Q2 2023 Hilltop Holdings Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the Hilltop Holdings second quarter 2023 earnings conference call and webcast.
At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Friday July 25 2023.
I would now like to turn the conference over to Erik Yohe Executive Vice President with Hilltop Holdings. Please go ahead.
Thank you.
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 liquidity and sources of funding the impact and potential impacts of inflation.
<unk> stock repurchases and dividends and impacts of interest rate changes 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 and quarterly reports filed with the SEC.
Please note that the information presented is preliminary and based upon data available at this time.
Except 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 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 Nash holdings Dot com.
With that I'd like to now turn the presentation over to Jeremy Ford President and CEO .
Thank you Eric and good morning.
The second quarter Hilltop reported net income of $18 million or 28 cents per diluted share.
Return on average assets for the period was <unk>, 5% and return on average equity was three 5%.
Hilltops operating results reflect the challenging market conditions in our mortgage origination and making segments offset by profitability growth in our broker dealer segment.
We continue to prioritize the strength of our balance sheet by building on our robust capital and liquidity positions.
And we remain confident in our ability to continue serving our valued clients through various business and interest rate cycles, with our synergistic and durable business model.
During the quarter since capital bank generated $40 million of pre tax income of $13 $8 billion of assets, representing a return on average assets of <unk>, 9%.
Average loans at the bank increased by $172 million in the quarter or approximately 9% annualized as core bank commercial loans mortgage warehouse loans and retained mortgage balances increased.
Growth was strong this quarter as a result of the great work by our bankers over the past year.
But we now expect loan growth to slow given declining pipelines, we have realized over the last few months.
So our credit standards are largely unchanged the market is still competitive and clients, particularly in commercial real estate are pulling back as elevated rates diminish the economics in many projects.
Regarding deposits we.
We continue to take actions to ensure the bank maintains financial flexibility, while also being mindful of margin impact during.
During the quarter, we increased broker deposits at the bank by $390 million and continued to access $1 $5 billion of core deposits from hilltop Securities FDIC sweep program.
This is an increase of approximately $500 million from the amount that we have historically access from the program.
Given the heightened competition in the market for deposits, we were aggressive with deposit rate increases in the quarter to retrain and attract customers.
We believe our deposit rates are now competitive there's still expect our cost of deposits to moderately increase throughout the second half of 2023.
While our deposit base has stabilized as expected. These actions have led to net interest margin compression.
The bank's results were also impacted by a provision for credit losses of $14 $9 million.
This provision was driven by a combination of factors, including deterioration in the overall commercial real estate outlook.
Negative credit migration, particularly in the office portfolio and loan growth.
Although we had built up our allowance we are still yet to realize any notable charge offs.
Overall, our bank continues to operate at a high level and produced solid results. Despite NIM compression from deposit competition and elevated provisioning given expectations of credit normalization.
Our team of seasoned bankers and tenured leadership are working hard to ensure that the bank maintains the flexibility to sell land as strong credits and long standing relationships in the current market.
Moving to prime lending the.
The second quarter was another challenging period for the mortgage business.
The spring home buying season did not materialize on account of low housing inventory and high home prices, coupled with high mortgage rates, which are adversely impacting homebuyer affordability and confidence.
In addition to Sidelining many prospective homebuyers.
Rates further reinforced inventory constraints and low rate refinance volume due to the rate lock in effect caused by having so many current mortgages with a sub 4% mortgage rates.
Prime lending originated $2 $5 billion and volume decline of 36% from the same period prior year roughly in line with the overall industry volume projections of 32%.
Of this originated volume only 6% was refinance volume compared to 12% during the second quarter of last year.
This reduction in refinance volume can be attributed to the previously mentioned rate lock in effect that will continue to have a significant impact on volumes until rates decline.
We did we did see some relief and gain on sale margins during the period as reported gain on sale margins increase from Q1, 2023 by 15 basis points to two 201 basis points.
This is still lower than the same period prior year. It is an encouraging sign of some stabilization in the market.
Given the difficulty of projecting future market size due to inventory levels interest rates and prolonged industry excess capacity.
Prime lending continues to resize, the business and correspondingly reduced its expense base.
This includes actions such as non sales head count reductions.
Holiday season of unprofitable branches.
Termination of underperforming originators and renegotiation of leases and vendor contracts.
Additionally, we continue to recruit loan originators and take advantage of some opportunities in areas, where other firms have exited by recruiting experienced originators with strong relationships.
We also remain focused on improving efficiencies and lowering costs associated with the overall loan fulfillment process.
