Q3 2021 Hilltop Holdings Inc Earnings Call
Welcome to the Hilltop Holdings third quarter 2021 earnings conference call webcast. The pool will begin shortly thank you.
[music].
Welcome to the Hilltop Holdings third quarter 2021 earnings conference call and webcast. My name is Robin and I'll be coordinating your crude today. If you would like to ask a question. During the presentation. You may do so by pressing star one on your telephone keypad. If you have joined US 90 compressor flag icon on your web browser.
To ask a question I will now hand, you over to your highest Eric <unk> Executive Vice President of corporate development. Eric. Please go ahead.
Thank you.
Before we get started please note that certain statements. During today's presentation that are not statements of historical facts, including statements concerning such items as our outlook business strategy future plans financial condition allowance for credit losses.
<unk> 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 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 and quarterly report filed with the SEC.
Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information and.
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 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'll now turn the presentation over to Jeremy Ford President and CEO.
Thank you Eric and good morning.
For the third quarter Hilltop reported net income of $93 million or $1 15 per diluted share.
Return on average assets for the period was two 1% and return on average equity was 15%.
These favorable operating results again demonstrate the strength of hilltops diversified model, when our businesses and our people execute on their strategies and capabilities.
<unk> capital Bank had another strong quarter with pretax income of $63 million and a return on average assets of one 4%.
Income during the period included $4 $6 million of PPP loan related origination fees.
And a $5 $8 million reversal of provision.
We have seen continued improvement in our asset quality, which is a reflection of both the banks sound lending practices and a healthier economic outlook.
Total average bank loans declined $252 million or 4% versus Q2 2021 as.
As P. P P balances ran off <unk>.
Excluding PPP loans average bank loans were stable in the quarter.
Although the lending environment is extremely competitive and many of our clients remain flush with liquidity, we have seen growth in our loan pipeline, which is at its highest level since the pandemic.
The current pipeline is heavily commercial real estate, specifically in residential lot development industrial and multifamily across the major Texas markets.
Payoffs will remain a challenge, though as our quality real estate clients continue to find attractive opportunities for their projects and the permanent financing markets.
Total average deposits remained stable linked quarter with average deposits, excluding broker deposits, increasing by $200 million or 2% from Q2, 2021, and $1 9 billion or 16% from prior year.
We continue to see growth in both interest bearing and noninterest bearing accounts.
<unk> Q3, 2020, we have run off almost $1 billion in broker deposits.
This was another strong quarter for prime lending generating $62 million in pretax income.
Although a decline from the astonishing levels in 2020 volumes and pricing held on longer than anticipated and as a result, we were able to deliver favorable returns during the period.
Prime lending originated $5 $6 billion in volume in the quarter from its continued strength in home purchase volume.
Refinancing volume as a percent of total volume decreased to 29% from 35% during the same period in 2020.
If current mortgage rates remained relatively unchanged through the end of the year. We believe this downward trend of refinancing volumes will continue.
Gain on sale margin of loan sold to third parties declined by 17 basis points linked quarter to 359 basis points.
Margins remain pressured as we see competition reacting to the decline in refinancing volume and as our product mix has shifted where the relatively higher margin government product is lagging.
Our team at Prime lending remains acutely focused on monitoring pricing and margins.
Prime lending continues to recruit productive loan officers and has hired 127 year to date.
Bringing total loan officer head count to 1314.
This is a primary focus as we target purchase oriented loan officers to help offset the lower margins, we expect in the coming quarters.
We believe our exceptional team purchase orientation technology investments and focus on customer experience will continue to drive attractive returns from the mortgage business.
During the quarter Hilltop securities generated $17 $4 million of pre tax income on net revenues of $127 million for a pretax margin of 13, 8%.
This was a good quarter for the public finance business and particular with revenues up $12 million from prior year predominantly from a few larger deals.
We are encouraged by the potential for growth in the municipal finance market with the healthy current pipeline and the anticipation of increased future infrastructure spending.
Revenues within the structured finance business decreased by $26 million from last year as the overall mortgage market has declined from the astonishing levels in 2020.
From a historical average perspective volumes are still strong and revenues rebounded by $24 million linked quarter.
We continue to build on the structured finance business by solidifying existing relationships and adding new clients.
Within our fixed income business customer demand weakened given expectations of higher interest rates on the horizon, a trend that has been seen across the industry.
While all product areas were challenged in the quarter.
