Q2 2022 Hilltop Holdings Inc Earnings Call
[music].
Good morning, and welcome to today's Hilltop Holdings second quarter 2022, and its conference call. My name is Cathy and I will be your moderator for today's call all.
All lines have been placed on mute during the presentation portion of the coal.
With an opportunity for a question and answer thank.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
I would now like to pass the conference Typo.
Oh hi.
Alright.
Vice President you May now begin.
Presentation.
Great. Thank you Candice.
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, the impact and potential impacts of COVID-19, or disruptions in the global or national.
Supply chain.
Doc repurchases and dividends and impacts of interest rate changes as well as such other items referenced in the preface there 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 and quarterly reports filed with the SEC.
Please note that the information presented his 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 intangible 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 Com.
With that I will now turn the presentation over to President and CEO Jeremy Ford.
Thank you Eric and good morning for.
For the second quarter Hilltop reported net income of $33 million or <unk> 45 per diluted share.
Results include nonrecurring after tax expenses of $3 $5 million related to the tender offer executed in may.
Consolidated return on average assets for the period was <unk>, 8% and return on average equity was five 8%.
Same capital Bank continues to prudently grow while maintaining solid profitability generating $51 million of pre tax income with a return on average assets of 1.09%.
And an efficiency ratio of 50%.
We are encouraged by the growth in the bank loan portfolio.
Average loans were up $146 million in the quarter or 8% annualized from both core commercial loans and retained mortgage balances.
Our bankers have steadily built the pipeline of in progress and approved loans each quarter and their prospect list is at an elevated level.
The bank's loan growth remained centered in commercial real estate across all of our markets with outside strength in Dallas Fort worth and Austin.
We also expect additional growth in Houston, given several recent hires in that market.
Importantly, we remain committed to our underwriting standards and credit approval process.
This is reflected in our prudent loan growth and strong credit quality trends.
This past quarter criticized loans declined to two 5% of total bank loans, which is a decrease from two 8% in Q1 2022 and four 8% in Q2 2021.
Additionally, nonperforming loans declined by $9 million or 19% from Q1, 2022, and $33 million or 48% from Q2 2021.
Total average deposits decreased by $435 million or 3% quarter over quarter. The reduction in deposit balances was driven by clients moving funds into higher yielding opportunities and reactions of the sharp rise in rates as well as us utilizing internal hilltop holdings deposits for the repurchase.
A shares.
Compared to prior year average deposits are still higher by $350 million or 3% largely due to growth from existing customers. The bank's loan to deposit ratio remains very conservative at 63%, which provides ample liquidity for our company and will is going to speak about later in the presentation.
Moving to prime lending.
After almost two years of historically low mortgage rates mortgage rates have increased by approximately 250 basis points since last December .
With just over half of that increase occurring in the second quarter.
As a result mortgage refinance volume has fallen off at a rapid pace. Additionally record low home inventory and affordability challenges, resulting from rising home prices and higher interest rates have negatively impacted the purchase mortgage market.
As expected these trends have had an adverse impact on both loan origination volume and gain on sale margins.
Prime lending origination volume has declined by 35% from prior year with refinancing volume declining from 32% to 12% of total volume.
Prime lending gain on sale of loans sold to third parties declined by 116 basis points from prior year and 61 basis points from prior quarter.
Partially offsetting these negative trends were decreases in variable compensation and lower fixed expenses.
Prime lending management team has been vigilant in this environment and taken actions to adapt by reducing back office and support head count by 20% and reducing other expenses, such as business development and professional fees and occupancy costs.
During the quarter Hilltop Securities generated $9 1 million of pre tax income on net revenue of $100 million for a pretax margin of 9%.
This was an improved quarter for the business with structured finance fixed income services and wealth management, all performing better than prior year.
While TBA lock volumes declined 62% from prior year structured finance revenues improve from favorable pipeline valuation on lower market volatility.
Fixed income services revenues increased 2% compared to Q2 2021 as trading activity from municipals and better performance in mortgage products more than offset lower sales related revenues.
Wealth management revenues improved 3% compared to Q2 2021 as revenues from sweep balances increase due to fed funds rate increases.
Hilltop Securities continues to focus on growing its retail production and adding quality advisors and expects sweep revenues to continue to grow with further rate hikes.
