Hilltop Holdings Inc
NYSE:HTH
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
28.64
35.46
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Hilltop Holdings Inc
You don't have any saved screeners yet
00:03 Welcome to the Hilltop Holdings Third Quarter Twenty Twenty One Earnings Conference Call and Webcast. My name is Robin, and I'll be coordinating your call today. [Operator Instructions] I will now hand you over to your host Erik Yohe, Executive Vice President of Corporate Development. Erik, please go ahead.
00:33 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 conditions, allowance for credit losses, the impact and potential impact of COVID-19, stock repurchases and dividends, as well as such other items referenced in the preface of our presentation are forward-looking statements. These statements are based on management's current expectations concerning future events that, by their nature, are subject to risks and uncertainties.
01:09 Our actual results, capital, liquidity and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our presentation and those included in our most recent annual report and quarterly report filed with the SEC. Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.
01:34 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.
01:53 With that, I would now turn the presentation over to Jeremy Ford, President and CEO.
01:59 Thank you, Erik, and good morning. For the third quarter, Hilltop reported net income of ninety three million dollars or one point one five dollars per diluted share. Return on average assets for the period was two point one percent and return on average equity was fifteen percent. These favorable operating results again demonstrate the strength of Hilltop’s diversified model and our businesses and our people execute on their strategies and capabilities.
02:28 PlainsCapital Bank had another strong quarter with pre-tax income of sixty three million dollars and a return on average assets of one point four percent. Income during the period included four point six million dollars of PPP loan related origination fees and a five point eight million dollars reversal of provision. We have seen continued improvement in our asset quality, which is a reflection of both the banks sound lending practices and the healthier economic outlook.
02:57 Total average bank loans declined two fifty two million dollars or four percent for Q2 twenty twenty one as PPP balances ran off. Excluding PPP loans, average bank loans were stable in the quarter. Although the lending environment is extremely competitive, and many of our clients remain flush with liquidity, we have seen growth in our loan pipeline, which is at its highest level since the pandemic.
03:24 The current pipeline is heavily commercial real estate. Specifically in residential lot development, industrial and multifamily across the major Texas markets. Payoffs will remain a challenge though as our quality real estate clients continue to find attractive opportunities for their projects and the permanent financing markets.
03:45 Total average deposits remained stable linked quarter with average deposits excluding broker deposits increasing by two hundred million dollars or two percent from Q2 twenty twenty-one and one point nine billion dollars or sixteen percent from prior year. We continue to see growth in both interest bearing and non-interest bearing accounts. Since Q3 twenty twenty, we have runoff almost one billion dollars in broker deposits.
04:14 This was another strong quarter for Prime Lending, generating sixty two million dollars in pre-tax income. Although a declined from the astonishing levels in twenty twenty, volumes and pricing held on longer than anticipated. And as a result, we were able to deliver favorable returns during the period. Prime Lending originated five point six billion dollars in volume in the quarter from its continued strength in home purchase volume.
04:39 Refinancing volume as a percent of total volume decreased to twenty nine percent from thirty five percent during the same period in twenty twenty. If current mortgage rates remain relatively unchanged for the end of the year, we believe this downward trend of refinancing volumes will continue. Gain on sale margin of loans sold to third parties declined by seventeen basis points linked quarter to three fifty nine basis points. Margins remain pressure as we see competition reacting to the decline in refinancing volume and as our product mix has shifted where the relatively higher margin government product is lagging. Our team in prime Lending remains acutely focused on monitoring pricing and margins.
05:24 Prime Lending continues to recruit productive loan officers and has hired one hundred and twenty seven year-to-date, bringing total loan officer headcount to three fourteen. This is a primary focus as we target purchase oriented loan officers to help offset the lower margins we expect in the coming quarters. We believe our exceptional team, hurt orientation, technology investments and focus on customer experience will continue to drive attractive returns from the mortgage business.