Hilltop Securities has made several key additions in the business, including leadership for our middle market sales effort, which has been a strategic priority for several years.
Therefore, we remain focused on growing our market share and profitability in fixed income.
Overall hilltop securities as well positioned as we have added key infrastructure producers and leadership broadened our core capabilities and customer penetration as a leading municipal investment bank.
Moving to page four.
As a result of strong and diversified earnings we continue to grow our tangible book value, while returning capital to shareholders. Our capital levels remained very strong with a common equity tier one capital ratio of 21, 3% at quarter end.
And we have grown our tangible book value per share by 18% over the last quarter to $27 77.
During the quarter hilltop returned $84 million to shareholders through dividends and share repurchases.
The $74 million in shares repurchased or part of the $150 million share authorization. The board granted earlier in this year.
This week the hilltop board of directors authorized an additional increase to the stock repurchase program of $50 million.
The total authorization to $200 million.
As a result of dividends and share repurchase efforts hilltop has returned $153 million in capital to shareholders year to date.
Additionally, we paid down $67 million in trust preferred securities during the quarter, which will reduce our annual interest expense by over $2 million going forward.
In conclusion, we are very pleased with the results for the quarter.
All businesses showed solid momentum going into the fourth quarter and are performing well against our strategic objectives.
We feel well positioned with a team and capital in place to continue growing long term shareholder value.
With that I will now turn the presentation over to will to discuss the financials.
Thank you Jeremy I'll start on page five.
As Jeremy discussed for the third quarter of 2021, who will talk reported consolidated income attributable to common stockholders of $93 million equating to $1.15 per diluted share.
Included in the third quarter results was a net reversal of provision for credit losses of $5 8 million during.
During the third quarter hilltop recorded a modest net recovery of charge offs.
On page six we have detailed the significant drivers to the change in allowance for credit losses for the period.
Most significant drivers in the quarter, where the positive migration of certain credits in the portfolio.
And the further improvement in the expected macroeconomic outlook.
These were somewhat offset by an increase in specific reserves taken against a small number of credits that experienced deterioration during the quarter.
First related to the macroeconomic outlook.
We leverage the Moody's <unk> scenario for our third quarter analysis, consistent with our second quarter outlook selection.
This scenario considers lower overall GDP rates higher inflation higher ongoing unemployment.
Other market consensus outlooks.
That said the seven scenario did improve from the prior period.
And the impact of the improvement resulted in the release of $6 million of credit reserves during the third quarter.
Second key driver was the ongoing improvement in credit quality across the portfolio.
During the quarter portfolio experienced positive migration across a number of industries and geographies, resulting from improving financial performance and more resilient outlook for future periods.
Further the portfolio of loans that are currently under active deferral plan build a $17 million from $76 million at the end of the second quarter of 'twenty one.
The result of the improvements at the current level equated to a net release of credit reserves of $5 million during the third quarter.
The net impact of these changes resulted in allowance for credit losses for the period ending September 30 of $109 5 million.
Or 145% of total worlds.
Further the coverage ratio of ACL to total loans increases to 174% when loans that we believe have lower loss potential, including Pvp broker dealer and mortgage warehouse loans are excluded.
I'm moving to page seven.
Net interest income in the third quarter equated to $105 million, including $8 3 million PPP related interest and fee income as well as purchase accounting accretion.
Net interest margin declined versus the second quarter of 2021, driven by lower PPP fee recognition higher average cash balances and continued pressure alone Egfr yields.
Somewhat offsetting these items were higher loan held for sale yields resulting from higher overall mortgage rates.
With lower interest bearing deposit costs, which have continued to trend lower finishing the quarter down four basis points versus the second quarter of 'twenty, one at 28 basis points.
To expect an interest bearing deposit cost to move modestly lower over the coming quarters as consumer CD portfolio continues to mature and reset the lower yields.
As it relates to asset yields the current competitive environment for commercial loans is resulting in substantial pressure on loan yields for new originations, which were three 8% during the third quarter and is also challenging our ability to maintain current loan floor rates.
Do you have an overall market and competitive conditions, we expect that NIM will remain pressured into the fourth quarter of 'twenty, one moving lower to between 240 and 250 basis points by year end.
Turning to page eight.
Total noninterest income for the third quarter of 2001 equated to $368 million.
Quarter mortgage related income and fees decreased by $114 million versus the third quarter of 2020, driven by lower origination volumes declining gain on sale margins and lower lock volumes.
