Q1 2021 Hilltop Holdings Inc Earnings Call
Yeah.
Good morning, everyone and welcome to the Hilltop Holdings, Inc. First quarter 2021 earnings conference call and webcast.
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At this time I'd like to turn the conference call over to Eric Kelly. Please.
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 plans financial condition allowance for credit losses, the impact and potential impact of COVID-19 stock repurchases and dividends.
As well as such other items referenced in the preferences 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 risks and uncertainties.
Our actual results capital liquidity and financial condition 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 on quarterly report filed with the SEC.
Please note that the information presented is preliminary and based upon data available at this time.
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 tangible book value per share.
A reconciliation of these measures to the nearest GAAP measure maybe found in the appendix to this presentation, which is posted on our website at IR Hilltop Dash holdings Dot com.
With that I would like to turn the presentation over to your President and CEO Jeremy Ford.
Thank you Eric and good morning.
For the first quarter Hilltop reported net income was $120 million or $1.46 per diluted share representing an increase from the first quarter of 2020 of $71 million or <unk> 91 per diluted share.
Return on average assets for the period was two 9% and return on average equity was 26%.
These results do include a $5 $1 million reversal of provision compared to the first quarter of last year. When we had a provision expense of $34 five volume as we introduce seasonal on the outlook for credit in the economy looks to be deteriorating.
Much of the momentum around mortgages from 2020 continued into this first quarter, notwithstanding higher long term interest rates and refinanced volume slowing the overall mortgage mortgage market remains strong and our origination business was able to deliver $6 $2 billion on volume of 71 per cent increase from <unk>.
One 2020.
Driven by PPP loan balances the base average loans for the first quarter increased 7% from prior year and average deposits grew by $2 $4 billion or 26, 26% from prior year as well.
While pretax margin at the broker dealer was down slightly from Q1 2020, we did see growth in the structured finance business, which also benefited from a strong mortgage market.
In the public finance business efforts to improve productivity and growth are showing positive return as net revenue increased 8% from the first quarter 2020.
During the period hilltop return $50 million to shareholders through dividends and share repurchases.
The $5 million of shares repurchased or part of the $75 million share authorization. The board granted in January.
Liquidity and capital remain very strong with a tier one leverage ratio of 13% and a common equity tier one capital ratio of 19, 6% at quarter end.
We continue to see improvement in the economic trends and during the quarter, we had payoffs and a return to contractual payments for a large portion of the modified loan portfolio.
This portfolio, which at the end of June 2020 was $968 million is now down to $130 million as on March 31.
Notably all COVID-19 modified retail and restaurant loans are now off deferral program.
Our allowance for credit losses as of March 31 totaled $144 5 million or $1, 98% of the bank's loan portfolio.
This reflects a reduction in the reserve balance of $4 $5 million from the fourth quarter, which was driven primarily by positive shifts in the economic outlook.
While the general economic outlook for the Texas economy has improved the bank remains cautious.
In constant communication with borrowers in certain higher risk segments of our hotel and office portfolios.
These segments were more severely impacted by the pandemic and will take longer to recover.
Moving to slide four.
Flames capital Bank had a solid quarter with a pretax income of $65 million, which includes the aforementioned provision recapture of $5 $1 million also contributing to the increased pre tax income from Q1 2020 with higher net interest income.
From lower deposit costs, and PPP loan fees and interest income.
Our bankers continue to work with small business customers on PPP program and as of March 31 had funded approximately 1100 loans totaling $178 million as part of the second round, bringing the total PPP loan balance to $492 million at period end.
Prime lending had another outstanding quarter and generated pretax income of $93 million, an increase of $53 million from Q1 2020.
That was driven by both a $2 $6 billion increase in origination volume and a gain on sale margin of 388 basis points.
Bill rate increase towards the end of the quarter and margins tightened we remain encouraged by the demand for mortgages across the country.
And by the Prime lending team that continues to perform exceptionally well actively recruiting quality loan originators.
For hilltop securities that they had a good quarter with pretax income of $18 million.
The structured finance business had a strong start to the quarter with favorable volume and spread than the sudden rise in interest rates adversely impacted net revenue in March.
