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2019 Annual Report, Notice of 2020 Annual Meeting & Proxy Statement

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2019 Annual Report, Notice of 2020 Annual Meeting & Proxy Statement 2019 Annual Report, Notice of 2020 Annual Meeting & Proxy Statement To Our Stockholders, Customers and Employees: 2019 was an exceptional year across the Hilltop family of companies, both financially and operationally. Through acquisitions and organic maturation, our company has experienced material growth over the past few years. Accordingly, a key 2019 initiative was to increase the connectivity and collaboration across the organization. To help drive this effort, management from all lines of business and the holding company completed the Momentum World Tour, visiting all major markets across 50 cities and connecting with over 3,500 employees. I continue to be blown away by the quality of our people in the field. They are the tip of the spear for Hilltop, and I want to thank them for their steadfast commitment to our clients and the communities we serve. Hilltop generated consolidated net income of $225.3 million in 2019, with sizable profitability gains from all operating companies. These results illustrate the strength of our diversified business model, where PlainsCapital Bank, our cornerstone business, produced substantial bank earnings that were augmented by favorable market conditions and strong operational execution from PrimeLending and HilltopSecurities. Hilltop also was able to return $103.0 million of earnings to stockholders via dividends and share repurchases in 2019. Notably, in 2019 we achieved a significant milestone of surpassing $1 billion in cumulative net income since Hilltop’s transformational acquisition of PlainsCapital Corporation in 2012. In last year’s letter, I acknowledged the retirement of PlainsCapital Bank’s founder, Alan White, and the succession planning at HilltopSecurities, where Brad Winges succeeded Hill Feinberg as CEO. Hill continues to serve as Chairman Emeritus of HilltopSecurities and a Director of Hilltop Holdings, and Brad has done an outstanding job transitioning into his new role. Additionally, in October of 2019, we proudly announced the promotion of Steve Thompson to CEO of PrimeLending, effective January 1, 2020. Steve succeeded Todd Salmans, who remains with PrimeLending as its Chairman. I would like to thank Todd for his tremendous contribution over his past fourteen years building PrimeLending into a vibrant, industry leading mortgage company. Jerry Schaffner continues to do an exceptional job as CEO of PlainsCapital Bank and has provided unwavering leadership throughout this past year. Alan, Todd and Hill were pioneers that laid the foundation for what Hilltop is today. Because of their stewardship, we now have outstanding leadership across the Hilltop enterprise, with deep industry expertise and the capacity to grow with our shared strategic vision. Operating Companies: PlainsCapital Bank had a strong year and delivered $182.2 in pre-tax income, primarily due to organic loan and deposit growth, a 4.00% net interest margin and meaningful efficiency improvements. The bank offers commercial banking, personal banking and wealth management products and services across Texas and continues to employ a measured approach to profitable growth by focusing on relationship- based lending and prioritizing credit quality. The bank had net charge-offs of only 0.08% of the loan portfolio in 2019 and ended the year with $11.1 billion of assets, $8.8 billion of deposits and 63 branches. In August, we announced the sale of two branches that were not core to PlainsCapital Bank, and we continue to evaluate our branch network to optimize the bank’s presence throughout Texas. PrimeLending is a nationwide mortgage originator operating in 44 states with over 300 locations. After a challenging 2018, the mortgage company rebounded in 2019 from realizing the benefit of key efficiency initiatives taken in the prior year and capitalizing on heightened levels of refinance activity. While PrimeLending took advantage of the elevated refinance volume, we remain committed to purchase mortgage originations, which represented 75% of total volume and has proven to be an enduring strategy. We are in the deployment phase of our new loan origination system that will drive further efficiency, as well as give our loan originators better tools to serve their customers. In 2019, PrimeLending originated $15.6 billion in mortgage loans, equating to a 14% year-over-year increase, and contributed pre-tax income of $64.7 million. HilltopSecurities operates through four primary lines of business: public finance services, structured finance, fixed income services, and wealth management. 