HTH - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the Hilltop Holdings third quarter 2020 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. please then question, your withdraw press two. star To being note this is event Please recorded. like conference turn Yohe. would to I now the over Erik to Please go ahead.

Erik Yohe

Thank you Operator.

today’s financial concerning such started, certain as our statements get events note strategy, nature items for historical presentation future business during plans, of on impacts statements. statements we These forward-looking not allowance that including Before subject losses, fact, outlook, are credit condition, please management’s statements expectations and COVID-XX current of uncertainties. and their the impact are that concerning risks to future are are and that based by potential statements

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

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

Jeremy Ford

you Thank morning. Erik, and good

of safe for would share a results quarter, a Hilltop XXXX manner. and prudent quarter, serve future year businesses in final the get to million per $XXX,XXX for of us provide diluted to stronger I in related net QX unwavering and share. was company $XXX delivered Before effective holding income XXXX of I or include to has $X.XX. note, the Of I the our In will customers third like the their per This an quarter Lloyds. earnings teams our highly from this $XX the $X.XX the sale and for foundation the increase company of million all made a at National growth. results applaud true-up third believe across three into and commitment

XXXX Hilltop’s loan outsized and mortgage at as the well PrimeLending provision Securities, Hilltop earnings results no related at QX as Importantly, losses reflect exceptional for bank.

remain we and to volume further pandemic the cautious affect businesses, that our However, including in loan COVID-XX deterioration adversely mortgage may portfolio. credit our reduced continue

on rate strong both in purchase net basis Our for from increase $XXX environment. a $X.X low the billion the quarter mortgage revenue XXXX. million period, quarter higher the third in originated and this the $X.X PrimeLending quarter of remain an markets refinance as linked during of billion was year-over-year and loans

quarter. third lead basis to by the or we position. basis on expanded billion decline deposits million to compared as linked the gain due the suite dealer sale points XX% XXXX, quarter by basis returned margin fortified liquidity quarter a Total period XXX bank’s during slightly deposits points in $X.X on $XXX and XX year over a broker approximately Additionally, by increased year this

XXXX income dealer optimize robust services business. services quarter our finance broker continually and in public the results were improvement the net strong XX% a finance well to by financial in driven capital structured the as quarter of million revenues quarter, the position. performance margin $XXX fixed as in During firm’s We business aim grew reported The by the pre-tax the XX.X%. third to from and

on per-share $XXX The to expire more October than tender commencement offer scheduled we price than an of million, announced purchase price and modified $X less a the is cash $XX. As not common to in at of On tender not Hilltop $XX.XX XX, aggregate up purchase to billion for of capital. approximately September had our quarter offer Dutch XX, auction end, a shares XXXX. excess of and stock

Additionally, we a quarterly XXXX. continue $X.XX directors a a dividend and and level perspective, recently economy. continue per board of of prudent risk healthy while maintain COVID-XX to dividend declared XX, clients a our customers on loan cash From monitor and we November the at common our on of portfolio our effect to share as on maintaining the support pandemic our allowance bank credit the the payable we

the and related As balance an was our allowances September from where the update on million, X end deferrals, I loan million go $XXX category. on down Slide into will by we XX down more the of of the deferments as second at quarter. $XXX detail COVID-XX break

credit $XXX portfolio. for X.XX% of losses totaled the Our September as million loan or XX of allowance bank’s

based pace of is estimate, value their expected customers, quantitative position the qualitative and the assets. factors and allowance on best the and the given of both our our Our recovery, underlying of economic reflects

