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spk00: Good morning and welcome to today's Hilltop Holdings second quarter 2022 earnings conference call. My name is Candice and I will be your moderator for today's call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. If you would like to ask a question, please press start followed by one on your telephone keypad. I would now like to pass the conference over to our host, Eric Yerry, Executive Vice President. You may now begin your presentation.
spk01: 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 chains, stock repurchases and dividends, and impacts of interest rate changes, as well as such other items referenced in the preface or 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 risk 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 may be found in the appendix to this presentation, which is posted on our website at ir.hilltop-holdings.com. With that, I will now turn the presentation over to President and CEO, Jeremy Ford. Thank you, Eric, and good morning.
spk02: For the second quarter, Hilltop reported net income of $33 million, or 45 cents per diluted share. Results include non-recurring after-tax expenses of $3.5 million related to the tender offer executed in May. Consolidated return on average assets for the period was 0.8%, and return on average equity was 5.8%. Plains 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 where 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 remains 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 2.5% of total bank loans, which is a decrease from 2.8% in Q1 2022 and 4.8% in Q2 2021. Additionally, non-performing 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 in reaction to the sharp raise in rates, as well as us utilizing internal Hilltop Holdings deposits for the repurchase of 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's management team has been vigilant in this environment and taken actions to adapt by reducing back office and support headcount 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 pre-tax 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 improved 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 and 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 $27.08, as both the tender offer and a decrease in AOCI had negative impacts that 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 demonstrate the durability of our franchise. We do anticipate further interest rate increases in the near term, ongoing market volatility, and inflationary pressures that 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.
spk03: Thank you, Jeremy. I'll start on page five. As Jeremy discussed, for the second quarter of 2022, Hilltop reported consolidated income attributable to common stockholders, $33 million, equating to 45 cents for diluted share. I'm turning to page six. During the second quarter, we continued to experience improvements across the loan portfolio as NPLs declined and charge-offs remained low. The improvements in the portfolio positively impacted the allowance for credit losses by $10.5 million, but were more than offset by deterioration in the U.S. economic outlook since the last quarter as provided in the Moody's June S-7 scenario. Cumulative changes to the economic outlook resulted in a build in the ACL of $17 million in the quarter. As of June 30th, the allowance for credit losses was $95 million, yielding an ACL to total loans HFI coverage ratio of 1.2%. Additionally, excluding mortgage warehouse, broker-dealer, and PPP loans, the ACL to total bank loans HFI ratio equates to 1.33%. Of note, we continue to believe that allowance for credit losses could be volatile and that changes in the allowance will be driven by net loan growth in the portfolio, credit migration trends, and changes to the macroeconomic outlook over time. Further, certain industry-provided economic forecasts 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 forecasts 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. That 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. That interest margin expanded by 39 basis points versus the first quarter of 22 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, had an average book yield of 4.48%, 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 4.35%. Moving to page 8. In the chart in the upper left, 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 point scenario. As we evaluate asset sensitivity and interest rate risk, we assess a number of potential scenarios. Of note, if we shift the analysis from an instantaneous parallel shift to a gradual increase over the course of the next 12 months, the up 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 30th, Hilltop had approximately $960 million of loans that remained at 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 maintain an approximate 50% yield data on interest-bearing deposits. As such, our current modeling and outlook continues to reflect that Hilltop's through-the-cycle deposit data will be approximately 50% once this cycle concludes. Lastly, for 2022, we expect that the impact of PPP-related fees and interest, which were approximately $22 million in 2021, and purchase loan accretions, which was approximately $19 million, could decline by a combined $25 to $30 million versus the 2021 levels. I'm moving to page 9. Total non-interest income for the second quarter of 2022 equated to $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, decreasing by $1.4 billion, or 75%. During the second quarter, reported gain on sale margins declined sharply to 253 basis points, down 111 basis points versus the 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 through rate buy downs 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 level seen over the last two years, and the competition for that lower volume drives higher margins. Currently, we expect that full year average gain on sale margins for loans sold to third parties will average between 250 and 290 basis points contingent on 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 both fixed income services and structured finance businesses can be volatile from