- Earnings call transcript Q3 2022

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Operator

Hello and welcome to today’s Hilltop Holdings Third Quarter 2022 Earnings Conference Call. My name is Alex, and I will be coordinating the call today. [Operator Instructions] I will now hand over to your host, Erik Yohe from Hilltop Holdings. Erik, please go ahead.

Erik Yohe

Thank you, operator.

outlook, please not certain including statements such impact items the of impacts as preface started, are presentation during statements get our referenced plans, and in potential and as well forward-looking inflation, items are future rate presentation that of the of our we note interest allowance statements and that changes, today's concerning repurchases statements. financial as Before condition, dividends strategy, for business historical losses, credit stock impacts such other of fact, These statements management's and current subject future concerning uncertainties. their expectations risks by nature, are based to on events that, are

the Our actual our those quarterly disclaim included a that available extent materially to is variety with differ note information. results, expressly of recent reports we in at Please to result factors, as of filed time. our new a presentation may and data required and Except most this precautionary capital, SEC. information to the annual update earlier in any based law, and condition including and upon these referenced due statements financial presented from statements the obligation the liquidity, by statements preliminary

value will including that, Jeremy of GAAP presentation is With to President on non-GAAP this the certain to presentation, tangible CEO, A appendix be ir.hilltop-holdings.com. this found common and may turn our Ford. at I these which measure posted share. measures, presentation includes and equity book measures Additionally, to nearest website per reconciliation tangible now the over in the

Jeremy Ford

Erik morning. Thank you, and good

average generated point in quarter, PlainsCapital $XX $X.XX by quarter XXXX. loans XX Return annualized This equity rate income interest average return per a in reported grew was basis was X%. on X.X%. primarily Hilltop of net average In share. assets an that margin increase the quarter, QX bank an by X.X% of on period income million third excellent the or million Bank. and $XX for For for pretax from driven was the Bank diluted The

and in positive retainment believe and growth As economy mortgage remains to loans invest more mortgages originated this the commercial in sentiment offset they our warehouse is paydowns in strong business. with PrimeLending than of overall our decline as quarter, our expected the and are core commercial -- In new talking bankers our finance elevated projects. continuing

such, across almost products in As above levels markets. elevated geographic remain our pipelines pre-COVID and all

new requirements projects, However, are elevated are on often see the family clients of and in and construction we single see costs rates impact leading pullback to residential. in area deals. new elevated the where particular, is equity among relative beginning higher rates and to are we In inflation to starting

and clients As and slows. look demand are a markets and appropriately competition have structure homebuilder in there high-level as lot major as move Texas still yields inventory is result, pressure. under Overall, takedowns to slowed quickly

by Although quality maintain putting standards high deposits credit X% average and asset decreased ensure Total on quality forward opportunities. or are strong, we remained lenders best our foot will their $XXX continue quarter-over-quarter. our million to

only X% rise by sensitive rate which as and correspondent to have XXXX. our be runoff linked-quarter QX declined to clients seen accounts, have In the reacted market Our rates. stickier more money operating non-interest elevated deposits, bearing remained to we accounts, sharp some tend compared and in

on which are presentation. in XX% Will pricing our We has funding our the later strong us allowed on core realize expansion. margin co the track and is expected through remain and to address be position disciplined going to strong this Overall, to to runoff excess continuing beta, cycle

bank, remained have XX%. loan at to support the core to and funding deposits end this held become liquidity sweep which we differentiator environment scarce. utilize We continued where a ability as favorable potentially and approximately Importantly, growth. HilltopSecurities third investment from liquidity more of provide is we quarter, believe to core funding our believe ratio the the for Also, liquidity bank's loans to ample would the funding in deposit at further

Moving PrimeLending. to

interest interest Rising operations. mortgage they challenges current mortgage our have at continue bank, net for margin While conjunction and rising adversely declining impacted have the the accreted to inventory negatively rates rates with affordability been mortgage in volumes. housing impact

