Hilltop

First Southwest Co. and Southwest Securities began officially operating as one company Monday after regulators approved their merger under the ownership of Hilltop Holdings Inc.

With regulatory approvals in hand, the two Dallas-based companies completed a process that began in January 2015 with Hilltop's acquisition of SWS Group, Inc., the parent company of Southwest Securities.

The stock-swap deal valued at $350 million required approval from the Financial Industries Regulatory Authority and other regulators.

Southwest Securities adopted the name Hilltop Securities in October in anticipation of the completed merger. Hill Feinberg, previously chairman and chief executive of First Southwest, will hold the same titles at Hilltop Securities.

"This is the beginning of a new chapter for our combined firm," Feinberg said in a prepared statement. "The completion of our merger propels us into a future filled with opportunity for our clients, our employees, our company and our community."

Feinberg said First Southwest will continue to operate under that name for an indeterminate amount of time and eventually be known as Hilltop Securities. The SWS business already uses that name.

In developing the merger, the company beefed up its regulatory staff.

"We are probably more up to speed on regulatory issues challenging the industry than any other firm," Feinberg said. "We have invested in the future."

Jeremy Ford, chief executive of Hilltop Holdings, called the merger "an important milestone on our path toward building a leading regional broker-dealer with an expanding national presence."

First Southwest is the perennial leader among financial advisors in Texas and the Southwest region. Nationally for 2015, it ranked second behind Public Financial Management Inc., credited with advising on $62.35 billion over 846 deals, according to Thomson Reuters data.

Robert W. Peterson, former president and chief executive of Southwest Securities, is president and chief operating officer.

John R. Muschalek, formerly head of correspondent clearing and securities lending at First Southwest, is Hilltop Securities' chief administrative officer, and J. Michael Edge, former CFO of SWS Group, is CFO of the new firm.

With about 1,000 employees in more than 50 offices across the United States, Hilltop Securities services public and private institutions, issuers and investors through six primary business lines.

The public finance sector is led by vice chairmen Jack Addams and David Medanich. Addams has been with First Southwest for 15 years and Medanich has worked there 34 years.

Capital Markets is led by Daniel Leland, who has been with Southwest Securities for 20 years. David Geschke is head of retail brokerage, while Michael Marz heads structured finance. Lisa Palmeri, a 13-year veteran, heads securities lending.

Plains Capital Bank, Hilltop's primary business, acquired First Southwest during the financial crisis of 2008 when investment banks sought to convert to commercial banks.

In the new structure, Hilltop Securities, including First Southwest, becomes a separate firm from Plains Capital.

Hilltop Holdings is publicly traded under the symbol HTH on the New York Stock Exchange.

The merger of First Southwest and Southwest Securities was valued at $350 million as each company's stock was traded for Hilltop Securities Holding stock. SWS stockholders received 0.2496 shares of Hilltop common stock and $1.94 of cash, equating to $6.92 per share based on Hilltop's closing price on Dec. 31, 2014.

Through Hilltop Holdings' other wholly owned subsidiary, National Lloyds Corp., it provides property and casualty insurance through two insurance companies, National Lloyds Insurance Company and American Summit Insurance Company. As of Sept. 30, Hilltop employed approximately 5,400 people and operated approximately 425 locations in 44 states.

Fitch Ratings affirmed Hilltop Holdings issuer default rating of BBB on Jan. 12.

"The ratings are supported by Hilltop's diverse business model for a bank of its size, experienced and consistent management team, solid capital position, and PlainsCapital Bank's historically stable operating performance," Fitch analyst Stefan Kahandaliyanage wrote.

"Fitch also considers the management team of PlainsCapital Bank to be deep and stable with a number of PlainsCapital's senior managers having worked at the bank almost since its inception in 1987," the report added.

"Fitch views Hilltop's current levels of capital as a ratings strength given the bank's relatively low risk profile and historical net charge off trends," analysts said.

With a market capitalization of $1.49 billion, HTH shares hit a 52-week low of $14.38 on Jan. 20 before closing at $15.11.

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