period to period, as they are impacted by interest rates, overall market liquidity, volatility, and production trends. Turning to page 10, non-interest expenses decreased 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, largely 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 volumes declined versus the prior year. Including 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 do not expect any further costs related to those transactions in subsequent quarters. Looking forward into this last half of 2022, we expect that inflation will continue to impact compensation, occupancy, and software expenses, resulting in elevated fixed costs 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. Starting at page 11. Average HFI loans equated to $7.8 billion in the second quarter, increasing by approximately $285 million from the prior year levels. During the second quarter, commercial lending, in particular commercial real estate, was solid as both closed production and our forward pipelines remained robust. While commercial loan growth rates have improved over the last few quarters, that we expect that the full year commercial loan growth during 2022 will be in the two 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 2022. Mortgage marketplace has shifted towards adjustable rate products which we prefer holding versus the 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. In the graph in the upper right, we show the ongoing progress made in reducing NPAs as overall credit quality continues to improve across the portfolio. As is shown in the graph in the bottom right of the page, the allowance for credit loss coverage at the bank into the second quarter of 22 at 1.27%, 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 and have decreased by approximately $388 million, or 3%, versus the first quarter of 22. 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 22. Given the expectation of additional rate changes from the Federal Reserve, we do expect to see deposit costs continue to rise in 2022. While deposit levels remain elevated, it should be noted that we remain focused on growing our client base and deepening wallet share for our Treasury products and services. These efforts have been successful, and we expect they will continue to accelerate into the second half of 2022. Moving to page 14. Given the challenges during the first half of 22, we are updating our 2022 outlook to reflect current market conditions, expectations for future performance, and actions we'll be taking 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.
spk00: Thank you. If you would like to ask a question, please press Start followed by 1 on your telephone keypad. If for any reason you'd like to remove your question, please press Start followed by 2. I will now pause here while I compile the Q&A roster. Our last question comes from the line of Brady Gailey of KBW. Your line is now open. Please go ahead.
spk04: Hey, thanks. Good morning, guys. Good morning. I wanted to start just with mortgage origination. It was great to see that, you know, on a length quarter basis stay pretty stable, if not up a smidge. But that $3.8 billion... What was the monthly progression? Was that fairly consistent over the months of the second quarter and any color on how that's trended in July?
spk03: Great as well. I think it was reasonably consistent through the period of the quarter. We didn't have a significantly high month or a significantly low month. And we're continuing to see, I'd say, depressed levels on a seasonal basis to reflect what we've defined here as a pretty challenging mortgage market that is almost expressly purchased in the current environment.
spk04: Was there any sort of MSR write-up or MSR benefit that Hilltop realized in the second quarter?
spk03: In the quarter, we always evaluate the overall value of our MSR, and during the period, we had MSR valuation adjustments of approximately $9 million.
spk04: Okay. All right, so a $9 million write-up of the MSR in 2Q, right? All right. And then finally on me, just buybacks. You guys obviously were very active with the tender offer in the second quarter. But how do you think about buybacks going forward? Given the move that you all had at 2-2, should we think about kind of no buybacks going forward, or do you think we'll still be active where it makes sense?
spk02: You know, as we 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 approve another authorization.
spk04: And then just lastly for me, is there any additional opportunity to cut mortgage expenses to help increase the profitability of that segment, just giving kind of the headwinds there.
spk03: I think from a mortgage perspective, obviously 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 us to maintain profitability through the first half. The team continues to focus on a series of items driving toward our productivity targets. as well as our staffing targets to ensure we continue to drive toward profitability. But again, the second half, we do expect to be challenging in that regard.
spk02: Yeah, and I think, you know, a lot of the cost there is just going to be variable to the volume. And then on the fixed cost side, as Will said, that they've really been vigilant about really managing the franchise, not cutting to the bone, but really managing it to the volume. And at the end of the day, we want to emerge from this a leader in the business. So we're out there recruiting and still trying to make investments in the business that will exit this cycle in a better place.
spk04: Okay. All right, great. Thanks for the call, guys. Thank you.
spk00: Thank you. Our next question comes from the line of Michael Rose of Raymond James. Your line is now open. Please go ahead.
spk05: Hey, good morning, guys. Thanks for taking my questions. Hey, well, the other income was up fairly substantially. I know that bounces around from quarter to quarter, but can you just remind us what's in there and then maybe what comprised the large sequential increase and then maybe If you can, to the extent that you can, you know, what's the outlook for the next couple quarters just based on what's in there? Thanks.