05:57 During the quarter, Hilltop securities generated seventeen point four million dollars of pre income on net revenues of one hundred and twenty seven million dollars or a pre-tax margin of thirteen point eight percent. This was a good quarter for the public finance business in in particular, with revenues up twelve million dollars from prior year, predominantly from a few larger deals. We are encouraged by the potential for growth in the municipal finance market, with the healthy current pipeline and the anticipation of increased future infrastructure spending.
06:30 Revenues within the structured finance business decreased by twenty six million dollars from last year as the overall mortgage market has declined from the astonishing levels in twenty twenty. From a historical average perspective, volumes are still strong, and revenues rebounded by twenty four million dollars linked quarter. We continue to build on the structured finance business by solidifying existing relationships and adding new clients.
06:57 Within our fixed income business, customer demand weakened given expectations of higher interest rates on the horizon. A trend that has been seen across the industry. While all product areas were challenged in the quarter, Hilltop securities has made several key additions in the business, including leadership for our middle market sales effort, which has been a strategic priority for several years. Therefore, we remain focused on growing our market share and profitability in fixed income. Overall, Hilltop securities is well positioned as we have added key infrastructure, producers and leadership to broaden our core capabilities and customer penetration as a leading municipal investment bank.
07:43 Moving to Page four. As a result of strong and diversified earnings, we continue to grow our tangible book value while turning capital to shareholders. Our capital levels remained very strong with a common equity tier one capital ratio of twenty one point three percent at quarter end. And we have grown our tangible book value per share by eighteen percent over the last quarter to twenty seven point seven seven dollars.
08:07 During the quarter, Hilltop returned eighty four million dollars to shareholders through dividends and share repurchases. The seventy four million dollars in shares purchased are part of the one hundred and fifty million dollars share authorization Board granted earlier this year. This week, the Hilltop Board of Directors authorized an additional increase to the stock repurchase program of fifty million dollars bringing the total authorization at two hundred million dollars. As a result of dividends and share repurchase efforts, Hilltop has returned one hundred and fifty three million dollars in capital to shareholders year-to-date.
08:45 Additionally, we paid down sixty seven million dollars in trust preferred securities during the quarter, which will reduce our annual interest expense by over two million dollars going forward. In conclusion, we are very pleased with the results for the quarter. All businesses showed solid momentum going into the fourth quarter and are performing well against our strategic objectives. We feel well positioned with the team and capital in place to continue growing long term shareholder value.
09:14 With that, I will now turn the presentation over to Will to discuss the financials.
09:20 Thank you, Jeremy. I'll start on page five. As Jeremy discussed, for the third quarter of twenty twenty one, Hilltop whole top reported consolidated income attributed to common stockholders of ninety three million dollars equating to one point one five dollars per diluted share. Included in the third quarter results was a net reversal of provision for credit losses of five point eight million dollars. During the third quarter, Hilltop reported a modest net recovery of charge offs. On page six, we have details with significant drivers to the change in allowance for credit losses for the period. Most significant drivers in the quarter were the positive migration of certain credits in the portfolio and the further improvement in the expected microeconomic outlook.
10:05 These were somewhat offset by increase in specific reserves taking against a small number of credits that experienced deterioration during the quarter. First related to the microeconomic outlook. We leveraged the Moody's S7 scenario for our third quarter analysis, consistent with our second quarter outlook selection.
10:25 This scenario considers lower overall GDP rates, higher inflation, and higher ongoing unemployment than other market consensus outlooks. That said, the S7 scenario did improve from the prior period and the impact of the improvement resulted in the release of six million dollars of credit reserves during the third quarter.
10:44 Second key driver was the ongoing improvement in credit quality across the portfolio. During the quarter, portfolio experienced positive migration across a number of industries and geographies, resulting from improving financial performance more resilient outlook for future periods. Further, the portfolio of loans that are currently under enacted deferral plan seventeen million dollars from seventy six million dollars at the end of the second quarter of twenty one.