We believe that the arduous re sizing at recruiting and process improvement efforts by the prime lending team are going to be a substantial tailwind for us when the market does recover.
Hilltop Securities realized pre tax income of $19 million on net revenues of $113 million during the second quarter.
Pre tax profit and margins improved compared to last years second quarter due to a 13% increase in net revenues and a lower compensation ratio of 58% compared to 64% in Q2 2022.
The revenue improvement over the second quarter of 2022 was primarily related to the wealth management business, where money market and FDIC sweep accounts revenues benefited from the higher short term interest rates despite weaker transactional production.
After a difficult start last year Hilltop Securities has performed well over the last 12 months with nearly all business lines generating revenue growth.
I believe this demonstrates the resilience of its established business lines enhancements made to the firm and the quality of its people.
Moving to page four.
Hilltop maintains strong capital levels with a common equity tier one capital ratio of 17, 6%.
And our tangible book value per share increase from Q2 2022 by 37.
The $27 45.
In summary, hilltops profitability has been challenged the first half of the year from the macroeconomic environment and we do expect interest rates to remain elevated so we will continue to be conservative in our approach.
However, we also believe that our demonstrated focus on balance sheet strength and capital preservation will provide opportunities for long term growth.
With that I will now turn the presentation over to will to discuss the financials.
Thank you Jeremy I will start on page five.
As Jeremy discussed for the second quarter of 2023 Hilltop reported consolidated income attributable to common stockholders of $18 million equating to <unk> 28.
Per diluted share.
During the quarter year over year net interest income growth was offset by the ongoing headwinds in the mortgage business increase in cost of deposits and higher provision expenses.
Further address the change in allowance I'm turning to page six.
We will talk to allowance for credit losses increased during the quarter by $12 million to a $109 million.
Deterioration in the macroeconomic outlook, coupled with the impact of loan growth and selective portfolio changes resulted in an allowance build for the quarter.
Flowers for credit losses of $109 million yields an ACL to total loans egfr ratio of 131%.
As of June 32023.
As we've seen over time ACO can be volatile as it is impacted by economic assumptions.
As well as changes in the mix and makeup of the credit portfolio.
We continue to believe that the allowance for credit losses could be volatile in the future changes in the allowance will be driven by net loan growth in the portfolio.
Gration trends and changes to the macroeconomic outlook over time.
Given the current uncertainties regarding inflation interest rates, the future outlook for GDP growth and unemployment volatility could be heightened over the coming quarters.
I'm moving to page seven.
For the quarter, we wanted to provide a little more detail and more CRE portfolio the allowance distribution across some of our key loan segments.
As of June 30, the CRE portfolio totaled $3 3 billion, which we segregated the owner and non owner occupied or Investor real estate.
Internally, we view owner occupied real estate more like C&I lending is for the most part repayment is driven by the operating business that owns the real estate.
Non owner occupied real estate makes up 57% of the CRE book.
As noted in the upper right hand chart is diverse across diversified across multiple income producing property types.
The table on the lower left we provide a breakout of non owner occupied office and retail within the portfolio to highlight the differentiation in ACO coverage by loan segment type.
Our view today is that the office and retail markets across our footprint represent the highest exposure to both recession absorption and valuation risk in the portfolio.
As such you can see that those loan segments maintained larger ACL coverage ratios and other non owner occupied real estate products.
We're currently monitoring the entire portfolio closely and have not seen any systemic risk emerged as of the second quarter.
That said, we do expect that the ongoing cash flow challenges facing existing and new projects driven by higher interest rates and ongoing inflation and lead to further credit migration overtime.
Turning to page eight.
Net interest income in the second quarter equated to $118 million, including $3 3 million of purchase accounting accretion.
Versus the prior year second quarter net interest income increased by $6 million or 6%.
Primarily driven by higher yields on loans securities and cash balances.
These benefits were largely offset by higher rates on deposits and variable rate borrowings.
As we expected net interest margin declined versus the first quarter of 2023 by 25 basis points to 303 basis points.
Of note approximately 14 basis points of this change can be attributed to our outsized cash levels or by the average cash balance in the quarter was approximately $1 8 billion.
Our current outlook reflects a scenario whereby fed funds moves to between $5 25, and $5 75 by the end of the third quarter of 2023.
We remain stable for the balance of the year.
Further rate increases coupled with ongoing deposit competition could cause NII and NIM to decline further during the third and fourth quarters.
Turning to page now.
