On March 11, 2009, management of Hilltop Holdings Inc., or the Company, concluded that the Company will be required to restate its previously issued unaudited financial statements for the three and nine months ended September 30, 2008, which appeared in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2008.

Loss and Loss Adjustment Expense Adjustment

Due to an error in the application of a prepayment from a reinsurer related to catastrophe losses incurred and the ultimate retention per catastrophic event in the third quarter of 2008 to loss and loss adjustment expense, loss and loss adjustment expense, as set forth in the unaudited consolidated statements of operations for the three and nine months ended September 30, 2008, was understated by $3.1 million. This understatement of loss and loss adjustment expense resulted in net loss for the three and nine months ended September 30, 2008 being understated by $2.0 million, net of tax. The following table sets forth the unaudited consolidated statements of operations for the three and nine months ended September 30, 2008 as originally presented in the Quarterly Report on Form 10-Q, the effect of the required adjustment on a line item basis and the restated amounts after giving effect to adjustment.

                                    Three Months Ended September 30, 2008            Nine Months Ended September 30, 2008
                                    As                                                 As
                                Previously        Effect of                        Previously        Effect of
                                 Reported        Restatement       Restated         Reported        Restatement     Restated
                                    (In thousands, except per share data)           (In thousands, except per share data)

Revenue:
Net premiums earned            $      22,745                     $      22,745   $        83,017                    $  83,017
Net investment income                  6,716                             6,716            21,887                       21,887
Net realized (losses) gains
on investments                        (1,213 )                          (1,213 )         (42,907 )                    (42,907 )
Other income                           1,503                             1,503             4,674                        4,674
Total revenue                         29,751                            29,751            66,671                       66,671
Expenses:
Loss and loss adjustment
expenses                              26,872            3,074           29,946            66,154    $      3,074       69,228
Policy acquisition and other
underwriting expenses                 10,736                            10,736            32,350                       32,350
General and administrative
expenses                               1,750                             1,750             7,207                        7,207
Depreciation and
amortization                             532                               532             1,628                        1,628
Interest expense                       2,617                             2,617             7,925                        7,925
Total expenses                        42,507            3,074           45,581           115,264           3,074      118,338
(Loss) Income from
continuing operations before
income tax benefit and
allocation to minority
interest                             (12,756 )         (3,074 )        (15,830 )         (48,593 )        (3,074 )    (51,667 )
Income tax benefit (expense)
from continuing operations             9,092            1,076           10,168            21,618           1,076       22,694
(Loss) Income from
continuing operations before
allocation to minority
interest                              (3,664 )         (1,998 )         (5,662 )         (26,975 )        (1,998 )    (28,973 )
Minority interest                          -                                 -                 -                            -
(Loss) Income from
continuing operations                 (3,664 )         (1,998 )         (5,662 )         (26,975 )        (1,998 )    (28,973 )
Preferred stock dividend              (2,579 )                          (2,579 )          (7,735 )                     (7,735 )
Net (loss) income
attributable to common
stockholders                   $      (6,243 )  $      (1,998 )  $      (8,241 ) $       (34,710 )  $     (1,998 )  $ (36,708 )

(Loss) Income per share from
continuing operations less
preferred dividends
Basic (loss) income per
share                          $       (0.11 )  $       (0.04 )  $       (0.15 ) $         (0.61 )  $      (0.04 )  $   (0.65 )
Diluted (loss) income per
share                          $       (0.11 )  $       (0.04 )  $       (0.15 ) $         (0.61 )  $      (0.04 )  $   (0.65 )

(Loss) Income per share
attributable to common
stockholders
Basic (loss) income per
share                          $       (0.11 )  $       (0.04 )  $       (0.15 ) $         (0.61 )  $      (0.04 )  $   (0.65 )
Diluted (loss) income per
share                          $       (0.11 )  $       (0.04 )  $       (0.15 ) $         (0.61 )  $      (0.04 )  $   (0.65 )

Weighted average share
information
Basic shares outstanding              56,452                            56,452            56,452                       56,452
Diluted shares outstanding            56,452                            56,452            56,452                       56,452

Reinsurance Receivable and Payable Adjustments

In connection with and as a result of the error in the application of that prepayment to loss and loss adjustment expense, reinsurance payable, as set forth in the balance sheet at September 30, 2008, was understated by $4.1 million, reinsurance receivable was understated by $1.0 million and income taxes receivable was understated by $1.1 million. The following table sets forth the unaudited consolidated balance sheet at September 30, 2008 as originally presented in the Quarterly Report on Form 10-Q, the effect of the required adjustments on a line item basis and the restated amounts after giving effect to the adjustments.

                                                               September 30, 2008
                                                        As
                                                    Previously       Effect of
                                                     Reported       Restatement      Restated
                                                      (In thousands, except per share data)
Assets
Investments
Fixed maturities
Available for sale securities, at fair value
. . .