While we feel positive about the momentum of hilltop Securities. We do believe the trading environment remains volatile and therefore expect to maintain lower levels of trading inventory until the market improves.
Moving to page four.
During the quarter hilltop returned $455 million of capital to shareholders through a tender offer in dividends.
The Q2 2022 tender offer was a significant action for us and repurchasing approximately 19% of the company.
Over the past 18 months, we have repurchased approximately 29% of outstanding shares for an average price of 1.09 times tangible book value.
Even with these actions, we remain very well capitalized and have more excess capital than when we entered the COVID-19 pandemic.
Tangible book value per share increased by 1% from Q2, 2021% to $27 eight.
As both the tender offer and a decrease in OCI had negative impact there were offset by retained earnings.
In summary.
The first half of the year has been challenging for our trading and mortgage centric businesses.
So the strength of our bank and diversity of our business lines has been key to delivering strong profitability and demonstrates the durability of our franchise.
We do anticipate further interest rate increases in the near term ongoing market volatility and inflationary pressures that we will have varying impacts to our businesses.
I am confident in our ability to navigate this changing economic environment and emerge a stronger company.
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 second quarter of 2020 to hilltop reported consolidated income attributable to common stockholders of $33 million. According to <unk> 45 cents per diluted share.
I'm turning to page six.
During the second quarter, we continue to experience improvements across the loan portfolio as Npls declined and charge offs remained low the.
The improvements in the portfolio positively impacted the allowance for credit losses by $2 $5 million.
More than offset by deterioration in the U S economic outlook since the last quarter is provided in the Moody's juice seven scenario.
Cumulative changes to the economic outlook resulted in a build in the ACO of $17 million in the quarter.
As of June 30, the allowance for credit losses was $95 million, yielding an ACL to total loans egfr coverage ratio of one 2%.
Additionally, excluding mortgage warehouse broker dealer and PPP loans, the ACL to total bank loans <unk> ratio equates to 133%.
Of note, we continue to believe that allowance for credit losses could be volatile and the changes in the allowance will be driven by net loan growth in the portfolio, but in migration trends and changes to the macroeconomic outlook over time.
<unk>.
Certain industry provided economic forecast are beginning to reflect an increased likelihood of economic recession in future periods. Some starting as early as fourth quarter of 2022.
We will continue to monitor the current environment as well as a broad set of economic forecast during the third quarter to determine what impacts any updated outlook may have on the allowance for credit losses in future periods.
Turning to page seven.
Net interest income in the second quarter equated to $112 million, including $1 $3 million of PPP fees and interest $3 million of purchase accounting accretion.
Net interest margin expanded by 39 basis points versus the first quarter of 'twenty two to 275 basis points, driven primarily by declines in excess cash levels and higher yields on both loans held for investment and loans held for sale.
We continue to rigorously manage interest bearing deposit costs in the face of increasing competition and customer expectations for higher rates.
During the second quarter, new commercial loan originations, including credit renewals at an average book yield of 440%.
Which moved higher by 55 basis points versus the first quarter levels. In addition, we retained $104 million of residential mortgages during the quarter, yielding an average interest rate of 435%.
Moving to page eight.
In the chart in the upper lift we highlight the asset sensitivity of hilltop, assuming parallel and instantaneous rate shocks, which represents an asset sensitive position of approximately 8% in the up 100 basis points scenario.
As we evaluate asset sensitivity and interest rate risk, we assess a number of potential scenarios.
If we shift the analysis from an instantaneous parallel shift with gradual increase over the course of the next 12 months.
100 basis point asset sensitivity falls to 4%.
Impacting future asset sensitivity will be our loans currently at or below their floor levels.
As of June 30, <unk> had approximately $960 million of loans.
It remained as their contractual floor levels.
Of these loans $366 million will reset above their floor levels over the next 12 months.
In the graph on the bottom right of the page, we highlight our deposit pricing approach to the last meaningful rising rate cycle.
Throughout that cycle, we maintained an approximate 50% yield data on interest bearing deposits.
As such our current modeling outlook continues to reflect the hilltops through the cycle deposit beta will be approximately 50% once the cycle concludes.
Lastly for 2022, we expect that the impact of PPP related fees and interest which were approximately $22 million in 2021.
