Operator, call that time. at turn concludes our we'll this over prepared the for comments Q&A

Operator

you. Thank

today Please the will question. [Operator James. Raymond of now Instructions] Rose We with session. question-and-answer will first from Michael question your proceed Our come

Michael Rose

are guys. How morning you? Hey, good

Jeremy Ford

Good, Michael?

Will Furr

Good morning.

Michael Rose

Hey. in we on looks like Can some Will color Jeremy. they jumped this fairly non-performers get or Thanks. meaningfully. the increase Maybe It for quarter?

Will Furr

Yes, to so I – note. principle occurred. try as had I things We two that really

losses, portfolio really the $XX.X up had allowance of that the change we our credit of we into that I the the the that's related inadequate into prior for were accounted specifically by, other oil of and gross gas the the movement increase, relationships into of non-performing in the we item $XX million discount you balance reserve go about one non-performing, in the as in the and And with specific that for $XX as did have take oil gas then for CECL, my and moved comments, $XX million specific were the non-performing two million First, real to up that then, loans, sector which million. loan so driven know, moved did adoption and about noted to Houston estate credit. in

So…

Michael Rose

the give an of appreciate like the and exposures. I then percentage deferred provided are on that? on color what And risk statistics that. categories Can then terms or missed at I you and in stuff if that what kind update non-performing sorry the of like there look us Thanks. I'm are percentage guys what you Great. maybe credit

Will Furr

March days, emerge as many think through first, not their as not cases these some in March the the early I’d extent in pay to in and the had portfolios we're delinquency seen their early April and least some these seen through we we've significant even we're evaluating April making payments. at in I customers portfolios were

We deferrals, think, to it have relate false working at time through, a to we're we through had got that we've clients. are we the would different and because with odd of I our million a as XXX many we're unfair those through working one be working be number requests

to deferral the in So to relates updates we'll provide as portfolios. continue delinquency as it as the levels, well

as of work gate. But of required continuing through mitigate of coming received of customers been contractually we're we help to again, with April, preponderance even over as for payments the clients to of kind circumstances day have month. out deferrals again, try has the set were an last every unprecedented asking the those And for to who what

Michael Rose

the XX%. all we floors wanted one you that the have just to to the PPP a just I flow And the assume anticipate know that pressure? the is quarter I to through color rate it appreciate purchase core fees Is to given you down of of had tough to will from increasing Maybe that XX% and secondly, helpful. on more last PPP number But then and margin assume be expected That's the I some without guys and margin specifically and think the margin? should me. with touch cuts, just mentioned kind program. for there. fair it you the fair

to intact? just So if still wanted see was that Thanks.

Will Furr

Yes.

So a XX%. on to commentary page that going are loans we our running the that's to not purchase XX XXXX is we decline, accounting to schedule on and Those off decline accretion basis. expect slug, reaffirmed on XX%

as that to expect continue our period. as over I’d slower loan pressure well would We PPP do growth yield about this be. of as perspective kind take are we net curve are also, new as an from coming a decreases perspective, imagine in customers XX they income month but at flat a seeing down as pretty from you'd given you expect the to new rates, reluctant mentioned, on both point loan would outstanding asset And say on falling the relatively interest based credit I yields,

as So income, interest flatter both those lower yield forward. net will going prior And PPP as as rates on going net of income interest levels reflected to a be well asset amortized from but loan. are yes, and fees put will kind otherwise pressure the through curves be lower outlook,

Michael Rose

color. I Great. the appreciate all

Jeremy Ford

you. Thank

Operator

next from SunTrust. question will question. Our come Michael proceed of your Please Young with

Michael Young

morning. good Hey,

Jeremy Ford

Good morning.

Will Furr

Hey, Michael.

Michael Young

business. a on to Wanted just the start, TBA as follow-up

Because mark-to-market million I Can that? the detail more expands. typically fair XX when that year on provide guess value any rates mentioned $XX You down impact typically there. you move

then So thoughts you just wanted where to and quarters? see something if in idiosyncratic expect to was be there on subsequent any would that

Jeremy Ford

prices delivery were in – we certain the we have when that kind under pipeline declined that water. hedge is, materially, fixed the Yes. prices cases of was – What occurred

nuance that's So the there.

we And which as each both comments, municipal as month prices as becomes of specific constructed I and unrealized and the prices We more relates as some it recoup – mark throughout of more certainly I trading rebounded recovered, have quarters. to mentioned, mentioned could through second of the trading more think that I and pipeline have third portion As activity constructive. my in that seen, we mark, was April, terms become have constructive in day. overall in as mortgage

Michael Young

Okay.

I there So you're would not expect you there really a that rebound capital. be because hedging hit – and present to so is and before a there, then unhedged valuations then, to it seeing was thought you're some

Jeremy Ford

Yes.

day. authorities. a value for because loan that the March in are contract this And we’ve the was We housing that heads, XX as providing impact at and hedging on at of was the had gains have – you the snapshot a later a take we purchase a to the past,

Will Furr

agreed to – – a reiterate, and priced of we have hedging is upon for our bonding. are that we delivery kind of those then pipeline it – hedging are So just have securities we we clients

Jeremy Ford

of this phenomenal in and of part starting just kind of on really – exception a Hilltop did and as And Securities lot the the they February had with I this quarter add we the the And environment. to market would to continue we through a pull until and do exposures things we're our so and think hopefully the stabilize third be to going in see for environment the I second and back future in cautious quarter foreseeable more, so quarter.