And the chart, we highlight the approximately $7 billion of available liquidity sources that hilltop maintained as of June 30.
While we considered the federal reserve discount window to be a source of liquidity, we do not plan to leverage that program under our internal liquidity modeling efforts and as such it is noted below our other collateralized borrowing sources.
Further comparable liquidity sources as of December 31.
Waiting to just over $7 million and remained relatively stable throughout the first half of the year.
As is shown in the chart at June 30th Hilltop maintained $1 4 billion of excess reserves at the Federal reserve.
Given the stabilization in the banking sector in the last weeks and months, we are revising our cash target lower to between 750 and $1 5 billion at the Federal Reserve.
We expect to maintain these levels throughout year end.
Additionally, in the bottom left chart, we provide some detail on the pace of deposit beta changes to date and noted our expectations for future changes in interest or interest bearing deposit rates under the view that the federal reserve continues to move short term rates higher.
Moving to page 10.
Second quarter average total deposits were approximately $1 3 billion, an increase by approximately 300 million or 3% versus the first quarter of 'twenty three.
On an ending balance basis.
<unk> increased by 67 million to $11 $2 billion from the prior quarter.
Of note approximately $370 million of customer deposits remain off balance sheet, and our wealth management business to place capital.
A large majority of these balance balances or in products that will mature by year end and we're working diligently to get the move back on balance sheet at competitive rates for our clients.
As a result of our ongoing pricing efforts interest bearing deposit costs rose to 284 basis points, an increase of 83 basis points from the prior quarter.
It is our expectation that interest bearing deposit costs will move higher for the balance of 2023, given our stated used on the path of potential rate increases from the federal reserve and the updates we've made to our pricing approach.
As it relates to deposit balances and costs, we remain focused on balancing our competitive position with our long term customer relationships. While we continue to focus on prudent managing net interest income over time. However.
However, the current environment remains challenging and as noted earlier, we expect that the intensity of competition for deposits will continue to pressure rates higher in the short and medium terms.
Now moving to page 11.
Total noninterest income for the second quarter of 2023 equated to $191 million.
Second quarter mortgage related income and fees decreased by $50 million versus the second quarter of 'twenty, two driven by the ongoing challenges in mortgage banking or by the combination of higher interest rates home price inflation.
Limited housing supply and ongoing overcapacity in terms of mortgage originators across the U S driven volumes and margins materially lower.
Further versus the prior year second quarter purchase mortgage volumes decreased by 1 billion or 31% and refinance volumes decreased by $316 million or 68%.
During the second quarter of 'twenty three gain on sale margins showed further signs of stabilization with gain on sale margin for loans sold to third parties, increasing 14 basis points to 207 basis points.
While gain on sale margins remain pressure, we were pleased to see a very modest rebound during the quarter.
We expected a full recovery in margins will occur slowly and likely will not be a straight line as industry capacity and other constraints remain.
Other income increased by $6 million, driven primarily by improved trading activity in our fixed income businesses at hilltop Securities.
Further while TBA lock volumes increased substantially from the second quarter of 'twenty two levels to $1 6 billion. During the second quarter of 'twenty three structured finance revenues remained stable as this quarter's results include a negative $8 $1 million Mark on the pipeline and the prior year results reflected a modest positive.
Mark in the period.
As we've noted in the past it's important to recognize that both fixed income services and structured finance businesses at hilltop securities can be volatile from period to period as they are impacted by interest rates overall market liquidity volatility and production trends.
Turning to page 12.
Noninterest expenses decreased from the same period in the prior year by $31 million to $267 million <unk>.
A decrease in the expenses versus the prior year second quarter was driven by decreases in variable compensation of approximately $23 million at prime lending and hilltop securities, which was linked to lower fee revenue generation in the quarter compared to the same period in the prior year.
Looking forward, we expect expenses of the variable compensation will remain relatively stable as the ongoing focused efforts related to streamlining our operations and improving productivity continue to support lower head count.
<unk> throughput across our franchise, helping to offset the ongoing inflationary pressures that persist in the market.
Turning to page 13.
Second quarter average HFF loan liquidity to $8 billion relatively stable with first quarter levels.
Period, ending basis Asia by loans grew versus the first quarter of 'twenty, three by $161 million driven by improving commercial loan growth.
Particularly in commercial real estate lending mortgage warehouse lending and the retention of one four family mortgages originated by prime lending.
We expect that loan growth will slow.
In the second half of the year is one to four family retention levels decline in commercial lending activity continues to contract.
