HTH - Earnings call transcript Q4 2021

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Operator

Good morning. My name is Candice and I will be your conference operator today up this time. I would like to welcome everyone to the Hilltop Holdings fourth quarter 2021 earnings conference call. All lines have been placed on mute to but any background noise after the speaker’s remarks. There will be question-and-answer.

to If question withdraw you [Operator like simply this your would Instructions]. instructions] [operators would you ask during a time, question, If like to you. Thank Yohe the would over I to hand like to now Erik (ph). convert Eric you begin. may

Erik Yohe

Thank you.

of concerning for certain and and business chains. Stock Before presentation or during financial items nature their strategy, and supply of rate management's statements. COVID-XX historical including national future that to future note interest subject the items are potential such allowance of are today's expectations changes, statements statements plans, statements in well concerning repurchases the we our credit not and events, as other in dividends, such Please that --statements uncertainties. impact impacts forward-looking are on global get fact, These as by started. of impacts losses, that risks the are our disruptions presentation preface as condition, outlook, or based referenced current

is Please statements as results, capital a variety Our available annual a reports and to note SEC. the may obligation update referenced earlier precautionary most including information the law, in those from factors, any to presented that this in we our the result upon by filed due the new data time. liquidity, required statements based preliminary at extent materially quarterly included condition actual to recent presentation, statements of Except expressly and these and and financial our with information. differ disclaim of

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

Jeremy Ford

And good morning. Thank you, Eric.

for average share. per For $XX of the was and return million the $X.XX on reported Hilltop quarter, X.X% Return or period on equity assets fourth diluted was average net income X.X%.

the earnings X% of it loan themes all, in quality, prior the near-term, core the growth generate a income, income businesses. including This we mortgage investment quarters, loans quarter and balances our increased and pre Through core of PlainsCapital rates beginning Average improved a both generated and for of discussed held on Bank of assets continue softening normalized in prospect XXXX. same And with in quarter-over-quarter average we to increasing $XX book, market. as forward returns. the in strong our then many credit a million at Bank and more in PlainsCapital million retained competitive or carried return in mortgage QX loans $XXX X.X% -tax fixed grew.

by loans Importantly, lending growth balances. net impacted PPP the bank a commercial growth The was downs. continued despite seasonal in loan in decline and runoff pay generated elevated loan the national warehouse

Our $XX million December PPP $X.X XX% by million was or $XXX quarter-over-quarter, The or billion and balance average XX, deposits remaining by XXXX. year-over-year. increased X% as of

customers. existing growth from to bearing continue in both and bearing accounts see non-interest we interest As primarily

of return spite teams credit, the XXXX reflected and to on of refocusing across PrimeLending quarter QX, business the due XXXX PlainsCapital assets it as existing strong another record year, sold from decline margin volume excellent customers and total loan full point income a with the a same competitive new -tax We managing X.XX%. did XXX a but while to possible the period the from and officers focused comparable in $X our of third as of $XXX as margins, optimizing originated be for pre tough generated basis XX%, gain on XX% job at -tax generated was Refinancing for this state still done Bank million remain pricing results, in of fantastic allowing a on loans quarter XXXX. pre care For in bank's during and stable tight market. with bank as year a billion $XX income. in to on year-over-year leadership million by the percent volume sale business parties, was volume The was taking in This average prior In growth. have increasingly

was mortgage XXXX, and that outperform to of profile, million. early provide who team funding experienced led shrinking multiple institutional challenging capitalizing stable enable to heightened have to advantages a PrimeLending for orientation, ever leadership mortgage another purchase inventory, XXXX and competition. best during that limited $XX volumes, will be market what refinance cycles time with managed company year and volume PrimeLending, market the industry pre we through by $XXX to circumstances the driven Our started in second due exceptional the housing excellent the have funded of Overall, pandemic broader its should in on year -tax income the billion believe lenders, COVID-XX in

During finance. of million. primarily the quarter $X.X revenue $XX.X XX% net of shortfall declines margin by driven million on in decline rent income net $XX.X of such pre revenue compared fixed HilltopSecurities income million revenues or QX, to was generated as our in The -tax and highest businesses, structured A XXXX.