Michael Young

than pretty the episodic or is revenue in that Okay. one count expected, sustainable is that expense Hilltop just down were is that number? in the And considerably, Securities, something there on another maybe better levels

Jeremy Ford

more function the a think it’s a as it revenue than count else. business, anything of is really been I that has makeshift of down, in

Michael Young

about the that due and ability you Okay. maybe then that going that the impact kind lastly sell that's talk within servicing And the I to And the servicing just also on assume you're going of assets forward. servicing market of you mortgages to mentioned build then just you service? portfolio. dislocations just Can the to book. deferments

Will Furr

correct. That's

it's did sale a I few first about slides. a in of value. million was was in $XX MSR months that which think So of worth noting we the We our positive noted the and execute quarter,

closed on So behalf. $X.X with worth we million assets, assets reflects all have our billion serviced those kind which of about the sub-serviced a MSR, of quarter $XX

– So [indiscernible] we the a with we've a got that arrangement. there said, are sub-servicing is

forbearance monitoring request. are We

advances were loans to they are I at think provide otherwise of servicer, X% and in payments. behalf of have service on we or advances advances been forbearance X% those their those primary have the to would make between watching also And portfolio. that the we extent didn't –

would that And have as liquidity a we exposure. result,

this we'll we’ll we we'll reasonably watch and view note of – and it's material. as – as a something At manage to such. manage that continue it it it note time it sized become have We to

quarters. we've servicing of of of willingness I the market, challenges. in the challenged, retaining environmental due expect large what second as a we varies providers the servicing. a for to be our execution portion traditional think and portion space overall of of on And originations obviously, call In to servicing purchase dislocation forbearance XXX%, seen it result, provide and in dislocation the over quarter has been the significant just servicing to the pricing I other to as next pricing with rates, in would of kind terms And and a material servicing pretty couple

Michael Young

Thanks. Okay.

Jeremy Ford

you. Thank

Operator

will from with question. question of come next Brady KBW. Our proceed Please your Gailey

Brady Gailey

thanks. Hey Good morning, guys.

Jeremy Ford

Good morning.

Will Furr

Good morning.

Brady Gailey

So could you those Houston-based two and more real what loans are? give went bucket, on type that maybe CRE us estate little the size non-performing into color the of the a

Will Furr

million the buildings total about again, with and size loans. aggregate They office $XX were

Brady Gailey

that was what's or going And energy on related Okay. in to unrelated?

Will Furr

I think impacted declines the Houston by is oil and being price overall demand.

kind tried but little So put specifically way. had different, portfolio, not we're call calling a if to – will, reasonably because portfolio, you related in being a energy out in as impacted aggressive particular is we of by we bit the pandemic our our energy Houston both that in

much So was it's hard much to out combination oil the in driver, certainly tease it of absolute it how the was how the deterioration those material pandemic a But quarter. and prices. of of drove

Brady Gailey

that a on Is roughly PPP I fee up? the Okay. where then loans. roughly think X% And most have been Hilltop's earning banks

Will Furr

estimate. I think that's reasonable

Brady Gailey

buying Ford And of priced just of some assets then pretty attractively has stress uncertainty. right. Gerry and times Hilltop’s track good All record picture, over decades during a bigger Chairman,

at look have Hilltop you clearly today, you excess capital. If

excess uncertainty? after think the you company the years struggling buy the more assets, next about You'll do couple just opportunity of capital given buy the have to insurance sold. cheap even the to is over How banks

Jeremy Ford

first environment be the and going continue think be And aggressive. we're itself, to then I work own to and patient presents businesses. when to on very we're our foremost, going

Brady Gailey

All guys. right, thanks

Will Furr

Thank you.

Operator

proceed next come Compass of Point. question Chris Our Please will question. your from Gamaitoni with

Chris Gamaitoni

guys. Good morning

Will Furr

morning. Good

Chris Gamaitoni

overall average CRE for just what on the LTVs you your Could disclose portfolio? are

Will Furr

of not we've relevant. and think other on the specifically going to XX% to in the going underwriting package, the range. we different about be out range. hotel in restaurants, you ones be largely as better the a about work of we I'm kind – through the XX% is LTV and our is the both give underwritten. in better. for portfolio XX% I it's And LTVs the From materially our perspective, underwriting kind But it's to called XX%, as But think max think referenced certain kind for it's XX% is of going that's way and to it asset to classes, then certain retail

the than price, to underwrote call been those is has point. discovery significant the going And reason had give we out it this slide can there event liquidate And actually we the at and go go through assets. there's we price give this I it that for LTVs dislocation the in what be some rather kind as of here we reason on is didn't you what of the you amount to price you a through

