Hilltop Holdings Inc.

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 touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded and I'll turn the conference over to Eric Yogi. Please go ahead.

Thank you, Operator. Before we get started, please note that certain statements during today's presentation that are not statements of historical fact, including statements concerning such items as our outlook, business strategy, future plan, financial condition, allowance for credit losses, and the impact and potential impacts of COVID-19 are forward-looking statements. These statements are based on management's current expectations concerning future events that by their nature are subject to risk and uncertainties. Our actual results, capital, liquidity, and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our presentation and those included in our most recent annual report and quarterly report filed with the SEC. except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information. Additionally, this presentation includes certain non-GAAP measures, including tangible common equity and tangible book value per share. A reconciliation of these measures to the nearest GAAP measure may be found in the appendix to this presentation, which is posted on our website at ir.hilltop-holdings.com. I will now turn the presentation over to Jeremy Ford, President and CEO.

Thank you, Eric, and good morning. Before I get into the results for the quarter, I would like to applaud our teams across all three businesses and at the holding company for their unwavering commitment to serve our customers in a safe and highly effective manner. I believe this year has made us a stronger company and will provide the foundation for prudent future growth. In the third quarter, Hilltop delivered $153 million in net income and earnings per share of $1.70. This was an increase from the third quarter 2019 of $74 million or $0.84 per diluted share. Of note, Q3 2020 results include a final true-up of $736,000 related to the sale of National Lloyds. Importantly, Hilltop's Q3 2020 exceptional results reflect outsized mortgage-related earnings at Prime Lending and Hilltop Securities, as well as no provision for loan losses at the bank. However, we remain cautious that the COVID-19 pandemic may continue to adversely affect our businesses, including reduced mortgage volumes and further credit deterioration in our loan portfolio. Our net revenue for the quarter of $604 million was higher on a year-over-year and linked quarter basis, as both the mortgage purchase and refinance markets remain strong in this low-rate environment. Prime lending originated $6.5 billion in loans during this period, an increase of $1.7 billion from the third quarter of 2019. Additionally, the gain on sale margin during this period expanded by 105 basis points year-over-year and by 72 basis points lean quarter. Total deposits increased by $2.5 billion, or 29%, compared to the third quarter 2019, but declined slightly on a lean quarter basis as we returned approximately $400 million in broker-dealer suite deposits due to the bank's fortified liquidity position. During the quarter, the broker-dealer grew net revenues by 23% from the third quarter 2019 to $149 million and reported a pre-tax margin of 23.7%. The firm's robust financial results in the quarter were driven by strong performance in the structured finance and fixed income services businesses, as well as improvement in the public finance services business. We continually aim to optimize our capital position. As of quarter end, Hilltop had approximately $1 billion in excess capital. On September 23rd, we announced the commencement of a modified Dutch auction tender offer to purchase shares of our common stock for an aggregate cash purchase price of up to $350 million and at a per share price not less than $18.25 and not more than $21. The tender offer is scheduled to expire on October 30th, 2020. Additionally, we continue to maintain our dividend at a prudent level. and the Board of Directors recently declared a quarterly cash dividend of $0.09 per common share payable on November 30, 2020. From a risk perspective, we continue to support our bank clients while maintaining a healthy allowance on our loan portfolio as we monitor credit and the effects of the COVID-19 pandemic on our customers and the economy. As an update on the COVID-19 related loan deferrals, our balance as of September 30th was $291 million. down from $968 million at the end of the second quarter. I will go into more detail on slide five where we break down the deferments and allowances by category. Our allowance for credit losses as of September 30 totaled $155 million or 2.08% of the bank's loan portfolio. Our allowance is based on both quantitative and qualitative factors and reflects our best estimate given the pace of the economic recovery, the position of our customers, and the value of their underlying assets. Moving to slide four. Plains Capital Bank delivered pre-tax income of $50 million as no provision was recorded during the quarter. Net interest margin was 3.03% during the period, a decline late quarter of eight basis points as loan yields remained under pressure. Prime Lending had a record quarter and generated pre-tax income of $146 million, an increase of $114 million from Q3 2019. That was driven by a 35% increase in origination volume and a gain on sale margin of 440 basis points. I would like to commend Prime Lending's leadership, loan originators, and secondary marketing team for originating $16 billion in mortgage loans year-to-date and doing a fantastic job managing pricing during this record year. Hilltop Securities experienced another great quarter with pre-tax income of $35 million, an increase of $8 million, or 31%, from the third quarter of 2019. In the structured finance business, the TBA Group took advantage of the strong purchase mortgage market, which led to a surge in lock volumes that were 71% greater than Q3 2019. In the fixed income services business, credit and municipal products continue to be relatively strong compared to last year. And also of note, the public finance services business showed considerable improvement from a favorable issuance environment. As I referenced last quarter, I believe Hilltop Securities is well underway in building the best municipal-focused investment bank by raising the profile of the firm. Moving to slide five. As I touched on earlier, the bank's leadership, bankers, and credit team have done a great job serving the needs of their clients while protecting the bank's capital. And we saw a reduction in COVID-19 related deferral loans of 70% from the second quarter. This positive trend was expected with the request for further deferments coming from the most severely impacted industries, namely hotels and restaurants. While this is a good sign, We do anticipate further deferments and challenges in these highlighted areas, and potentially in other areas such as office space, where we believe shifting trends and a gradual economic recovery can have a longer-term impact. The current allowance on the deferred portfolio is $49 million, or 17% compared to $69 million, or 7% in the second quarter. We believe this to be our best estimate of the reserve needed for the portfolio given our analysis of the underlying credit and current economic environment. With that, I now turn the presentation over to Will to talk further about the financials.