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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 25, 2018

 

Hilltop Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Maryland

 

1-31987

 

84-1477939

(State or other jurisdiction of

 

(Commission

 

(IRS Employer Identification

incorporation)

 

File Number)

 

No.)

 

2323 Victory Avenue, Suite 1400

 

 

Dallas, Texas

 

75219

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (214) 855-2177

 

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o                        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b— 2 of the Securities Exchange Act of 1934.

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 


 

Section 2 — Financial Information

 

Item 2.02  Results of Operations and Financial Condition.

 

A copy of the Earnings Presentation of Hilltop Holdings Inc., or the Company, for the quarter ended September 30, 2018, is set forth in Exhibit 99.1 attached to this Current Report on Form 8-K and is incorporated herein by reference. The Company intends to use the Earnings Presentation, in whole or in part, in one or more meetings with investors or analysts, including in a webcast on October 26, 2018 at 8:00 a.m. (central time).

 

The information in this Current Report on Form 8-K (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth in such filing.

 

Section 9 — Financial Statements and Exhibits

 

Item 9.01  Financial Statements and Exhibits.

 

(a)                     Financial statements of businesses acquired.

Not applicable.

(b)                     Pro forma financial information.

Not applicable.

(c)                      Shell company transactions.

Not applicable.

(d)                     Exhibits.

 

The following exhibit(s) are filed or furnished, depending on the relative item requiring such exhibit, in accordance with the provisions of Item 601 of Regulation S-K and Instruction B.2 to this form.

 

Exhibit
Number

 

Description of Exhibit

99.1

 

Third Quarter 2018 Earnings Presentation (furnished pursuant to Item 2.02).

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

Hilltop Holdings Inc.,

 

 

 

a Maryland corporation

 

 

 

 

Date:

October 25, 2018

By:

/s/ COREY PRESTIDGE

 

 

Name:

Corey G. Prestidge

 

 

Title:

Executive Vice President,

 

 

 

General Counsel & Secretary

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

HilltopHoldingsInc. Q3 2018EarningsPresentation October 2018

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Preface 2323 Victory Ave, Suite 1400 Dallas, TX 75219 Phone: 214-855-2177 www.hilltop-holdings.com FORWARD-LOOKING STATEMENTS Please Contact: Isabell Novakov Phone: 214-252-4029 Email: inovakov@hilltop-holdings.com This presentation and statements made by representatives of Hilltop Holdings Inc. (“Hilltop” or the “Company”) during the course of this presentation include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated in such statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we do not assume any duty to update forward-looking statements. Such forward-looking statements include, but are not limited to, statements concerning such things as our business strategy, our financial condition, our efforts to make strategic acquisitions, integration costs, our revenue, our l iquidity and sources of funding, market trends, operations and business, capital levels, mortgage servicing rights (“MSR”) assets, stock repurchases, dividend payments, expectations concerning mortgage loan origination volume and interest rate compression, expected levels of refinancing as a percentage of total loan origination vo lume, projected losses on mortgage loans originated, loss estimates related to natural disasters, anticipated changes in our revenue, earnings, or taxes, the effects of government regulation applicable to our operations, the appropriateness of our allowance for loan losses and provision for loan losses, anticipated yields, expected accretion of discount on loans, the collectability of loans, cybersecurity incidents, construction costs, and cost savings expected from PrimeLending’s cost reduction efforts, core system upgrades and the outcome of litigation, our other plans, objectives, strategies, expectations and intentions and other statements that are not statements of historical fact, and may be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “might,” “plan,” “probable,” “projects,” “seeks,” “should,” “target,” “view” or “would” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: (i) the credit risks of lending activities, including our ability to estimate loan losses; (ii) the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (iii) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (iv) changes in the interest rate environment; (v) risks assoc iated with concentration in real estate related loans; (vi) risks associated with merger and acquisition integration; (vii) severe catastrophic events in Texas and other areas of the southern United States; (viii) effectiveness of our data security controls in the face of cyber attacks; (ix) the effects of our indebtedness on our ability to manage our business successfully, including the restrictions imposed by the indenture governing our indebtedness; (x) cost and availability of capital; (xi) changes in state and federal laws, regulations or policies affecting one or more of the our business segments, including changes in regulatory fees, deposit insurance premiums, capital requirements and the Dodd-Frank Wall Street Reform and Consumer Protection Act; (xii) changes in key management; (xiii) competition in our banking, broker-dealer, mortgage origination and insurance segments from other banks and financial institutions, as well as investment banking and financial advisory firms, mortgage bankers, asset-based non-bank lenders, government agencies and insurance companies; (xiv) legal and regulatory proceedings; (xv) failure of our insurance segment re insurers to pay obligations under reinsurance contracts; (xvi) our ability to use excess capital in an effective manner; and (xvii) the possibility that any of the anticipated benefits of the acquisition of The Bank of River Oaks will not be realized or will not be realized within the expected time period. For further discussion of such factors, see the risk factors described in our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and other reports, that we have filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement. 2 Corporate Headquarters Additional Information