year-over-year broader finance fixed by million by and revenue the and Specifically, $XX Public $XX structured with declined lower finance in volume, million mortgage industry revenues or services XX%. declines. or XX%, income which line on was X% also issuance fell fell revenues by

fees. by management account X% wealth stronger managed on While transactional and increased revenues

For of and million the XX.X%. year, margin pretax $XXX revenues net of HilltopSecurities a generated

due we and combined for to of rising the investor mortgage expectations a its improves. half believe fear of our industry, inflation. second income housing was uncertainty interest operating in grow in rates, businesses environment economic particularly The Nevertheless, is the with HilltopSecurities of the slowdown in challenging businesses once for to a that year position fixed

have our broaden capabilities our breadth and to of to businesses. infrastructure, key producers, complementary in added We and expertise leadership expand

take revenue confident year we're full-year team have for Hilltop of fourth share. quarter HilltopSecurities, per strong or finish our the and that. million, to streams and net already $XXX diluted time made growing This but investments necessary leadership direction. on diversifying with Collectively, $X.XX and to excellent income We are a an the focusing strategic XXXX was will support

a Hilltop's XXXX inflationary people taking year was chain disruptions, results with the and reflect talented customers. the in of model, of exceptional dedication our pressures, supply including tremendous of a steadfast diversified variants, uncertainties, amount and care of volatile COVID-XX our While business who are strength our

$XX.XX. capital common increased year Moving end. by levels per XX.X% value X. share strong one Hilltop tangible to our from QX, to ratio page equity capital a XX% book tier at of with maintained And XXXX

Will to common through earnings share and representing efforts, week, Directors shareholders dividends shareholders. dividend Hilltop This a the quarterly During will of financial. increase stock approximately of repurchase to and a presentation quarter, XX% of a XXXX, million declared share, over per that, now from $XXX Hilltop walk returned million $X.XX XX% With through new program repurchase prior XXXX. the cash turn to $XXX Board authorized through I the to of January

Will Furr

I'll equating share. start five, Hilltop reported fourth page for on million you, common per as attributable was $X.XX the discussed Jeremy consolidated $XX diluted quarter stockholders to to Thank Jerry. income of XXXX,

the of $XXX losses X the charge-offs more net cover During thousand losses in reserves the $XX credit prior in in reduction million. quarter, for deck. of allowance detail reflected the on and of I'll for changes of page the fourth a net provision credit recovery

to X. Turning page

to strength to income benefits reported or made of For per XXXX the the businesses, ongoing results of $XXX full Hilltop and franchise. year we've stockholders the consolidated XXXX, across support of the diversity attributable investments diluted of $X.XX our million, share. common highlight and productivity, scale improved including our

by the in supported drove mentioned shares earnings-per-share X% a previously further which repurchases, Additionally, was share outstanding. decline

a capital Common strengthened XXXX a result Equity and taken Tier Tier levels X of with XX.X%. actions capital year-end of XX.X%, leverage XXXX, and Hilltop As stable X performance the year-end ratio versus earnings of ratio in

or declined coming yields Loan by offset deposits. in in driven X.XX% and note, in levels, million Page significant Further, excess continue basis quarter XXXX, losses investment loan by the for third and X. believe portfolio costs. impact income quarter driven credit recovery loans nine of and pressured quarter. Turning deposit the over the million a X. declined of These income. points, the specific improvements we $XX margin funded outlook changes yields XXXX be turning growth the migration points, from quarter equated in in pressure to trends, $XXX the net third versus during excess $X.X credit substantial the has the average of reserves economic grew and during Hilltop that allowance HFI broader fee quarters. including create interest portfolio, the million higher to bank of resulted resulting growth of for high-quality outlook the credit $XXX PPP the Versus a and the fourth credit in by changes Of to versus by basis the allowance to interest as for macroeconomic Net model to remain ACL net the during million, uncertainty, in continued Page in ACL X% accretion. growth I'm the decreased interest-bearing and improvements as decline losses pandemic for competitive quarter. to fees we $X.X market in in months the total to macroeconomic lower year-end could This by could the interest XXXX. lower declines gradual the across and somewhat contributed in and of purchase $X.X interest, the of ongoing quarter, the quarter, reserve Further, were fourth which spurred has driven the reduction release occur the accounting liquidity ratio the prior-year continues primarily net the million also by to PPP Net as credit income further allowance volatility recognition, in fourth environment million asset in the yields quality in in assets. million in cash primarily of the supported portfolio at accretion improvement $XX quarter period. items XXX by modest losses ongoing Allowance time.