As mortgage XXXX. origination XX% from a result, volumes QX by declined

by third sale parties gain loan points. While down to on sold XX% to has basis XXX declined

the for last Mortgage mortgage For the third has of towards year. only to originations pure to up decline a The over current quarter period same approximately are industry expected perspective, market XX% Bankers shifted market. volumes the made volumes dramatically XX% the X% compared in Association. purchase QX Refinance per in

aligning our need of purchase-oriented, immediate organization. on homebuyers to volume purchase mortgage model the two to more put in lower shrinking underway is billion future. the towards production competitors office headcount and $XX operations consecutive of pressure the and for the originating volume foreseeable of a continue business towards reset lower While mortgages, better generate Expense After initiatives has business will support years to pool volumes. started the back include market

reduced to ensure months, we aligning production are headcount XX%, closely business and targets with monitor past by in we staff to we have the the appropriate Over XX levels. will continue

the That team their so organization we that at time and growing side. other in ability years. overall fixed business us feel and Additionally, the about come it this we and rates a cycle for XXXX. has mortgage as we professional we volumes through This sustained leadership PrimeLending lower real more challenging out the industry is stronger mortgage and record come good estate, the assessing in costs business profitable is suddenly higher and have services, development, on prepare said, other following navigate a all to and multiple

income products year secure advisors up. to overall despite revenues by $XX.X equity shifted by declined of continues markets. management in sweep last improvement profit compared revenues. expectation of offset income. management despite fixed year, generated $XXX High The and trading deposits sized we largely a income net and year's a the wealth X% XX% improved income within to up prior services million mix in continue margin a prior from to pretax quarter the decline wealth due the both of HilltopSecurities continue revenues increased public decline margin in fees quarter, activity lower were as for pretax pretax rates, the rate environment third strong move improved from and contribution picked over struggle million prior increases, fed of trading on to During fixed rising the compared finance year finance Pretax business. to with add slightly structure the within Though as Revenues versus but in this fixed XX%. to

trading remains feel made the stabilize. the volatile our HilltopSecurities lines expect we momentum to we about levels of believe quarter environment across are positive lower the in While do business, the and in position that maintain and trading they inventory market of until

four. page to Moving

quarter, origination At is of now, through our as as have of shareholders in dividends. a pressure decline capital share evaluate to to part time, new process and mortgage returned business report, a Hilltop the planning our million the and in do Despite earnings to we at Board $XX year-end. our this not plan this of to book business During and the purchase drove challenging summary, the authorization securities with sales quarter. diverse the years we but delivering portfolio increase per value available two it every purchases modestly over In our third share our our value remain significant profitability for from share market, focused growth has past quarter. rates, model is this and of in tangible from consolidated rising supported on a annual profitable

been through who experience have strong business in cycles each leaders have We times. tough and

to market can are in We to and the support continued we dynamics with our clients with work every how understand partner them. employees and evolving and and best

over strengths Bank business on HilltopSecurities weather I PrimeLending and As rate to higher PlainsCapital realigns to a we we plan the mortgage of through financials. this anticipate will With now to Will XXXX, its discuss the environment turn to cycle. while that, rely presentation the

William Furr

Jeremy. diluted five. equating you, on Jeremy of million reported to I'll common Thank Hilltop XXXX per the stockholders quarter discussed $X.XX $XX third to for start income attributed share. of consolidated page

Moving to six. page

levels remain quarter, second to stable During at credit low XXXX. the as solid of non-performing quality the remains loans compared third quarter

quarter, resulted offset the Moody's migration improvement in $X.X modest the which the in risk of quarter, ACL for reflected book. modestly The the coupled as the in rating outlook reduction scenario. across by the to improved growth was largely outlook a During in U.S. the in with million economic the economy SX portfolio

As of of ACL coverage allowance XXth, an million, for the September credit was yielding losses HFI to loans X.XX%. $XX total ratio

to PPP Additionally, warehouse, total bank equates dealer broker excluding ratio ACL HFI loans to the loans X.XX%. mortgage and

be likelihood credit we be current the volatile the losses in remain the state macroeconomic will portfolio, the economic for and the outlook are industry allowance time. in of changes the we in to forecast credit portfolio, an constructive periods. While by of growth could credit that on reflecting future driven believe allowance our continue and loan trends economic Further, migration to changes increased recession certain provided over net