In purchased loan accretion, which was approximately $19 million could decline by a combined 25% to $30 million versus the 2021 levels.
I'm moving to page nine.
Total noninterest income for the second quarter of 2022 liquidity $239 million.
Second quarter mortgage related income and fees decreased by $102 million versus the second quarter of 2021, driven by the ever evolving environment in the mortgage banking, which has moved quickly to being purchase focused.
Versus the prior year quarter purchase mortgage volumes decreased by $677 million or 17% and refinance volumes declined much more substantially increasing by $1 4 billion or 75%.
During the second quarter reported gain on sale margins declined sharply to 253 basis points down to 111 basis points versus same period in the prior year.
Margins were negatively impacted by pricing reductions across the markets as well as customer preference to pay more in origination fees for <unk> versus paying the prevailing interest rate in the market.
We expect full year average margins to remain under substantial pressure during 2022 as mortgage volumes normalized from the historically high levels seen over the last two years and the competition for that lower volume growth higher margins.
Early we expected full year average gain on sale margins for loans sold to third parties will average between 250 and 290 basis points.
General market conditions.
The change in other income principally reflects the impact of improved results in structured finance, which benefited from lower market volatility during the second quarter.
It remains important to recognize that those fixed income services structure.
Structured finance businesses can be volatile from period to period.
They are impacted by interest rates overall market liquidity volatility and production trends.
Turning to page 10.
While interest expenses decrease from the same period in the prior year by $45 million to $299 million.
The decline in expenses versus the prior year was driven by decreases in variable compensation of approximately $38 million.
Driven by Prime lending, which was linked to substantially lower fee revenue generation in the quarter compared to the prior year period.
Additionally, non compensation variable expenses, particularly mortgage production related expenses declined as volume decline versus the prior year.
Included in our second quarter expenses as Jeremy mentioned earlier Hgh incurred $4 4 million of transaction related expenses related to the closing of the tender transaction we.
We do not expect any further costs related to this transaction in subsequent quarters.
Looking forward this lag.
Last half of 2022, we expect that inflation will continue to impact compensation occupancy and software expenses, resulting in elevated fixed cost within the businesses compared to prior periods.
To help mitigate some of these headwinds we remain focused on continuous improvement leveraging the investments we've made over the last few years to aggressively manage increased productivity across our front middle and back offices.
While these inflationary pressures do exist, we are continuing to further streamline our businesses and accelerate the adoption of our digital capabilities to support client acquisition and overall business productivity.
Turning to page 11.
Average AFI loans equated to $7 8 billion in the second quarter, increasing by approximately $285 million.
From the prior year levels.
In the second quarter commercial lending in particular commercial real estate solid close production and our forward pipelines remained robust.
While commercial loan growth rates.
Have improved over last few quarters.
We expect that the full year commercial loan growth during 2022 will be in the two 2% to 5% range as competition remains very intense for newly funded loans.
Further given our current liquidity position, we expect to continue to retain one to four mortgages originated at prime lending at a pace of between 25 and $75 million per month throughout 2020, twos mortgage marketplace has shifted towards adjustable rate products.
Which we prefer holding versus longer duration fixed rate mortgages that made up the preponderance of the loans retained in prior periods.
Turning to page 12.
Overall credit quality remains solid and the graph in the upper right. We show the ongoing progress made in reducing NPA as overall credit quality continues to improve across the portfolio.
As is shown in the graph on the bottom right of the page the allowance for credit loss coverage at the bank into the second quarter of 'twenty, two at one point to 7%, including both the mortgage warehouse lending as well as PPP loans.
Moving to page 13.
Second quarter average total deposits were approximately $12 3 billion.
<unk> decreased by approximately $388 million or 3% versus the first quarter of 'twenty two.
Given the pace of change of interest rates interest bearing deposit yields have begun to move higher increasing by seven basis points versus the first quarter of 'twenty two.
Given the expectation of additional rate changes from the Federal reserve, we do expect to see deposit costs continue to rise.
2022.
While deposit levels remain elevated it should be noted that we remained focused on growing our client base and deepening wallet share for our treasury products and services.
<unk> have been successful and we expect they will continue to accelerate into the second half of 2022.
Moving to page 14.
The challenges during the first half of 'twenty. Two we are updating our 2022 outlook to reflect current market conditions.