increase decline increase marketing for and originating XX% from issuance on Moving were $XX of Slide favorable to $XX gain sale environment. a during Also a XX% services quarter business the loan income XXXX greater to was origination compared improvement by advantage of pressure. linked mortgage third the that points margin of in income another finance and to commend TBA income business, eight billion to during be record volumes fixed pre-tax PrimeLending’s last group experienced of recorded to market in from of remained with of was led team provision the the took than and Net managing of Bank pre-tax leadership, increase the relatively margin yields in as to as fantastic that business, QX job Securities originator a I year XXXX. no X, and date driven this $XXX Hilltop a like continued delivered note, lock $XX a X.XX% the basis during structured loans million year. pre-tax PlainsCapital generated a volume quarter $XXX of XXXX. million, under million, quarter the considerable an products PrimeLending municipal surge would In the loan XXX an mortgage was strong million secondary purchase QX a public record pricing had points. XX% year. million which basis and interest period, of income credit services great In quarter showed strong from doing finance $X or quarter.

believe last building I is best As municipal firm. quarter, well by Securities underway referenced focused in Hilltop I profile bank the the of the raising investment

in coming to I job bank’s This related protecting clients deferral hotels Moving earlier, on COVID-XX bank’s a most their was capital, bankers the great done the Slide and impacted quarter. expected from of a second trend credit we team the industry, X, while namely the the restaurants. reduction as have needs touched and positive serving saw a severely request with of loans and further deferments from XX% for leadership,

further further to deferments presentation have gradual analysis With and financials. challenges areas a X% this is believe term best The that, the economic or in estimate highlighted areas, While in can deferred these in $XX quarter. shifting space I impact. turn this our We the for do over underlying or million current we reserve portfolio the trends million good XX% is recovery allowance the of other given talk economic and credit about and to believe and the needed of environment. second Will compared we to the now $XX to anticipate as be such a a our portfolio potentially sign, where current office the longer on

William Furr

X. on I Thank you start Jeremy. Page will

the share. third diluted year-to-date continuing net provision per originations. the net As $X.XX recovery Hilltop Growth the The during credit Hilltop’s led million, common stockholders the in to million of to to from Jeremy our relatively and net quarter or of In revenue net prior per Income of charge-offs XXXX date. provision year year million attributable to the discussed, $XXX credit credit bank for losses quarter, approximately driven attributable which $XXX.X period income operations period. equating declined $XXX.X quarter, the during versus million $XXX,XXX third strong was losses for equated stable as diluted a stockholders prior period earned the by to brings allowance pre-provision to consolidated recorded third quarter continuing and to third share. diversified streams of losses reflected generated the for PPNR, by mortgage reported million, for $XXX no or $XXX,XXX. PPNR common remained during $XXX operations up $X.XX from revenue,

a million of pursuant number $XXX impacted including our loans XX were During contractual are the an their have to of the a items of quarter, assessment payment an approximately made losses, credit active the on terms. no on active for at and that June allowance deferral longer plan deferral

migration excluding In addition, there across Further, CRE improvement loan tepid. remains quarter warehouse to declined payoffs impact used XX. base second evaluate the during mortgage the portfolio these that September the overall scenario was case to negative demand and both portfolios, in C&I of some content was favorable the as the and lending, accelerated credit quarter. loss loan the our economic of versus items was Offsetting

third the reflect our segments closely the the the while and It times. economy. manage quarter, capital risk classified important of to note these status clients protect $XXX monitor to we taking deterioration bank migrated that of and million our to loans supporting are of the the continue softening approximately all criticized portfolio pandemic bank proactive to very to steps the through challenging is and and During related to

economic losses and be credit periods, period volatile for for As in period credit as actions noted from could over change assumptions and will portfolio time. we prior to have the allowance the losses provision

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

purchased loan over decline the We million we per coming from million run will expect continue will purchase from to to accretion portfolio loan the that $X expect quarter continue revenue purchase as accretion previously Further, average off. to quarters. $X the revenue

that of to equated X Hilltop’s transaction September to equated the XXXX. the Tier ratio Hilltop’s did note launched significant the any position be X not this improve as presented and on to continues from XX, impact actions earnings position XX.XX%. of that the income address XX, opportunities we remains capital XXXX, equity in ratio over Please Tier that result may may advantage leverage ratios offer both as was XX.XX% company to and of ongoing September in capital open time. tender and therefore pandemic XXXX impacts the the period and growth take Hilltop’s Given

the impact approximately Tier were Hilltop’s risk-weighted to equity assets. at points the subscribed fully $XXX constant if common be reference, million, offer assuming X would basis ratio For tender XXX