As it relates to gain on sale margins. We noted our key driver table in the lower right of the page the gain on sale margins on loans fell 18 basis points versus the prior quarter.
We are providing the impact of gain on sale margin related to those loans that had been retained on the balance sheet, which for the third quarter equated to 13 basis points.
During the third quarter of 2021, the environment in mortgage banking remained resilient and is expected to continue to shift to a more purchased mortgage centric marketplace.
Approximately 71% of our origination volumes, serving as purchase mortgages.
During the third quarter purchase mortgage volumes declined modestly to 395 billion, while refinance volumes declined 12% or $235 million versus the second quarter origination levels.
We expect this trend to continue towards a more purchase centric mortgage market over the coming quarters and we continue to expect the gain on sale margins for the third party sales will fall within our full year average range of 360 to 385 basis points.
In addition, other income declined by $36 million, driven primarily by the clause and TVA lock volumes.
With lower volumes and market depth in the fixed income capital markets.
As we've noted in the past the structured finance and fixed income capital markets businesses can be volatile from period to period as they are impacted by interest rates market volatility origination volume trends and overall market liquidity.
Lastly, our public finance and retail brokerage businesses at the broker dealer drove solid revenue growth as highlighted in the securities related fee growth of $15 million versus the prior year period.
This growth highlights the impact of our ongoing investments in enhanced products and service capabilities across hilltop Securities, which has provided our bankers with additional tools and capabilities to support their clients.
Turning to page now.
Noninterest expenses decreased from the same period in the prior year by $44 million to $355 million.
The decline in expenses versus the prior year was driven by decline in variable compensation of approximately $35 million at hilltop securities and prime lending.
The decline in variable compensation was linked to lower revenues in the quarter compared to the prior year period.
Bank continued continues to deliver improved efficiency as highlighted in the sub 50% efficiency ratio.
This has been driven by lower overall head count as well as benefits from strong mortgage production and the acceleration of PPP fees into current period income.
As we've noted in the past, we expect that over the longer term the efficiency ratio at the bank, we will fall within a range of 50% to 55%.
Moving to page 10.
End of period, <unk> loans equated to seven 6 billion.
Relatively stable with the second quarter levels.
As we've noted previously we have seen substantial increases in competition for funded loans crossed the Texas markets, which we expect will continue into 2022.
Further the ongoing growth in available liquidity, both on bank balance sheets and consumer balance sheets.
Could further delay a return to more normal commercial loan growth rates for at least a few quarters. We continue.
To expect that full year 2021 average total loan growth, excluding PPP loans will be within a range of zero to 3%.
During the third quarter of 2001 prime lending locked approximately $243 million of loans to be retained by plains capital over the coming months.
Loans had an average yield to nine 5%.
And average FICO and LTV of 776, and 64% respectively.
Moving to page 11.
Third quarter credit trends continue to reflect the slow but steady recovery in the Texas economy, which is supporting improved customer cash flows and fewer borrowers on active deferral programs.
As of September 30, we have approximately $17 million of loans on active deferral programs down from 76 million at June 30.
Further the allowance for credit losses to period in loan ratio for the deferral loans equates to 22, 8%.
September 30.
As is shown on the graph the bottom right of the page to the allowance for credit loss coverage, including both mortgage warehouse lending as well as PPP loans at the bank ended the third quarter and one 5%.
We continue to believe that both mortgage warehouse lending as well as our PPP loans will maintain lower loss content over time.
Excluding mortgage warehouse in PPP loans that makes ACL to end of period loans <unk> ratio equated to 174%.
Turning to page 12.
Third quarter end of period total deposits were approximately $12 1 billion, increasing by $398 million versus the second quarter of 2021.
Given our strong liquidity position and balance sheet profile, we are expecting to continue allow broker deposits to mature and run all the <unk>.
On 30 September hilltop maintains $243 million of broker.
Deposits that have a blended yield of 33 basis points.
Deposit levels 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 focus on acquisition efforts.
Turning to page 13.
In 2021, we continue to remain nimble as the pandemic evolves to ensure the safety of our teammates and our clients further our financial priorities for 2021 remains centered on delivering great customer service to our clients attracting new customers to our franchise supporting the communities, where we serve maintaining a moderate risk profile.
<unk> and delivering long term shareholder value.
The current uncertainty uncertainties in the marketplace, we're not providing specific financial guidance, but we are continuing to provide commentary. This is the most current outlook for the remainder of 2021 with the understanding that the business environment, including the impacts of the pandemic could remain volatile.