11:13 The result of the improvement at the client level equated to a net release of credit reserves five million dollars during the third quarter. The net impact the changes resulted in allowance for credit losses for the period ending September 30th of one hundred and nine point five million dollars or one point four five percent of total loans. Further, the coverage ratio of ACL to total loans increases to one point seven four percent and loans that we believe have lower loss potential, including PPP, broker dealer and mortgage warehouse loans are excluded.
11:47 I'm moving to Page seven. Net interest income in the third quarter went to one zero and five million dollars including eight point three million dollars of PPP related interest and fee income, as well as purchase accounting accretion. Net interest margin declined versus the second quarter of twenty twenty one driven by lower PPP recognition, higher average cash balances and continued pressure on loan HFI yields. Somewhat offsetting these items were higher loan held sale yields, resulting from higher overall mortgage rates, coupled with lower interest bearing deposit costs, which have continued to train lower finishing the quarter down four basis points versus the second quarter of twenty one at twenty eight basis points. We continue to expect that interest bearing deposit cost to move modestly lower over the coming quarters as this consumer CD portfolio continues to mature and reset the lower yields.
12:43 As it relates to asset yields, the current competitive environment for commercial loans is resulting in substantial pressure on loan yields for new originations, which were three point eight percent during the third quarter and is also challenging our ability to maintain current loan for rates. Given overall market and competitive conditions, we expect that NIM will remain pressured into the fourth quarter of twenty one moving lower to between two forty and two fifty basis points by year end.
13:13 Turning to page eight. Total non-interest income for the third quarter of twenty one equated to three sixty eight million dollars, per quarter mortgage related income and fees decreased by one hundred and fourteen million dollars versus the third quarter of twenty twenty, driven by lower origination volumes, declining gain on sale margins and lower locked volumes. As it relates to gain on sale margins, we note in our key driver table in the lower right of the page. The gain on sale margins on loans fell eighteen basis points versus the prior quarter. Further, we are providing the impact of gain on sale margin related to those loans that have been retained on the balance sheet, which for the third quarter according to thirteen basis points.
13:56 In the third quarter of twenty twenty-one, environment and mortgage banking remained resilient and is expected to continue to shift to a more purchased mortgage centric marketplace approximately seventy one percent of our origination volumes serving as purchase mortgages. During the third quarter, purchase mortgage volumes declined modestly to three point nine five billion dollars while refinanced volumes declined twelve percent or two thirty five million dollars versus the second quarter origination levels.
14:26 We expect this trend to continue towards the more purchased centric mortgage market of the coming quarters and we continue to expect gain on sale margins for third party sales will faller than a full year average range of three sixty to three eighty five basis points. In addition, other income declined by thirty six million dollars driven primarily by the cause in TBA Lock Volumes coupled with lower volumes and market debt in the fixed income capital markets.
14:55 As we've noted in the past, the structured finance and fixed income capital markets businesses can be volatile from period to period as they are impacted by interest rates, market volatility origination volume trends and overall market liquidity. Lastly, our public finance and retail brokerage businesses at the broker dealer drove solid revenue growth as highlighted in the securities related fee growth of fifteen million dollars versus the prior year period. This growth highlights the impact of our ongoing investments and enhanced products and service capabilities across Hilltop securities which has provided our makers with additional tools and capabilities to support their clients.
15:36 Turning to page nine. Non-interest expenses decreased from the same period in the prior year by forty four million dollars to three fifty five million dollars. Decline in expenses versus the prior year was driven by decline in variable compensation of approximately thirty five million dollars in Hilltop Securities and PrimeLending. This decline in variable compensation was linked to lower revenues in the quarter compared to the prior year period.
16:03 The bank continues to deliver improved efficiency as highlighted in the sub fifty percent efficiency ratio. This has been driven by lower overall headcount as well as benefits from strong mortgage production and the acceleration of PPP fees into current period income. As we've noted in the past, we expect that over the longer term efficiency ratio of the bank will fall in a range of fifty percent to fifty five percent.