including book had average an X.XX%, current quarter, commercial of During continued of to trend XXXX. originations, end lower the yield loan through which renewals, the credit

XXX In the represent an instantaneous to asset-sensitive of of which XX% up points assuming and rate the in area. X. Page highlight the Turning shocks, chart, parallel asset Hilltop we approximately basis position sensitivity

point next months. rate a up interest number and XXX-basis assets interest As $X the scenarios. gradual we falls the each an net scenario, impacts points XX income instantaneous sensitivity of Further, if potential parallel approximately shift risk, increase the shift positively course increase, analysis to XX we we from assess note, by approximately of Of X%. million. The evaluate over asset-sensitivity this a to basis in

could accretion the we of loan expected XXXX $XX approximately $XX PPP decline the in fees $XX were related XXXX, to which by versus and for XXXX levels. interest, Lastly, impact million and million purchase

Moving by and fourth for which $XXX a strong $XXX million XXXX, the decreasing XX. during mortgage-related by by or Total volumes traditional fourth equated fees refinance to saw driven declined mortgage $XXX we in by of prior-year the income environment much XXXX more a volumes $X.X billion X%, to versus period million the or decreased quarter versus Page remained non-interest purchase cyclical the or but quarter evolving income banking, pattern decreased XX%. of substantially, and mortgage when reflected a the quarter million prior-year more quarter

to of quarter basis, by sold point with gain stable third and basis XXXX, margins on X During quarter reported on the X were third sale basis a increasing loans points on parties. levels fourth

be loans Other million primarily expect decreased $XX by margins by a volumes, sold average XX%, normalize by can we rates, locked tighter structured important between XXXX by average income seen for overall under will is mortgage prior-year or both lower volatility, services period, million parties volume XXX to or the drives gain declines and contingent $XX levels revenues which two units that $XX the by from versus for challenging finance fixed on in borrowing We the interest income and that income to average full-year by basis full-year market fixed pressure to the years, expect historically and Currently, It from impacted volumes market last sale and conditions. declined points, as high over period services, XXX finance [Indiscernible] liquidity, margins. the they period. and competition production trading are trends. driven on be million declined recognize as to third in during environment margins structured

PrimeLending, period. for which $XX the of prior-year generation million the approximately variable the decreased and $XX Turning HilltopSecurities to to page the Non-interest XX. fee expenses decreases million period prior in compared to was the lower same in million $XXX prior was in Decline compensation revenue driven expenses by quarter linked year by year in in versus to

Additionally, non-compensation expenses volumes the to Professional prior we reducing year-over-year few decline expenses focused where and years, declined these prior services consultancy $XX efforts as a over expenses, dropped the on as production-related expenses versus last particularly noted the year. place the variable related year. is mortgage and expense from benefit million as

Looking back elevated headwinds, made help 'XX, inflation fixed aggressively occupancy, business. [Indiscernible] years and expect impact remain mitigate few in manage and some to will we for resulting across we middle of the will investments software productivity, improvement, continuous on To expenses forward that last the our these increased costs within focused we've leveraging over offices. the compensation,

productivity. capabilities business to to businesses these further client streamline accelerate are adoption our and digital of acquisition the While inflationary we overall our support do and pressures continuing exist,

HFI $X.X second period, On particularly of HFI in estate page by space the real customer end in to XXXX, family commercial by driven and the XXXX, improved lending we XX. pipelines and with the In by the through average versus activity year XXXX to billion equated the one $XXX half a loans growth, quarter. stable basis, continued commercial million to third our retention fourth to mortgages quarter fourth-quarter improving in of prior Fourth-quarter four levels. grow Turning grew of the originated PrimeLending. loans loan experienced commercial

of the a and we XXXX. a COVID growth of of expect quarters emergence the activity do However, to latest with the second the variant, short-term, third during in with return slowing

over an fourth XXXX, of During had to respectively. approximately of XXX PrimeLending coming to locked These of LTVs loans average $XXX and and points, basis of PlainsCapital loans FICO be million delivered yield XX% the quarter months. the average XXX and