X, XX equated interest to net versus margin XXX Page by Turning points points basis third quarter continuing basis and quarter. the to from declined operations prior

decline The third operations income interest million XXXX. $XX to the income by accretion continuing in million interest purchase versus was interest $XXX loan quarter for offset to $X.X net the well quarter lower by from loans on impact lower Hilltop the approximately lower second somewhat was debt the driven Additionally, million, in third Securities, by declined equated and of income net of interest PPP the raise, net loans investment on as equated securities both reflected held quarter. for and Further, income from quarter at million which substantially sale. sub of $X.X bank the yields yields which as

expect net quarters, In as continue costs, deploying bank the that ensuring Over term expect credit and additional deposit low believe challenging. for to we additional expect portfolios, and future, remain return to with broker to cash on take to income on we our we that remains not securities In short continue excess to the projected take invest to as remain down growth risk will be will are pressured that portfolio duration the portfolio, loan judiciously. do interest will securities they committed foreseeable deposits cash very remain to interest these and manage rates excess liquid look we investments. but mature, into our coming

by the to average in during the mortgage levels The customer and impact quarter. and as in in the consolidated loans portfolio increased while deposits approximately held Hilltop’s experienced $XXX robust make grew customer already million higher higher to Hilltop’s quarter, the investment has favorably investments cash business most in at types, Further, cash bank of third the consistent product we sale continues measured warehouse significant resulted During for modestly growth and assets inflows deposits liquidity continue lending securities position. resulting securities across balance. earnings

should we expect on manage excess which billion and to improvement billion sheet to $X levels and $X over provide remain in income interest the coming and $X quarters, NIM between which of billion, some liquidity off-balance time. Over to net

our movements, As and markets, a over excess we manage continue to liquidity will market time. in prudent monitor we Hilltop’s to continue volumes liquidity against manner, balance broader mortgage the all to capital risk

X, to $XXX income for third Moving to equated non-interest quarter million. Page continuing operations from the

billion applications the locked and interest quarter. and period, lower quarter approximately mortgages rate and expected the income was lock PrimeLending better reflected than year. of the business This as robust production very of demand lock versus impact period as the mortgage in record in $X.X third strong for new remained increasing of the locks a During for by and origination resulted sale improving in gain purchase mortgages on the well The across and fee combination volume same market. mortgage prior as spreads million $XXX rates our

our third XX gain second basis XXXX. mortgage the quarter, the quarter by in business points During expanded sale on margins of versus

within remain the the on to margins We elevated range likely year remaining point end. sale XXX gain will basis expect quarter, the XXX during fourth through

It income delivered to solid business finance important structured other the from period pipeline structured income revenue, finance income, on the mark from growth volatile to of At finance securities the significantly million results which structured note revenue can progress as is period. was prior versus and fixed services increased rates, market our quarter. $XX million a volumes improved $X as can remains to quarter, and be both and and net businesses $XX third included spreads, $X fixed with spreads the volumes end, continued reduction as period by million, approximately conditions. in million change the that market During loan approximately of show valuation

specific increase this mortgage variable and operations $XX non-interest to the the period expenses costs that in at $XX million, driven approximately the of $XXX were increased versus items related the The expenses were bank to in million quarter. same production, variable specifically both in million. by Turning Page by compensation year in Hilltop continuing of prior year prior production recorded related a growth Securities an X, from to and from set

same quarters, linked prior quarter compared the third increases variable year. strong to compensation period in in As fee revenue are the prior the in to growth in