Spectation for future performance and actions will be taken to support profitable growth over the coming quarters.
It should be noted that we expect ongoing volatility in the capital markets and the overall economy and that this volatility could materially impact our results and change our expectations in the future.
As such we will provide updated outlook where appropriate during our 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.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you'd like to remove your question. Please press star followed by case.
I would now call Ted will compile the Q&A roster.
Last question comes from the line of Brady.
Good evening all.
Your line is now open please.
Please go ahead.
Hey, Thanks, good morning, guys.
Good morning.
I wanted to start just with mortgage originations it was great to see that.
Linked quarter basis stay pretty stable, if not up a smidge.
But that $3 8 billion.
What is the monthly progression was that fairly consistent.
So the second quarter.
Any color on how thats trended in July .
Radius.
I think it was it was reasonably consistent through the through the period of the quarter.
We didn't have a.
A significantly high months are significantly low month.
And we were continuing to see I would say depressed depressed levels almost on a seasonal basis.
To reflect what we've defined here as a pretty challenging mortgage market that is almost expressly purchase in the current environment.
And then was there any sort of MSR write off or MSR benefit, but hilltop realized in the second quarter.
In the quarter.
We always evaluate.
The overall value of our MSR and during the period, we had net MSR valuation adjustments of approximately $9 million.
Okay Alright.
Alright, so a $9 million.
Write up of the MSR and <unk>.
Alright, and then finally on maybe just buybacks you guys obviously.
We're very active.
The tender offer in the second quarter.
How do we think about buybacks going forward given the move we don't have it should we think about.
No buybacks going forward or do you think will still be there.
Active where it makes sense.
As I said, we've exhausted our authorization with that tender offer.
So we don't have any authorization. That's currently outstanding and we'll obviously stay in tune to that if we want to.
Improve another authorization.
Okay, Alright, and then just lastly for me is there any additional opportunity to cut.
Mortgage expenses to help that.
Increase the profitability of that.
Segment, just given kind of the headwinds there.
Yes, I think I think from a mortgage perspective, obviously, we're we're adjusting quickly to a challenging environment. The team has worked as Jeremy mentioned in his comments diligently over the first six months of the year to right size the business and allow allow us to maintain profitability through the first half.
Team continues to focus on a series of items driving toward our productivity target targets.
As well as our staffing targets two to ensure we continue to drive toward profitability, but again the second half we do expect to be challenging in that regard.
And I think a lot of the cost there is this going to be variable to the volume.
And then on the fixed cost side as well said that they've really been vigilant about.
Really managing the franchise and not cutting to the bone, but having really managing it to the volume and at the end of the day, we want to be.
We want to emerge from this a leader in the business. So we're out there recruiting and.
And still trying to make investments in the business that we will exit this cycle in a better place.
Okay.
Alright, great. Thanks for the color guys.
Thank you.
Thank you.
Our next question comes from the line of Mike Weiss with Raymond James Your line is now open. Please go ahead Sir.
Hey, good morning, guys. Thanks for taking my questions.
Hey, well the other income was up fairly substantially I know that bounces around from.
From quarter to quarter, but can you just remind us what what's in there and then maybe.
What comprised the large sequential increase and then maybe if you can.
Except that you can.
Whats the outlook for the next couple of quarters, just based on whats in there. Thanks.
So thanks for the question I think other income as we've tried to note.
The preponderance of that revenue is generated in our structured finance business as well as our fixed income services businesses Hilltop securities.
It is volatile.
We have seen as we've noted pipeline marks in the past that were negative pipeline works that are positive kind of period over period. We continue that youll continue to see that just in nature nature of the business, but also mark to markets in our trading trading books as well so.
It will be a volatile the improvement was as Jeremy noted in his comments.
Lower volatility in the quarter.
On a more stable rate environment as well.
Improved demand.
For some of our products really drove the improvement linked quarter.
But on a go forward basis that will be volatile as it relates to overall market volatility.
And rates.
In particular as well as well as overall demand in the structured finance business, obviously, we're showing here.
The production level of has fallen pretty materially again thats our focus.
That business is mortgage the mortgage centric business. So we do expect again volatility to continue and that's why we kind of highlight that in all of our comments.
Okay helpful. And then maybe just back to the to the mortgage outlook you reduced the outlook for originations for.