Net revenue grew in public finance services compared to prior year from a modest increase in national insurance and recruiting efforts.
The fixed income services and wealth management businesses generated modestly lower net revenues in Q1 2020 levels.
Overall for hilltop this was an excellent quarter and a great start to the year. We believe our balance sheet is strong and our credit quality is sound.
We're excited about the strategic direction and growth potential of our three businesses and we are grateful for the talented leadership and dedicated teams we have across hilltop.
With that I will now turn the presentation over to will to talk about the financials.
Thank you Jeremy I'll start on page five.
As Jeremy discussed from the first quarter of 2021, those off reported consolidated income attributable to common stockholders on a $120 million equating to $1 46 per diluted share.
During the first quarter revenue related to purchase accounting was $4 $9 million on expenses were $1 $3 million, resulting in a net purchase accounting free tax income of $3 $6 million from the quarter.
In the current period, the purchase accounting expenses largely represent amortization of other intangible assets related to prior acquisitions.
During the first quarter provision for credit losses reflected a net reversal.
$5 1 million and included approximately $600000 from net recoveries of previously written off credit.
The improvement in the current macroeconomic environment.
As well as the outlook for continued improvement in key economic metrics positively impacted allowance for credit losses during the quarter.
It was half quarter end capital ratios remain strong with common equity tier one on 19, 63% and tier one leverage ratio of 13, 1%.
On moving to page six.
Net interest income in the first quarter equating to a $106 million, including.
Including $7 5 million of previously deferred DPP origination fees and purchase accounting accretion.
Versus the prior year quarter, net interest income decreased by $4 $7 million or 4% per.
Net interest margin declined versus the fourth quarter of 2020 by two basis points.
On the current period net interest margin benefited from the recognition of deferred PPP origination fees higher yields and stock loan and lower deposit costs.
Offsetting these benefits were lower loan Asia volume in Egypt as yields.
Driven by market pricing and absolute yield levels on the mortgage market.
Further pcbs.
Excess cash levels.
We held at the Federal reserve increased by $365 million from the fourth quarter, putting an additional five basis points of pressure on net interest margin.
During the quarter, new loan commitments, including credit renewals maintained an average book yield of 4%.
This was stable with the fourth quarter of 2020.
Total interest bearing deposit costs declined by eight basis points in the quarter as we continue to lower customer deposit rates and return broker deposits during the first quarter.
We expect continued consumer CD maturities and additional broker deposits acquired in the coming quarters, both of which support continued steady decline in interest bearing deposit costs.
Given the current market conditions, we expect net interest income and net interest margin will remain pressured as overall market rates remain low putting pressure on held for sale on commercial loan yields and the competition could remain aggressive over the coming quarters as we expect new loan demand will be what will remain below historic.
Loves.
Turning to page seven.
Total non interest income for the first quarter of 2021, equating to $418 million per quarter mortgage related income and fees increased by $131 million versus the first quarter of 2020.
During the first quarter of 2021, the environment in mortgage banking remained strong and our business outperformed our expectations in terms of origination volume principally driven by lower mortgage rates, which drove improved demand from both refinance and purchase mortgages.
The prior year quarter purchase mortgage volumes increased by $561 million or 24% and refinance volumes improved substantially increasing by $2 billion or 156%.
While volume during the first quarter were strong relative to traditional seasonal trends gain on sale margins did decline versus the fourth quarter of 2020 is a combination of lower linked quarter market volumes, principally purchase mortgage volumes competitive pressures and product mix yield of the gain on sale margin of 388.
<unk> points.
We expect pressures on margin to persist throughout 2021, and we continue to expect full year average margins to move within a range of 360 to 385 basis points contingent on market conditions.
Other income increased by $12 million, driven primarily by improvements in the structured finance business as the prior year period included a $16 million negative unrealized mark to market on the credit pipeline as.
As we've noted in the past the structured finance and capital markets businesses can be volatile from period to period as they are impacted by interest rate origination volume trends in overall market liquidity.
Starting on page eight.
