Edgar Filing: Hilltop Holdings Inc.

hth_Current folio_10Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-31987

Hilltop Holdings Inc.

(Exact name of registrant as specified in its charter)


Maryland		84-1477939
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

200 Crescent Court, Suite 1330
Dallas, TX		75201
(Address of principal executive offices)		(Zip Code)

(214) 855-2177

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)		Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of the registrant's common stock outstanding at July 29, 2015 was 99,517,560.

Table of Contents

HILLTOP HOLDINGS INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2015

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	56

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	92

Item 4.	Controls and Procedures	95


PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	96

Item 1A.	Risk Factors	96

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	97

Item 6.	Exhibits	98

Table of Contents

HILLTOP HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(Unaudited)


	June 30,		December 31,
	2015		2014
Assets
Cash and due from banks	$	583,043	$	782,473
Federal funds sold		22,814		30,602
Securities purchased under agreements to resell		79,153		—
Assets segregated for regulatory purposes		188,094		76,013
Securities:
Trading, at fair value		265,429		65,717
Available for sale, at fair value (amortized cost of $765,392 and $924,755 respectively)		763,463		925,535
Held to maturity, at amortized cost (fair value of $313,529 and $118,345, respectively)		312,960		118,209
		1,341,852		1,109,461

Loans held for sale		1,397,617		1,309,693
Non-covered loans, net of unearned income		4,956,969		3,920,476
Allowance for non-covered loan losses		(40,484)		(37,041)
Non-covered loans, net		4,916,485		3,883,435

Covered loans, net of allowance of $934 and $4,611, respectively		493,299		638,029
Broker-dealer and clearing organization receivables		2,070,770		167,884
Premises and equipment, net		206,411		206,991
FDIC indemnification asset		102,381		130,437
Covered other real estate owned		125,510		136,945
Other assets		636,183		458,862
Goodwill		251,808		251,808
Other intangible assets, net		61,778		59,783
Total assets	$	12,477,198	$	9,242,416

Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing	$	2,135,988	$	2,076,385
Interest-bearing		4,660,449		4,293,507
Total deposits		6,796,437		6,369,892

Broker-dealer and clearing organization payables		2,048,176		179,042
Short-term borrowings		1,100,025		762,696
Securities sold, not yet purchased, at fair value		135,592		48
Notes payable		245,420		56,684
Junior subordinated debentures		67,012		67,012
Other liabilities		409,904		345,803
Total liabilities		10,802,566		7,781,177
Commitments and contingencies (see Notes 13 and 14)
Stockholders' equity:
Hilltop stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; Series B, liquidation value per share of $1,000; 114,068 shares issued and outstanding at December 31, 2014		—		114,068
Common stock, $0.01 par value, 125,000,000 shares authorized; 99,515,048 and 90,181,888 shares issued and outstanding, respectively		995		902
Additional paid-in capital		1,582,655		1,390,788
Accumulated other comprehensive income (loss)		(1,105)		651
Retained earnings (accumulated deficit)		90,376		(45,957)
Deferred compensation employee stock trust, net		1,182		—
Employee stock trust (29,589 shares, at cost)		(590)		—
Total Hilltop stockholders' equity		1,673,513		1,460,452
Noncontrolling interests		1,119		787
Total stockholders' equity		1,674,632		1,461,239
Total liabilities and stockholders' equity	$	12,477,198	$	9,242,416

See accompanying notes.

Table of Contents

HILLTOP HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Interest income:
Loans, including fees	$	96,967	$	92,204	$	184,355	$	171,948
Securities borrowed		9,675		1,878		19,693		3,342
Securities:
Taxable		6,227		7,618		13,276		15,206
Tax-exempt		1,557		1,187		3,298		2,429
Other		1,236		1,521		2,709		3,311
Total interest income		115,662		104,408		223,331		196,236

Interest expense:
Deposits		3,900		3,096		8,215		6,855
Securities loaned		6,889		927		14,395		1,765
Short-term borrowings		1,143		542		2,167		939
Notes payable		2,289		632		2,958		1,280
Junior subordinated debentures		595		587		1,180		1,171
Other		179		178		357		359
Total interest expense		14,995		5,962		29,272		12,369