We will continue to provide updates during our future quarterly calls.
Operator that concludes our prepared comments and we'll turn the call back to you for the Q&A section of the call.
Thank you. So it's now time for Q&A, if you'd like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind I would like to withdraw your question. Please press star followed by K.
Today's who've joined online. Please press the flag icon when preparing to ask a question. Please ensure you're saying if I'm you took lately.
So our first question is from Michael Young from <unk> Securities. Michael Go ahead.
Hey, good morning, everyone.
To start off on the positive kind of municipal outlook for originations. There could you maybe just talk about you know kind of the factors driving that have you had any increased hiring or teams and then also you know I know I believe Texas passed a new.
La I guess that might be beneficial for you also could you maybe just walk through whether or not that should positively impact you.
Sure.
First day for the quarter.
That we did have a really good quarter in municipal finance and.
And you know we have a good team and a great organization in that as we've referenced so the $12 million increase a lot of that was due to some some bigger deals that I wouldn't.
Necessarily run rate, but.
So just to kind of dampen the run rate from last quarter, Although you look out towards the future we are very constructive on.
Or the municipal finance issuance.
To continue to be strong as it is this year and then also with the pending infrastructure Bill we think that could substantially increase municipal issuance.
And there's a lot of different reports out there, but in some cases it might be.
The 150% or 200% of what the run rate national issuance has been and US as an organization. This is really what we do we're very well prepared to.
To be a part of that.
And just on the recent passing of the bill that might drive more market share towards term towards you. All is that a fair assumption to make and maybe I don't know if you have any sort of sizing of how much origination takes place from those that would now be excluded.
Well, we think that you know net is a positive to us.
And clearly what Youre referencing is the bigger banks that are not going to be doing issuances in Texas because of the firearms.
Yeah for Us where we're in Texas, It's our number one state and we're number one here. So it will be beneficial I don't think it will be.
You know quite well.
Huge windfall in that you know.
Really where we're really NFA.
To say and so a lot of this will be the underwriting players. So don't think that it will be.
Huge but I do think it will be additive.
Okay, great and maybe just shifting gears over to mortgage.
I appreciate the color you did provide but maybe.
So, we'll just trying to understand on the expense side the variable piece.
I know you may not want to provide an outlook in terms of some absolute dollar level, but should we be thinking about a certain percentage of volume is being kind of the variable expense load or any other color on how we should think about that you know kind of moving up and down as volumes, maybe fall off a little bit.
Yes, I think thats.
Good morning, and I think that's a good question.
I'd point you to page nine we've tried to provide here a variable comp to originated volume ratio on the page.
Would you can see here Phil in the in the current period of about 158 basis points.
I think I think as volumes over time go down you will see that likely trend lower given where we are in terms of origination volume and where folks are on their compensation scorecards and alike likely.
Likely for this year, we would expect we would expect that number to stay.
Steady if you will maybe maybe slightly lower in the fourth quarter, but.
Going forward, we would expect kind of that ratio to continue to trend down to a more normalized level over time. So that's that's how we think about the variable comp portion I think as we think about fixed cost.
We are continuing to make.
Substantial progress I think on <unk>.
Measuring productivity evaluating our middle and back office functions across the franchise, where that would be mortgage or for hilltop securities or or the bank, ensuring that we are making substantial investments in digitizing our processes and capabilities one to support improved.
Customer response time.
And as well as improving the overall productivity of our associates across the franchise. So a lot of work being done to continue to.
Affect change positive change from an expense perspective around operating expenses, but from a variable perspective, that's that's how we would think about it in mortgage.
Okay. Thanks I appreciate it.
Thank you.
Our next question is from Brad Milsap from Piper Sandler Thank you Pat.
Hey, good morning, guys.
Good morning.
Jeremy maybe I wanted to start with the bank.
You sounded a little bit more bullish on the prospects of maybe commercial growth picking up.
I was curious if you could maybe quantify that a little bit more and if you do see a pick up there.
Would you continue to also.
<unk>.
Adding one to four family to the books as well one kind of offset the other just kind of want to get a sense of.
Kind of where where you think loan growth can go from here.
I'll just kind of talk maybe high level, and then will can be more specific on.
On the mortgage front.
I'd, just say, we're kind of becoming more optimistic about growth as we've seen the pipeline and read about this from a lot of our competitors start to build up.
It's up.
So it's filled up particularly in the last quarter.