16:28 Moving to Page ten. In the period HFI loans equated to seven point six billion dollars relatively stable with the second quarter levels. As we noted previously, we've seen substantial increases in competition for funded loans across the Texas markets, which we expect will continue into twenty twenty two. Further, the ongoing growth in available liquidity, both on bank balance sheets and consumer balance sheets could further delay a return to more normal commercial loan growth rates for at least a few quarters. We continue to expect that full year twenty twenty one average total loan growth, excluding PPP loans will be within a range of zero percent to three percent. During the third quarter of twenty one PrimeLending lock approximately two forty three million dollars of loans to be retained by PlainsCapital over the coming months. Loans had an average yield two point nine five percent and average [Indiscernible] LTV of seven seventy six percent and sixty four percent respectively.
17:32 Moving to page eleven. Per quarter credit trends continue to reflect a slow with steady recovery in the Texas economy, which is supporting improved customer cash flows, if you were borrowers on active deferral programs. As of September thirtieth, we have approximately seventeen million dollars of loans on active deferral programs down from seventy six million dollars to June thirtieth.
17:54 Further, key allowance for credit losses, the period loan ratio for the active deferral loans equates to twenty two point eight percent at September thirty. As this shown on the graph to bottom right of the page, the allowance for credit loss coverage including both mortgage warehouse lending as well as PPP loans at the bank ended the third quarter one point five eight percent. We continue believe that both mortgage warehouse lending as well as our PPP loans will maintain lower loss content over time. Excluding mortgage warehouse and PPP loans, the Bank's ACL to end of period loans, HFI ratio liquidity to one point seven four percent.
18:32 Turning to page twelve. Third quarter in this period total deposits were approximately twelve point one billion dollars increasing by three ninety eight million dollars versus the second quarter of twenty twenty one. Given our strong liquidity position and balance sheet profile, we are expecting to continue allow broker deposits to mature and runoff. The nine thirty Hilltop maintained two forty three million dollars of broker deposits to have a blended yield of thirty three basis points. While deposit levels remain elevated, it should be noted that we remain focused on growing our client base and deepening wallet share through the sales of our commercial treasury products and services and focus on acquisition efforts.
19:16 Turning to page thirteen. In twenty twenty one, we continue to remain nimble as the pandemic evolves to ensure the safety of our teammates and our clients. Further, our financial priorities for twenty twenty one remain centered on delivering great customer service to our clients, attracting new customers to our franchise, supporting the communities where we serve, maintaining a moderate risk profile and delivering long term shareholder value. Given the current uncertainties in the marketplace, we're not providing specific financial guidance, but we are continuing to provide commentary. This is the most current outlook, for the remainder of twenty twenty one with the understanding that the business environment, including the impacts of the pandemic could remain volatile. That’s it, we will continue to provide updates during our future of quarterly calls.
20:05 Operator, that concludes our prepared comments. And we'll turn the call back to you for the Q&A section of the call.
20:12 Thank you. So, it's now time for Q&A. [Operator Instructions] So our first question is from Michael Young from Truist Securities. Michael go ahead.
20:45 Hey, good morning, everyone. I wanted to start off on the positive kind of municipal outlook for originations there. Could you maybe just talk about kind of the factors driving that have you had any increased hiring or teams? And then also I know, I believe Texas passed a new law, I guess that might be beneficial for you also. Could you maybe just walk through whether or not that should positively impact you?
21:11 Sure. Well, I will first aid for the quarter that we did have a really good quarter in municipal finance, and we have a good team and a great organization in that as we referenced to the twelve million dollars increase, a lot of that was due to some bigger deals that I wouldn't necessarily run rate. But just to kind of the run rate from last quarter, although you look out towards the future, we are very constructive on municipal finance issuance. To continue to be strong as it is this year. And then also with the pending infrastructure bill, we think that could substantially increase municipal insurance. And there's a lot of different reports out there, but in some cases, it might the one hundred and fifty percent or two hundred percent of what the run rate national issuance has been. And us as an organization, this is really what we do, we're very well prepared to be a part of that.