Increase in Board Size; Appointment o f New Director

On March 12, 2009, the Board of Directors of the Company increased the number of directors constituting the Board of Directors from eleven to twelve. At the same time, the Board of Directors elected Jess T. Hay to fill the vacancy created by the increase in the number of directors constituting the Board of Directors. Mr. Hay also was appointed to the Nominating and Corporate Governance Committee of the Board of Directors. A brief biography of this new director follows.

Mr. Hay served as Chief Executive Officer and Chairman of Lomas Financial Group from 1969 to 1994. Mr. Hay also served as Chief Executive Officer and Chairman of Lomas Mortgage USA. He currently serves as Chairman of HCB Enterprises Inc. He also has been a director of Viad Corp. since 1981 and has been its presiding director since January 1, 2005. He has been a director of Trinity Industries Inc. since 1965. He also currently serves as Director of Moneygram International Inc and served as its Lead Director until April 25, 2008. He served as a Director of AT&T Inc. (formerly SBC Communications, Inc.) from 1986 to 2004 and Exxon Mobil Corporation from 1981 to 2001. He has been Chairman of the Texas Foundation for Higher Education since 1987.

Mr. Hay is not a party to any arrangement or understanding with any person pursuant to which he was appointed as a director, nor is he a party to any transaction, or series of transactions, required to be disclosed pursuant to Item 404(a) of Regulation S-K.

2008 Bonuses

On March 12, 2009, the Compensation Committee of the Board of Directors granted a bonus of $50,000 to Corey Prestidge, Secretary and General Counsel of the Company, and a bonus of $55,000 to Greg Vanek, President and Chief Executive Officer of NLASCO, Inc., a wholly-owned subsidiary of the Company. The bonus awarded to Mr. Vanek was discretionary and not under the incentive compensation plan for 2008, as the minimum thresholds under the incentive plan with respect to NLASCO, Inc. were not achieved in 2008.

2009 Compensation

On March 12, 2009, the Compensation Committee of the Board of Directors determined to maintain the current salaries of each of the named executive officers of the Company during 2009, except for Mr. Prestidge. With respect to Mr. Prestidge, the Compensation Committee of the Board of Directors approved an increase in Mr. Prestidge's salary from $225,000 per year to $275,000 per year, which is commensurate with the salaries of the other named executive officers of the Company, other than the Chief Executive Officer of the Company.

The Compensation Committee also determined to maintain the discretionary basis of incentive and bonus compensation for the named executive officers at Hilltop Holdings Inc. With respect to incentive compensation for the named executive officers at NLASCO, Inc., including Mr. Vanek, the Compensation Committee approved the following thresholds for calendar year 2009:

† Maximum - a 2009 combined ratio(1) of 84% or less, a maximum of 75% of the named executive officer's salary;

† Target - a 2009 combined ratio above 84%, but 90% or lower, a maximum of 50% of the named executive officer's salary; and

† Threshold - if the 2009 combined ratio is over 90%, but the non-catastrophe loss and loss adjustment expense ratio(2) is 42% or less, then a maximum of 25% of the named executive officer's salary.

The Board of Directors ratified the actions of the Compensation Committee at its March 12, 2009 meeting.

On March 12, 2009, the Board of Directors of the Company amended and restated the Company's bylaws to, among other things, reflect the name change of the Company, address recent developments in corporate governance, to conform the bylaws to the requirements of Maryland law and to make certain other enhancements, clarifications and technical corrections. Among the changes effected by the amendment and restatement are the following:

†††††† the expansion of information required to be provided by stockholders submitting proposals, including disclosure of any hedging or similar transactions or agreements and inclusion of procedures for the verification of information provided by the stockholder making the proposal;

†††††† revisions to provisions that relate to special meetings requested by stockholders that clarify, among other items, that the chairman of the meeting may in certain situations adjourn the meeting without any action on the matter for which the meeting was called;

†††††† the addition of a provision that authorizes the Board of Directors or stockholders to ratify any action or inaction by the Company or its officers to the extent that the Board of Directors or stockholders could have originally authorized the matter;

†††††† the deletion of the provision that required the annual meeting of stockholders to be held within a specified 31-day period, and clarification that the annual meeting of stockholders shall be held on a date and at a time set by the Board of Directors;

†††††† the addition of provisions permitting "householding" of stockholder meeting notices and the express authority to postpone or cancel stockholder meetings;

†††††† the addition of a provision to address meeting, notice and quorum requirements in emergency situations;

†††††† the clarification of provisions related to uncertificated shares consistent with the requirements of the New York Stock Exchange that all listed securities be eligible to participate in the Direct Registration System and deletion of provisions regarding content and signature requirements of certificates;

†††††† the deletion of outdated provisions related to the closing of transfer books; and

†††††† clarification that the right of directors and officers to indemnification vests immediately upon their election and are not altered by subsequent bylaw amendments.

The foregoing summary does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Company's Second Amended and Restated Bylaws that is being filed with this Current Report on Form 8-K as Exhibit 3.2 and is incorporated herein by reference.

(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 exhibits 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

  3.2     Second Amended and Restated Bylaws of Hilltop Holdings Inc.