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Investor Highlights – Q3 2018 • Successfully completed acquisition of The Bank of River Oaks (“BORO”), which included $327 million (net of fair value mark) in loans and $376 million in deposits at time of acquisition Net interest income grew 5% versus prior year period despite declining accretion, driven by loan and securities growth Noninterest expense down 5% versus prior year period due to lower insurance losses and compensation • • • Year-to-date capital distributions to shareholders of $58.9 million including dividends and share repurchases $85 million deployment of capital for the acquisition of BORO Book value per share1 of $20.51, up 3% versus prior year period, and tangible book value per share2 of $17.00, up 1% versus prior year • • • Year-to-date net charge-offs of $1.7 million. Non-covered non-performing loans as a percent of total non-covered loans was 0.44% compared to 0.50% at the end of Q2 2018 Non-covered non-performing assets (NPAs) declined to $39.5 million, or 0.29% of total assets, compared to $45.1 million, or 0.33%, at the end of Q2 2018 Insurance pre-tax income increased $13 million year over year driven by lower losses and LAE • • Notes: (1)Based on shares outstanding at period end, (2)For a reconciliation of tangible book value per share to book value per share see management’s explanation of Non-GAAP Financial Measures in Appendix. 3 Significant Q3 2018 Items ($ million, except per share)Pre-taxNet IncomeEPS – Diluted ($) 1)The Bank of River Oaks transaction related expenses$(6.6)$(5.2)$(0.06) 2) DOJ / HUD settlement$(3.3)$(1.1)$(0.01) 3) Mortgage efficiency initiative$(0.8)$(0.6)$(0.01) 4) FDIC Indem. Asset Amortization for settlement$(0.7)$(0.5)$(0.01) Managed Risk Value Creation and Capital Optimization Diversified Growth ROAE 7.41% EPS – Diluted $0.38 ROAA 1.07% Net Income $35.8MM

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Business Results – Q3 2018 $48.4 $44.7 • Banking pre-tax income of $38.6 million increased by 6% from prior year, largely driven by strong asset quality and improving net interest income. Third quarter 2018 results include transaction related expenses of ($6.6) million associated with the acquisition of The Bank of River Oaks and ($0.7) million of expense related to settlement with the FDIC. Mortgage pre-tax income declined by $8.0 million to $4.8 million compared to prior year period as gain-on-sale margins improved versus the second quarter, but remain pressured. Originations during the third quarter declined 8%, or $319 million versus prior year period. Results include ($3.3) million expense related to the settlement of DOJ / HUD matter and ($0.8) million of cost related to the execution of planned efficiency initiatives. Broker-Dealer pre-tax income declined by $10.3 million to $9.9 million compared to prior year third quarter. Structured Finance results reflect improving secondary margins and stable volume. The Clearing business continues to perform well as short-term interest rates have continued to rise. Insurance Loss & LAE ratio for the third quarter 2018 was 54.7% compared to 90.6% during the third quarter 2017. Third quarter 2017 results included a negative impact of $6.1 million related to Hurricanes and severe storm activity. • • • Note: The sum of the period amounts may not equal the total amounts due to rounding. 4 Pre-Tax Income vs. Prior Year ($ in millions) Q3 2017Q3 2018 ($9.3)($11.7) ($12.2) BankingMortgageBroker-DealerInsuranceCorporate / OtherHilltop Holdings Business Drivers for Q3 2018 $36.3$38.6 $20.2 $12.8$9.9 $4.8$3.7