22:22 And just on the sort of recent passing of the build that might drive more market share towards you all, is that a fair assumption to make and maybe I don't know if you have any sort of sizing of how much origination takes place from those that would now be excluded?
22:41 Well, we think that net it is a positive to us and clearly what you're referencing is the bigger banks that are not going to be doing issuances in Texas because the firearms. So, for us we're in fact it's our number one state and we're number one here. So, we will be beneficial. I don't think it will be quite a huge windfall in that. Really, we're really in assay to say and so a lot of this will be underwriting players. So don't think that it'll be huge, but I do think it will be additive.
23:23 Okay, great. And maybe just shifting gears over to mortgage. Appreciate the color you did provide. But maybe just trying to understand on the expense side, the variable piece I know you may not want to provide an outlook in terms of some absolute dollar level, but should we be thinking about a certain percentage of volume as being kind of the variable expense load or any other color on how we should think about that kind of moving up and down as volumes maybe fall off a little bit?
24:00 Yes, I think that's good morning, I think that's a good question. I point you to page nine, we have tried to provide here a variable comp to originated volume ratio on the page, which you can see here fell in the current period about one hundred and fifty eight basis points. I think as volumes over time go down, you'll see that likely trend lower given where we are in terms of origination volume and where folks are on their conversations scorecard and the likely for this year. We'd expect that number to stay steady, if you will, maybe slightly lower in the fourth quarter. But going forward, we'd expect kind of that ratio to continue to trend down to a more normalized level over time. So that's how we think about the variable comp portion I think as we think about fixed cost. We are continuing to make substantial progress; I think on measuring productivity evaluating our middle and backlog functions across the franchise or that the mortgage or Hilltop securities or the bank ensuring that we are making substantial investments in digitizing our processes and capabilities once you support improved customer response time and as well as improving the overall productivity of our associates across the franchise. So, a lot of work being done to continue to affect change positive change from an expense perspective around operating expenses, but from a variable perspective, that's how we would think about it in mortgage.
25:37 Okay. Thanks. I appreciate it.
25:40 Thank you.
25:48 Our next question is from Brad Milsaps from Piper Sandler. Thank you, Brad.
25:55 Hey good morning, guys.
25:58 Good morning.
25:59 Good morning.
26:00 Jeremy, maybe I want to start with the bank. You sounded a little bit more bullish on the prospects of maybe commercial growth picking up. Was curious, if you could maybe quantify that a little bit more and if you do see a pickup there, would you continue to also adding one to four family to the books as well, one kind of offset at the other. Just kind of want to get a sense of kind of where you think loan growth you go from here?
26:34 I'll just kind of talk maybe high level and then Will can be more specific particularly on the mortgage front. But I'd just say we're kind of becoming more optimistic about growth. As we've seen the pipeline and about this from a lot of our competitors start to build up. It's up, so it's built up particularly in the last quarter to levels we haven't seen since pre-pandemic. And at the same time, we are fighting payoffs and we had a large payoff quarter as a lot of our clients and finding more permanent financing. So, I do think, and we'll check my math there, but I do think we're expecting to turn to grow the core portfolio, but we're also going to be measured about it and it's extremely competitive with a lot of underwriting standards that we try to maintain is going to be difficult. So, I guess my due, it's just I think we are going to grow it is positive, but I don't think that it's just going to be unrivaled. And I do think we'll continue our strategy and purchasing mortgages from Prime. So, we'll go ahead.