Currently we are expecting full year average loan growth of zero to 2% during 'twenty three excluding mortgage warehouse lending and any retained mortgages from prime lending.
Turning to page 14.
For the first period in a number of quarters. We did see NPA has moved slightly higher to $42 million during the second quarter.
The change was driven largely by a single credit downgrade in the second quarter.
This credit has subsequently paid off early in July .
Overall credit quality has remained solid through the second quarter and while we do not see any prevailing trends that causes outside is concerned in our portfolio. We are watching the portfolio closely as higher interest rates potentially lower utilization rates in certain segments of commercial real estate and unexpected slowdown in economic activity could have a negative impact.
Our clients in our portfolio.
As is shown on the graph the bottom right of the page the allowance for credit loss coverage the bank and is the second quarter at 136%, including mortgage warehouse lending.
Turning to page 15.
As we move into the third quarter of 2003, there continues to be a lot of uncertainty in the market regarding interest rates inflation and the overall health of the economy. We're.
We're pleased with the work that our team has delivered to position our company for times like these.
Teammates across our franchise remained focused 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 and delivering long term shareholder value.
As noted in the table our current outlook for 2023 reflects our current assessment of the economy and the markets, where we participate further as the market changes and we adjust our business to respond we will provide updates to our outlook on future quarterly calls.
Operator that concludes our prepared comments, we'll turn the call back to you for the Q&A section of the call.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
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One moment please for the first question.
The first question comes from Thomas Wendler Stephens, Inc. Please go ahead.
Hey, good morning, everyone.
Good morning, good morning.
I just wanted to start off with the interest bearing the beta.
The expectations. So you said the marginal interest bearing deposit rate expectations are for 75% to a 100% beta on any additional federal funds increases is this would you expect the cumulative beta to get and then also that seems like a step down from what we saw in for a beta and <unk> can you maybe give us an idea of how you play.
On managing the tail end risk for interest bearing deposit costs.
Sure will.
During the second second quarter.
Coming off of the.
The bank failures in some of the some of the activity that occurred late in the first quarter we.
We made we saw a substantial increase in kind of overall demand for higher rates from our customers and it really awake in the market I think the higher rates as a result during the quarter.
Second quarter, we increased rates pretty substantially on our top tier.
Top tier products, we moved our Cds, we launched a CD special that was at a rate well.
In excess of 5% all really out of an abundance of caution to stabilize any any otherwise runoff that we might have otherwise been seeing in our deposit basin outside of us outside of tax tax activity. During the second quarter. We believe we were able to stabilize that so we did do we did take some pronounced.
I'd say larger than expected moves in the second quarter, just to again out of an abundance of caution and mitigate any potential run off.
On a go forward basis, we do think the market remains competitive we think we're in a competitive position from a rates perspective across our product and pricing suite.
And as a result, we would expect to pass through the vast majority of any of any future fed rate increases to our clients and that's where the 75% to 100% comes from but to your 0.2nd quarter was higher as we as we reset to what.
A changing marketplace after the after the bank failures.
That was great color. Thank you and then just kind of sticking with deposits looks like you added some broker deposits during the quarter can you give us an idea of the rate and term on those.
They are <unk>.
<unk>.
They range, but there are five <unk>.
Percent to 510 basis points and the term was.
90 days 180 days 90 to 180 day terms.
Alright, Thats all my questions. Thanks, guys.
Thanks.
Our next question comes from the line of Steven <unk> of Piper Sandler. Please go ahead.
Hey, good morning, everyone I appreciate it.
Well.
So I'm wondering the improved guide in the broker dealer if you could.
Give us some more color there on what Youre seeing and then in particular I would think you guys have some interesting visibility into broker dealer.
Balances for your customers just kind of curious if youre seeing stability, there and how you feel about.
The strength of those deposits import.
Will you want to start off and I'll. So yes.
What we're seeing from a from an outlook perspective from a revenue perspective, we're obviously seeing strengthen our sweep.
Sweep revenues as Jeremy has mentioned overtime and during the call today.
Higher rates have historically benefited the overall suite suite revenues, we do think that no different than the deposit discussion. We just had all over the prior question that we will be passing along the vast majority of any future rate increases to customers from a from a from an overall sweep deposit perspective.
But nonetheless, we are seeing we've seen an improvement there. We're also seeing strength as we've continued to invest in our business.
Around fixed incomes improving public finance services, we expect to have a stronger.
Second half as they historically do and structured finance notwithstanding the market I mentioned in my prepared comments is also having a better year than they've had here of recent so that's where we start to see the strength in kind of the fee income from deposit level perspective, we are.