Noninterest expenses increased from the same period in the prior year by $85 million to $367 million.
The growth in expenses versus the prior year were driven by an increase in variable compensation of approximately $63 million at hilltop securities and prevalent.
This increase in variable compensation was linked to strong fee revenue growth in the quarter compared to the prior year period.
The balance of the increase in compensation and benefits expenses is related to higher payroll taxes salaries and overtime expenses.
Looking forward, we expect that our revenues will decline from the record levels of 2020, which will put pressure on our efficiency ratio.
That said, we remain focused on continuous improvement leveraging the investments we've made over the last few years to aggressively manage fixed call. While we continue to further streamline our businesses and accelerate our digital transformation.
I'm moving to page now.
Total average H F on loans grew by 5% versus the first quarter of 2020.
Growth versus the same period in the prior year was driven by growth in PPP loans and higher balances in the mortgage warehouse lending business.
In the period banking loans, excluding PPP and mortgage warehouse lending have declined modestly versus the prior year period as commercial loan demand has remained tepid throughout the pandemic.
As we've noted on prior call. We are planning to retain between 30 and $50 million per month of consumer mortgage loans originated at prime lending to help offset soft demand from our commercial clients.
During the first quarter of 2021 prime lending lock approximately $146 million of loans to be retained by plane capital over the coming from a month.
These loans had an average yield of 287 basis points, and an average FICO and LTV of 779, and <unk>, 61% respectively.
I'm moving to page 10.
First quarter credit trends continue to reflect the slow but steady recovery in the Texas economy is the reopening of businesses continues to provide improved customer cash flows and fewer borrowers on active deferral programs.
As of March 31, we have approximately $130 million of loans on active deferral programs down from $240 million at December 31.
Further the allowance for credit losses to end of period loan ratio for the active deferral loan equates to 13, 4% at March 31.
As is shown on the graph on the bottom right from the page the allowance for credit loss coverage, including both mortgage warehouse lending as well as PPP loans at the bank ended the first quarter at one point on 8%.
We continue to believe that both mortgage warehouse lending as well as our PPP loan will maintain lower loss content over time, Inc.
Excluding mortgage warehouse and PPP loans, the banks ACL to end of period loans held for investment ratio equated to three 8%.
Turning to page 11.
First quarter average total deposits are approximately $11 $4 billion and it increased by $2 4 billion or 26% versus the first quarter of 2020.
Throughout the pandemic, we've continued to experience abnormally strong deposit flows from our customers driven by government stimulus efforts and shifting client behaviors as customers remain cautious during these challenging times.
Given our strong liquidity position and balance sheet profile, we are expecting to continue to allow broker deposits to mature and run off.
At 331, hilltop maintain $639 million of broker deposits that have a blended yield of 34 basis points.
These broker deposits 284 million will mature by 630 of 2021.
These maturing these maturing broker deposits maintained an average yield from 47 basis points.
While deposits remain elevated it should be noted that we remained focused on growing our client base and deepening wallet share through the sales of our commercial treasury products and services and we remain focused.
On driving car client acquisition efforts.
I'm moving to page 12.
During the first quarter of 2021 place capital Bank generated solid profitability producing $65 million of pre tax income during the quarter.
Bank benefited benefited from the reversal of credit losses of $5 2 million and the recognition of the one 5 million previously deferred PPP origination fees.
During the quarter, the bank's efficiency ratio dropped below 50% as the focus on managing expenses improving fee income streams through our Treasury management sales efforts and working diligently to protect net interest income is proving to be a successful combination.
We do not expect the efficiency ratio will remain below 50%, we do expect that the bank's efficiency will operate within a range of 50 to 55 per cent overtime.
Moving to page 13.
Lindy generated a pretax profit of $93 million for the first quarter of 2021, driven by strong origination volumes that increased from the prior year period by $2 6 billion or 71% per.
The purchase percentage of the origination volume was 47% in the first quarter.
While refinance remained above our expectations during the first quarter, we expect that the market will begin to shift towards a more purchase focused marketplace. During the last three quarters of 2021.