progress addition, while expenses had we two continue increased our and overall quarters, growth against substantial make In the over prior efficiency initiatives. to

last or XX XXX declined has headcount X%. the Over approximately months, by

business move consulting Additionally, and related substantially while non-mortgage have marketing production other development service declined to have expenses and related lower. expenses professional continued

that upon are our delivering While efficiency on their system our move and been the improvements core will well into grow now we to to franchise, progress phases value positioned we’re completion. continue based, has to broad deployment which of final already our value expect

rates the by Turning X% the of XXXX. total the grew by declined loans balance period grew to on for $XXX decline Page average held business, including million continues and same during with will XX, on approximately growth LIBOR coupled year. the in mortgage loans contributed loans customer growth sheet the to as net quarter be investment Average market by demand prior prime yields. expect the in X.XX% continued quarter the production which million $XXX of quarter driven averaged versus lending lower purchase to to the both PPP coupled We to as yields rates, as the new pressured soft. versus business XXXX loan the has Other lower versus yields warehouse be second the remained loan with Loan approximately that third third during do loan yields continue quarter. third accretion to X% lower

investment to equated $XXX,XXX or quarter basis. points XX, held charge-offs to on of net annualized the Turning loans Page basis total bank during for an three

processes, and and loan a bank our credit criticized During status. migrated of classified normal accruing approximately pursuant $XXX million loans the quarter to management the to

these apparent deterioration in clients’ and, existing programs loans agreements, the under many substantial. cash active performing in are is deferral remain our on While of flows cases, and many their payment contractual currently

processes, our focused challenging the to to while it these to relates support we customers capital of As our with the remain bank preserving on credit times. continuing work through them

single portfolio. basis these the generally equated the During which are family the ratio, chart the increased COVID the portfolio, impacted Page $XX the September current loans assets third result XXXX. for across XXX right to deterioration investment of credits including diverse by which to and of of bank to XX, not held on a related credit non-performing XX ACL set at points bottom highlights was in The residential, quarter, million, approximately

Jeremy are XX.X% active coverage As $XXX at to the September XX. million loans deferral and earlier, noted ACL as of the that related on is currently

Turning bearing continued to to deposits across expand Page as Interest this XX, market sales the during in Notably, to at cycle categories. liquidity the manage and take Hilltop advantage liquidity approximately service clients. period the non-interest to deposits taken they throughout third actions grow client continued as treasury to continue deepen grew overall liquidity the quarter product been deposits by while build efforts share our million able excess the most bank has in have to the declined to of due wallet trends bank. bearing actively with $XXX

pronounced most actions sweep Hilltop to $XXX back swept Securities. million the of Some of included deposits bank broker-dealer the

the addition, mature actions allowed quarter. customer growth These million. during and somewhat be bank $XXX the deposit broker offset to $XXX were approximately deposits returned of million In by of

noted, previously most the returned be deposits bearing nine the currently which and $X to billion of allow of represent next XX deposits we As months. to to over mature expect broker interest

The incurred expenses, our certain million write-down consolidation to third noting that obligations certain XX, Page return $X.X the income, quarter’s related pre-tax quarter XXXX, related a earned which of prepayment and million stable from represents the FHLB results of reflect quarter expenses Bank $XX space of to to and a during the the ongoing of of PlainsCapital profitability during bank penalties revenues third second Moving lease quarter. efforts.

quarter and efforts of in improvements net ratio XX.X% The the impact costs, to quarter. drive migration a in modest As the growth the operating revenue change not lower previously the to ACL quarter reflects economic deposit provision only during and did variables incur earlier, bank the yielded the any during the time. credit improved prudent much as to referenced reduce efficiency bank offset the we over the third noted ongoing and costs, expense

As expect bank’s credit to begin to an consumer we move and retaining originated continue assuming orderly sheet. forward function mortgages in we fashion and remains balance stable, the PrimeLending markets on

