Hilltop Holdings Inc.

Good morning and welcome to the Hilltop Holdings fourth quarter and full year 2020 earnings conference call and webcast. All participants will be in a listen-only mode. Should they need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Eric Yui. Please go ahead.

Thank you, operator. Before we get started, please note that certain statements during today's presentation that are not statements of historical fact, including statements concerning such items as our outlook, business strategy, future plan, financial condition, allowance for credit losses, the impact and potential impacts of COVID-19, stock repurchases and dividends, as well as such other items referenced in the preface of our presentation are forward-looking statements. These statements are based on management's current expectations concerning future events that by their nature are subject to risk and uncertainty. Our actual results, capital, liquidity, and financial conditions may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our presentation and those included in our most recent annual report and quarterly report filed with the SEC. Please note that the information presented is preliminary and based upon data available at this time. Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information. Additionally, this presentation includes certain non-GAAP measures including tangible common equity and tangible book value per share. A reconciliation of these measures to the nearest gap measure may be found in the appendix to this presentation, which is posted on our website at ir.hilltop-holding.com. With that, I would now like to turn the presentation over to President and CEO, Jeremy Ford.

Thank you, Eric, and good morning. For the fourth quarter 2020, Hilltop reported net income of $116 million, or $1.35 per diluted share, representing an increase from the fourth quarter 2019 of $67 million, or $0.81 per diluted share. This included a final settlement from the sale of national loins of $3.7 million, or $0.05 per diluted share. Return on average assets for the period was 2.8%. and return on average equity was 21%. Full year 2020 net income equated to $448 million or $5 per diluted share. This was an increase from $225 million or $2.44 per diluted share in 2019. Full year results reflected discontinued operations from National Loyce of $38 million. The fourth quarter caps off a remarkable year of growth for the organization. We continue to capitalize on a tremendous mortgage market, as originations for the quarter totaled $6.8 billion, an increase over prior year of $2.4 billion. Driven by PPP loan balances, the bank's average loans for the fourth quarter increased 8% from prior year, and average deposits grew by $2.3 billion, or 26% from prior year as well. Net revenues at the broker-dealer increased for the same period by $37 million, or 33%, primarily due to robust volumes in structured finance, public finance, and fixed income businesses. Our strong capital position in 2020 enabled us to distribute $241 million in both dividends and share repurchases. This includes the Dutch auction tender that was executed in the fourth quarter. where Hilltop paid $193 million to repurchase approximately 8 million shares of common stock. Yesterday, our Board of Directors declared a quarterly cash dividend of 12 cents per common share, an increase of 33% from the prior quarter. This dividend is payable on February 26, 2021. During the period, we continue to support our impacted banking clients through the approval of COVID-related loan modifications. The balance of total active deferrals as of December 31 was $240 million down from $968 million at the end of the second quarter. Our allowance for credit losses as of December 31 totaled $149 million, or 2% of the bank's loan portfolio. This reflects a reduction in the reserve balance of $6.2 million from the third quarter, which was driven by fourth quarter payoffs lower than expected charge-offs, and a shift in the economic outlook. 2020 was a challenging year for all of us, though I believe made us a stronger and better company. I'm very proud of our teammates company-wide and how they responded to take care of each other, as well as our clients and the communities we serve. At the onset of the pandemic, our treasury and capital markets teams immediately pulled together to manage the volatility which occurred and to ensure our businesses had ample liquidity to serve the needs of our clients. As well, the coordinated efforts of our technology, properties management, and human resources groups enabled us to effectively transition 90% of our employees to a work-from-home model in less than 30 days. Although the pandemic caused Hilltop to change the way we worked, it did not deter our company from making progress on large and complex initiatives. Also notable, our team at Plains Capital Bank originated 2,800 PPP loans and deferred loan payments in a few short months for their commercial and consumer clients that were most impacted by the pandemic. Their efforts in partnering and supporting our bank clients highlight the culture of Plains Capital and the quality of our bankers. 2020 was also a record-breaking year for the company. as Prime Lending funded a record $23 billion in mortgage loans, Hilltop Securities generated record net revenues of $530 million, and Hilltop produced record earnings. Importantly, we do not expect these favorable market conditions to continue indefinitely. As we embark upon 2021, we believe that Hilltop is well-positioned with established businesses, synchronized leadership, and substantial capital. Moving to slide four. Plains Capital Bank had a solid quarter with pre-tax income of $59 million, as a negative provision of $3.6 million was reported. Net interest income increased $11 million from Q4 2019, driven by fees and interest income from PPP loans. Net interest margin was 3.37% during the period, a linked quarter increase of 35 basis points. as the bank utilized cash proceeds from PPP loan payoffs to reduce sweet deposits from Hilltop Security. Prime Lending had an outstanding fourth quarter and generated pre-tax income of $84 million, an increase of $76 million from Q4 2019. That was driven by a 54% increase in origination volume and a gain on sale margin of 448 basis points, a strong finish to an incredible year for the Prime Lending team. Hilltop Securities also had an outstanding quarter with pre-tax income of $34 million, an increase of $10 million, or 42%, from the fourth quarter of 2019. Structured finance grew net revenue by 92% from Q4 2019, driven by a 57% increase in TBA lockbox. Public finance services grew net revenue by 32%, and fixed income services grew net revenue by 45%, both driven by robust volumes, improved capabilities, and key talent addition. Moving to slide five. In late 2017, we announced a broad set of initiatives to enhance our platform and streamline operations with a goal of lowering operating costs and building a foundation for future growth. Our goal was to deliver $84 million in run rate, PP&R benefits by the end of 2021. Through the end of 2020, we have completed projects that have resulted in $90 million in revenue and cost benefits. This program was centered around three main areas, enhanced business operations, strategic sourcing, and shared services. In the first area of enhanced business operations, we streamlined front-end operations through the replacement of legacy core systems with the Blue Sage loan origination system at Prime Lending and with the FIS platform at Hilltop Security. Also, we improved alignment of leadership and management through effecting succession plans and making certain large organizational changes, such as the Prime Lending staff reorganization in 2018 and the restructuring of Hilltop's risk organization in 2019. Additionally, we established the agency MBS group at Hilltop Security. which is a securitized product platform that complements our mortgage origination businesses. In the second area of strategic sourcing, the focus was to take advantage of the size of our organization in order to improve our pricing and discounts with all vendors. In order to do this, we implemented an enterprise contract and procurement platform to better enable the organization to work effectively through contracts and across vendors. a single travel and entertainment platform to aggregate data and leverage our scale for better rates and discounts, and a consolidation of supplier sourcing, which includes IT hardware and software to janitorial services and office supplies. Notably, strategic sourcing has been a huge effort and has shown very positive results that we will continue to leverage as we negotiate contracts. The focus of the third and last area was to build a shared services organization to support the entire enterprise. We had redundancy across the organization in most functional departments, and through the centralization of certain responsibilities, we now have better controls, communications, and run rate costs. Most importantly, our shared services organization has positioned us for enhanced scalability to support both organic and acquisitive growth. With that, I will now turn the presentation over to Will to talk through the financials.