Noted earlier gain on sale margins contracted during the first quarter, yet we continue to expect the full year average range of 360 to 385 basis points is appropriate given our outlook on production product mix and competition.
During the first quarter Prime lending closed on a bulk sale of $53 million of MSR value.
Somewhat offsetting the impact of the bulk sale.
On the business continued to retain servicing at a rate of approximately 50%, which yielded a net MSR value at 331 of $142 million.
Stable was 131 levels.
We expect to continue retaining servicing it at a rate of 30% to 50% of newly created servicing assets during 2021 subject to market conditions, and we will be looking to potentially execute additional bulk sales throughout the year if market participation remains robust.
Moving to page 14.
Hilltop Securities delivered a pre tax profit and margin of $18 million and 16, 2% respectively. In the first quarter of 2021, driven by structured finance in the public Finance service services businesses.
While activity was strong in the quarter, we've continued to execute on our growth plan investing in bankers and sales professionals across the business to support additional product delivery enhance our product offerings and deliver our differentiated solutions debt to municipalities across the country.
Moving to page 15.
In 2021, we're focused on remaining nimble as the pandemic evolves to ensure the safety of our teammates and their clients.
Further our financial priorities for 2021 remains centered on delivering great customer service to our clients.
That being new customers to our franchise supporting the communities, where we serve maintaining a moderate risk profile and delivering long term shareholder value given.
Given the current uncertainties in the marketplace, we're not providing specific financial guidance, but we are continuing to provide commentary as to our most current outlook for 2021 with the understanding that the business environment, including the impact of the pandemic could remain volatile throughout the year.
That said, we will continue to provide updates to our future quarterly call.
Operator that concludes our prepared comments and we'll turn the call back to you for the Q&A section of the call.
Ladies and gentlemen at this time, we will begin the question and answer session.
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Once again that is star and then one particularly on the question queue.
Our first question today comes from Michael Young from <unk>. Please go ahead with your question.
Hey, good morning, Thanks for taking the question Mike.
Michael.
I wanted to maybe just start on the mortgage business, obviously, that's going to be.
Swing factor this year with a potentially lower revenue lower gain on sale, but just on the expense side.
I think in the comments you had made mention of sort of the fixed costs across the business as being stable, but I would assume there is some opportunity there to bring the fixed costs down and obviously in a variable costs will move in accordance with how they have historically so.
Any color to add there on the expense side for mortgage.
I think I think the mortgage business as we sit here, we've made substantial investments in technology through our loan origination system.
On the digital activities, where we're launching you continue to launch as it relates to customer engagement. So all of those things are going to allow us to streamline and continue to make good progress on reducing the cost to originate a loan.
Simple as it relates to our middle and back office functions.
And again I think to your point, our expectation is debt.
Those costs remained stable kind of year on year on that's offsetting the inflationary costs that naturally occur in the business, whether that be increased salaries through merit or or escalators and real estate costs or otherwise so.
From our perspective on the ongoing benefits from the investments are going to help us offset inflation and we hope that we hope to exceed that but also.
Again maintained maintain stable costs as volumes are rationalized throughout the year.
Okay, and then maybe a broader question just on on new growth or revenue opportunities are you guys looking at any new business opportunities or new lending verticals that could help with revenue growth as we move into 2021 and a softer mortgage here.
Yeah, I think as far as our business model and in the company's and the things that we have we're not looking to do anything differently and we're looking to grow in each business.
So I wouldn't think there's any new vertical or anything different from what we're doing.
Okay and then.
Just last one just on kind of customer demand and appetite I think you guys were still expressing a little bit of caution around.
Credit quality.
On the back half of the year, but are you seeing any potential signs of growth or new demand coming as well I think a lot of banks kind of pointed to that so I. Just didn't know if you guys are seeing that within your customer base or in your geography.
Well currently commercial loan demand, we think is soft, but we think there is optimism and we do feel like we have a.
Pretty solid pipeline.
From where we're at day.
Okay I'll step back thanks.
Okay.
Our next question comes from Michael Rose from Raymond James. Please go ahead with your question.
Hey, guys How're you doing.
That's gone.