The levels, we havent seen since pre pandemic.
And at the same time, we are fighting pay offs and we had a large payoff quarter as you know a lot of our clients are finding more permanent financing.
So I do think and we'll check my math here, but I do think.
We're expecting to turn to to grow the core portfolio.
But we're also.
Gotta be measured about it and it's extremely competitive with.
A lot of underwriting standards that we try to maintain is going to be difficult. So I guess my view is just that you know I think we are going to grow it is positive.
But I don't think that.
It's just going to be on bridal and I do think we will continue our strategy of purchasing mortgages from prime. So we'll go ahead, yes, I think Brad I think thats right.
I'll Echo a lot of that which is pipelines are stronger I think Texas is a growing market and that's obviously been to our benefit.
From a from a commercial perspective as Jeremy said, it's been a it's been a kind of a one step forward.
I wanted to ask steps backward as it relates to payoffs and new originations.
As it relates to the mortgage retention, though the $50 million to $75 million as we noted in the past that's a little more of a liquidity kind of consumption strategy and approach than it is necessarily a loan growth. We did kind of start that and accelerate it to offset what would've otherwise been soft commercial loan growth as Jeremy mentioned, we expect that.
Loan growth in the commercial book to start to accelerate here.
Early part of 'twenty, two but that said as long as we're sitting on kind of the cash levels, we have which.
From an average.
<unk> perspective, we were over $2 billion in cash at the bank. Our expectation is we'll continue to retain those mortgages are looking to create an over concentration in mortgage exposure, but.
But we're managing that portfolio in concert with our Securities book.
To try to soak up as much liquidity as we can while doing it in small bites kind of each quarter and each month and not taking any substantial vintage risk our vintage exposure as it relates to legging in overly heavy.
To either the mortgages or securities in any given period.
Okay, Great that was kind of my next question just curious your appetite for deploying some of that liquidity into the bond portfolio. It looks like you grew it a little bit in the third quarter.
It looks like on a linked quarter basis, and my numbers are right your yields were up.
In both the taxable and nontaxable can can you kind of speak to what you're buying in that.
The change in yield and sort of appetite for.
No.
Further increases in the bond book.
Yes, I think we.
Had some it some yield improvement in the in the <unk>.
Trading book, but in the in what I'd call. The bank portfolio, which has which is specifically used here for liquidity purposes, and not not a credit not a credit risk book, we don't have.
And some of the other more let's say exotic type of securities in the portfolio.
As I mentioned, we're not looking to take a lot of vintage risk and leg and so we're legging in kind of $50 million to $75 million a year in terms of securities per month, as well and you'll see that likely continue.
Through certainly through the end of the year and into next year.
As well.
We're buying the traditional mortgage mortgage security our average duration is about three and a half years. So we're trying to keep it call it relatively short.
Because again it doesn't feel like this is the place to take a ton of duration exposure and so we're we're doing things we think are prudent to harvest NII.
In a world, where the interest rate environment hasnt materially be conducive to get to take a big bet.
Okay, Great and then just final question for me just back to the public finance numbers. Jeremy I was curious if you could maybe just offer a little more color on the big deals and the pieces that you might think.
Art repeatable or just looking at.
The dollar amount of offerings. He did was down about 2% year over year, a number of offerings is down 17, but your your revenue was up 10 or $12 million. So just trying to kind of kind of piece together sort of what you consider.
Run ratable versus versus not.
Yeah, I guess, something we have $12 million increase year over year, we did see improvement in our.
Just kind of our traditional business outside of those deals I don't have the exact number on what those deals of the $12 million increase was.
Well I don't know if theres anything you want to take that.
Think the way to think about it is.
We.
We have added substantial resource, our Prudential public finance businesses, including a debt capital markets team that debt capital markets team throughout the quarter has been on with us for a period of time now.
They are starting to they're starting to deliver some transactions.
That are that are larger and generate generally kind of larger fees in aggregate than a risk in terms of run rate ability I would say.
$5 million to $7 million of the number without going without going deal by deal and being specific about it so $5 million to $7 million of kind of this period was what I'd call.
Large larger transactions that might not repeat themselves on a period over period basis.
Great. Thank you guys I appreciate it.
Thank you Brad our next question comes from Matt Olney from Stephens. Please go ahead.
Thanks, Good morning wanted to start on the mortgage side.
On the gain on sale it looks like we dip in the quarter.