Net interest income		100,667		98,446		194,059		183,867
Provision for loan losses		158		5,533		2,845		8,775
Net interest income after provision for loan losses		100,509		92,913		191,214		175,092

Noninterest income:
Net realized gains on securities		—		—		4,403		—
Net gains from sale of loans and other mortgage production income		147,175		106,054		267,720		185,165
Mortgage loan origination fees		20,958		16,983		35,547		29,327
Net insurance premiums earned		40,318		40,777		79,885		81,096
Securities commissions and fees		41,137		6,994		84,188		13,992
Investment and securities advisory fees and commissions		29,665		15,270		54,587		29,607
Bargain purchase gain		—		—		80,657		—
Other		22,147		17,203		46,626		34,194
Total noninterest income		301,400		203,281		653,613		373,381

Noninterest expense:
Employees' compensation and benefits		200,381		124,445		382,954		230,874
Loss and loss adjustment expenses		41,241		35,275		60,101		53,612
Policy acquisition and other underwriting expenses		11,740		11,652		23,414		23,339
Occupancy and equipment, net		30,842		25,762		60,027		52,100
Other		69,113		54,078		141,297		103,916
Total noninterest expense		353,317		251,212		667,793		463,841

Income before income taxes		48,592		44,982		177,034		84,632
Income tax expense		18,137		16,294		33,557		30,648

Net income		30,455		28,688		143,477		53,984
Less: Net income attributable to noncontrolling interest		405		177		758		287

Income attributable to Hilltop		30,050		28,511		142,719		53,697
Dividends on preferred stock		428		1,426		1,854		2,852
Income applicable to Hilltop common stockholders	$	29,622	$	27,085	$	140,865	$	50,845

Earnings per common share:
Basic	$	0.30	$	0.30	$	1.41	$	0.56
Diluted	$	0.30	$	0.30	$	1.40	$	0.56

Weighted average share information:
Basic		99,486		89,709		99,613		89,708
Diluted		100,410		90,569		100,507		90,576

See accompanying notes.

Table of Contents

HILLTOP HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Net income	$	30,455	$	28,688	$	143,477	$	53,984
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of tax of $(3,829), $7,638, $625 and $17,221, respectively		(6,855)		13,553		1,058		32,362
Reclassification adjustment for gains included in net income, net of tax of $(1,589)		—		—		(2,814)		—
Comprehensive income		23,600		42,241		141,721		86,346
Less: comprehensive income attributable to noncontrolling interest		405		177		758		287

Comprehensive income applicable to Hilltop	$	23,195	$	42,064	$	140,963	$	86,059

See accompanying notes.

Table of Contents

HILLTOP HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


									Accumulated		Retained		Deferred					Total
							Additional		Other		Earnings		Compensation		Employee			Hilltop				Total
	Preferred Stock			Common Stock			Paid-in		Comprehensive		(Accumulated		Employee Stock		Stock Trust			Stockholders’		Noncontrolling		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Income (Loss)		Deficit)		Trust, Net		Shares	Amount		Equity		Interest		Equity
Balance, December 31, 2013	114	$	114,068	90,176	$	902	$	1,388,641	$	(34,863)	$	(157,607)	$	—	—	$	—	$	1,311,141	$	781	$	1,311,922
Net income	—		—	—		—		—		—		53,697		—	—		—		53,697		287		53,984
Other comprehensive income	—		—	—		—		—		32,362		—		—	—		—		32,362		—		32,362
Stock-based compensation expense	—		—	—		—		1,979		—		—		—	—		—		1,979		—		1,979
Common stock issued to board members	—		—	5		—		115		—		—		—	—		—		115		—		115
Dividends on preferred stock	—		—	—		—		(2,852)		—		—		—	—		—		(2,852)		—		(2,852)
Cash distributions to noncontrolling interest	—		—	—		—		—		—		—		—	—		—		—		(348)		(348)
Balance, June 30, 2014	114	$	114,068	90,181	$	902	$	1,387,883	$	(2,501)	$	(103,910)	$	—	—	$	—	$	1,396,442	$	720	$	1,397,162