one Lastly, of growth and position retain least Page originated pace of loan at XXXX. we four family mortgages given the PrimeLending, to half per first a the expect between our to current level moving I'm to liquidity continue commercial through $XX and million at lower of month, $XX XX. to

the of $XXX,XXX, During net kept credit performance net charge-offs $XXX,XXX. full This recorded sale, team assets of million our year. Further a approximately recovery charge-offs the of upper the for earlier our quarter, fourth we NPAs prior far in Hilltop previous quarter. expectations all HGH of exceeding reported recovery whereby the PrimeLending special and a recovery year but in as from in XXXX, the right, the target made substantial progress the assets reducing show graph a exited loan year during $X executed of all

right As it's X.XX%, ended well shown loss the credit allowance loans. as lending, on the the bank at PPP at graph both at warehouse the bottom page, XXXX coverage of as mortgage of the for the including

well loans, ratio We that content bank mortgage warehouse PPP loss lower over continue loans, maintain the as ACL, warehouse believe bank's lending, PPP to excluding and X.XX%. as to both the mortgage HFI to time, will loans total equates

the Throughout customers, abnormally throughout fourth the pandemic, from average quarter. quarter versus XX% deposit continue $X.X page experience and by or total have of strong XX. fourth deposits quarter to flows Fourth continued $XX.X we to approximately our increased this Turning billion, billion and the are XXXX.

basis, on sequential In deposits, a growth yields solid average lower points. continued addition fourth-quarter deposit both to and interest-bearing in costs to a of year-over-year drift basis XX have with quarter

XXXX in While costs expect few solid deposit higher to do XXX deposit costs year. to rate Reserve points adjusts begin the over rise Funds see XX Federal years, if improvement we in Fed to later basis the we've last during the by seen the

were client will XXXX, on wallet continue products expect to remain treasury's deepening remain successful These While and efforts that and through should share services. XXXX. focused into we noted in be and deposit elevated, they that accelerate growing our it base levels we our

XX. to Page Moving

our few over In as the focused and possible the infrastructure of presented were teams we keep remain franchise service opportunities delivering attempting a to team's on by the nimble long-term well-positioned focused franchise, moderate of value. safety as our while market the take clients, our where we priorities our new delivering of XXXX customer pandemic remain customers communities from to great a past the As maintaining supporting result work pandemic. as staying safe financial the the advantage attracting for our clients years, serve evolves serve, clients. teammates profile, shareholder our customers, to on our to ongoing the our ensure risk to and XXXX, to and Further, we and enhanced leveraging

but provision Federal well pace Operator, call moderate As it's as growth excess purchase both our balance by sheet of concludes and expectations. increases credit the you XXXX as noted to normalizing comments the migration the for reflects year. in levels Reserve current market. measured A a the that as the credit table, and cash more A rate outlook two our call. mortgage we'll given loans section normalization prepared for for of the constructive grow during and back at Q&A losses, turn productive

Operator

this like telephone everyone press At would press remind in on time, order one to ask question, then star, keypad. I your a to

here just the We to roaster. comply moment a will for question-and-answer pause with

comes question Please your Michael, now first from Young Our ahead. open. line Truist. from is go Michael

Michael Young

Good everyone. morning, Hey.

Jeremy Ford

Good morning.

Will Furr

Morning.

Michael Young

to ask quick wanted one, I a housekeeping Will.

Just that business be unhedged. like we impacts there the side earnings fair quarter. MSR kind Were move in should normalizing on kind sometimes as And the value anything the many we of of TBA on is this throughout -- XXXX.

Will Furr

period. year-end the in substantial Nothing

of had the some but things we So significant nothing in consequence. the throughout year, fourth quarter

Michael Young

more macro difficult markets the you what etc. initiatives can of Okay. I, to business going rates about can't the control against you and and that can what's sort efforts And you macro-environment. interest or maybe within obviously with TBA capital the within business, But grow yeah business on underway control talk just

Jeremy Ford

This take is that. Jeremy. Sure, I'll

build given quarter the people given focus rate competitors market. capital this try we of have environment that on second obviously, side, this talented The and seen business. income effort, that think we the continue market up push on to see, markets to recruited you because fixed year appetite. sales versus is that and this I light customer’s to we sales. half come the on that have with its to has fixed what and to there of a income having side. challenging the real In biggest challenging have our revenue a That's our building do other you've if particular, a middle On reliance we lot trading really year diversify