We will during future as outlook updated losses to broad have economic to the as periods. fourth the continue allowance environment for forecasts a if monitor the any current what of credit set may determine impacts well quarter on in

manage income margin points expanded cash rigorously increasing bearing to loans by basis bearing rates, $X million, driven from PPP Further, costs cost second HFS. Turning quarter excess yield of primarily the interest Net interest face including of and in we XXXX basis Net of increase accounting rose $XXX an points, basis to XXX the and interest deposit related expectations million page XX in continue of seven. the to competition approximately by to points quarter and prior HFI and a quarter. basis third interest to customer XX of the for equated higher income quarter loans while purchase versus to deposits accretion. points XX higher

the will from current through that deposit XX% XX% beta XX% believe increasing the to level. to continue We cycle average

new higher XXX quarter, X.XX%, the including average originations, versus of commercial second levels. which yield quarter renewals an moved points third the basis book During at credit loan by

yielding retained rate and the chart assets left, which asset instantaneous represent we average I'm the an residential of turning quarter, X% the rate $XXX In eight. basis an assuming the the mortgages we approximately page X.XX%. interest in of addition, XXX shocks, Hilltop, of million scenario. position highlight point sensitive in to upper sensitivity of In during parallel up

below a next asset asset from interest potential if gradual the to impacting XX of course evaluate currently assess at Of sensitivity asset we or instantaneous we we the our a increase point One parallel X%. months, risk, number be sensitivity loans F levels. and will rate XXX scenarios. approximately the over falls of analysis to sensitivity floor As shift shift the factor an their future basis note,

levels. their above floor As reset had million levels contractual Hilltop of remained floor the of Of million XX their these September at will over $XXX months. $XXX approximately loans XXth, next loans,

are levels floor billion of the to $X.X scheduled loans currently addition, above rate In rate days. XX reset variable over their coming

for combined $XX which which XXXX, to of levels. versus expect related million we impact and PPP was in XXXX fees and $XX million loan XXXX decline the by approximately Lastly, interest, $XX approximately were to the million $XX million accretion, purchase

of Moving million. to the for equated page nine. non-interest $XXX third XXXX Total income to quarter

by decreasing of and focused. XX%. quarter, Versus the and decline X.X versus ever income refinance moved quickly related evolving billion decreased in or to has by which volumes mortgage driven third quarter prior fees banking, year Third or XX% mortgage the XXXX, decreased $XXX mortgage billion purchase X.X purchase substantially quarter more by volumes million environment being

the XXXX, the as sale negatively the in buydowns down in to customer prior XXX price across declined were same reductions of well more the as interest preference origination sharply quarter third through paying market. prevailing in points by versus the versus the markets, basis to fees pay points impacted gain rate Margins year. rate on basis XXX period margins During reported

September, basis basis be sold contingent XXX margins margins for that drives points parties sale remain volume averaged by we year-end, years, to and high substantial conditions. from volumes competition year We gain expect between Through third tighter points, for full as market historically the level to average scene the full XXXX and last margins. on during on year XXX the expect average the XXX over and to mortgage pressure under loans normalized has two the lower

maintain sales result to third no quarter during hedged quarter. we execute MSR and quarter realized XXXX. MSRs the both fully in as resulted sales net mark our of significant a valuation the of third asset, we Further, a of against activity These approximately in losses had position continue in Additionally, the $XXX,XXX.

note. the the HilltopSecurities finance quarter, During of from at business benefited structured items two

during states increased sponsored volume to of those lock that in related clients assistance through the additional First, the reside provided down subsidization funds. the quarter payment additional that allocation government

income mark $XX.X the gains finance valuation $X unrealized mortgage certain the period million are equated business benefited recognize of for million liquidity, in structured important be both hedges XXth. and can interest finance to services fixed the September book. reflected structured remains Secondly, the Further, positive businesses Realized as the overall from the to hedge from market quarter. that to production by they trends. as It rates, period outperform volatility business a volatile and third impacted

Turning the prior driven by versus from million to lower expenses in quarter to to period decline in decrease linked the page fee prior by substantially decreases Non-interest The in year to same compared year $XXX the largely compensation generation approximately of the expenses period. XX. $XX million, was by the was revenue year in variable driven $XX PrimeLending, prior which million.