We in medium month mitigate over loans as $XX loan effort the million serve as help CRE and cash retain of this and to for $XX portfolio per investments C&I expect approximately an million the lower term. investment alternative will demand to

PrimeLending generated million Page moving volumes, the of year strong increase of period XX, Now or pre-tax quarter in driven the prior by origination XXXX an the XX%. to third a during $XXX billion profit by from $X.X same

As noted same as margins volumes market earlier, period the in on versus sale spreads. and actions gain provided expanded year the third pricing during higher prior for quarter the

lower During the that our during originations. are normal quarter, of we represented from fourth transactions than the portion of total remain refinance levels, historical should Further, period, be third XX% the activity quarter which refinance originations expect that will seasonality. given elevated

During mortgage the during continue rights XX% could that retaining and for coming increase we the portion retained MSR related sold a of the the $XXX the servicing grow in loans which that significant between year XX% servicing asset of to to by We will the of third XX% and the $XXX an end. $XXX quarter, expect likely million do Hilltop to rights over sold quarters period, million. loans million between and resulted

significantly quarter, manner. of services the in in million, in revenue very we prudent manage generated continued quarter XXXX. period million finance increased Hilltop year $X.X the for revenues fixed pre-tax structured $XX related volatile note solid from that be a In secondary finance to and to finance for as increased delivered prior growth income to period. prior period bonds pre-tax of growth delivered and in improve. year activity. offerings Moving the positions to increased $XX fixed XX% strong a billion, period markets businesses volumes versus and and the by margin as and a Page versus public business the remains market same the spreads municipal structured can our revenue mortgage profit volumes as from in grew has The risk by our change market business of The as continued million remains third to resulting can market XX% It the Securities $X volumes the XX, results rates, to important income of

management rates interest versus wealth the During year. were lower market quarter, income impacted impacted third which businesses prior the the by negatively interest

will headwind that For an these client lower efficiency. on we’re through provide acquisition mitigating interest businesses, rates and focused ongoing improved

the to XX, our Turning updated the uncertainty updating surrounding XXXX given providing but guidance commentary to Page the pandemic, or economy we’re outlook. related not are specifically

the against we managing not of believe While will the clear that can rebound, be delivering will remain the exactly the it in items rebound economy how linked that on timeline which to or focused pandemic, we is success directly we control. those

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

business most delivering the and value. section across growth call our while call. and term you our a and answer comments, risk that shareholder the question moderate delivering lines are and prudent profile turn concludes to for we’ll focused we of important, over long the on prepared maintaining Operator, Lastly

Operator

Truist Please Securities. will question from ahead. Young with first Michael Our go come instructions] [Operator

Michael Young

the quarter. Thanks taking and question, for Hey, the good morning. congrats good on

equation. start plan the know of would to of end update on targeted progress be, the stock’s if you provide there maybe that high above I the either on Dutch there. the the side range or modified what wanted don’t guys can any the Just now capital and the auction

comments helpful. any there Just be would

Jeremy Ford

XX. Sure. a comment there. tender and on don’t We lot The outstanding, the and we on it have is to open October do expires have short answer

Michael Young

if or open of either, if be--you capital just fully after comment that would an share know amount on market depending guess over, on maybe excess you process I to look accelerated filled, guys would know, you wasn’t don’t the amount I it but repurchase, this actually that filled, into there deploy is again purchases? Okay. can that’s still

Jeremy Ford

so we’ll the today, the we’ve focused continue we’re as offer in think I tender our manage thereafter to done past. and capital on

Michael Young

the volume expectations, Okay, fair Then enough. business, on appreciate etc. mortgage to Will, moving the comments

at looking we benefit but there, margin, gain should Just there actually sort that was not normalize out to or a this from point basis XX other the sale on margin? on expected the the in sale impacts going gain maybe we think pricing pay the having of having that increase forward, from though, GSCs about any of quarter, on should