We are seeing customers as we are in our core deposit base searching for higher yields. So we've got a suite of products from FDIC insured products to money market money market mutual funds.
It's the latter latter treasuries and the like so we've got a series of options those customers can pursue and.
And we are seeing customers based on their risk appetite.
Their appetite for term products.
Move into some of those higher yielding products so move.
Say excess cash out of their brokerage account into I'd say higher yielding more term oriented products in certain cases.
Just as we're seeing from a from a deposit base perspective, so similar activity.
From a deposit base at hilltop Securities as we're seeing in the core and the core bank franchise.
Okay extremely helpful. Thank you.
I guess as you think about the margin from here I mean, you noted do you think there could be more compression third quarter fourth quarter on both the margin.
And NII.
Can you give us a feel for what you think the magnitude of that might be maybe compared to what we saw this quarter and then with noninterest bearing deposits down to around 31% do you have any feel for where the floor of that could be or if you see stability there.
Yes so.
Our I'll answer those in reverse so from a noninterest bearing perspective.
While there are 31% correct, we generally think about it X X broker because again, we don't we don't fully anticipate to hold those brokers for long for long periods of time pass their maturity unless something changes in the marketplace. So we look at the more normal level here closer to 33% historically pre pandemic, we would have been 31% to 32% as of <unk>.
And I would be the total we expect we will.
We will revert to that we may we may sink a little lower in the short run, but it's our expectation we'll be in that 30% to 32% noninterest bearing over time.
As the market continues continues to settle out as it relates to net interest income and NIM.
I think if we see the way we were thinking about it if we see 25 basis points of an increase for example.
We would expect NIM potentially would decline somewhere between seven and 10 basis points on a quarterly basis for each incremental 25.
From a net interest income perspective.
The variability you're seeing here, we peaked in the third quarter like we would have expected we would had pretty stable in the fourth quarter.
We do expect NII will continue to decline just as.
Again that 75, if rates move higher.
And we have a 75 to 100 basis point deposit made obviously, our loan data won't be able to keep up with that from.
From an overall NII perspective, so we would expect to see NII again drift lower I wouldn't call. It a step function lower but I'd say drift lower through the through the back half of the year.
Great extremely helpful color and then just last thing from me I guess as you guys were already weighted to that Devon, Moody's scenarios I'm curious.
Was that just that theyre scenario.
Dynamics, there changed so significantly that that drove some of the.
Reserve increased or did you guys wait it differently or theres. Some qualitative factors, what's kind of the mechanics of that increase in the reserve and like you noted without the charge offs as of yet.
Yes, so our.
We don't we don't actually weight scenarios. So we use the seven on a pure spaces, we do a pretty.
I would say onerous evaluation of a series of economic scenarios and management goes through and select one that we believe best reflects where we think the market is and where we think it's going to go over and.
Over the coming quarters and years and we believe the 7% reflected that all in our view continues to be with.
With the federal reserve moving as fast and as far as it has the economy being a big ship and as it starts to turn and we are we are seeing some signs of.
Of a downshift it'll be difficult to avert.
A recession and so our view is that that recession scenario best reflects again, what our view of where the overall economy is going as we've noted since seasonal came out.
Allowance is going to be volatile there'll be principally volatile loan. This macroeconomic scenario will continue to evaluate it each quarter as we do.
But right now we feel like we're adequately and appropriately reserved for the environment.
We believe is forthcoming.
Got it so it sounds like most of those changes came just as Moody's worst in bed at seven scenario. Then is that is that fair to say.
Yes, I mean, if you look at our charge $7 $7 million of the build was specifically related to macroeconomic and that's that's that's pretty.
Direct drive quantitative quantitative assessments, so again over half of the build was driven by by that change.
Perfect. Thank you so much I appreciate the color guys.
Sure.
Our next question comes from the line of sight of K B W.
Please go ahead.
Hey, good morning, guys.
Good morning.
Just wanted to follow up on on the deposit cost commentary.
You noted your rates pretty aggressively.
During the quarter, just any color on windows races occurred.
Most of the rate increase has happened in the month of April and to some extent in May again, we were.
We went into a heavy evaluation period when when the bank failures started to occur macron started to occur.
And we also saw a corresponding.
Spike and request from our customers again, we bifurcate it.
There was some concern about safety and soundness in the banking sector, we really didn't see or feel a lot of that beyond maybe the first week after the.