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PlainsCapital Bank – Houston Market Opportunity  System integration – During October existing systems were converted to PCB core platforms  Increase market presence - The acquisition of BORO increased PCB’s branch presence to 5 locations in attractive Houston submarkets and allowed PCB to retain an experienced, well connected leadership team to drive future growth  Grow lender base - 15 total lenders now in the Houston market, relative to 8 in 2017  Leverage synergies in existing franchise - Significant room for growth in Houston market (#23 deposit market share among Texas banks) by taking advantage of PCB’s platform/services, capital and the recent dislocation in the Houston bank landscape 1 2 3 4 5 6 7 8 9 10 Pr osper it y Ba n csh a r es In c. Cu llen /Fr ost Ba n ker s In c. Ca den ce Ba n cor p. Woodfor est Fin a n cia l Gr p In c. A lleg ia n ce Ba n csh a r es In c. Com er ica In c. Tex a s Ca pit a l Ba n csh a r es In c. V er it ex Holdin g s In c. CBTX In c. In depen den t Bk Gr ou p In c. 59 33 11 1 04 28 47 2 14 16 14 4 , 9 7 6 4 , 4 8 3 4 , 08 1 4 , 03 8 3 , 4 6 8 3 , 000 2 , 4 1 3 2 , 1 56 1 , 4 9 4 1 , 3 6 2 2 . 08 % 1 . 8 8 % 1 . 7 1 % 1 . 6 9 % 1 . 4 5% 1 . 2 6 % 1 . 01 % 0. 9 0% 0. 6 2 % 0. 57 % Mem o: 2017 Ra n ki n g Legacy PCB 15% Legacy PCB 35% BORO 65% BORO 85% Houston Loans: $508MM Houston Deposits: $466MM Notes: (1)SNL as of June 30, 2018 5 Loan and Deposit Breakdown Well-Positioned Geographic Presence 53Pl a insCa pit a l Ba nk2580.02% 23Pl a insCa pit a l Ba nk54290.18% Ov era l l Bra nch es Deposit sHou st on Ra nk T ex a s-Ba sed Ba nks(#)($ MM)Ma rket Sh a re Acquisition Progress Update Enhanced Houston Market Share1

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Building a Platform for Growth and Efficiency    Implementing a cloud-based network of business platforms to support scale and long-term growth Improving the digital client experience to deliver higher satisfaction and improved execution Reducing organizational redundancy by streamlining business processes and lowering operating costs 6 Key Projects Vendor Partners Enhanced Business Operations • Core Systems enhancements – PrimeLending and HilltopSecurities • Consolidate to single General Ledger platform • Streamlining mid/back office to reflect current operating conditions Strategic Sourcing • Purchasing to scale with integrated Procurement and T&E platforms • Scalable systems that require limited costs to support substantial growth Shared Services • Integrated Corporate Real Estate • Consolidating 7 IT Data Centers into 2 • Implementing a shared services platform