Michael Young

great Okay, to as rates XXXX is we seen obviously, rise but to been refinance really in and fall is expected the maybe And guys volume looks purchase just off moving historically decent. pretty actually market, and already have strong in over fall. we've mortgage, somewhat and rates that are that pretty

control So and in about in guys are you context XXXX? still talk just going outlook maybe costs or a you that grow trying hiring could take little to to that for maybe your XXXX? more in to volume are efforts and for bit business that business you

Jeremy Ford

and talk three the over by are XX%. can increase and purchase the originator, and years, about just focus in. to to first, expected expectation recruiting purchase really about I'll chime the is always albeit a volumes next mortgage volumes we have Will for cut been obviously But be refinancing

that So going affect and on that think do and competitive do -- already our we landscape, margins. seen to the we think that's an impact have we've

focus. we're of been about are we experienced we loan a through incremental producers competitive then And can recruiting And for XXXX, say successful are million we recruiting. it's volume. that purchase We doing as have and looking for gain a actively have $XXX I in -- originators of that, XX well net had very at but

Will Furr

Michael. [Indiscernible],

takes you competitive to quickly keep we're managing business, size have into the lower of terms fulsome hold kind and their obviously, while the where cycle worked the moved the rationalize the generally the if in overcapacity set, to machine of the In will, overall they price, quickly of to of market profitability moving operations. and

range. XXX, here, So margins basis to we're gain decline into we guided sale points expecting as on XXX that

basis XXX basis reported on a in As quarter. on third-party the they call, the we on loans, were a and noted XXX

be going new business efforts As pull we drive which years origination in our a to focus working four the overall productivity. to to through. -- of we're the platform, the as to is base, mortgage leverage, to pretty overall through mentioned the as the and loan -- It's productivity worked three do well be decline also but originator grow with our ours our It be over space. of to digital as our expect purchase improve as going material Jeremy much mortgage last We're looking going going will grow. to grow, given has business, XXXX our couple the than of is both But understanding get the been to of it the of and business. we in profitability to year a remain last just of the be drive we're as possible, that be on feel backdrop. expect that years, levers we to in pulling side market constructive more that to try to do expects it challenging do fair and share constructive The we to or

Michael Young

Thanks. back. step I'll

Operator

Our please Olney from from Matt Stephens. next comes Matt, go question ahead.

Matt Olney

Hey, Good thanks. guys. morning,

Jeremy Ford

Matt. Hey,

Will Furr

Good morning.

Matt Olney

I think I go discussion HilltopSecurities. And year And million. back those to headwinds the came the revenue throughout for the industry some year. full around the kind obviously $XXX want of of on said around you was to

it see can today, $XXX that million you XXXX. do think you achieve in you As

Jeremy Ford

you it margin we we've last them. things of on upside our year our guidance know kind people contain improve. businesses. the to should this that. I businesses they're to they'll going and say mean, look of and six improve, We I committed we're markets I back if And that. doing, think not that and -- year I 'XX an these We're revenue with that be we as those should as into exact described, businesses. the going where got those pressure to to expect, go -- run months what would really Then and eventually two impact and at see great of improve, evolve we're the saw on the give there's would

Matt Olney

loan kind fourth of you on quarter guidance the And that. quarter. for the the then at guess then And the any of drivers over I -- inflection. in the the sound it growth. color guess was Any think on looking that growth, Thanks bank growth to doesn't loan like loan I switching more Okay. fourth

more color the guidance there. any Just around

Will Furr

Yeah.