spk03: So, thanks for the question. I think other income, as we've tried to note, is, you know, the preponderance of that revenue is generated in our structured finance business as well as our fixed income services businesses, Hilltop Securities. And, you know, it is volatile. We have seen, as we've noted, pipeline marks in the past that were negative, pipeline marks that are positive, kind of period over period. You'll continue to see that. It's just the nature of the business, but also market markets in our trading books as well. So it will be volatile. The improvement was, as Jeremy noted in his comments, lower volatility in the quarter and a more stable rate environment as well as kind of improved demand for some of our products really drove the improvement link order. But on a go-forward basis, that will be volatile as it relates to overall markets, volatility, and rates in particular, as well as overall demand in the structured finance business. Obviously, we're showing here the production level has fallen pretty materially. Again, that's a focus of that business is mortgage. It's a 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.
spk05: Okay, helpful. And then maybe just back to the mortgage outlook, you know, you reduce the outlook for originations for the year totally makes sense, but you're off to a pretty good start. So it implies a decent decline in the back half of the year. Um, if I just take what the MBA forecast is, is kind of spitting out currently for, for this year, about down 41%. You know, what, why, 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 MBAs forecast, it would apply something closer to the 13, 13 and a half. Thanks.
spk03: I think we've got to provide a range. The market's been volatile. We're not articulating that we've got a concrete view of where the market goes from here, but we are asserting a range of what we think to be kind of plausible outcomes. And, again, you know, as we have historically, if you take our guidance and you kind of take the midpoint, that's a reasonable spot to evaluate from our perspective.
spk05: All right, fair point. And then maybe just one more for me, just housekeeping. It looks like PAA last year was around 19 million. You've got it down 50 to, I think, 80% now. So it looks like it'll beat the minimus from here. Please remind us how much PAA is left to be recognized. Thanks.
spk03: We've got just over $12 to $15 million. You said $15? $12 to $15. Okay.
spk05: It will continue to run down on a quarterly basis. Got it. All right. Thanks for taking my questions. Michael? Thank you.
spk00: Thank you. Our next question comes from the line of Brad Milsatz of Piper Sandler. Your line is now open. Please go ahead.
spk07: Hey, good morning. Morning. Maybe, well, I wanted to start with expenses. I think your guidance is now down for either a 1% decline or 3% growth in fixed costs. If my math is right, it looks like year-to-date your fixed costs are down about 4%. I may not be comparing apples to apples, but close. That would imply to your guidance a pretty big step up in fixed rate expenses in the back half. Can you just maybe flesh that out a little bit more? It just seems like it would just be a really big expense bill to kind of get anywhere near the guidance.
spk03: I think what we're seeing is ongoing inflation in our compensation related costs, in particular our retail associates, operations associates, and the like. And so we're monitoring and managing that, but we are continuing to see it and expect to continue to see it throughout. We also have step-ups that we've modeled through from a technology perspective in our overall technology operating costs. And then we also have step-ups in our occupancy spend. So again, we've modeled it through. Again, we are doing lot of work every day and the team's doing a lot of work every day to try to evaluate opportunities to moderate cost as well as align our cost base to 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
spk07: You know, you're thinking around deployment, you know, whether that's, you know, additional bonds. Obviously, you've given guidance on loan growth, but just kind of curious how you're thinking about the liquidity on the balance sheet.
spk03: Yeah, so we continue to maintain an above average cash level. What I noted in my comments was we are intending to repurchase or purchase $25 to $75 million of mortgage loans on a monthly basis from Prime Lending. We do expect that the securities 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 could continue to kind of moderate and run down over time as some of those deposits seek other investment alternatives. So 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 a monthly and quarterly basis to see um uh consume consume liquidity in a targeted way and we're also growing our investment portfolio again uh in a very uh awful and and modest way uh but consistent with what you've seen over the last 12 to 18 months okay and then maybe just final one for me kind of kind of bigger picture you guys have you know unique insight into the purchase mortgage market given given your presence there across the country um
spk07: 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 you know don't won't give guidance for us then but um just kind of curious you know based on what you're seeing across the country talks with your lenders um would would would you agree or disagree with that kind of given you know where rates have moved to um just kind of curious given you know kind of the unique insight you guys have to you know the purchase market across the U.S.?