William Furr

I so. don’t think

overall allowed and within--stay which think actions we I benefited what From noted certainly, we pushed see would to quarter think business, exceptions you’ve margins origination days, were seen that note really, we to well think, to points. change to business. fourth of in rigor portion I continued sale pricing dynamics and pleased XXX expect has us, sufficiently quarter, perspective, that fourth the into at I the like, last quarter enhanced the I market to our we’ve believe allow over point. has team greater on and that exceptions we would allow we pricing basis and range taken is certainly say the as the was them to leadership at we’re pricing was a our stay have perspective, to the we of for gain believe that on believed substantial the oversight the retain overall the as PrimeLending bound our system return the just prudence get in of loan asset and as increase. which been and capabilities XXX for market has benefited us second this between system, overall third to wide. large technology the new make volumes and are to through provide good customers in Again, remain to our but pricing reasonably started spreads MSR, From investments mortgage of and our beneficial both asset advantage that here XXX we around would when to the I the XX the prices able also

Michael Young

thanks. Okay,

Sorry basis? to corporate a one on o larger anything quarter we one Was jump last expect the this segment. around, and but or go-forward shouldn’t just other unique in that there

William Furr

in there is compensation you’ll think there what I impacts see principal. compensation, variable related incentive

Michael Young

maybe more we levels? more so true-up then Okay, return of normal and to a

William Furr

Correct.

Michael Young

all That’s me. thanks. for Okay,

William Furr

you. Thank

Jeremy Ford

Thanks Michael.

Operator

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

Michael Rose

Hey, good sold guys insurance proceeds level little a taking morning is really asking lot bit of Maybe generated you capital the from guys, my a for that, questions. business, the and thanks differently, and buyback high. question obviously

in where you normalized guys that business that I and levels you read I and insurance business think is As pandemic run after the about the do does hopefully a would more excess of and you hold period? that proxy for shares guys Thanks. we the subsides, should the Jeremy, think mix, as a longer days now no part that market tender, think repurchase levels capital the basically liquidity can that’s open should how XX Dutch the complete. say in of about liquidity it capital the

Jeremy Ford

the thanks question. Sure, for

afterwards. we’d of to be when the the came was I a range think that having go-forward we size the $XXX considering also opportunities pandemic pursue million, want of this that and combination able during up with capital

viewed you tell where kind We on demand that’s so it. the of I sizing shareholders can institutional be, and would what in that our also light of--that’s

I this to set plans opportunity think our have that and tender on of bogey we’re and focused the that evaluate that, for given really M&A the will be, what offer environment. out coming we’ll

Michael Rose

of capital up, deployment you so strategy does picking part is about are that guys is be is having the that like M&A you something should conversations? It looking for seem chatter at Okay, we Are and thinking here? that guys? you

Jeremy Ford

given going strategy That is we’re we always Well, opportunities, but when are one. we’ve right to the it’s it be had. pursuing the aggressive since--you know, interested and M&A find environment hasn’t the we same changed be in patient

Michael Rose

How we think matching more slightly migration, to me. just think understand double. essentially provision quarter’s forward. pace Is about Okay. migration you some the quarter, did criticized the but negative. about credit here? should look move see I still Maybe MPA we guys just very metrics benign, from one trying future gauge of I see this are We see for charge-offs more we provision, Thanks. so the as provisioning? balances we how it

William Furr

This is Will.