of So fourth saw in a in PrimeLending -- late kind better gives just the of again, in comments, quarter, go your warehouse $XXX a over of for the things a in business was of loans and tried CRE that. so lending just that million, declined All path. growth you million, The declined for to our unique and warehouse sense we kind where national mortgage followed just that the quarter is activity more was. space any declined balance about The saw the that things that $XX basis, space our a obviously retention lending national kind was million. highlight seasonal I that and if we period, lending that over PPP on in million $XXX up -- period the seasonal which about a $XX

this normally we've the expected rage the in-person again last forward, kind we the a -- be approximately lot continued COVID the protect you that of loan and commercial in quarter that growth negotiate calling again, we're to of out, safety of would is year a the our and environment parts clients back of and to a our the late to trying and associates. as with pulled We what look from of pulled the back perspective, challenging middle we restarted As of in pandemic calling the fourth strand activities year. --

your efforts is if again, back more clients, for a on and efforts short time, in-person and generally what and fruitful efforts, the we're period sales still the endeavor. is pull calling we but which you retail a So get people phone of the expecting

quarter, of growth you a our a as commercial send resume growth X% that in a Again, we're and average activity range that abating the quarters a but see in a across be little trying in to to expectation to third strand of stronger to in our activity this the what say start low starts perspective. there lot from and second that full to the is basis. this looks And certainly seeing grow expect in most be CRE. of focus year. text the We business CRE on footprint will But then first bit to X% I'd activity year of C&I a solid as

Jeremy Ford

other of in would only the just is the the our I fourth quarter, was lot existing mention it customers. thing And on growth a

So that was the commonality.

Matt Olney

on guess you the I XX, and guys increase guidance expense between you on side, That's expenses, that looks variable that between appreciate at on broken the helpful expenses Slide the I helpful like side, looking non-variable to non-variable way expect then out that’s and it X% pressures I that, thought the side, I on X%. hoping provide on to obviously wage guess commentary I can more Any some -- you cost there's and could fixed some cut -- even going was on opportunity more but there be the in industry.

us on Just any that? give commentary you can other

Will Furr

it. hit I on think you

Again, other think and of agreements living I would here. on We'll I a agreements productivity couple A got the so costs. we're focused of been. doing of here. merit reflects real our are be doing the end what pressure's software and that's would just acknowledging points expect I to wage escalators that than inflationary or embedded historically in it an the reflected adjustments see lower work the they here that's, higher say real. of perspective. think have occupancy there, what offsetting agreements, some we're We've also impact We're percentage range from and

the in short you run, which business be do not position again, short-term which not driving productivity think But our across perspective. to successful are. operations, both been most our an want it's on we the of as to going practice, also I laser-focused absolutely take expense that away all but to we for not kind that to focused, view one-year phenomenon, will they're we're a the we're long reduction them here So -- quarter, a and we're in quarter, be they going to the over almost term, help there run, overreact short certainly things seeing a period. continue we to so a be we the going our And we're expect from fourth period from investment into of have to the those inflationary pressures persisted, we're first perspective, an

Matt Olney

guys. Thank Okay. you,

Jeremy Ford

Thank you.

Will Furr

Thank you.

Operator

Brad question from next from ahead. Our Please go is Piper Milsaps Sandler.

Brad Milsaps

morning. good Hey,

Jeremy Ford

Morning.

Brad Milsaps

It follow-up $XXX 'XX. Hey, you XXXX, will I which based of Just the big million in just had all around the a the kind question $XX wanted in show to additional that is mean, on now. on Matt's expense Just just and category? like to expenses midpoint seems I curious. would imply kind just million Non-variable I number, like personnel expenses. where going you big in I of of are of range of leap like up? If a take most about seems of think

Will Furr

I few going in personnel level. there. see think all portion at not but you'll things up the percentage few at there's a It's show personnel, things that to

see year moved on see in then will to the inflation to, -- and are software rest the efforts core relates a expenses and where affect the expectation make progress healthcare-related to digitize automate you're personnel as were other improvements the perspective. it. across into up our as moving That's that and is of again, year-over-year continue costs move and in of we're And living in a to But as again, and going productivity working adjustments going compensation, and here. and from which sustainably to higher. as diligently as of a has moved of we generally just They'll we run, adjustments expenses. we across terms are contracts And businesses, going series balance You think, in in occupancy balance market has costs the the the we pretty based there. all processes, that quickly range those well headcount short

that. with to we're deal So subject

Brad Milsaps

then on just was linked up to X.X%, basis XX ask average the like I taxable to wanted Okay. about balance points yield the -- bond Thank looks And over about up you. sheet, quarter.

if sustainable the that anticipate curious Just you that adding are and bonds would a is grow anything that in there's or portfolio be of kind one-time level XXXX? portfolio you to continuing bond higher where would there driving in new to

