Good morning, everyone, and welcome to the Hilltop Holdings First Quarter 2021 Earnings Conference Call and Webcast. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Eric Yealy. Sir, please go ahead.
Thank you, operator. Before we get started, please note that certain statements during today's presentation that are not statements of historical fact, including statements concerning such items as our outlook, business strategy, future plans, financial condition, allowance for credit losses, the impact and potential impacts of COVID-nineteen, 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. 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. 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 would like to turn the presentation over to President and CEO, Jeremy Ford.
Thank you, Eric, and good morning. For the Q1, Hilltop reported net income of $120,000,000 or 1 point 4 $6 per diluted share, representing an increase from the Q1 2020 of 71 $1,000,000 or $0.91 per diluted share. Return on average assets for the period was 2.9% and return on average equity was 20.6%. These results do include a $5,100,000 reversal of provision compared to the Q1 of last year when we had a provision expense of $34,500,000 as we introduced CECL and the outlook for credit in the economy look to be deteriorating. Much of the momentum around mortgages from 2020 continued into this Q1.
Notwithstanding higher long term interest rates and refinance volume slowing, the overall mortgage market remains strong and our origination business was able to deliver $6,200,000,000 in volume, a 71% increase from Q1 2020. Driven by PPP loan balances, the bank's average loans for the Q1 increased 7% from prior year and average deposits grew by $2,400,000,000 or 26% from prior year as well. While pre tax margin at the broker dealer was down slightly from Q1 2020, we did see growth in the structured finance business, which also benefited from a strong mortgage market. In the public finance business, efforts to improve productivity and growth are showing positive returns, as net revenue increased 8% from the Q1 2020. During the period, Hilltop returned $50,000,000 to shareholders through dividends and share repurchases.
The $5,000,000 of shares repurchased are part of the $75,000,000 share authorization the Board granted in January. Liquidity and capital remain very strong with a Tier 1 leverage ratio of 13% and a common equity Tier 1 capital ratio of 19.6 percent@quarterend. We continue to see improvement in the economic trend. And during the quarter, we had payoff and a return to contractual payments for a large portion of the modified loan portfolio. This portfolio, which at the end of June 2020 was $968,000,000 is now down to $130,000,000 as of March 31.
Notably, all COVID-nineteen modified retail and restaurant loans now off deferral program. Our allowance for credit losses as of March 31st totaled $144,500,000 or 1.98 percent of the bank's loan portfolio. This reflects a reduction in the reserve balance of $4,500,000 from the 4th quarter, which was driven primarily by positive shifts in the economic outlook. While the general economic outlook for the Texas economy has improved, the bank remains cautious and in constant communication with borrowers in certain higher risk segments of our hotel and office portfolios. These segments were more severely impacted by the pandemic and will take longer to recover.
Moving to Slide 4. PlainsCapital Bank had a solid quarter with a pre tax income of $65,000,000 which includes the aforementioned provision recapture of $5,100,000 Also contributing to the increased pre tax income from Q1 2020 was higher net interest income from lower deposit costs and PPP loan fees and interest income. Our bankers continue to work with small business customers on PPP program. And as of March 31, had funded approximately 1100 loans totaling $178,000,000 as part of the 2nd round, bringing the total PPP loan balance to $492,000,000 at period end. PrimeLending had another outstanding quarter and generated pre tax income of $93,000,000 an increase of $53,000,000 from Q1 20 That was driven by both a $2,600,000,000 increase in origination volume and a gain on sale margin of 388 basis points.
While rates increased towards the end of the quarter and margins tightened, we remain encouraged by the demand for mortgages across the country and by the PrimeLending team that continues to perform exceptionally while actively recruiting quality loan originators. For Hilltop Securities, they had a good quarter with pre tax income of $18,000,000 The structured finance business had a strong start to the quarter with favorable volumes and spreads. Then the sudden rise in interest rates adversely impacted net revenue in March. Net revenue grew in public finance services compared to prior year from a modest increase in national insurance and recruiting efforts. The fixed income services and wealth management businesses generated modestly lower net revenue than Q1 2020 levels.