Balance, December 31, 2014	114	$	114,068	90,182	$	902	$	1,390,788	$	651	$	(45,957)	$	—	—	$	—	$	1,460,452	$	787	$	1,461,239
Net income	—		—	—		—		—		—		142,719		—	—		—		142,719		758		143,477
Other comprehensive loss	—		—	—		—		—		(1,756)		—		—	—		—		(1,756)		—		(1,756)
Issuance of common stock	—		—	10,101		101		199,932		—		—		—	—		—		200,033		—		200,033
Stock-based compensation expense	—		—	—		—		4,253		—		—		—	—		—		4,253		—		4,253
Common stock issued to board members	—		—	6		—		113		—		—		—	—		—		113		—		113
Dividends on preferred stock	—		—	—		—		—		—		(1,854)		—	—		—		(1,854)		—		(1,854)
Redemption of preferred stock	(114)		(114,068)	—		—		—		—		—		—	—		—		(114,068)		—		(114,068)
Repurchase of common stock	—		—	(774)		(8)		(12,431)		—		(4,532)		—	—		—		(16,971)		—		(16,971)
Deferred compensation plan	—		—	—		—		—		—		—		1,182	30		(590)		592		—		592
Cash distributions to noncontrolling interest	—		—	—		—		—		—		—		—	—		—		—		(426)		(426)
Balance, June 30, 2015	—	$	—	99,515	$	995	$	1,582,655	$	(1,105)	$	90,376	$	1,182	30	$	(590)	$	1,673,513	$	1,119	$	1,674,632

See accompanying notes.

Table of Contents

HILLTOP HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2015		2014
Operating Activities
Net income	$	143,477	$	53,984
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		2,845		8,775
Depreciation, amortization and accretion, net		(36,557)		(48,612)
Net realized gains on securities		(4,403)		—
Bargain purchase gain		(80,657)		—
Deferred income taxes		(2,691)		4,842
Other, net		(2,810)		2,191
Net change in securities purchased under agreements to resell		(34,412)		—
Net change in assets segregated for regulatory purposes		69,529		(3,998)
Net change in trading securities		66,356		(2,817)
Net change in broker-dealer and clearing organization receivables		(929,477)		(146,643)
Net change in FDIC Indemnification Asset		28,882		15,024
Net change in other assets		(69,150)		(39,844)
Net change in broker-dealer and clearing organization payables		1,021,493		177,748
Net change in other liabilities		(13,349)		18,512
Net gains from sales of loans		(267,720)		(185,165)
Loans originated for sale		(6,858,751)		(4,927,983)
Proceeds from loans sold		6,993,935		4,782,239
Net cash provided by (used in) operating activities		26,540		(291,747)

Investing Activities
Proceeds from maturities and principal reductions of securities held to maturity		23,509		911
Proceeds from sales, maturities and principal reductions of securities available for sale		548,280		97,867
Purchases of securities held to maturity		(146,433)		(66,207)
Purchases of securities available for sale		(16,725)		(47,557)
Net change in loans		244,681		68,552
Purchases of premises and equipment and other assets		(14,394)		(19,815)
Proceeds from sales of premises and equipment and other real estate owned		70,767		38,281
Proceeds from redemption of bank owned life insurance		822		—
Net cash paid for Federal Home Loan Bank and Federal Reserve Bank stock		(14,313)		(31,440)
Net cash from acquisition		41,097		—
Net cash provided by investing activities		737,291		40,592

Financing Activities
Net change in deposits		(1,123,301)		(647,143)
Net change in short-term borrowings		173,089		845,106
Proceeds from notes payable		150,078		1,000
Payments on notes payable		(35,970)		(1,743)
Redemption of preferred stock		(114,068)		—
Payments to repurchase common stock		(16,971)		—
Dividends paid on preferred stock		(3,280)		(2,768)
Net cash distributed to noncontrolling interest		(426)		(348)
Other, net		(200)		(187)
Net cash provided by (used in) financing activities		(971,049)		193,917

Net change in cash and cash equivalents		(207,218)		(57,238)
Cash and cash equivalents, beginning of period		813,075		746,023
Cash and cash equivalents, end of period	$	605,857	$	688,785

Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	27,662	$	13,046
Cash paid for income taxes, net of refunds	$	95,708	$	5,582
Supplemental Schedule of Non-Cash Activities
Conversion of loans to other real estate owned	$	37,241	$	34,391
Common stock issued in acquisition	$	200,626	$	—

See accompanying notes.