mortgage particularly production expenses, Additionally, declined declined related variable the non-compensation as volumes versus year. prior expenses,

in Mortgage in million which the in segment. was incurred our principally $X.X recorded Lastly, Hilltop quarter, severance

continue into to the ongoing reflect in the business our to investing are mortgage of continue cycle we portion of that work once continuing quarter forward -- focus we market the future the on begins XXXX, currently growth ease. this will present, to while the Looking business of repositioning dynamics fourth for

steps the is quarters. on work of few levels over continue reduce over proving beneficial cost as and to originating mentioned, the coming we the we've taken that Jeremy focus productivity last As loans to target our years, definitive

headwinds, resulting business to and While facing elevated these periods. we costs of compared support to will overall To we we core client this made offices. these do our the our Further, productivity. expenses while accelerate continuous help and remain years businesses the improvement, occupancy, pressures is mortgage software continuing our investments streamline prior inflationary the within that digital we in XXXX. will franchise, leveraging continue fixed aggressively remain increased expect of are productivity we further acquisition expect the it focused in on to compensation, middle, few as exist, some we've and the business and to the to do mitigate committed across businesses continue over manage the inflation adoption front, impact And to last our that back headwinds capabilities business to

equated HFI increasing approximately billion quarter, the prior Moving $XXX to in the million Average XX. page by from to third $X.X levels. loans

particular in pipelines was as the During estate forward production real robust. our third closed quarter, lending, commercial commercial both remain and solid

versus made has continued loans full shifted products, and that will retained loans towards few periods. loans year loan While quarters, the Further, to hybrid remainder retained million we adjustable at commercial range we to mortgages X% that these loan the and month in excluding mortgages pace during as we the growth very million prefer HFI PrimeLending position, one $XX the rate XXXX over X% duration be rate move up loans preponderance expect holding of marketplace has remains the originated warehouse Mortgage growth, for our lower continue last improved fixed the $XX average lending. XXXX. newly year. a funded intense the mortgage expect competition mortgage the in to to for current and and PPP family four Outstanding to given liquidity prior of balances of throughout between longer have per retain

to right, page XX. ongoing graph showed upper across the Turning stable progress quality we in the remained credit reducing the in NPAs In portfolio. as made overall the

exposure periods, to XX The systemic do but below expectations. third the at time. related, currently total prior not During this points the not basis portfolio rate were any at across quarter, loss and nor versus net the the period loans emerging run normalized in we was expect charge-offs elevated annualized well charge-offs remained

of the credit quarter the second the the X.XX%. for allowance quarter graph or third loss at the As XXXX of bottom into at on page, is bank into the coverage right on shown

XX. to Turning page

average and XXXX. deposits quarter $XX.X X% of were Third total million billion $XXX decreased versus or approximately the have by quarter approximately third

we As with the other to are deposit in have clients has laddered periods. in expected lower was and are seeing bank PlainsCapital. a throughout been HilltopSecurities deposits requiring would provided earlier line projects, equity and flows in treasury offered to putting internally certain movement and into that than private achieve rates, trend movement Overall, we and bond reflect outlook, expectations past higher year, Further, client deposits capital their case. now the within work funds more while our are in that or are the which of

in outflows monitor in to continue We a competitive, market the and yield leading our anticipate and perspective. remain pricing adjusting future to but the not from deposit

do into of expectation Federal earlier, in XXXX to the from noted expect Reserve, rate see costs additional deposit given and As we continuing rise the XXXX. to changes later

base through focused and accelerate it XXXX. growing These successful remain levels will be services. we client in and products efforts remain they noted on that the that share and treasury deposit been continue in deepening elevated, While expect our should to wallet have our we XXXX,

to Moving XX. page

are performance to be ongoing economy, will profitable materially taking future. impact overall reflect volatility market in our over this markets the We and we noted expect the It conditions, outlook updating we future volatility our quarters. to results the that should XXXX that growth current and be coming our capital could in expectations the support expectations for change and and actions

provide appropriate our section where calls. quarterly of we you As back Q&A our call. to concludes such, prepared the Operator, we'll the for comments turn the will call that updated during and Question-and-Answer outlook Session

Operator

for your line question from Sandler. first is today Milsaps of Piper Our Instructions] open. [Operator now you. Thank comes Brad Brad,

Brad Milsaps

morning. Good

Jeremy Ford

Morning.

William Furr

Morning.