27:51 Yes. I think Brad, that's right. I go a lot of that, which is pipelines are stronger. I think Texas is a growing market, and it's obviously been to our benefit from a commercial perspective, as Jeremy said, it's been a kind of a one step forward have one point five steps backward as it relates to payoffs and new originations. As it relates to the mortgage retention though, the fifty dollars to seventy five million dollars as you noted in the past, that's a little more of a liquidity kind of consumption strategy and approach than it is necessarily a long growth. We did kind of start that and accelerate it to offset what would have otherwise been soft commercial loan growth. As Jeremy mentioned, we expect that loan growth in the commercial book to start to accelerate here early part of twenty two. But that said, as long as we're sitting on kind of the cash levels we have, which we –from an average perspective, we were over two billion dollars in cash as the bank our expectation is we'll continue to retain those mortgages looking to create an over concentration in mortgage exposure, but we're managing that portfolio in concert with our securities book to try to soak up as much liquidity as we can while doing it in small bites kind of each quarter and each month and not taking any substantial vintage risk our vintage exposure as it relates to lagging and overly heavy to either the mortgages or securities in any given period.
29:24 Okay, great. That was kind of my next question. Just curious your appetite for deploying some of that liquidity into the bond portfolio. It looks like you grew it a little bit in the third quarter. It actually looks like our only quarter base my numbers is right. Your yields were up in both the taxable and non-taxable. Can you kind of speak to what you're buying in the change in yield and sort of appetite for further increases in the bond book?
29:52 Yeah. I think we had some, it’s an yield improvement in the trading book, but in what I call the bank portfolio, which is specifically used here for liquidity purposes and not a credit – not a credit risk book. We don't have CLOs and some of the other more, I'd say exotic type of securities in the portfolio. As I mentioned, we're not looking to take a lot of vintage risk in lagging and so we're lagging in kind of fifty million dollars to seventy five million dollars year in terms of securities per month as well and you'll see that likely continue through – certainly through the end of the year and into next year as well. We're buying the traditional mortgage, mortgage security, our average duration is about three point five years. So, we're trying to keep it call it relatively short because again, we doesn't feel like this is the place to take a ton of duration exposure. And so, we're doing things we think are prudent to harvest NII in a world where the interest rate environment hasn't been momentarily conducive to get – to take a big bet.
30:59 Okay, great. And then just final question for me. Just back to the public finance for Jeremy. I was curious if you could a maybe just offer a little more color on the big deals and the and the pieces that you might think aren't prepayable. I was just looking at the dollar amount of offerings you did it was down about two percent year-over-year, A number of offerings is down seventeen. But your revenue was up ten million dollars or twelve million dollars. So just trying to kind of piece together sort of what you consider run ratable versus not?
31:36 Yes. I guess mean we have twelve million dollars increase year-over-year. We did see improvement in our just kind of our traditional business outside of those deals. I don't have the exact number on what those deals of the twelve million dollars increase was. Well, I don't know if there's anything you want to add.
31:57 I think the way to think about it is, we have added substantial resource on potential public finance businesses, including a debt capital market team that debt Capital markets team throughout the quarter has been all with us for a period of time now and they're starting to deliver some transactions that are larger and generate kind of larger fees in aggregate than a risk. In terms of run rate ability, I would say five million to seven million dollars of the number without going deal my deal and being specific about it, so five million dollars to seven million dollars of count of this period was, what I'd call larger transactions that might not repeat themselves on a period over period basis.
32:48 Great. Thank you, guys. I appreciate it.
32:53 Thank you, Brad. Our next question comes from Matt Olney from Stephens. Matt, please go ahead.
33:01 Thanks good morning. I want to start on the mortgage side, specifically on the gain on sale. It looks like we dip in the quarter, any more commentary you can provide within this, the pressures seeing whether it's a steady trend throughout the quarter or any commentary on that margin? And September or in recent weeks. It feels like we're heading towards the lower end of that full year range that you gave us said, just want to make sure I'm thinking about this, right? Thanks.