Table of Contents

Hilltop Holdings Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting and Reporting Policies

Nature of Operations

Hilltop Holdings Inc. (“Hilltop” and, collectively with its subsidiaries, the “Company”) is a financial holding company registered under the Bank Holding Company Act of 1956, as amended by the Gramm-Leach-Bliley Act of 1999. The Company’s primary line of business is to provide business and consumer banking services from offices located throughout Texas through PlainsCapital Bank (the “Bank”). In addition, the Company provides an array of financial products and services through its broker-dealer, mortgage origination and insurance subsidiaries.

The Company provides its products and services through three primary operating subsidiaries, PlainsCapital Corporation (“PlainsCapital”), Hilltop Securities Holdings LLC (“Hilltop Securities”) and National Lloyds Corporation (“NLC”). PlainsCapital is a financial holding company, headquartered in Dallas, Texas, that provides, through its subsidiaries, traditional banking services, wealth and investment management and treasury management primarily in Texas and residential mortgage lending throughout the United States. Hilltop Securities is a holding company, headquartered in Dallas, Texas, that provides, through its subsidiaries, investment banking and other related financial services, including municipal advisory, sales, trading and underwriting of taxable and tax-exempt fixed income securities, equity trading, clearing, securities lending, structured finance and retail brokerage services throughout the United States. NLC is a property and casualty insurance holding company, headquartered in Waco, Texas, that provides, through its subsidiaries, fire and homeowners insurance to low value dwellings and manufactured homes primarily in Texas and other areas of the southern United States.

On January 1, 2015, Hilltop completed its acquisition of SWS Group, Inc. (“SWS”) in a stock and cash transaction, whereby SWS merged with and into Hilltop Securities, a wholly owned subsidiary of Hilltop initially formed for the purpose of facilitating this transaction (the "SWS Merger"). SWS’s broker-dealer subsidiaries, Southwest Securities (“Southwest Securities”) and SWS Financial Services, Inc. (“SWS Financial”), became subsidiaries of Hilltop Securities. Immediately following the SWS Merger, SWS’s banking subsidiary, Southwest Securities, FSB (“SWS FSB”), was merged into the Bank, an indirect wholly owned subsidiary of Hilltop. As a result of the SWS Merger, each outstanding share of SWS common stock was converted into the right to receive 0.2496 shares of Hilltop common stock and $1.94 in cash, equating to $6.92 per share based on Hilltop’s closing price on December 31, 2014 and resulting in an aggregate purchase price of $349.1 million, consisting of 10.1 million shares of common stock, $78.2 million in cash and $70.3 million associated with Hilltop’s existing investment in SWS common stock. Additionally, due to appraisal rights proceedings filed in connection with the SWS Merger, the merger consideration is subject to change, and is therefore, preliminary as of the date of this report. Based on preliminary purchase date valuations, the fair value of the assets acquired was $3.3 billion, including $707.5 million in securities, $863.8 million in non-covered loans and $1.2 billion in broker-dealer and clearing organization receivables. The fair value of liabilities assumed was $2.9 billion, consisting primarily of deposits of $1.3 billion and $1.1 billion in broker-dealer and clearing organization payables.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), and in conformity with the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these financial statements contain all adjustments necessary for a fair statement of the results of the interim periods presented. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”). Results for interim periods are not necessarily indicative of results to be expected for a full year or any future period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates regarding the allowance for loan losses, the fair values of

Table of Contents

financial instruments, the amounts receivable from the Federal Deposit Insurance Corporation (the “FDIC”) under loss-share agreements (the “FDIC Indemnification Asset”), reserves for losses and loss adjustment expenses, the mortgage loan indemnification liability, and the potential impairment of assets are particularly subject to change. The Company has applied its critical accounting policies and estimation methods consistently in all periods presented in these consolidated financial statements. As discussed in Note 2 to the consolidated financial statements, the SWS Merger purchase date valuations associated with loans and taxes are considered preliminary because management’s review and approval of certain key assumptions is not complete.