Brad Milsaps

for all color questions. appreciate thanks and taking my I the

it -- of still plan you existing about kind thinking bit Just you a portfolio. the kind to to of versus some of talk there to curious, about little maybe it Just how bond liquidity, beta Will, take And talked can get that to about? competitive manage you're is guys You of the will going do kind on how want appreciate have the finally, you balance how elsewhere. deposit it sheet, then, that beta forward? deposit you kind how cycle quickly through think XX%

William Furr

a fit, perspective, cash basis, from the kind as drift So, It cash an with growth are grow -- we've portfolio investment excess but said, it's to balance to it's we'll levels. take expect, where current portfolio we on going From we're of certainly on those higher in parts. slow outsize drifts a the so, not yields be -- looking higher. investment sheet likely to

of originate the retain million we're remainder $XX to for I do going to continue this year half would arm to and product As a million deposits the a able Again, at we balancing And perspective, primes from on to and deposit evaluate of it's to level likely in mentioned first -- call, that line with expected. the -- into certainly adjustable We next certainly flows. balance been the $XX hybrid right in -- think year. the terms we're mortgages expectations what that then, our we'll of we're today. the from looking otherwise

do that within when get XX% actually the there As relates to rate. of we be the a we terminal your of to would to its Fed it couple expect question after beta, reaches quarters

perspective we leveling to toward fine that need moves we'll us a amount the generally settles be generally And rates the it we leg that is the see that'll clients as in and stops, some Fed think normally a through deposit XX% to in reasonable beta. way that expect competitive increases to is is see market occur. gravity the to and we last the there's from takes occurs pass So, And come through. what after this those then what Fed

as definitive Fed hundred when that occurs. percent date when So, not it's ball. not the Understanding, to a hits clear a

Brad Milsaps

follow-up Then for Great. for color. maybe that Great. me. a Thanks question

those those quarter, heard go I if predict can even this about you -- of million broker/dealer, basically XX.X you the a marks kind and correctly. helps broke on broken the I at -- either I think if take There maybe hard But are would've do Just out, which I broker/dealer. of way. on to even obviously basis that guys you pretax were

of guidance of think lean the guys there, change you Jeremy, kind broker/dealer my think as math but if expect also to Without you those I of it well into -- kind correct, you headwinds the bank commented level? you out get your that about the didn't could as hump to you that of are of breakeven you marks, that talk mortgage improve there. can where with kind kind you over

Jeremy Ford

to want you marks do the to talk Will, first?

William Furr

Yeah.

the I the terms Let's let And -- the trading but spot favorable. mean, activity and you're -- don't together in normal the of to throughout to whole larger I had been think that can out. XX.X have we some that's marks, it terms simply and called $Xmillion had -- which so the than adding because think have historically it in you million We've is obviously, versus in disclose the it me we've of you I on been first, XX.X. a to them out we've back back marks, been book. I don't whole year wanted thing. XX.X, amount closer they negative some quarter kind historically, $X of

can you the all on that's that existed think we volatility the don't out. back way I again, of and existing unrealized it is And September there why So, out. call again, mentioned million XXth. I that's at that $X book volatility The that

I to of it all was is that of expect initial XX.X in necessarily So, wouldn't gains, but out pull quarter. outsized the -- trading third out of it kind

Jeremy Ford

Yeah.

an have I million run just right -- kind profitability of $XX outlook of there. perspective million that have quarter. a of to so first guess, the pretax now we from this HilltopSecurities, And case $XX And rate deposits that on that's then, a sweep

improve, that particularly that's should in seasonally income's So for good the level will been public I fourth at when finance improve. that, business market I a stabilize time, that the backdrop. Fixed think some rate low then, quarter. think the And

have through So that'll mortgage market. going business what struggle counterbalance structured the finance is this to to

Brad Milsaps

marks. on clarity queue. the Thank step We'll I'll Thanks. back those the Thanks guys. you. in -- I appreciate

Jeremy Ford

Thank you.

Operator

you. Thank

comes of is now Inc. Our line Stephens, open. next Thomas from question your Wendler Thomas,

Thomas Wendler

for everyone. morning Thanks Good taking questions. my Hey.

you XQ there? kind XX% far material linked in that's What given Mortgage -- you your guidance caution points to the midpoint are volume so of of segment, the a deceleration what it of at quarter. looks looking do seeing Just like XXXX --

William Furr

the really mean, third deceleration certainly I all about seen originated I year, further the in we quarter. $X billion. think we've

You QX a of There's down on substantially see that handful step the fourth from and quarter. going QX. pretty things

have continued if Reality, that's that. move now mortgage XX-year high has above that's and a moved Xs, days. starting pressure higher, rates a handful the to XX-year on does to Fed The put X% then become more Xs, to consistent. there First, going move, rates of low for additional

continue the And also to put seasonal rates. moving upward on year-end into Thanksgiving, Then Christmas window and that's so pressure pressure, holidays, of going to the mortgage you're the like.