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Hilltop Holdings – Financial Summary Notes: (1) (2) (3) (4) (5) Pre-provision net revenue is calculated as the sum of net interest income and noninterest income less noninterest expense (excep t provision for loan losses). Includes impact of Purchase Accounting, FDIC Indemnification and True-up accrual (clawback). Efficiency Ratio is calculated as noninterest expense divided by the sum of net interest income and noninterest income. Based on the end of period Tier 1 capital divided by total average assets during the quarter, excluding goodwill and intangible assets. Significant Items include Q3 Hurricane Impact (($9.8) million, Q3 2017, DOJ Reserve ($1.0) million), wire fraud loss (($4.3) million, Q2 2018), Bank of River Oaks Acquisition related charges ($6.6) million, DoJ / HUD Settlement ($3.3) million, Mortgage Restructuring ($0.8) million. 7 HTH Pre-Tax Income 2 5 $ in Millions, except EPS Income StatementQ3 2017Q2 2018 Q3 2018 Net interest income105.0104.8 110.3 Noninterest income298.5279.4 269.7 Noninterest expense353.8338.5 335.7 PPNR1$49.7$45.7 $44.3 Provision (recovery) for loan losses1.30.3 (0.4) Pre-tax income$48.4$45.4 $44.7 Net income$30.2$33.1 $35.8 Purchase Accounting Impact2 Revenue10.18.0 7.8 Expenses7.43.7 2.9 Pre-tax income impact$2.8$4.3 $4.9 Key Metrics EPS - Diluted$0.31$0.35 $0.38 ROAA0.90%1.03% 1.07% ROAE6.32%6.95% 7.41% Efficiency Ratio387.7%88.1% 88.3% Common Equity Tier 1 Capital Ratio17.66%17.61% 16.95% Tier 1 Leverage Ratio412.87%12.90% 12.40%

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Hilltop Holdings – Net Interest Income & Margin ($ in billions) • Net interest income of $110 million increased $5 million, or 5%, from third quarter 2017 • Loan accretion of $8.1 million declined by $2.4 million, or 23%, year over year NIM increased 2 basis points versus Q2 2018 and 4 basis points versus Q3 2017 • Loan yields, excluding the impact of purchased loan accretion, increased by 36 basis points year over year • Loan yields remain pressured from competition Earning asset growth driven by The Bank of River Oaks acquisition HTH total deposit beta approximately 31% since December 2015 • Interest bearing deposit beta approximately 36% since December 2015 • • • • Average Loans HFS have declined by $69 million from Q3 2017 to $1.7B • Average Loans HFS yielded 4.75% • Average funding cost approximately 0.83% Notes: (1)See appendix for reconciliation of NIM to Pre-PAA taxable equivalent NIM, as presented. Measures during the 2017 periods presented reflect certain category reclassifications within the detailed calculations to conform with the current period presentation. 8 Net Interest Income Highlights Average Earning Assets and NIM1 Trends

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Hilltop Holdings – Noninterest Income ($ in millions) $298.5 $290.5 Securities Related Fees & Commissions $279.4 (3.9) $269.7 Other Income (4.1) • Noninterest income of $270 million declined by $29 million compared to the third quarter 2017 • $21 million reduction in mortgage production income and fees driven by lower volume and secondary market spreads tightening by 45 bps to 330 bps, though slightly offset by improving origination fees Structured Finance revenues decline driven primarily by lower volumes and tighter secondary spreads • Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Noninterest Income Fee Income Ratio Note: (1)Fee Income Ratio is calculated as noninterest income divided by the sum of net interest income and noninterest income. 9 Noninterest Income Highlights Q3 2018 $269.7 Net Insurance Premiums Earned(0.3) 74.0% 72.8% $235.1 72.7% 70.9% 69.5% Q3 2017 $298.5 Mortgage Production Income & Fees(20.5) Noninterest Income & Fee Income Ratio 1 Year-over-Year Noninterest Income ($MM)