Chris Gamaitoni

business in term? moving purchase wondering sense. to Okay. makes business, And focusing very PrimeLending historically is on more how has shifting That to standpoint, from been mortgage immediate focused. refinances a I'm the the more marketing the

Jeremy Ford

it's been I given. just Well, think what been market's the

refi to being veterans when and advantage I in going nature able are think as been of has that take that purchase sticky the markets of it add So, nature are like our markets been, well. focus of embedded is the real business to not. they're refi the communities when industry being the And that

Chris Gamaitoni

could you… you gain-on-sale I how was give margins, Okay. wondering And saw any you if insight into how

Jeremy Ford

minute. lost a you Sorry, for Chris, we

Will Furr

think you… I Chris,

Chris Gamaitoni

what looking Fed Yes, April, they're I after margins bond came asked through this market the and gain-on-sale in the month the changed? like

Will Furr

through in Yes, I think improvement month margins of have we seen the a gain-on-sale April. constructive

We kind performing can of market to the and on expect continue through that what we QX how based is today. see

gain-on-sale So a little the margins here we do more have think constructive market gotten as stabilized.

Chris Gamaitoni

need are very issuance to debt, over seeing next year? And of thoughts your weird level All there situation. think business Number a last municipal just any the one, like in look bankers wave? finance is right. the be what Just one delay will less due what Obviously more we're debt, right municipalities big you high now? going a on in

Jeremy Ford

start the expected be deals the I strong. the remain a year weakness. of central for well. we March had has going until do pretty bond and the then think do notably stability obligation I And to like And for could second weaker. challenged we you're year likelihood a municipal the fairly revenue XXXX. think good half think strong and services however, So being tax But we will reasonably deals very And the saw have that a activity that returns, some mean, we of year good the was

Chris Gamaitoni

so you Okay. That's much. perfect. Thank

Operator

come question of Stephens. today final with question. will Matt your from Olney Our Please proceed

Matt Olney

Thanks on the morning. back around circle mortgage. discussion and want I good to

given kind us to peak gave commentary some and that? fall at point, gain-on-sale curious I'm on Just what expectations. in the what of mortgage You good volumes second thoughts what volumes? around this know expect ball are curious crystal Do – beyond says? your And you we your quarter

Will Furr

a from perspective, your crystal mortgage is a reference volume think and think one. I I good ball Yes,

mentioned, – a are We to percentage I expecting we volumes. higher of refinance think see I as are

overall think some in further I flare until out the volume of kind ups will little As no more, peak at a of mentioned the and presumes going XXXX looking purchase pressure pandemic related commentary, little homes we our feel be kind kind away getting comfortable of pandemic. in citizens under from of And activity. a that

the to the for – how markets the responds traditionally what an start we're one we quarter. then but is the what periods of buyer second have watching reality the refinanced volumes, all don't certainly the it But from home of the think from a I'd in – centric can stronger say and through and see states I year we And the and terms for heavily overall outlook shutdown. aggregating more of how will reboot consumer be, as is in cities

Matt Olney

in in loan appreciate Okay. the modification going mentioned much the so I of to that weeks. that XX as you've amount rise. XX, trying this curious And April know of modifications you recent are continues if X. weeks? do this that if then the on I requests to March amount But changed discussion, has back seen you expectations just number far Will, as think, modification I'm the to of you recent disclose have Slide of

Will Furr

was it. persist to the number. shutdowns XX, were pace and of small it the to it it recovery. pretty on Yes, we continue as a March weeks grow of will into depending again, as continue say you – a expect couple But But I’d has

the modification you if from most – set our impacted some a hotel could most forth some So requests. gotten, of of of we've has the take portfolio as perspective, one hotel

customers at that full dependent a deferment governmental full quickly than they think out carry experience ready the I type is of obviously question take restaurant what service a and of and levels organizations coming bifurcated they how The kind of quickly have type dining perspective, of quickly and markets come reopened forward from months. what over on and kind of – to solely a look is profile more you feedback. reopened experience of If There service importantly how dining reasonable how set is QSRs the back outperformed other feedback restaurants, spending restaurants.

I what realistic into. going think hearing are and we're That's June. most of at of – happen least May most them not to in

that's question through But certainly pulse third quarter get latter look it's response persist. this on customer to The quickly going hotels quarter. the for estimate better – going start the significant most and pace as to unknown restaurants, and to for second is into will us largely be an it's of to continue that and will as of the continue and and into a it to the occur. hard the driver the quarter that just, So third how that we'll client to parts we

Matt Olney

Okay, question from that's helpful. last then me. And

Houston us this the just is portfolio at previously, that mentioned You that remind portfolio how big time?

Jeremy Ford

portfolio – had that total think off I I well, $XXX assets million. want about is million. here say here, to got I've it $XXX in under I hand Houston the

Will Furr

Just loans. million under $XXX total

Matt Olney

Thank Okay. guys. you,

Will Furr

Thank you.

Jeremy Ford

Thank you.

Operator

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

disconnect. now may You

Hilltop (HTH) 1 May 202020 Q1 Earnings call transcript