And so that's just materially during pull pretty generally a back normally second one of expect seasonally we week the period. would half And see volumes to December.

combination market the depressed. origination be a continue it against period also it's dynamics So, move -- seasonal of obviously cause to then would the to and mortgage

Thomas Wendler

you. what move around All back pretax are expectations margin as for do XX% like right. you broker/dealer, XXXX a to looks What there in a the Thank then, forward? pretax we in your over moving had -- in you XQ XQ. And margin

Jeremy Ford

just wealth see able business would versus still the to for there. third sweep up. we're quarter, should public the good be guidance And that ratio a say in I going to provides there. the really pick the quarter, fourth for quarter, the the give strength business not I'm and fourth comp we seasonally hoping finance that deposits,

structured trading there. and cautious be what activity finance However, we're about will our

Thomas Wendler

questions, my all Thanks great. All right. That's answering for guys.

Jeremy Ford

you. Thank

William Furr

Thank you.

Operator

you. Thank

Our of your Carl, line next from Doirin is Carl Raymond now question James. open. comes

Carl Doirin

you question. taking Thank for Thank my Hi. for Michael morning. Good you. in Rose. Calling

Jeremy Ford

Sure.

Carl Doirin

slide And with have, should year, XX% the profitability you you could efficiency that'd down the some rate declining ago. on if also mentioned environment from further XXX, the Starting and originations there and levers about year? thinking ratio was believe you headcount so additional may a also the that, into that PrimeLending, dig I deeper to at How maybe expectation you mentioned helpful. a next be the for we given also, next going bit and with a year be

William Furr

-- we we're outlook or comments, net working think market January diligently we be in position will pretax QX give said results. moved not expect as going to that But try our breakeven us or to I again, as we'll in So, in a and drive remain give We'll is to we about think, I call. XXXX to quickly, We're from think day The to where a working an the very here. every prepared drive And diligently. challenging. outlook closer perspective, we teams profitable But dynamic. move position. and has our loss

And guidance that to QX give be it lead -- environment. we're noted we comments, us in current expect position. would a our But perspective, that in will will net so going again, our today. to not from believe a prepared as on challenging as sit XXXX remain on the loss And we financial we here

Jeremy Ford

I what position initiatives cost think on to can is we the do year to we're year to say And everything to ourselves trying it. next this trying we're weather through

Carl Doirin

Okay. Well, thank you for that.

deposits have deposit business seasonality? some any capacity, couple next the decline perhaps shift to you of to in I due expectation related also usual maybe that over do Now to loan ratio. than a have for understand moving on in continued low the to deposits. larger I the a be the you expected cost may mix, guess, quarters mortgage with Do low

William Furr

perspective, -- product and They of got $X.X we've think billion not higher. a up of very -- slide, doing $X.X well at relationship made were non-interest it we've of move billion we that's QX very moved to end and But years. think management From services continue to bearing could No, around on our the from some They've do out performance see mortgage as treasury rates of as that. our with end year. few stable and as We bearing reflects deposits. kind here feel the That day, the non-interest we've They a down. the the it could we QX. of said, the is and if at are good the seasonality sales we what to migration bankers over are the about efforts that ongoing our necessarily and say, that of related expect perspective, I been our last business. deposit very work nothing pleased would last

we've I expected. seen from pace bearing deposit but them deposit outflows, again, an we've we perspective, at the interest think seen

think abundance just our $XXX quarter-to-quarter deposits those of of window. second HilltopSecurities, from then deposit the $XXX by chart, About and kind decline, things. to letting Those an two a because is broker of note. can the put million. of I on couple One, COVID we of sending runoff, that QX-to-QX And to drop items in the thing caution about were you were sweep see million during there to back. $XXX to out continued allow driven million we've our runoff from

another So that million. approximate $XXX was

So, our from seek we're expected they if yields. customers about flows, you seeing deposit think overall higher as outflows