For the year totally makes.
But you are off to a pretty good starts and implies a decent decline in the back half of the year.
If I just take what the MBA forecast is kind of spitting out currently for this year, but down 41%.
Why what.
What would cause you to be anywhere close to that the upper end of that limit around $16 billion, because if I just plug in the mba's forecast it would imply something closer to two.
The $13 $13 five thanks.
Yes, I think I think we try to provide a range the market has been volatile.
Sure.
We're not.
Articulating that we've got a concrete view of where the market goes from here, but we are starting a range of what we think could be kind of plausible plausible outcomes and again.
We have historically, if you take our guidance you'd kind of take a take the midpoint, that's a reasonable spot.
To evaluate from from our perspective.
Alright Fair point and then.
Maybe just one more for me.
Just housekeeping.
It looks like PAA last year was.
Around <unk>.
Around $19 million, you've guided it down 50 to I think 80% now so it looks like it will be de Minimis from here can you just remind us how much.
PAA has left can be recognized.
We've got just over just over $12 million to $15 million.
You said 15.
So the <unk>.
Okay.
Run down on a quarterly basis.
Got it alright, thanks for taking my questions.
Thank you.
Thank you.
Our next question comes from the line of Brad Millsaps of Piper Sandler. Your line is now open. Please go ahead.
Hey, good morning.
Good morning.
Maybe well I wanted to start with expenses I think your guidance is now down four.
Either a 1% decline of 3% growth in fixed cost by math is right. It looks like year to date your fixed costs are down about <unk>.
4%.
It may not be comparing apples to apples, but close.
Yeah.
That would imply to hit your guidance, a pretty big step up in fixed rate expenses in the back half can you just maybe flush that out a little bit more it just seems like it would just be a really big expense build to kind of get anywhere near near the guidance.
Yes, I think what we're seeing is ongoing inflation in our compensation related cost and in particular our.
Retail associates operations associates, and the like and so we're monitoring and managing that well.
We are continuing to see it and expect to continue to see it throughout we also have step ups that we model through from a technology perspective and our.
And our overall technology operating cost and then and then we also have step ups in our occupancy expense. So again, we've modeled it through again, we're doing a lot of work every day and the team is doing a lot of work every day to try to evaluate opportunities to.
Moderate cost as well as align our cost base to the revenue trends as we sit here today, but again I think we think our guidance reflects our current bottoms up build up for our expense outlook.
Okay, Great and then you guys are still sitting on a fair amount of cash can you just kind of talk through.
Youre thinking around deployment, whether that's additional bonds, obviously, you've given guidance about loan growth, but just kind of curious how youre thinking about the liquidity on the balance sheet.
Yes, so we continue to maintain.
And above average cash cash level, what I noted in my comments was.
We are intending to repurchase our purchase $25 million to $75 million of mortgage loans on a monthly basis from prime lending we do.
<unk> that the securities portfolio.
Portfolio will continue to modestly grow as we have in a very kind of moderate pace through the end of the year and then we also.
As we've guided here, we do expect deposits.
Good could continue to kind of moderate and run down over time as some of those some of those deposits seek other investment alternatives. So from as we as we look out we've got commercial loan growth, which is our primary consumer we've got the ancillary retention of one to four mortgages that we continue to evaluate on.
On a monthly and quarterly basis.
Consume consume liquidity in a targeted way and we're also growing our investment portfolio again.
Very.
Awful and modest way, but consistent with what <unk> seen over the last 12 to 12 to 18 months.
Okay, and then maybe just final one for me kind of kind of bigger picture you guys have unique insight into the purchase mortgage market given given your presence there across the country.
I think most of us use the NBA forecast or some form thereof to kind of forecast for you guys. It actually is showing an increase in purchase activity in 2023, I know you guys don't won't give guidance for stand but just.
Just kind of curious based on what youre seeing across the country.
Talks with your lenders.
Would you agree or disagree with that kind of given where rates are to just.
Kind of curious given kind of the unique insight you guys have cut.
The purchase market across the U S.
I think if you look at our <unk>.
Leadership in Prime I think that they'd be cautious about that.
They feel like there is a kind of a resetting in the housing market that home prices have appreciated some 20% and you're starting to see some indications of cooling whether it stays on market our sellers reducing their prices.