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Hilltop Holdings – Noninterest Expenses ($ in millions) $353.8 $328.7 Occupancy and Equipment --Insurance Loss and LAE (12.5) • Noninterest expense of $336 million declined $18 million from the third quarter 2017, driven by lower Loss & LAE in the insurance business • Q3 2017 noninterest expenses included a $9.8 million impact from hurricanes and severe weather during the period Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Noninterest Expense Efficiency Ratio Note: (1)Efficiency Ratio is calculated as noninterest expense divided by the sum of net interest income and noninterest income. 10 Selected Noninterest Expense ItemsQ3 2018 ($, millions) The Bank of River Oaks transaction related expenses $6.6 DOJ / HUD settlement $3.3 Core system improvements $2.8 Mortgage efficiency initiative $0.8 FDIC indemnification $0.7 Total $14.2 Noninterest Expense Highlights Other Expenses(3.8) Q3 2018 $335.7 Professional Services2.4 87.7% $338.5$335.7 88.1% 88.3% 82.3% $308.2 91.0% Q3 2017 $353.8 Compensation and Benefits(4.2) Noninterest Expenses and Efficiency Ratio 1 Year-over-Year Noninterest Expense ($MM)

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Hilltop Holdings – Loans ($ in billions, ending balances) 5.56% 5.42% 5.41% Annualized Loan HFI Yield1: 5.34% 5.26% $6.9 $6.5 $6.5 $6.4 $6.3 $5.8 Q3 2017 Non-Covered Loans Q4 2017 Q1 2018 Q2 2018 Q3 2018 Annualized Gross Loan Yield Covered Loans B/D Margin Loans Vs. Prior Quarter: (Non-Covered Loans) Notes: Non-covered loans excludes broker-dealer margin loans. The sum of the period amounts may not equal the total amounts due to rounding. (1) Annualized Gross Loan Yield contains purchased loan portfolio. 11 2.0% -0.4% 0.6% 7.2% 0.7% Non-Covered Loan Growth h9.5% vs. PY h3.8% vs. PY Without the impact of BORO $0.6 $0.6 $0.5 $6.2 $5.7 $5.7 $5.7 $0.5 $0.6 Total Loan Growth h9.5% vs. PY h4.3% vs. PY Without the impact of BORO Loan Mix and Yield

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Hilltop Holdings – Deposits ($ in billions, ending balances) 0.51% Cost of IB Deposits: 0.87% 0.76% 0.64% 0.56% $8.3 $8.0 $8.0 Q3 2017 Noninterest bearing Q4 2017 Q1 2018 Q2 2018 B/D Sweep Deposits Q3 2018 Interest bearing Cost of IB Deposits (%) Vs. Prior Quarter: (Total Deposits) Notes: Noninterest-bearing deposits excludes broker-dealer sweep deposits. The sum of the period amounts may not equal the total amounts due to rounding. 12 6.1% -1.8% -0.2% 4.1% 1.2% Noninterest bearing h10.8% vs. PY h2.6% vs. PY Without the impact of BORO $7.7$7.8 $1.3$1.3$1.3 $4.1$4.3$4.1$4.0 $2.3$2.4$2.6$2.5 $1.3 $1.3 $4.5 $2.5 Total Deposit Growth h8.2% vs. PY h3.3% vs. PY Without the impact of BORO Deposit Mix and Cost

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PlainsCapital Bank – Q3 2018 Highlights Net Interest Income Provision for Loan Losses Noninterest Income Noninterest Expense 89.3 1.7 11.4 62.7 94.9 --11.4 67.7 ROAA Efficiency Ratio1 Net Interest Margin TE - Net Interest Margin – Pre-PAA 0.94% 62.3% 4.03% 3.54% $9.7 1.19% 63.7% 4.13% 3.75% $10.0 Average Assets ($bn) • Year-over-year non-covered loan growth of $540 million, or 9.5% Deposit growth, excluding broker-dealer sweep, of $605 million, or 9.5%, year-over-year Credit quality consistently strong as Non-Covered NPAs / Total HTH Assets continue to decline Loan accretion income of $8.1 million declined $2.4 million, or 23%, in Q3 2018 compared to Q3 2017 Results include FDIC indemnification asset amortization of ($0.7) million due to settlement 0.34% 0.33% 0.33% 0.32% • 0.29% $45.4 $45.1 $44.7 $42.2 • • • $2.6 million of loan Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Non-Covered NPAs Non-Covered NPAs / Total HTH Assets Note: (1)Efficiency Ratio is calculated as noninterest expense divided by the sum of net interest income and noninterest income. 13 BORO Details Loans Deposits Pre-Tax Impact Metrics as of close (except PTI) $327 $376 ($3.5) million, includes accretion $39.5 Q3 2018 Highlights Credit Quality Income Before Taxes$36.3$38.6 Key Highlights Q3 2017 Q3 2018 Summary Results ($ in millions) Q3 2017 Q3 2018

