Hilltop Holdings Inc.

Welcome to the Hilltop Holdings Third Quarter 2021 Earnings Conference Call and Webcast. My name is Robin and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. If you have joined us online, you can press the flag icon on your web browser to ask a question. I will now hand you over to your host, Eric Yowie, Executive Vice President of Corporate Development. Eric, please go ahead.

Thank you. Before we get started, please note that certain statements during today's presentation that are not statements of historical facts, including statements concerning such items as our outlook, business strategy, future plans, financial condition, allowance for credit losses, the impact and potential impacts of COVID-19, stock repurchases and dividends, as well as such other items referenced in the preface of our presentation 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. With that, I will now turn the presentation over to Jeremy Ford, President and CEO.

Thank you, Eric, and good morning. For the third quarter, Hilltop reported net income of $93 million, or $1.15 per diluted share. Return on average assets for the period was 2.1%, and return on average equity was 15%. These favorable operating results again demonstrate the strength of Hilltop's diversified model when our businesses and our people execute on their strategies and capabilities. Plains Capital Bank had another strong quarter, with pre-tax income of $63 million and a return on average assets of 1.4%. Income during the period included $4.6 million of PPP loan-related origination fees and a $5.8 million reversal of provision. We have seen continued improvement in our asset quality, which is a reflection of both the bank's sound lending practices and the healthier economic outlook. Total average bank loans declined $252 million or 4% versus Q2 2021 as PPP balances ran off. Excluding PPP loans, average bank loans were stable in the quarter. Although the lending environment is extremely competitive and many of our clients remain flush with liquidity, we have seen growth in our loan pipeline. which is at its highest level since the pandemic. The current pipeline is heavily commercial real estate, specifically in residential lot development, industrial and multifamily across the major Texas markets. Payoffs will remain a challenge though, as our quality real estate clients continue to find attractive opportunities for their projects in the permanent financing markets. Total average deposits remain stable link order, with average deposits excluding broker deposits increasing by $200 million or 2% from Q2 2021 and 1.9 billion or 16% from prior year. We continue to see growth in both interest-bearing and non-interest-bearing accounts. Since Q3 2020, we have run off almost $1 billion in broker deposits. This was another strong quarter for Prime Lending. generating $62 million in pre-tax income. Although a decline from the astonishing levels in 2020, volumes and pricing held on longer than anticipated, and as a result, we were able to deliver favorable returns during the period. Prime lending originated $5.6 billion in volume in the quarter from its continued strength in home purchase volume. Refinancing volume as a percent of total volume decreased to 29% from 35%, during the same period in 2020. If current mortgage rates remain relatively unchanged through the end of the year, we believe this downward trend of refinancing volumes will continue. Gain on sale margin of loans sold to third parties declined by 17 basis points linked quarter to 359 basis points. Margins remain pressured as we see competition reacting to the decline in refinancing volume and as our product mix has shifted where the relatively higher margin government product is lagging. Our team at Prime Lending remains acutely focused on monitoring pricing and margins. Prime Lending continues to recruit productive loan officers and has hired 127 year-to-date, bringing total loan officer headcount to 1,314. This is a primary focus. as we target purchase-oriented loan officers to help offset the lower margins we expect in the coming quarters. We believe our exceptional team, purchase orientation, technology investments, and focus on customer experience will continue to drive attractive returns from the mortgage business. During the quarter, Hilltop Securities generated $17.4 million of pretax income on net revenues of $127 million. for a pre-tax margin of 13.8%. This was a good quarter for the public finance business in particular, with revenues up $12 million from prior year, predominantly from a few larger deals. We are encouraged by the potential for growth in the municipal finance market, with a healthy current pipeline and the anticipation of increased future infrastructure spending. Revenues within the structured finance business decreased by $26 million from last year, as the overall mortgage market has declined from the astonishing levels in 2020. From a historical average perspective, volumes are still strong and revenues rebounded by $24 million linked quarter. We continue to build on the structured finance business by solidifying existing relationships and adding new clients. Within our fixed income business, customer demand weakened given expectations of higher interest rates on the horizon. a trend that has been seen across the industry. While all product areas were challenged in the quarter, Hilltop Securities has made several key additions in the business, including leadership for our middle market sales effort, which has been a strategic priority for several years. Therefore, we remain focused on growing our market share and profitability in fixed income. Overall, Hilltop Securities is well positioned. as we have added key infrastructure, producers, and leadership to broaden our core capabilities and customer penetration as a leading municipal investment bank. Moving to page four. As a result of strong and diversified earnings, we continue to grow our tangible book value while returning capital to shareholders. Our capital levels remain very strong with a common equity tier one capital ratio of 21.3% at quarter end. We have grown our tangible book value per share by 18% over the last quarter to $27.77. During the quarter, Hilltop returned $84 million to shareholders through dividends and share repurchases. The $74 million in shares repurchased are part of the $150 million share authorization the Board granted earlier in this year. This week, the Hilltop Board of Directors authorized an additional increase to the stock repurchase program of $50 million, bringing the total authorization to $200 million. As a result of dividends and share repurchase efforts, Hilltop has returned $153 million in capital to shareholders year to date. Additionally, we paid down $67 million in trust-referred securities during the quarter, which will reduce our annual interest expense by over $2 million going forward. In conclusion, we are very pleased with the results for the quarter. All businesses showed solid momentum going into the fourth quarter and are performing well against their strategic objectives. We feel well positioned with the team and capital in place to continue growing long-term shareholder value. With that, I will now turn the presentation over to Will to discuss the financials.