Oh go on well thanks for thanks for asking just wanted to get a little color on our on the buyback I know this question's kind of assets.
Every quarter you guys have a ton of capital can you just kind of update us on your on your thoughts there.
Maybe Jeremy just.
Thoughts on on M&A, just we've seen a fair amount of activity here in recent weeks and just wanted to see what your updated thoughts are thanks.
With regards to share repurchases.
On the repurchased $5 million in the first quarter that was largely due to limited.
Open window period.
And we have a 75 million dollar repurchase authorization and we have $70 million.
Yes.
Utilized before going back to the board and that that would be our expectation as we sit today.
And you know we will constantly evaluate where we feel like we are.
Trading versus you know intrinsic value.
And then on the M&A front.
We are.
You know.
We've all long stated we do have the type of capital that we want to deploy towards M&A.
We feel like the relatively healthy environment. So it makes it easier to have conversations about deal there's less.
Distressed deals that we've done kind of historically in the past so as I said last quarter, our focus is going to be on.
Trying to find the right strategic partner and something that we think will really enhance our collective share holder value.
That's helpful.
Just switching on mortgage so you guys reiterated the on the origination expectations for the year of 17 to 20 yesterday the M. B, a big upward revision to the second quarter refi and if I annualize what you guys did in the first quarter it implies.
Much higher than the guide so I guess the thought is that we all know mortgage is going to come off at some point, but any thought as to why you wouldn't be at the upper end of that range.
Yeah, I think I think.
Certainly the annual ovation.
With yields you there I think our.
Our view is the next couple of quarters will start to normalize and become more I'd say seasonal in trajectory as they as they rotate towards a more purchase oriented market.
You know some of our considerations around how we think about it or the inventory challenges that are in the marketplace.
And the overall competitive challenges that we believe are going to emerge.
As volumes do come out come out of the market and organizations and competition is left to rationalize.
The outsize the outsize operations that they've built over the last 12 to 18 months. So we.
We think there's we think the 17% to $20 billion is a reasonable range and again.
Our.
We'd like to we'd like to be popping debt range, but again from our perspective, there are some headwinds going forward, albeit the market remains certainly on the purchase side remains constructive.
And again, we think demand is reasonably strong, but the inventory challenges are real and present today.
Understood and that's a good color finally from me Jeremy if you can just kind of walk us through.
The different pieces of the fixed income business.
Now you know what.
What kind of the push and pull would be.
Right and then if the fed actually does increase rates at some point down the road just trying to get at.
Because again I know there are puts and takes within that.
The business based on where rates are but just trying to get an outlook for expectations for that business over the next couple of quarters. Thanks for hilltop Securities you're talking about.
Yeah correct.
Okay, Great Yeah sure.
You know I guess that we have four primary business lines in that business once public finance services and.
You know I think that Ah just given kind of the backdrop, we're positive on national insurance and we've also had a lot of really strong recruiting so we feel good about.
On the growth of that business.
What's really been the dominant revenue producer in that end hilltop securities has been structured finance, which is our mortgage.
Related business and and just like we mentioned it followed a similar pattern of Prime day.
First quarter, so I think that will tie to interest rates like that like the purchase on the purchase.
On purchase market well.
Our fixed income services.
You know our municipal impactful fixed income business and that.
That'll we're enhancing a lot of capability there I think we've got room to grow.
But it is subject to sudden changes in the direction of interest rate.
And then wealth management is where we win when you have.
Any kind of spread in short term interest rate that fall straight to the bottom line. So in the first quarter. Its revenue was off four and a half million dollars solely because of.
Having zero per cent short term rates.
That's great color. Thanks for taking my questions guys.
The.
The direction of interest rate at the parent as well.
But I think in general like even if rates increase we're not seeing rate increase.
That's a level that would preclude.
Uh huh.
Public finance issuance or a lot of these first time homebuyers and our structured finance business.
And if there and we don't see a period of time before that that short term rate increase and alleviate that Wilson.
Alright, thank you.
Our next question comes from Brad Milsap from Piper Sandler. Please go ahead with your question.
Hey, good morning.