spk02: I think if you ask our leadership at Prime, I think that they'd be cautious about that. And they feel like there's a kind of a resetting in the housing market that home prices have appreciated, you know, some 20%. And you're starting to see some indications of cooling, whether it's days on market or sellers reducing their prices. I don't know what that means exactly for the trajectory, but we think that that's a six to 12-month period of kind of resetting the housing market and shifting from being really a seller's market to more of a buyer's market. Great. Thank you, guys.
spk00: Thank you. Our next question comes from the line of Matt Olney of Stevens. Your line is now open. Please go ahead.
spk06: Hey. Good morning. I'll stick with the mortgage discussion here. Good morning. It looked like Prime was profitable in 2Q even with the pressure on the margins. But looking at that guidance, obviously we're calling for lower volumes and lower, you know, some margins from here. When I put that in the model, it looks like the mortgage segment may not be profitable in 3Q or 4Q. I just want to make sure I'm interpreting the guidance accurately with that.
spk03: Matt, a couple things to note. So, prime lending, we did have pre-tax profit in the period as we reported here, but as noted earlier on the call here, we had just over $9 million of MSR favorable adjustments in the period, so that gives you a sense of of the balance of the origination segment. The other thing I would note here is we are, again, the team continues to work toward managing expenses and driving productivity and evaluating the business as the market continues to evolve, and 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. the headwinds are significant and the challenges are present.
spk02: Yeah, and I just add to that is they are fighting hard to remain profitable, and I think that there's probably just some seasonal strength in the third quarter. The fourth quarter for the mortgage business is usually break-even nevertheless, so that's just something to keep in mind.
spk06: Okay, got it. Thank you for that. And then I also want to just flush out the deposit guidance. A little confused. I think you talk about the average deposit should decline this year between 3% 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 the back half the year. So I want to make sure I'm interpreting that right.
spk03: Well, the way we're looking at it currently is the overall deposits are down about $1 billion on an ending basis, a little over $1 billion on an ending basis from 1231 to 630. Again, as Jeremy mentioned, his note, $442 million of that is attributable to the tender. We've also seen some public finance flows as well as we've returned some broker deposits that we otherwise had. So about half of that is explainable and the other half is more customer deposits, which puts us 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 of our liquidity position, our overall relationship base, but we're not going to chase some of the outsized, I'd say, deposit yields that are being offered in the marketplace by some of our competitors that 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 uh, we do recognize, uh, that some of our, some of our competitors are offering higher rates. And again, we're, we're going to be, we're going to be diligent about not chasing that, uh, to the best of our ability.
spk02: And as I mentioned, you know, our loan to deposit ratio right now is below 60. So we don't really need to.
spk06: Okay. Appreciate that. And then just lastly, um, I think you mentioned sweep revenue. You made some comments on that. I didn't get the details, but sweep revenues have improved. I think you recognized more in the second quarter. Are we now at normal levels? Are we going to see more of the benefits in the third quarter?
spk02: We are not at normal levels yet. This will, and let me jump in, Will, you correct me, but we're starting to see that we didn't really see the impact in the first quarter. We saw the impact here. We had about $5.5 million. And we should trend up if the Fed continues to raise to that three, three and a quarter at year end to be on about a $10 million a quarter level of sweep revenue.
spk06: And that's $10 million.
spk02: Sorry.
spk06: I'm sorry. I was just going to ask about the $10 million per quarter versus the five and a half and two Q. Am I interpreting that right? Yes.
spk02: Yes, and up from a little under $2 million in Q1. Got it.
spk03: Okay. It is the way to think about these revenues is they're going to track very similar to the kind of deposit costs, except on an inverse basis. So as rates go higher, we'll pass through a portion of that to the client, and we'll retain a portion of that, and that's what drives these fees higher. So a lot of what Jeremy's – that outlook Jeremy provided there is contingent on the Fed moving again, to that $300 to $325 base, what Rachel said, but I just want to make sure we're clear it is dependent on rates continuing to move higher. Got it.
spk06: Okay, guys, thank you. Thank you. Thank you.
spk00: Thank you. Ladies and gentlemen, that concludes today's Hilltop Turn into Conference call. Thank you for your participation. You may now disconnect your lines.
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