Overall, for Hilltop, this was an excellent quarter and a great start to the year. We believe our balance sheet is strong and our credit quality is sound. We are excited about the strategic direction and growth potential of our 3 businesses and we are grateful for the talented leadership and dedicated teams we have across Hilltop. With that, I will now turn the presentation over to Will to talk about the financials.
Thank you, Jeremy. I'll start on Page 5. As Jeremy discussed, for the Q1 of 2021, Hilltop reported consolidated income attributable to common stockholders of $120,000,000 equating to $1.46 per diluted share. During the Q1, revenue related to purchase accounting was $4,900,000 and expenses were $1,300,000 resulting in a net purchase accounting pre tax impact of $3,600,000 for the quarter. In the current period, the purchase accounting expenses largely represent amortization of other intangible assets related to prior acquisitions.
During the Q1, provision for credit losses reflected a net reversal of $5,100,000 and included approximately $600,000 of net recoveries of previously written off credits. The improvement in the current macroeconomic environment as well as the outlook for continued improvement in key economic metrics positively impacted allowance for credit losses during the quarter. Hilltop's quarter end capital ratios remained strong with common equity Tier 1 of 19.63 percent and Tier 1 leverage ratio of 13.01%. I'm moving to Page 6. Net interest income in the Q1 equating to $106,000,000 including $7,500,000 of previously deferred PPP origination fees and purchase accounting accretion.
Versus the prior year quarter, net interest income decreased by $4,700,000 or 4%. Further, net interest margin declined versus the Q4 of 2020 by 2 basis points. In the current period, net interest margin benefited from the recognition of deferred PPP origination fees, higher yields in stock loan and lower deposit costs. Offsetting these benefits were lower loan HFI and HFS yields, driven by market pricing and absolute yield levels in the mortgage market. Further, PCB's excess cash levels held at the Federal Reserve increased by $365,000,000 from the 4th quarter, putting an additional 5 basis points of pressure on net interest margin.
During the quarter, new loan commitments, including credit renewals, maintained an average book yield of 4%. This was stable with the Q4 of 2020. Total interest bearing deposit costs declined by 8 basis points in the quarter as we continue to lower customer deposit rates and return broker deposits during the Q1. We expect continued consumer CD maturities and additional broker deposit declines in the coming quarters, both of which support a continued steady decline in interest bearing deposit costs. Given the current market conditions, we expect net interest income and net interest margin will remain pressured as overall market rates remain low, putting pressure on held for sale and commercial loan yields and that competition could remain aggressive over the coming quarters as we expect new loan demand will remain below historical levels.
Turning to Page 7. Total non interest income for the Q1 of 2021 equated to $418,000,000 1st quarter mortgage related income and fees increased by $131,000,000 versus the Q1 of 2020. During the Q1 of 2021, the environment in mortgage banking remained strong and our business outperformed our expectations in terms of origination volumes, principally driven by lower mortgage rates, which drove improved demand for both refinance and purchase mortgages. Versus the prior year quarter, purchased mortgage volumes increased by $561,000,000 or 24% and refinanced volumes improved substantially, increasing by $2,000,000,000 or 156%. While volumes during the Q1 were strong relative to traditional seasonal trends, gain on sale margins did decline versus the Q4 of 2020 as a combination of lower linked quarter market volumes, principally purchased mortgage volumes, competitive pressures and product mix yielded a gain on sale margin of 3.88 basis points.
We expect pressures on margin to persist throughout 2021 and we continue to expect full year average margins to move within a range of 360 basis points to 385 basis points contingent on market conditions. Other income increased by $12,000,000 driven primarily by improvements in the structured finance business as the prior year period included a $16,000,000 negative unrealized mark to market on the credit pipeline. As we've noted in the past, the structured finance and capital markets businesses can be volatile from period to period as they are impacted by interest rates, origination volume trends and overall market liquidity. Turning to Page 8. Non interest expenses increased from the same period in the prior year by $85,000,000 to $367,000,000 The growth in expenses versus the prior year were driven by an increase in variable compensation of approximately $63,000,000 at Hilltop Securities and Prime Lending.