And customer have And seen there sheet. continued as the otherwise liquidity a to expected. deposit of in flows wouldn't so have the perspective I'd kind the that managed some, manage nothing we've we say, from portfolio what position we lost balance overall then on

Carl Doirin

Well, Thank questions. you All all my sharing right. for you. me. It'll thank for be

Jeremy Ford

you. Thank

Operator

you. Thank

comes Woody line open. your Lay question next of from Our KBW. Woody, is now

Woody Lay

Hey, good guys. morning

Jeremy Ford

morning. Good

Woody Lay

asset from range from give, sensitivity fair quarter. for to and NII a So, expectations wide assume that the increase here given it's NII guidance based on the Do you you to for it margin here? continues should just expand implies fourth the pretty the think NII

William Furr

interest sit in the income. think here, we I mean, quarter $XXX third net of we million worth as I

on Some run I in end expect from and up continues of move we stable based here to the would -- this we wideness start Fed doing. higher, that the would to some -- than expand improve Fed out it the continue if -- But will rate is continue if is, the there we'd perspective. to expect, from does level what we'll to they're

think drivers. I are So, real the those

basis XXX points. Our to a of funds Fed of current XXX outlook rate assumes

I move higher, the is a expect to if driver. think to and XXXX. continue peaking will, right So, NII we we But to -- likely they early Fed the that's do big in XXXX, continues market we which into expect see grow would

Woody Lay

couple yield looking a And what item you earning It's that just it. up at on the other line color -- about interest can it's average asset million. line, give XX%. is the Got if representing? is I'm showing Any

Jeremy Ford

I thinks number. it’s pretty a small

William Furr

Yeah.

you. and back to Let get me that -- we'll circle

Woody Lay

I the me, could up. the opportunities XXXX XXXX? position like the mean, for set right. All is company outpace I you the do sounds of pipeline cast mean, growth continuing just lastly it is And think well to then grow, in

Jeremy Ford

mean, strength our I good Texas, is, think pipeline. good think, in there I more I like cautious. we're and strength on I said,

also we've interest our that we are tell are do rates through I pivotal risen. is you in we're of rates where lower have costs think pull period tried a because what to competition. rising, And think

development to it'll to see clients interesting perspective. do what from So, want be a our

Woody Lay

me. guys. it. all All you Got That's Thank right. for

Jeremy Ford

you. Thank

Operator

you. Thank

Brad, from Our is now your open. next follow-up line of Brad question Sandler. is Piper a Milsaps question

Brad Milsaps

or out I Hey, follow-up. anything way one MSR, go just Q I any out in business. might thanks next the find are in the you kind other will for marks -- that swung this the taking but the mark of curious you know way quarter? help that the come mortgage Was other or there just if that soon, may thought

William Furr

kind time they just Not of point -- are to of end mean, I of where evaluation. marks difficult in kind are period given predict

difficult. it's So,

expect in third comments, the we fully gains MSR, expect wouldn't we got in meaningful noted or though we've under so any hedged, During normal losses circumstances that don't quarter regard. as our

at again, hedging different coupons adjusted. curve the are that expect are valuations those when of some of kind would move execution and every losses -- there. how marks perspective, about warrants and be the rates or could how yield modest from And performance in yield quarter continued are by structured on and that talked we impacted from We shifts those market and have finance, will sales bulk evaluated depending again, gains a kind we continue the to the as the execute so of are end to codetermined

Brad Milsaps

the is has percentage of a higher, of business, take much higher run much is it's much of lower? Historically, levels. it in kind kind comp quarter. there room this pretty that production ratio But X.XX% at -- Is that of much variable Will, floor point? terms in think mortgage production And around floor, pretty it at to obviously of a this out was your hit I

William Furr

folks will rate so lower fall volumes only in rate card lower -- drift as positions of kind as It kind the cards, decline. of as

just non-profitability. that based a volume -- reminder, compensation So on is variable those

it's move at lower, would be So, that volumes stable modesty rate level. reasonably going could necessarily as current but to we the expect decline,

Brad Milsaps

Okay. of you, guys. Q&A Great. End Thank

Operator

you. Thank

today. for questions further no have We

So for today's Thank you that concludes conference call. joining.

You may now disconnect.

Hilltop (HTH) 21 Oct 222022 Q3 Earnings call transcript