As a it’s be we by quarter think going about allowance, assessment. quarter to

mentioned, portfolio. to as I cash whether we again the downgrade in a will of we We moved well this as a a the The the think that so and deferral pay activity, we economic will assumptions quarter, noted, activity had ability significant flow were economic be continue well displaying those perspective. as to I you As drivers. aggressively as as credit be impairment assets lot credit it and see, assumptions, impact, believed migration, migration from in an to from did be

it the until We the deferral the both but of first middle or given as third and of substantially which the expect obviously on likely think quarter our economic quarter, analyses allowance to to the again, that. that at occurs, year, as well whether don’t matriculation matriculation programs late to evaluate credit migration into credit favorable next into the so unfavorable, materialize we’ll of of say or a that second normal quarter, XXXX, impact losses won’t as CECL will start amount do relates quarterly just occurs point through note charge-offs I to forward as basis important start towards that difficult the to view materialize is XXXX. the looking; It’s what the allowance it’s that

Michael Rose

fair? probably reserve? Okay, the scenarios economic really peak so that that or change, at for Is if that are to don’t we near fair the assume

William Furr

our say quarter. we for third economic given we adequately outlook reserved analysis the feel I’d for used Well, the

Michael Rose

taking questions, for Okay. guys. Thanks my

William Furr

you. Thank

Operator

with next go Stephens. will come question Our Matt Please ahead. Olney from

Matt Olney

remind Hey, good me mortgage around to the guys. go the morning. strategy back discussion and the Wanted to just MSR. Thanks of

fourth the the quarter. a more You increased in asset third the quarter, lot in

of could on your sale strategy been the are the does gain behind with servicing not this, me mean sales, remind you that Just even stronger? and so releasing margins have

William Furr

Well, let to that bit. unpack me try little a

First on that and decided were as that us if that. muted, opportunity overall of were March relates it quarter, service asset servicing, who position, to for--to for take certainly We of allowed and to the not and a noted overly was been capital we result servicing, advantage pretty it strategy, liquidity second we understanding advantage periods late bid to an was as there no There retain of to demand servicing those focused as were some able buy dislocation the into a that the our our pricing hasn’t growing. by and so thought an the where historically we in non-existent. take

a As sell to that improved, going spread receive to it the basis. we Those can flow continuing on has has we we is paid the that the least at excess we the spreads, versus of a market is can for the values what believe basis, market what and the get overall tightened, third originated but worth there’s on are that a would value believe the still quarter willing market and value that to certainly in otherwise asset in based the of the large pay relates forward, we the flow portion the value believe asset’s we we on and monitor asset.

sale set the and gain bid favorable again again virtually mortgage MSR so recognize market a you the no it that you through sales I was, the full for on XXX, a gain at by income, that and limited the capitalization was overall quarter, to favorable, impact the had asset, we’re the volumes In quarter The rate, but the the more flows third as the second way the impact on sale, impact. so as limited during favorable that MSR rate say then terms on across It relates impacted impact would as XXX. book our fact pipelines rate. in market is also the on the tools, coupled pricing on you it the just servicing, pricing market the capitalizing leadership strong earlier, new impact book a the of mentioned focus overall on today, mentioned, I there the actions managing PrimeLending that pricing I team has given our competitive the and taken focus again, on and but with the exceptions. as set, given

Matt Olney

briefly, through an that seems upgrades? give mentioned the upgrades like of Will, that. going the to are of this you various Thank run Is we update prepared initiative these remarks correct? a just on that us comment, in for where throughout two-year that’s Okay, helpful, you entire it year. the Will. Then company. Can on was the system just end various you a It was

William Furr

a asserted end we through to had we rate what ’XX. improve so on basis Yes, going the was of were run $XX million PPNR by

efforts think rollouts that would specifically effectively today, and it products very a implementation good relates about I few three - left, is complete sit feel program to here the is as some we for as launched but virtually mortgage a we the fully modest system been origination very have there’s process launched. loan we around that say minor question which We your mortgage had programs. still

the the accompanying say ledger Hilltop and installations Then around work work also with core two there, left to in got looking continue that there of occur we’ve launched general system that, to a enhancement in the by so speak, done implemented across bring our year close this units FIS I that financial ledger we have implementation would we’re early again be Securities end of in second of some say, we general program, but quarter principally one one three Our to but overall operating onto that aggressively two next had we and that May and we the like the the on was enhancements will still to day all day general system year. as and of at have bring remaining we year. ledger, business I to ERP, principle