Will Furr

to starting grow. are, we bank we'll the will levels given liquidity overall the cash that continue We levels do expect bond -- portfolio where see to with are, just

got of -- basis. has the trading portfolio, ending a million quarters on HilltopSecurities, and we've last between moved So on dollars $XXX couple an reported which $XXX

too We I'd focused higher per securities period likely a that portfolio, vintage move higher. appears over risk high drift $XXX higher Again, rolls on moving, $XXX [Indiscernible] asset to sensitivity. level taking bank the on expect the market focused the as on allow that will not fit purchasing what quarter. it has to much rates higher, to to as a are reasonably the hand, we're say bond we million maintain of be other a us

points. than securities rate and floating going rate basis now more some on money maybe historically be the security would are are about -- we've XXX fixed right purchase that fixed bought going on at So is rate --

expect the up. moved bank going to asset-sensitivity we're securities So what obviously portfolio our the manage again, at And again, move to do have we will level. Rates higher. can we

years. So we of to we a cycle can and of believe take next moving longer over the what maybe be advantage quarters rates higher

Brad Milsaps

this quarter. number forward. yield But nothing in specific going the That's pretty Okay, a great. good

Will Furr

I that it. say significant moved Nothing. wouldn't anything

Brad Milsaps

Okay. for just me. final And then question

rate that around product interest of appreciate how impact mentioned impact your disclosure. asset you just I refresher the to -- know much think the disclosed what Just if that you the there. deck, opportunity does of the How you is the suite that have sensitivity kind broker remind that the at a the all table of all. at I in I in wanted past. a Jeremy, have, kind that you reminder, me Can the sensitivity, I dealer?

Will Furr

it's it doesn't interest net far sensitivity it it deposits of impact obviously net consolidated not doesn't do not a the perspective. perspective a from generated the What a sensitivity value impact of so Thanks. P&L item more From an a move from through it. asset is interest will It's a higher. But asset that at income higher impacted. move -- it does dealer fee obviously interest item will the as The the as it's net in and asset grow. fees from evaluation fee income perspective as the P&L. sensitivity those broker line value perspective, of comes rates income We it

Brad Milsaps

I Okay. that. the questions. taking appreciate for Thanks there. Great. clarity for Thanks my

Operator

from from James. Next Tunis, Raymond Yan question is John

open. Your go ahead. line is Please now

John Yan Tunis

Good morning.

Jeremy Ford

Morning.

Will Furr

morning. Good

John Yan Tunis

why unpack relatively you such your hoping and you're big a guidance deposit was XXXX. anticipating could in drop I

Will Furr

time. as starts the to to the we of here, Fed pull additional by we usage And as deposits an well, to sheet, is be as as we marketplace over the kind stimulus what additional move think balance expect of our I well out view the note these last its expect of liquidity innings notwithstanding, stimulus efforts, kind see customers of

Again, to clarity will perspective, clear If for as economic well money however last our we inflation, seen as rate work couple been environment over start those of net deposits to investments, to in those as a going inflation start little as get are economic last -- expect see that innings whether benefits put we the again to we and community so of and around years, work environment, programs portfolio we stimulus improve otherwise inventory deposits that as starts a from both clarity. our is clarity consumer commercially additional is, that commercial our we and bank, will inflow the to are customers real believe from expect believe that as of put the deposits do a C&I stimulus both outlook We see perspective. put more draws a starts to more -- of get pandemic or work. to additional the temporary that there a projects the more of we to that with the as also start we've customers quarters, customers oriented an get couple a on we from estate also have or of customers result, profitable and in the the this and they dollars large the to next portion expect and as the be

John Yan Tunis

deposits the after increase and rate raise it guess hike first will on quick and do costs your wondering, appreciate the in any near-term? said how you I in have that you to you remarks, I where and was NIM then to then the in I shake XXXX, cost believe expect deposit out sense prepared I plan do you

Will Furr

a data. deposit which model Through the cost concert from would through, from XX% entire cycle, we about the cycle rate model perspective. a As pull-through cycle it be on

to gift pass a we couple first is XX% after liquidity in in basis the and to portion move Meda likely XXXX XX a Fed mentioned increases into XXXX market do an to From take the As were XXX the the our basis the as first that as points, we'll to second we of expect of evaluate But think Fed, and the XXX to a it move rates we through the position. our would some movements, that points, we'll period the XX% about time my to comments, valuate expect likely for customers. start I of have to example,