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PrimeLending – Q3 2018 Highlights Origination Volume ($mm) % Purchase Sales Volume ($mm) Servicing Assets ($mm) $3,973 84% $4,002 $48 $3,654 89% $4,015 $69 Net Interest Income Noninterest Income Noninterest Expense 0.1 163.8 151.1 0.4 144.4 140.0 • Origination volume of $3.7 billion in Q3 2018 declined versus Q3 2017 by $319 million, or 8% • Home purchase volume decreased ($95) million versus Q3 2017, or 3%, to $3.2 billion The noninterest income decrease of ($19) million, or 12%, versus Q3 2017 was attributable to competitive pricing pressures resulting from home inventory shortages and a reduction in national refinancing volume Noninterest expense decreased by $11 million, or 7%, versus prior year • During the third quarter 2018 the business executed on an efficiency initiative to better position the organization for the current competitive environment that resulted in a charge of ($0.8) million 375 380 362 333 330 317 $4.1 $4.1 $4.0 • • Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Gain on Sale (bps) 1 Mortgage Originations ($bn) Note: (1)Gain on Sale calculated as net gains from sale of loans divided by sales volume. 14 $3.7 $3.6 $3.0 Q3 2018 Highlights Mortgage Originations and Gain on Sale Income Before Taxes$12.8$4.8 Key Highlights Q3 2017 Q3 2018 Summary Results ($ in millions) Q3 2017 Q3 2018

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HilltopSecurities – Q3 2018 Highlights Net Interest Income Provision for Loan Losses 12.2 (0.4) 12.4 (0.4) Compensation/Net Revenue (%) FDIC Insured Balances at PCB 58.2% $1,301 62.5% $1,300 Noninterest Income Noninterest Expense 91.4 83.8 82.8 85.7 Other FDIC Insured Balances Public Finance Offerings TBA Volume $1,135 $20,813 $1,293 $873 $17,262 $1,202 • Public Finance business continues to face challenges as net revenue was down 25% compared to third quarter 2017 • National market issuance decline of 9% compared to third quarter 20171 • Decline in volume partially driven by the departure of Houston-based Public Finance team during the first and second quarters of 2018 The broker-dealer segment provided the banking segment with $1.3 billion of core deposits at September 30, 2018 Public Finance Capital Markets 19,907 17,257 27,431 15,031 15,560 25,937 Retail Structured Finance Clearing 21,782 11,208 2,469 19,011 12,435 2,362 Securities Lending Other • 3,579 4,930 Note: (1) Thomson Reuters The sum of the period amounts may not equal the total amounts due to rounding. 15 Net Revenues 103,633 95,266 ($ in thousands) Q3 2017 Q3 2018 Net Revenues by Business Line Q3 2018 Highlights Income Before Taxes $20.2 $9.9 Key Highlights ($ millions) Q3 2017 Q3 2018 Summary Results ($ in millions) Q3 2017 Q3 2018