So I don't know what that means for exactly for the trajectory, but we think that thats a six to 12 month period of kind of resetting.
The housing market and shifting from being really a seller's market.
More of a buyer's market.
Great. Thank you guys.
Thanks Keith.
Our next question comes from the line of Matt Olney of Stephens. Your line is now open. Please go ahead.
Hey.
Good morning, I'll stick with the mortgage discussion here.
It looked like prime was profitable and <unk>, even with the pressure on the margins.
But looking at that guidance.
We are calling for lower volume and lower gain on sale margins from here.
I put that in the model it looks like the mortgage segment may not be profitable in <unk> I, just want make sure I'm interpreting the guidance.
Accurately with that.
A couple of things to note so.
Prime lending we did we did have pretax pre tax profit in the period as we reported here of it as noted earlier on the call here we had.
Just over $9 million of MSR adjust favorable adjustments in the period. So that gives you a sense.
<unk>.
Of the balance of the origination.
Of the origination segment.
The other thing I would note here is we are again the team continues to work toward managing expenses.
Driving productivity and evaluating the business as the market continues to evolve and we're we're working through that process. We would not expect there to be a significant profit at prime lending, but the team is diligently focused on being profitable.
In the second half of the year, but again the headwinds are significant and the challenges our prism, yes, and I'll just add to that is no. They are fighting hard to.
To remain profitable and I think that they are probably just some seasonal strength in the third quarter to fourth quarter for the mortgage business is usually breakeven.
Nevertheless, so that's just something to keep in mind.
Okay got it thank you for that.
And then also want to just flush out the deposit guidance a little confused I think you talk about the average deposits should decline this year between three and 7% using the average balances.
It looks like the deposit balances are still relatively flat. The first six months of the year. So it implies that the deposit balances could fall pretty hard that the back half of the year just to make sure I'm interpreting that right.
While our.
The way, we the way we're looking at it.
Currently as the overall the overall deposits.
Are down about $1 $1 billion on an ending basis, a little over $1 billion on any basis from <unk>.
431% to 630 again as Jeremy mentioned in his note $442 million of that is attributable to the tender we have also seen.
Some public finance flows as well as we have returned some broker deposits that we otherwise had so about half of that.
Is explainable and the other half is more more customer deposits, which puts us from a from a decline perspective.
In that 4% to 5% range, which is exactly kind of where we're guiding we expect that's likely to continue principally because.
Our liquidity position, our overall relationship base, but we're not going to chase some of the.
Outsize I'd say deposit yields are being offered in the marketplace by some of our competitive set we're going to be prudent.
And we're going to continue to do the things, we think to position us for long term success in that regard, but we do recognize that some of our some of our competitors are offering higher rates and again, we're going to be really diligent about not chasing that to the best of our ability.
And as I mentioned in our loan to deposit ratio right now it's below $60. So I don't really need to.
Mm Hmm okay.
I appreciate that and then just lastly.
I think you mentioned sweep revenue you made some comments on that I didn't get the details but sweep revenues have improved. Thank you recognized more in the second quarter are we now at normal levels or are we going to see more of the benefits in the third quarter.
We are not at normal levels, yet this will let me jump in.
Greg lean, but we're starting to see that we didn't really see the impact in the first quarter. We saw the impact here of about $5 5 million and we should trend up.
As the fed continues to raise to that three three and a quarter at year end.
At about a $10 million a quarter level of sweep revenue.
And that the revenue correct.
Alright.
I'm, sorry, I was just going to ask about that $10 million per quarter versus the $5 happened <unk> am I interpreting that right yes.
<unk> and up from little under $2 million in Q1.
Got it okay and just the way to think about these revenues as theyre going to track very similar to the kind of deposit costs.
Except in the owner universe basis, so as rates go higher will pass through a portion of that to the client and we will retain a portion of that and that's what drives these fees higher so a lot of what Jeremy.
Jeremy provided there is contingent on the fed moving again at 300 to 325 basis point range, which he said I just want to make sure. We're clear. It's it is dependent on rates continuing to move higher.
Got it.
Okay guys. Thank you.
Thank you.
Thank you ladies and gentlemen that concludes today's hilltop today's conference call. Thank you for your participation you may now disconnect your lines.
Okay.
Okay.
Sure.
[music].