33:28 Yes. That's I think that's appropriate. I think where what we've seen is, I'd tell it was, it's been more resilient than we expected it what we thought it could be under more pressure and again, as I make these comments, think about it in terms of the gain on sale loans, sold the third parties the grey line on Page sixteen. As we see their three fifty nine, I would tell you, we expect that to continue to trend down as volumes decline and our view is the mortgage industry built up a lot of machinery, if you will to process mortgages through what has been kind historic mortgage run, what historically occurs is prices the first give back when volumes start to slow as we roll into the fourth quarter, which is a seasonally softer period, and we expect it will be, we expect to see volumes come in, and we would also expect to see price under some pressure. Again, I think gain I feel was more resilient during the third quarter than we thought it might be, but the three sixty two three five again really a target against that third party sales and we feel like we'll be trending a little lower in the fourth quarter.
34:44 I do think it be towards point a more gradual or a modest decline.
34:54 Okay. That's helpful. And then switching over to structured finance, I think the commentary mentioned there's some pressure there, lower volume tighter spreads. It sounds like the business continues to slow versus a year ago? Any more commentary we should be thinking about as far as from these levels? Thanks.
35:20 Well, I think that try to play in context that last year was as I said an astonishing year to be in the mortgage business. So, I mean, we had just exceptional levels and this quarter structure finance really bounced back. To have a strong quarter by historical means. So, I think that's the case on that. And so, we're constructive there and kind of having revenue to be at the level, we had this quarter and the risk we see to the future of that just going to be the risk of higher interest rates and affordability for first time homebuyers.
36:07 Okay. Thank you, guys.
36:12 Thank you, Matt. Our last question is from Woody Lay from KBW. Go ahead, Woody.
36:20 Hey good morning, guys.
36:22 Good morning.
36:24 So, I know in the past, you've highlighted your hotel portfolio is one segment that sort of lagging the rest of the group from a recovery perspective, any update on how that portfolio performed in the third quarter?
36:38 Well, morning, Woody. I think the portfolio performed certainly too, if not better than our expectations as we look in our deferred loan portfolio, we've got kinda one hotel, one hotel group that's still under an active deferral program and so we continue to, continue to see progress there. I think there's been a couple of things, one, there's been liquidity in the market to help those operators find either new equity or other forms of debt that certainly helped because but we're also seeing improved utilization that uses trends. I think as we've said in the past, the properties that are performing the best are a little more destination/consumer centric at least have a mix of that in their business. The pure business travel have been a little more – have been a little more pressure. But again, on the whole of the portfolio has for the year, outperformed our expectations and continues to heal itself slowly, but surely and we continue to be focused on supporting our clients through the last leg of the journey year.
37:51 Okay. That's helpful. And then on deposits, I mean there was another strong quarter for deposit growth. Any reason to believe this growth wouldn't be sticky, was there anything seasonal behind the growth?
38:04 Nothing, nothing I'd call out is seasonal as it relates to the growth. I think the overall liquidity in the market remains at historic levels. We continue to see positive deposit trends from our existing customers, those have, the operating businesses are generating solid cash flows. They're retaining those as Jeremy mentioned, we're also seeing customers who are able to sell properties. There's liquidity in the market to as our real estate customers take properties to market. They are able to find either additional funding or a takeout there. So, we're seeing a lot of the offset of the paydown as we're seeing a cash build here. And so, we expect that likely we'll moderate, but we expect deposits to remain elevated well into the twenty two maybe in the early twenty three.
38:58 Got it. And then last from me, just more of a housekeeping issue. But how many PPP fees do you have remaining to recognize, and do you expect most of these come in the fourth quarter?
39:10 Well, we think they're going to drift out over the next – over the next couple of quarters, we think it'll slow down, we've basically exhausted all of the first round. We're now just into the second round, there is a couple million dollars, so it starts to get in consequence or here after the fourth quarter.
39:31 Got it. Thanks guys.
39:34 Thanks.
39:38 We currently have no further questions. So, this concludes call. Thank you for joining the Hilltop Holdings third quarter twenty twenty one earnings conference call and webcast. You may now disconnect your lines.