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Mar 31, 2020
Hilltop Q1 2020 Earnings Report
Hilltop's performance was driven by diversified growth and managed risk during the first quarter of 2020.
Key Takeaways
Hilltop Holdings reported a net income of $28.1 million and EPS of $0.51. Mortgage origination volume grew by 48% compared to the same quarter in the prior year. The Broker-Dealer segment reported a pre-tax margin of 18.3%.
Net charge-offs in Q1 2020 equated to $1.5 million, or 9 basis points of average loans HFI.
Mortgage origination volume of $3.6 billion in Q1 2020 grew by $1.2 billion, or 48%, compared to the same quarter in the prior year as rates declined.
The Broker-Dealer segment reported a pre-tax margin of 18.3% compared to 15.8% during the first quarter 2019 as Fixed Income and Wealth Management businesses partially offset a decline in Structured Finance revenues.
Book value per share at March 31, 2020 grew by 12% versus March 31, 2019 to $23.71, and tangible book value per share increased 12% during the same period to $20.16.
Forward Guidance
Hilltop Holdings provided commentary on loan growth, deposit growth, net interest income, noninterest income, noninterest expense, provision expense and effective tax rate for 2020.
Positive Outlook
- PPP loan originations expected to provide majority of loan growth
- Commercial loan pipelines remain solid, clients delaying pricing and funding until further economic clarity emerges
- Deposit inflows expected to remain positive
- Non-variable expenses to remain stable
Challenges Ahead
- Suspending the retention of single family mortgage loans at PlainsCapital Bank
- Purchase accounting accretion expected to decline by 20 - 30% versus 2019 levels
- Negative impact on annualized Net Interest Income from falling rates and relatively flat yield curve
- Normalization of mortgage origination volumes once pandemic restrictions are removed, economic certainty can be assessed and citizens are comfortable that they can safely evaluate homes
Historical Earnings Impact
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Avg. Return Before/After Earnings
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