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National Lloyds Corporation – Q3 2018 Highlights Net Interest Income Noninterest Income Noninterest Expense 0.9 36.8 47.0 0.7 36.7 33.8 Direct Premiums Written Net Premiums Earned $33.9 $34.5 $32.7 $34.2 • Pre-tax income of $3.6 million in Q3 2018 versus pre-tax loss of ($9.3) million in Q3 2017 140.0% 131.0% • Prior year results included the net impact of Hurricanes to Loss and LAE of $3.9 million of retained losses and $1.5 million of program reinstatement premiums 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Loss & LAE Ratio Expense Ratio 16 40.4% 111.1% 85.2% 39.5% 93.5% 38.8% 90.6% 65.1% 39.9% 71.6% 41.0% 54.7% 45.3% 24.1% Combined Ratio Q3 2018 Highlights Income Before Taxes($9.3)$3.6 Key Highlights ($ in millions) Q3 2017 Q3 2018 Summary Results ($ in millions) Q3 2017 Q3 2018

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Q&A 17

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Appendix 18

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Non-GAAP to GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures Hilltop presents measures in this presentation that are not measures of financial performance recognized by generally accepted accounting principles in the United States (“GAAP”) including taxable equivalent net interest margin and pre-purchase accounting taxable equivalent net interest margin. These measures are important to investors interested in changes from period to period in net interest margin. For companies, such as Hilltop, business combinations can also result in purchase accounting adjustments (“PAA”). You should not view these disclosures as a substitute for results determined in accordance with GAAP, and these disclosures are not necessarily comparable to that of other companies that use non-GAAP measures. The following tables reconcile these non-GAAP financial measures to the most comparable GAAP financial measure, “net interest margin”. Note: (1) 2017 Annualized taxable equivalent adjustments are based on a 35% federal income tax rate; 2018 annualized taxable equivalent adjustment is based on a 21% federal income tax rate. 19 Reconciliation of Non-GAAP Pre-PAA Taxable Equivalent NIM (%)Q3 2017 Q3 2018 NIM Add: Taxable Equivalent Adjustment1 Non-GAAP Taxable Equivalent NIM Less: Purchase Accounting Adjustment Non-GAAP Pre-PAA Taxable Equivalent NIM 4.03 0.02 4.13 0.01 4.05 (0.52) 4.14 (0.39) 3.53 3.75 Reconciliation of Non-GAAP Pre-PAAQ3Q4Q1Q2Q3 Taxable Equivalent NIM (%)201720172018 2018 2018 NIM Add: Taxable Equivalent Adjustment1 Non-GAAP Taxable Equivalent NIM Less: Purchase Accounting Adjustment Non-GAAP Pre-PAA Taxable Equivalent NIM 3.443.573.523.46 0.020.020.010.01 3.48 0.01 3.463.593.533.47 (0.37) (0.43) (0.36) (0.29) 3.49 (0.28) 3.093.163.173.18 3.21 •PlainsCapital Bank •Hilltop Consolidated

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Non-GAAP to GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures (Continued) Tangible Common Equity, is a non-GAAP financial measure. Tangible common equity is defined as our total stockholders’ equity, excluding preferred stock, reduced by goodwill and other intangible assets. This is a measure used by management, investors and analysts to assess use of equity. Tangible book value per share, or TBVPS, is a non-GAAP financial measure. TBVPS represents Hilltop’s tangible common equity at period-end divided by common shares outstanding at period-end. This is a measure used by management, investors and analysts to assess use of equity. Total Stockholder's Equity Less: Preferred Stock Common Stockholder's Equity Less: Goodwill Other intangible assets, net Tangible Common Equity Shares outstanding as of period end Book Value Per Share (Common Stockholder's Equity / Shares Outstanding) Tangible Book Value Per Share (Tangible Common Equity / Shares Outstanding) 1,906,185 1,911,493 1,940,222 0 0 0 1,906,185 1,911,493 1,940,222 251,808 38,440 251,808 32,716 251,808 80,021 1,615,937 95,904 1,626,969 94,571 1,608,393 94,593 $19.88 $20.21 $20.51 $16.85 $17.20 $17.00 20 Reconciliation of Tangible Common Equity and Tangible Book Value Per ShareQ3Q2Q3 ($ '000, except per share amounts)201720182018 •Hilltop Consolidated

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