Any more commentary you can provide within this the pressure, we're seeing that steady trend throughout the quarter or any commentary on that margin in September or in recent weeks. It feels like we're heading towards the lower end of that full year range that you gave us that just want to make sure I'm thinking about this right.
Yes, I think Thats I think thats.
Appropriate I think we're we've what we've seen is.
It's been more resilient than we expected it would we thought it could be under more pressure and again as I as I make these comments think about it in terms of the gain on sale of loans sold to third parties, but the grey line on page 16.
As we as we see there are $3 59, I would I would tell you we expect that to continue to trend down as volumes decline in our view is.
The mortgage industry has built up a lot of machinery. If you will to process mortgages through what has been historic mortgage run what historically occurs as prices. The first give back when volumes start to slow and as we roll into the fourth quarter, which is a seasonally softer period and we expect it will be.
We expect to see.
Volumes volumes come in we would also expect to see price under some pressure again I think gain on sale was more resilient during the third quarter than we thought it might be.
But the $3 60 to $3 five again really really a target against that third party sales.
And we feel like we'll be trending a little lower in the fourth quarter, but.
But I do think it will be.
<unk> point.
More gradual are modest.
Decline.
Okay. That's helpful and then.
Switching over to structured finance I think the commentary mentioned there is some pressure there lower loan lock volumes tighter spreads.
It sounds like the business continues to slow versus a year ago any more commentary, we should be thinking about as far as from from these levels. Thanks.
Well I think that I've tried to put it in context that last year was as I said, an astonishing year to be in the mortgage business.
So I mean, we had just exceptional levels.
And this quarter structure.
The structure finance really bounced back.
To be.
A strong quarter.
By historical means.
So I think that's the case on on that and.
So we're constructive there and kind of having revenue to be.
At the level, we had this quarter and in the risk we see to the future of that is just going to be the risk of higher interest rates and affordability for first time homebuyers.
Okay. Thank you guys.
Yes.
Thank you Max.
Last question is from Whitney <unk> from K B W.
<unk>.
Hey, good morning, guys.
Good morning.
So I know in the past you've highlighted your hotel portfolio is the one segment that was sort of lagging the rest of the group from a recovery perspective any update on how that portfolio performed in the third quarter.
Morning, Woody I think.
The portfolio performed.
Certainly to if not better than our expectations as we look in our.
Deferred loan portfolio, we've got kind of one hotel one hotel group Thats still.
Under under an active deferral program.
And so we continue to continue to see progress there I think.
There's been a couple of things one there's been liquidity in the market.
Those operators pond, either new equity or are there other forms of debt that certainly helped the cause but we're also seeing improved improve utilization and usage trends.
I think as we've said in the past the properties that are performing the best or a little more destination slash consumer centric or at least have a mix of that in their business the pure business travel.
Have been a little more a little more pressured but again on the whole of the portfolio is.
For the year outperformed our expectations and continues to heal itself slowly, but surely and we continue to be focused on supporting our clients through.
Due to the last leg of the journey here.
Okay. That's that's helpful.
And then on deposits I mean, it was another strong quarter for deposit growth any reason to believe this growth wouldn't be sticky or was there anything seasonal behind the growth.
Nothing nothing I'd call out is seasonal as it relates to the growth I think the overall liquidity in the market remains.
At historic levels.
We continue to see positive deposit trends from our existing customers. Those that are of operating businesses are generating solid cash flows they are retaining those.
As Jeremy mentioned, we're also seeing customers, who are able to sell properties. There is liquidity in the market.
Two is our real estate customers take properties to market they are able to find.
Either additional funding or take out there. So we're seeing a lot of the offset to the pay downs as we're seeing our cash build here and so we expect that likely will moderate but but we expect deposits to remain remained elevated well into 'twenty two maybe in the early 'twenty three.
Got it and then last for me just more of a housekeeping issue, but how many PPP piece do you have remaining to recognize and do you expect most of these to come in the fourth quarter.
Well theyre going to we think theyre going to.
Drift out over the next.
Over the next couple of quarters, we think it'll it'll slow down we basically exhausted all of the first.
First round, we're now just into the into the second round is a couple of million dollars. So it starts to get in consequential here after the fourth quarter.
Got it thanks guys.
Thanks.
We currently have nathan's questions. So this concludes the call. Thank you for joining.
<unk> third quarter 2021 conference call and webcast you may now disconnect your lines.
Uh huh.
Okay.
Yes.
Yes.
Okay.
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