2019 was the first year under the stewardship of the company’s President & CEO, Brad Winges. During the year, we undertook an extensive review of HilltopSecurities’ businesses and made the strategic decision to further leverage our deep expertise in municipal finance by becoming a full-service provider for public entities. By orienting operations around our public entity clients, we also decided to exit certain smaller, non-core business units. The declining rate environment in 2019 served as a catalyst for multiple business lines, resulting in increased volume and superior execution. The combination of a constructive market and the strategic actions taken led to HilltopSecurities delivering pre-tax income of $89.8 million in 2019 on net revenue of $455.7 million. National Lloyds is a niche property & casualty underwriter offering primarily fire and limited homeowners insurance for low value dwellings and manufactured homes in Texas, Arizona and other southern states. In 2019, National Lloyds streamlined its book of business by simplifying its product lines into three core policies and by exiting non-core states and its commercial book of business. These actions have enhanced our underwriting profitability and better position the insurance company for long- term success. Notably, on January 31, 2020, Hilltop announced the sale of National Lloyds to Align Financial Holdings. I have worked closely with National Lloyds since we acquired the company in 2007 and am incredibly proud of everyone involved with the business. The transaction is expected to close in the second quarter of 2020. We continue to execute on our multi-year plan of lowering operating costs, driving revenue growth and building a foundation for future organic and acquisition growth. I appreciate the dedication shown across our organization and applaud the teams charged with implementing these initiatives. The actions taken through year end 2019 have resulted in approximately $45 million of incremental PPNR benefit, over half way to our goal of $84 million in run-rate PPNR improvements by year end 2021. We remain focused on maintaining a resilient balance sheet and preserving excess capital to deploy via organic growth and acquisitions. Our prudent, long-term oriented capital management will allow us to seek out attractive opportunities, while also appropriately returning capital to stockholders through dividends and share repurchases. As I write this letter, we are in the midst of an unprecedented environment caused by the COVID-19 pandemic. Since the onset of this pandemic, we have worked hard to ensure the business continuity of Hilltop and its operating companies. Our focus continues to be on providing our employees with a safe work environment, serving the needs of our clients and preserving our financial strength. Times like these demonstrate the importance of Hilltop’s sound financial position, as we have significant excess capital and maintain ample liquidity. I am confident that we will get through this together and emerge a stronger and closer company. In closing, I would like to sincerely thank the entire Hilltop organization. I am extremely proud of our company and believe the results we generated in 2019 are a reflection of the hard work and dedication shown by each employee. I would also like to thank our clients who trust PlainsCapital, PrimeLending, HilltopSecurities and National Lloyds with their financial services needs. Finally, I would like to thank the Hilltop Board and stockholders for their continued support. 2019 was a successful year, and though we are facing unprecedented challenges in early 2020, I believe Hilltop is well-positioned for the future. Sincerely, Jeremy B. Ford President & Chief Executive Officer Hilltop Holdings Inc. May 22, 2020 (This page has been left blank intentionally) Hilltop Holdings Inc. 6565 Hillcrest Avenue Dallas, Texas 75205 Tel: 214.855.2177 Fax: 214.855.2173 www.hilltop-holdings.com NYSE: HTH NOTICE OF 2020 ANNUAL MEETING AND PROXY STATEMENT April 29, 2020 You are cordially invited to attend our 2020 Annual Meeting of Stockholders (the “Annual Meeting”) at 10:00 a.m., Dallas, Texas, local time, on July 23, 2020. The meeting will be held at the offices of Hilltop Holdings at 6565 Hillcrest Avenue, 5th Floor, Dallas, Texas 75205. Although we currently intend to hold the Annual Meeting in person, we are actively monitoring the impact that the coronavirus (COVID-19) may have on the meeting. We are committed to maintaining a safe and healthy environment at the Annual Meeting and, as a result, may determine that it is necessary or appropriate to hold the meeting solely by means of remote communication. If we take this step, details about how to participate in the Annual Meeting will be announced in advance via press release, posted on our website at http://ir.hillop-holdings.com and filed with the Securities and Exchange Commission as additional proxy material. This booklet includes the formal notice of the meeting and our Proxy Statement. The Proxy Statement tells you about the matters to be addressed, and the procedures for voting, at the meeting. YOUR VOTE IS VERY IMPORTANT. Even if you only have a few shares, we want your shares to be represented. If your shares are held in a brokerage account, your broker does not have discretion to vote on your behalf with respect to electing directors or certain other non-routine matters. Accordingly, you must provide specific voting instructions to your broker in order to vote. Please vote promptly in order to ensure that your shares are represented at the meeting.
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