John Yan Tunis

Understood. -- I

Will Furr

really really I will expansion those on occur, perspective, to From start occur, [Indiscernible] drift here drift year. NIM expecting be second early total a -- they will in And the expand. be things. a we'll just NIM NIM if rate [Indiscernible] part There to likely side, the question. as NIM as there then liability likely we're little lower the noted. two to see increases But of

rigorous expect work competition the expansion On side, our we've overall of loan to floors asset we as through as the asset persist way got well to side. on our to the see kind

John Yan Tunis

it. mortgage backdrop playing at to that of, originators shrink or originators, has to market, wondering in shrunk pool me the you continuing increase Perfect XXXX, hire was that's and expected speaking ask [Indiscernible] the one out And last your I guys of question. guy if was number volumes Appreciate with just of guess across loan all. I total guess the

Jeremy Ford

-- far. Not much so so Not

Will Furr

of reset, expectations this take what has distortly series make going pare so can of they and in prices out a XX take taken start to perform say That's have or market in long and particular -- I'd or [Indiscernible] months those That earnings volumes kind to out. the the year who it reset, as going business. to shake or to will of XX reset, people's term, a quarters to just capability

John Yan Tunis

taking Understood. questions. for Thank you my

Jeremy Ford

Thanks.

Operator

Michael, is We ahead. your have go open. follow-up now from from a line question Young Michael Truist. Please

Michael Young

for Thanks the follow-up.

to ask on wanted Just allocation and capital returns.

And to standard any but to know $XXX maintain point. capital you anything is seeing M&A are of guys you the than a like so could XX, what try million versus of capital as levels past this just buyback quite you in above hold capital excess an more that cause million Even or onto more maybe that kind give capital, for are approved on if kind but Maybe today. thoughts guys be helpful. view this more the repurchase, or about would the pipeline high. update Will, of I $XXX so share You is you excess obviously other the you which in would maybe here than that share at

Jeremy Ford

sitting the matter, prior this caution we but at I the year, future, would share don't dividends of And to we fill pre rate $X excess and been Jeremy. expect million purgatory would in. to got I for able had outsized actions. It's this corporate right that believe and year do, earnings This say than XX% I and other in on for some we've to And shareholders and to about mentioned, higher is, that dividend the that It's did is increase. billion, that we're the Sure. that I XX% it's $XXX -pandemic. due in return about up. through that's I'll there Will what XX% as I think affirmation of on real we more that announcing strength now, take increase earnings and is a future we of return. dividends. -- shareholder about we're But excited I capital think up. repurchases last

authorization announced in we million. repurchase similarly, or so And of our share $XXX a increase

And those repurchases say. that in to we'll be that's periods me, evaluating all the window open do open so to Excuse markets.

of billion dollars still, an even until deal excess an we that going hover some that type. probably of M&A capital we're think around have I like to event

Michael Young

The of are bank period the be Okay. of also you case general more to running that amount different just M&A of like base or thoughts some not And give be generally, that's reevaluate I seems update, you pretty strong more an higher going maybe space through on guys when any know A the in us coming. market, going in distress could thoughts. banks economy of capital generally? rates M&A for lot stimulus are but given but just light just and the active at typically the it within there's time, in the looking position. to

Jeremy Ford

Sure.

that our Our M&A preference dialed it. of are desire balance in bolster looking not And at this would our a a collectively. and and enhancing franchise bank the of we Hilltop banks got a in of to set And where been in -- kind partners think strategic of to the Texas is that profile the advantage we've bank do where earnings sheet given the environment, implications tax cash that's be do more and good transaction. would we of

of are But We're worthwhile cash hopefully right enough find would We we deal can our that. and mindful with partner on challenged currency. and be based the for the us.

Michael Young

Okay. Thanks.

Jeremy Ford

you. Thank

Operator

to There are presenters. like to no would call I further time. questions at this over the back turn

Jeremy Ford

concludes that Thank call. our Operator you.

Operator

This conference concludes today's call.

your lines. disconnect now You may

Hilltop (HTH) 28 Jan 222021 Q4 Earnings call transcript