Hilltop : Q4 2020 Earnings Presentation

Hilltop Holdings Inc.

Q4 2020	Earnings Presentation

January 2021

Preface

Corporate Headquarters		Additional Information
6565 Hillcrest Ave	Please Contact:
Dallas, TX 75205	Erik Yohe
Phone: [phone]	Phone: [phone]
www.hilltop-holdings.com	Email: [e-mail]

FORWARD-LOOKING STATEMENTS

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 outlook, our business strategy, our financial condition, our revenue, our liquidity and sources of funding, market trends, operations and business, taxes, the impact of natural disasters or public health emergencies, such as the current coronavirus ("COVID-19") global pandemic, information technology expenses, capital levels, mortgage servicing rights ("MSR") assets, stock repurchases, dividend payments, expectations concerning mortgage loan origination volume, loan volume and interest rate compression, expected levels of refinancing as a percentage of total loan origination volume, projected losses on mortgage loans originated, total expenses, anticipated changes in our revenue, earnings, or taxes, the effects of

government regulation applicable to our operations, the appropriateness of, and changes in, our allowance for credit losses and provision for (reversal of) credit losses,

including as a result of the "current expected credit losses" (CECL) model, expected future benchmarks rates, anticipated investment yields, our expectations regarding accretion of discount on loans in future periods, the collectability of loans, cybersecurity incidents, cost savings expected from initiatives implemented and planned, including core system upgrades and cost reduction efforts, the outcome of litigation, and 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," "building", "could," "estimates," "expects," "forecasts," "goal," "guidance", "intends," "may," "might," "outlook", "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 COVID-19 pandemic and the response of governmental authorities to the pandemic, which have caused and are causing significant harm to the global economy and our business; (ii) the credit risks of lending activities, including our ability to estimate credit losses and increases to the allowance for credit losses as a result of the implementation of CECL as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; (iii) effectiveness of our data security controls in the face of cyber attacks; (iv) changes in general economic, market and business conditions in areas or markets where we compete, including changes in the price of crude oil; (v) risks associated with our concentration in real estate related loans; (vi) changes in the interest rate environment and transitions away from the London Interbank Offered Rate; (vii) the effects of our indebtedness on our ability to manage our business successfully, including the restrictions imposed by the indenture governing our indebtedness; (viii) changes in state and federal laws, regulations or policies affecting one or more of our business segments, including changes in regulatory fees, deposit insurance premiums, capital requirements and the Dodd- Frank Wall Street Reform and Consumer Protection Act; (ix) cost and availability of capital; (x) changes in key management; (xi) competition in our banking, broker-dealer, and mortgage origination segments from other banks and financial institutions, as well as investment banking and financial advisory firms, mortgage bankers, asset-basednon-bank lenders, and government agencies; (xii) legal and regulatory proceedings; (xiii) risks associated with merger and acquisition integration; and (xiv) our ability to use excess capital in an effective manner. 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.

The information contained herein is preliminary and based on Company data available at the time of the earnings presentation. It speaks only as of the particular date or dates

included in the accompanying slides. Hilltop Holdings does not undertake an obligation to, and disclaims any duty to, update any of the information herein.

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Investor Highlights -

Q4 2020

Net Income1

$116.4 MM

EPS - Diluted1

$1.35

ROAA1

2.83%.86%

ROAE1

20.56%5.76%

	• Mortgage origination volume in Q4 2020 increased by $2.4 billion, or 54%, from Q4 2019, while gain on
		sale margin expanded 144 basis points over the same period. For the full year 2020, mortgage origination
Diversified		volume was $23.0 billion, an increase of $7.4 billion, or 47% from 2019
•	Average Bank loans HFI2 grew by $568 million, or 8%, compared to Q4 2019, driven by SBA PPP loan
Growth
	originations. Average deposits grew by $2.3 billion, or 26%, compared to Q4 2019
	• Net revenue of $150.1 million at the Broker-Dealer in Q4 2020 increased by 33% from Q4 2019 as
		Structured Finance, Public Finance Services and Fixed Income Services finished with strong performances
	• Total capital distributions to stockholders in 2020 equated to $241 million including dividends, open
Value Creation		market share repurchases, and the 'Dutch auction' tender offer completed in Q4 2020
and	•	Book value per share at December 31, 2020 grew by 22% versus December 31, 2019 to $28.28, and tangible
Capital		book value per share3 increased 26% during the same period to $24.77
Optimization	•	Hilltop's Board of Directors declared a quarterly cash dividend of $0.12 per common share, a 33% increase
		from the prior quarter

Managed Risk

• As of December 31, 2020 there were $240 million of active loan deferrals related to COVID-19, a decline of 75% compared to $968 million at June 30, 2020
• Net charge-offs in Q4 2020 equated to $2.7 million, or 15 basis points of average Bank loans HFI
• Allowance for credit losses of $149.0 million at December 31, 2020, a decrease in the reserve balance of $6.2 million from September 30, 2020; ACL / Bank Loans HFI of 2.05% at December 31, 2020

Discontinued Operations ($ millions, except per share)	Pre-tax	Net Income	EPS - Diluted ($)
National Lloyds Corporation - Gain on sale, final settlement and true-up	$3.7	$3.7	$0.05

Notes:

1. Results are presented on a consolidated basis.
2. Loans HFI reflect loans held for investment excluding margin loans from the broker-dealer business.
3. 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.

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Business Results -

Q4 2020

Pre-Tax Income vs. Prior Year Period ($ in millions)

Q4 2020 Q4 2019

$156.4

	$84.0
$59.2						$59.8
$41.3		$34.3
		$24.2
	$8.5
				($21.1)	($14.2)
Banking	Mortgage	Broker-Dealer	Corporate / Other	Hilltop Holdings

Business Drivers for1Q420192020

• Banking pre-tax income of $59.2 million, an increase of $17.9 million compared to prior year period. Higher net interest income from higher balances and lower funding costs, as well as a negative provision of $3.5 million drove the pre-tax increase from prior year period. Noninterest expenses increased as OREO and healthcare costs were elevated during the period
• Mortgage pre-tax income of $84.0 million, an increase of $75.4 million from Q4 2019, driven by a 54% increase in origination volume and a gain-on-sale margin of 448 basis points. Lower rates continued to support a strong refinance market with refinance volumes increasing by 116% versus Q4 2019
• Broker-Dealer pre-tax income increased by 42%, or $10.1 million, to $34.3 million in Q4 2020. The increase was primarily driven by continued strength in Structured Finance and Fixed Income Services. Public Finance Services also realized elevated revenues from strong issuance volumes during the quarter
• Corporate includes compensation, transaction-related expenses associated with the 'Dutch auction' tender offer and higher interest cost from the subordinated debt issued in 2020

Note: The sum of the period amounts may not equal the total amounts due to rounding. All numbers reflect income from continuing operations

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