Right.
You've got to address a lot of my questions, but did want to ask about the balance sheet and.
Kind of how you would expect you manage some of the existing excess liquidity do you have the Gao on average.
On a 1 billion five in cash it didn't look like you grew the bond portfolio a lot in the first quarter, but just kind of curious.
Kind of how you think about managing that cash, particularly with.
You know that the loan growth dynamics, you're talking about and also the PPP forgiveness on the horizon.
Excess cash is obviously top of mind force I think as we've said historically, we're not looking to take on excessive amounts of duration exposure right here.
And so given where kind of absolute rates are although they have they have backed up since prior quarter. So.
You saw the investment portfolio with the bank kind of ended ended the period at about $2 billion.
We expect that to continue to drift higher I don't expect it to take a step function higher but I do expect to continue to drift higher as we put some money to work there.
In places, where we feel like we don't have kind of outsized outsized exposure, we are retaining the $30 million to $50 million I think our expectation is we'll be toward the top end of that retention range of prime lending originated mortgages on board for the balance of the year notwithstanding.
Stronger commercial demand and we're expecting it to at this time and then we do expect again at the other on the during the second quarter and into the third and fourth and do expect commercial on demand to pick up is that if that doesn't in fact occur.
We'll react to that and make some adjustments to the approach but.
We're going to continue to be prudent and continue to make our I'd say marginal steps in terms of overall deployment lastly, I'd say and we've tried to mention in my comments, we do have a series of broker deposits on the balance sheet and we expect those will will.
Will mature and all expectations all day will run off throughout the balance of this year. So in terms of kind of kind of overall liquidity and access to a rationalization.
Elevation of broker to broker deposits.
As well as mortgage retention on the balance sheet, and then I'd say the securities portfolio drifting higher over the $2 billion level on a quarter by quarter.
Okay, Great. That's helpful and just just to follow up on asset quality I think you commented in the ER again this quarter in the slide deck that you expect the provision expense to potentially be.
Elevated in the back half of the year. It seems like you guys have.
It's a pretty massive reserve it at 2% of loans, even higher if I were to maybe make some other adjustments just kind of curious kind of how to square that with what seemingly and.
On improving economic picture on credit environment.
With all the reserve building you've done in the past I Wonder if you could maybe frame up sort of what you bought you believe would be an elevated provision expense in the back half kind of given all those factors.
Yeah, So I think from a credit perspective as.
As you noted and we noted in our comments we are seeing.
Some from some rays of light in opportunity in in certain of the portfolios, but then continue to see challenges in others. So as Jeremy mentioned in his comments.
Loans on active deferral from a retail and restaurant perspective that now kind of moved to zero. So that is a substantial improvement from June to June of last year.
And what we're continuing to see as challenges certainly in the hotel space.
As it relates to those prop.
Properties that are principally business oriented are those that are a little more destination oriented which is we do have some of those have have outperformed but those business specific and business is kind of a targeted properties continue to be challenged and we've got about of the 130 million on the hotel portfolio.
Of those active deferrals makes up about $108 million of debt. So I think that's important to note.
On top of that we were looking at were looking at at the office portfolio across our across the state of Texas.
I think it's reasonably well known there's they're growing trends of vacancy in subletting kind of going on and so we remain cautious on that portfolio as well. So there is while there are clearly reasons to be more optimistic Theres also some places where we continue to have.
Our heightened focus on our on our credit measurement on a valuation as it relates to kind of charge off from the second half again, I think as we look at it.
We do though Theres just an expectation currently that some of these loans on active deferral once they kind of run through this defeat this deferral window here.
It'll be some tough decisions have been made in that that likely will yield some charge offs in the second half of the year and again.
We continue to be aggressive and working with our clients and trying to help every client get through what has been an unprecedented environment with that said our expectation is there will be some charge offs in the second half.
You know kind of under that framework I mean, do you think you'd be in position debt sort of moved you know kind of general reserves you know to maybe some of these specific situations just trying to think about the P&L impact I suppose.
Yes, I think that's right I mean, as you get more clarity into which properties.
