Hilltop Holdings Inc. (NYSE:HTH) Q3 2018 Earnings Conference Call Transcript

Oct 26, 2018 • 09:00 am ET

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Hilltop Holdings Inc. (NYSE:HTH) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning and welcome to the Hilltop Holdings Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Isabell Novakov. Please go ahead.

Executive
Isabell Novakov

Good morning. Joining me on the call this morning are Jeremy Ford, President and Co-CEO; Alan White, Vice Chairman and Co-CEO; and Will Furr, CFO.

(Forward-Looking Cautionary Statements)

Additionally, this presentation includes certain non-GAAP measures including taxable equivalent net interest margin, pre-purchase accounting taxable equivalent net interest margin, 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.

And now, I would like to hand the presentation over to Jeremy Ford.

Executive
Jeremy Ford

Thank you, Isabell, and good morning.

For the third quarter 2018, we reported net income of $35.8 million or $0.38 per diluted share, which represents a $5.6 million increase compared with the same quarter last year. This quarter's results are representative of our focus on disciplined growth, asset quality and value creation. As part of our diversified growth and disciplined M&A strategy, we successfully completed The Bank of River Oaks as transaction. The conversion and integration is now nearly complete and early financial results are ahead of expectations. Importantly, the performance of our recently integrated team and the pipeline of new opportunities give us confidence in our Houston presence.

This quarter net interest income grew 5% versus prior year despite declining accretion, as we saw NIM expansion and a 10% increase in our overall loan portfolio. Non-interest expense decreased $18 million or 5% versus Q3 2017 driven by lower losses in the insurance business and reduced operating and compensation expenses from lower volumes in the mortgage business. Through the first nine months of the year, we have returned $58.9 million in dividends and share repurchases to stockholders. Under our board of directors approved share repurchase program, $61.2 million remains available through January of 2019. Additionally, our board of directors declared a quarterly cash dividend of $0.07 per common share payable on November 30, 2018.

Our consistent focus on asset quality through established client relationships and talent underwriting was highlighted this quarter as non-covered non-performing loans fell to 44 basis points of total non-covered loans and year-to-date net charge-offs were only $1.6 million. The insurance business recorded a loss and LAE ratio of 54.7% for the third quarter as a result of less severe storms in its geographic footprint, down from 90.6% during the same period prior year, which included the impact of hurricane Harvey.

During the quarter, we had four significant items to call out including transaction expenses associated with The Bank of River Oaks acquisition, settlements with both the Department of Justice and the FDIC on different matters and costs related to the execution of