The operations of SWS were included in the Company’s operating results beginning January 1, 2015 and such operations included a preliminary bargain purchase gain of $82.8 million as disclosed in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 6, 2015. During the quarter ended June 30, 2015, the estimated fair value of the customer relationship intangible asset acquired as of January 1, 2015 was adjusted in accordance with the Business Combinations Topic of the Accounting Standards Codification (“ASC”) as a result of management’s review and approval of certain key assumptions that existed as of January 1, 2015. This adjustment resulted in a decrease in the preliminary bargain purchase gain associated with the SWS Merger to $80.7 million. This change is reflected in the consolidated statements of operations within noninterest income during the six months ended June 30, 2015. The adjustment to the preliminary bargain purchase gain decreased net income for the three months ended March 31, 2015 by $2.1 million as compared with amounts previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. Additionally, certain amounts previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 within the consolidated balance sheet as of March 31, 2015, the related statement of comprehensive income, stockholders’ equity and cash flows for the three months ended March 31, 2015, as well as the notes to the consolidated financial statements, will be revised in future filings.

Certain reclassifications have been made to the prior period consolidated financial statements to conform with the current period presentation.

Hilltop owns 100% of the outstanding stock of PlainsCapital. PlainsCapital owns 100% of the outstanding stock of the Bank and 100% of the membership interest in PlainsCapital Equity, LLC. The Bank owns 100% of the outstanding stock of PrimeLending, a PlainsCapital Company (“PrimeLending”) and has a 100% membership interest in PlainsCapital Securities, LLC.

PrimeLending owns a 100% membership interest in PrimeLending Ventures Management, LLC, the controlling and sole managing member of PrimeLending Ventures, LLC (“Ventures”).

Hilltop has a 100% membership interest in Hilltop Securities, which operates through its wholly-owned subsidiaries, First Southwest Holdings, LLC (“First Southwest”), Southwest Securities and SWS Financial (collectively, the “Hilltop Broker-Dealers”). The principal subsidiaries of First Southwest are First Southwest Company, LLC (“FSC”), a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority (“FINRA”) and a member of the New York Stock Exchange (“NYSE”), and First Southwest Asset Management, LLC, a registered investment advisor under the Investment Advisors Act of 1940. Southwest Securities is a broker-dealer registered with the SEC and FINRA and a member of the NYSE, and SWS Financial is an introducing broker-dealer that is also registered with the SEC and FINRA.

Hilltop also owns 100% of NLC, which operates through its wholly owned subsidiaries, National Lloyds Insurance Company (“NLIC”) and American Summit Insurance Company (“ASIC”).

The consolidated financial statements include the accounts of the above-named entities. All significant intercompany transactions and balances have been eliminated. Noncontrolling interests have been recorded for minority ownership in entities that are not wholly owned and are presented in compliance with the provisions of Noncontrolling Interest in Subsidiary Subsections of the Financial Accounting Standards Board (“FASB”) ASC.

PlainsCapital also owns 100% of the outstanding common securities of PCC Statutory Trusts I, II, III and IV (the “Trusts”), which are not included in the consolidated financial statements under the requirements of the Variable Interest Entities Subsections of the ASC, because the primary beneficiaries of the Trusts are not within the consolidated group.

Table of Contents

2. Acquisition

SWS Merger

On January 1, 2015, Hilltop completed its acquisition of SWS in a stock and cash transaction as discussed in Note 1 to the consolidated financial statements. The operations of SWS are included in the Company’s operating results beginning January 1, 2015. Such operating results include a preliminary bargain purchase gain of $80.7 million and are not necessarily indicative of future operating results. SWS’s results of operations prior to the acquisition date are not included in the Company’s consolidated operating results.

The SWS Merger was accounted for using the acquisition method of accounting, and accordingly, purchased assets, including identifiable intangible assets, and assumed liabilities were recorded at their respective acquisition date fair values. The components of the consideration paid are shown in the following table (in thousands).


Fair value of preliminary consideration paid:
Common stock issued	$	200,626
Cash		78,217
Fair value of Hilltop’s existing investment in SWS		70,282
Total preliminary consideration paid	$	349,125

The resulting preliminary fair values of the identifiable assets acquired, and liabilities assumed, of SWS at January 1, 2015 are summarized in the following table (in thousands).


Cash and due from banks	$	119,314
Federal funds sold and securities purchased agreements to resell		44,741
Assets segregated for regulatory purposes		181,610
Securities		707,476
Non-covered loans, net		863,819
Broker-dealer and clearing organization receivables		1,221,793
Other assets