target on certainly the We’re deployment. of terms in

mortgage benefits, from productivity to around and sit ledger $XX That general on functioning in had focus efficiency today. growth complete we relates other. is and and that here of seeing We’re the already as expected we that our the of some things. and of some or work controls be some that all at designed it of some those talking as company whether the about to the of and and rigor from it program, the million receive system, as cost we’re benefits pricing of efforts saves Also seeing we’re or purchasing, the we integration procurement

to So update made January a we overall the progress program, but very again, feel on good as we’ve more about we’ll give heretofore. our it the fulsome relates call,

Matt Olney

that’s great. Okay,

the the manage that. I you around expect Thanks. Just lastly that. highlights comments prepared you quite to just go remarks how in didn’t again? excess you of liquidity Can that over some Will, mentioned get from me, and all

William Furr

to two bank items: been we on think a impacts pandemic as mentioned March has consumer primary through the as both quarter also in previously. the the on I worked place one, during had so it that result a fourth management we credit but the PrimeLending Yes, sheet. originated suspended balance will we I had start program the wanted in years mortgages to pandemic. liquidity retain for we We way monitor of as capital That our

to to visibility that as also deploy million a product believe but better month of expecting house. some originate mortgages which retain means pretty we we’ve liquidity, a $XX Now million a per there, with got we we way are to capital in $XX efficient that in of

piece securities expanding at second The which stands bank, the is portfolio the be we’ll likely overall billion. currently at $X.X investment about

likely liquidity Those those that from given better continue regard. excess and kind that perspective. but really an pay Then as use downs to funds those flows are $X.X expect of sweep doing of go additional cash Securities the at cash there, to billion enhanced at higher in three than organization. can they to can seeing overall we’re will the the we and do back we put will deposits earnings we contingent lastly, Hilltop current are higher We position overall things

Matt Olney

Thank Congrats helpful. that’s quarter. you. on Okay, the

William Furr

you. Thank

Operator

next go will Please of Truist from Michael come ahead. Young Our Securities. question

Michael Young

thanks the for follow-up. Hey,

wanted your on and that what also or the expectations touch going are to just those of those base outside Just Are are to mortgages those? be retain. on to qualified rate would be some going you’re qualified, then for

William Furr

XX-year second be to, second we’ve going we be in it did score will there, and to be are plus product, able XXX we to principally the average agencies we the those, as execute qualified, retained basis, so to quality event XXX you so qualified. while to any an and given that on mortgages. the depending we between would XXX be like XXX during target perspective, quarter, tell we going would on FICO period. in From the the sell mix back we’re basis the quarter, is so that sale averaged felt to high XXX points, historically were yield assets. These expecting to Principally needed through on XX-year the yield able the range a I on

Michael Young

it’s into be M&A to follow-up, strategy capital the some more a Okay, and effective the creating that to of we earnings, expect deal and product, as this even fairly an would always could if a that leverage forward? maybe more portfolio. part the the term over of it because medium ratchet something off as excess seems mortgage salable grow you with going like down should sell back strategy Is maybe

William Furr

against customers, offset some overall position liquidity the that the in I the commercial our expectation balancing both think some our One these that pandemic prior to is soft the of will comments. in we’re then business context how it the economy mature, we’re but and least remain demand it’s core like second, future, it continue answer position are also doing it demand. our manage with I’d the remains and more but foreseeable of and liquidity for context loan to business to Obviously to going using we’d commercial be backfill softer assets if that we at of soft, growth.

Michael Young

Okay, makes sense. follow-up. Thanks for the

William Furr

you. Thank

Jeremy Ford

Thanks Michael.

Operator

our now there At The for this so conclude you are this today’s further time, questions, no presentation. attending concluded. has session. Thank conference will Q&A

You may now disconnect.

Hilltop (HTH) 23 Oct 202020 Q3 Earnings call transcript