After the bank failures, but we did see again, what I would call. It awakened customer focused on an overall higher yields. So we moved pretty aggressively in April and then again.
There towards the end of April and early May with another set of interest bearing product changes just to ensure again, we were well positioned against the market as it is it was moving pretty aggressively.
<unk> largely.
The cost of interest bearing deposits of 284 reflects I would say the vast.
The vast majority of those changes on a full on a full quarter average basis, but there'll be as I said in my comments some drift higher just because it wasn't it wasn't a perfect quarter.
Got it Thats helpful.
And then I wanted to switch.
Switchover.
The credit and the breakout of office.
I appreciate the breakout that you provided.
Any commentary you can provide on just the markets you're most exposed to within that invest your office portfolio.
Our our exposure is really across the footprint, but it's going to be in our larger or larger metro areas. So Dallas.
Boston.
Probably the largest two than Houston after that so I mean, it's it's the office portfolio, while not what I wouldn't say I would not characterize it as kind of downtown or urban if you will but I would call. It tangentially related to the larger metro areas, where we where we serve clients.
And does it mostly low rise building that fair to assume.
I'd say mid mid and low rise, but not we're not we're not out financing a lot of high rise buildings.
Got it.
And then last from me I, just wanted to touch on buyback.
Ed.
Been a minute since you've been aggressive on the buyback just any any thoughts on the outlook.
For here.
Yes. This is Jeremy I would say that.
It's just not really compelling right now at the macroeconomic environment.
And other alternative opportunities and really where our value sets.
Still higher than where we transacted on prior tenders, but.
It should dip <unk>.
Charlie then we certainly would consider it.
Got it alright, thanks, alright, thanks, guys.
Thank you.
Your next question comes from the line of Carl Doran of Raymond James and Associates. Please go ahead.
Hi, Good morning from just a quick and easy one on that.
Question on deposit this year you talked about.
Positive behaviors and client requesting higher rates as well as being more competitive on relative to peers.
Mike.
That's describe.
Perhaps that you're seeing in terms of the competitive environment in your markets for deposit pricing relative to QQ.
Are you seeing more or less.
Irrational behavior from competitors and how would you describe that.
I don't think we're seeing any more rational acreage I think I think the competitive landscape notwithstanding some other some additional shock has stabilized I mean, its aggressive customer are banks and others are looking for deposits.
I think customers have.
In there at least intellectually started to move toward a view that four and 5% as an earnings rate that.
<unk> are aspiring to achieve so but from a competitive perspective, we saw some we saw some things early.
Immediately after the bank the bank.
Turmoil occurred that seemed peculiar, but I'd say largely speaking, while where do we do with the weather certainly some competitors out there that have higher rates than we do I would say generally speaking, it's pretty rational and it's certainly stabilized here over last.
Three to six weeks.
Okay. Thank you for that.
Moving onto the broker dealer.
Business, we saw a pretty nice increase in our pre tax margin there.
Can you talk about that moving forward.
It sort of seasonality going on.
Well I think as will said earlier on the broker dealers, having a strong year and really has had a strong last 12 months.
And with the sweep deposits and the rate that we're getting there and the fact that thats a higher margin.
Kind of a bedrock to the results I would expect.
The second half of the year to be similar to the first, albeit I'd probably say the margin is at 16% pre tax margin is.
It would be on the high side.
Alright, thank you.
Yes.
One last one on.
The mortgage banking space took a pretty significant actions over the past few quarters, the rightsize costs at.
At Prime lending.
With the I guess would be updated outlook for lower origination.
We expect additional measures or do you think most of the initiatives.
<unk> been completed.
I would say as we evaluate that business obviously.
We're not pleased that we're not pleased with the loss that currently is being kind.
Kind of managed through so it's our view, we're going to continue to look.
In every in every corner to look for opportunities to streamline that business and rightsize. It for the market. However, as we've said previously we're committed to the mortgage business. We're also.
Absolutely focused on making sure we're doing things that position the franchise for long term success. So while it is important to us to continue to focus on.
Working towards profitability.
At a minimum breakeven results, we're going to continue to take steps to do things we think are prudent.
To improve productivity with a focus on helping position the franchise for long term success. When this market does turn.
Right and chemo that is all for me. Thank you very much.
Thank you. Thank you.
And ladies and gentlemen, there are no further questions at this time and this concludes our conference call for today.
We thank you for participating participating and we ask you that you disconnect your lines.
[music].
Okay.
Hum.
Yeah.
Hum.
Hum.
Yeah.
Yeah.