And kind of which you know which entities, you'll you'll we'll be more specific about that and I think you'll you'll see that matriculate overtime.
Kind of outside from Jill.
Okay, great. Thank you guys.
I think you've Inc.
Our next question comes from Matt Olney from Stephens. Please go ahead with your question.
Thanks for taking my question wanted to circle back on on mortgage and I think in the first quarter typically each year, we see more would you volume build each consecutive month as we move into the spring selling season, but this year. Obviously, we have the falling refi volume. So curious if you can provide any commentary on <unk>.
And in recent months and what you're seeing more recently.
Yes, I'd say I'd say through the first quarter Jeremy mentioned his comments. It was it was certainly seasonally high.
We had a we had a 47% purchase.
Purchase percentage and so the refinance volume was high debt.
We saw that start to deteriorate decline if you will in March as the 10 year rate backed up for you know a 160 or 70 basis points and that was settled back in you know in the in the 100 Fifty's, but.
That.
That portion of our of the volume is obviously very rate sensitive and we saw that.
Debt that pullback in the month of March and I think that's continued continued into April. So we continue to believe that this market is going to roll towards and move towards a more purchase oriented market, which from our perspective is a strength of ours on how we positioned our business overtime.
But again, we do believe that refinance volume will be more challenged even in the second quarter, but certainly in the second half of the year.
Mhm.
Okay.
Thanks for that well and then on the gain on sale margins I think what we're seeing from the marketplace pretty considerable divergence of margins.
Getting hit a lot harder on the wholesale side versus retail just from minus out of your of your mix of wholesale versus retail on the mortgage side, where.
We're 100% retail we don't have any we don't have any wholesale correspondent business.
Okay.
And then just lastly from me on the on the MSR.
That's on the strategy I saw you execute the sale in the first quarter was there any material impact on the financials in the first quarter and then thinking about the outlook. There are you just trying to manage that assets around that $140 million level moving forward.
Yeah. So we did have a sale we had a positive.
Positive outcome, there as well.
I'll take you back a little to the last year. So the strategy last year was to retain that servicing is the market for servicing.
Really deteriorated to the point, where there were periods of kind of a no bid for.
For servicing assets.
On the second quarter and early third quarter of last year that is starting to heal. Obviously you saw you saw the MSR balance increase.
During the period during the periods of 2020 as a result of that strategy, we were able to do that because of our liquidity and balance sheet strength. So we were able to be opportunistic in doing that.
Not our long term objective to have a 140 <unk> hundred $50 million MSR assets that will likely move lower over time.
In my comments I tried to note, we do expect to continue to execute.
Additional bulk sales to the extent the market is there for that and the market is robust.
Currently it has been.
Favorable for that.
But again I think our target you know.
<unk> historically has been in that $50 million to $75 million range. It may travel a little higher than that for the balance of 2021, but again objectively it's not our it's not a strategic objective of ours to maintain an outsized MSR.
But again, we did we do believe the strategy that we executed last year and into the first quarter has.
<unk> born favorable outcomes, both in terms of kind of price recognition.
And games through some of these executed sale.
Okay. Thanks for taking my question.
Yeah.
Yeah.
And our next question comes from and where do you live from <unk>. Please go on with your question.
Hey, good morning, guys.
Good morning, good morning.
So on the PPP front.
Do you have the amount of net origination fees that are on earned at this point and expect to recognize over debt forgiveness process.
As of 331, it was about $13 $9 million.
Okay got it on.
And then last from me could you just remind us the average yield on on on these consumer mortgage loans that you plan to return.
The other loans that were locked during the during the quarter that will come on the balance sheet over the coming months about 287 basis points.
Okay, great. Thanks, guys.
And that will as with each period now that mortgage rates are higher we do expect that will drift over drift over 3% on locks into the future and loans come on the balance sheet, but again for the first quarter lost about 287 basis points.
Got it that's helpful. All right. Thanks, guys.
Thank you.
And ladies and gentlemen, with that we'll conclude today's hilltop holdings first quarter 2021 earnings conference call and webcast.
Thank you for attending today's presentation you may now disconnect your lines.