This increase in variable compensation was linked to strong fee revenue growth in the quarter compared to the prior year period. The balance of the increase in compensation and benefits expenses is related to higher payroll taxes, salaries and overtime expenses. Looking forward, we expect that our revenues will decline from the record levels of 2020, which will put pressure on our efficiency ratio. That said, we remain focused on continuous improvement, leveraging the investments we've made over the last few years to aggressively manage fixed costs, while we continue to further streamline our businesses and accelerate our digital transformation. I'm moving to Page 9.
Total average HFI loans grew by 5% versus the Q1 of 2020. Growth versus the same period in the prior year was driven by growth in PPP loans and higher balances in the mortgage warehouse lending business. End of period banking loans, excluding PPP and mortgage warehouse lending have declined modestly versus the prior year period as commercial loan demand has remained tepid throughout the pandemic. As we noted on prior calls, are planning to retain between $30,000,000 $50,000,000 per month of consumer mortgage loans originated at PrimeLending to help offset soft demand from our commercial clients. During the Q1 of 2021, Prime Lending locked approximately $146,000,000 of loans to be retained by PlainsCapital over the coming months.
These loans had an average yield of 2.87 basis points and an average FICO and LTV of 7.79% percent 61% respectively. I'm moving to Page 10. 1st quarter credit trends continue to reflect a slow but steady recovery in the Texas economy as the reopening of businesses continues to provide improved customer cash flows and fewer borrowers on active deferral programs. As of March 31, we have approximately $130,000,000 of loans on active deferral programs, down from $240,000,000 at December 31. Further, the allowance for credit losses to end of period loan ratio for the active deferral loans equates to 13.4 percent at March 31.
As is shown in the graph at the 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 Q1 at 1.98%. Continue to 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 held for investment ratio equated to 2.38 percent. Turning to Page 11. 1st quarter average total deposits are approximately $11,400,000,000 and have increased by 2,400,000,000 dollars or 26 percent versus the Q1 of 2020.
Throughout the pandemic, we continue to experience abnormally strong deposit flows from our customers driven by government stimulus efforts and shifting client behaviors as customers remain cautious during these challenging times. Given our strong liquidity position and balance sheet profile, we are expecting to continue to allow broker deposits to mature and runoff. At threethirty one, Hilltop maintained $639,000,000 of broker deposits that have a blended yield of 34 basis points. Of these broker deposits, dollars 284,000,000 will mature by sixthirty of 2021. These maturing broker deposits maintain an average yield of 47 basis points.
While deposits 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 we remain focused on driving our client acquisition efforts. I'm moving to Page 12. During the Q1 of 2021, PlainsCapital Bank generated solid profitability producing $65,000,000 of pre tax income during the quarter. The bank benefited from the reversal of credit losses of $5,200,000 and the recognition of $7,500,000 of previously deferred PPP origination fees. During the quarter, the bank's efficiency ratio dropped below 50% as the focus on managing expenses, improving fee income streams through our treasury management sales efforts and working diligently to protect net interest income is proving to be a successful combination.
While we do not expect that the efficiency ratio will remain below 50%, we do expect that the bank's efficiency will operate within a range of 50% to 55% over time. Moving to Page 13. PrimeLending generated of $93,000,000 for the Q1 of 2021, driven by strong origination volumes that increased from the prior year period by $2,600,000,000 or 71%. Further, the purchase percentage of the origination volume was 47% in the Q1. While refinance remained above our expectations during the Q1, we expect that the market will begin to shift towards a more purchased focused marketplace during the last three quarters of 20 21.
As noted earlier, gain on sale margins contracted during the Q1, yet we continue to expect the full year average range of 360 basis points to 385 basis points is appropriate given our outlook on production, product mix and competition. During the Q1, PrimeLending closed on a bulk sale of $53,000,000 of MSR value. Somewhat offsetting the impact of the bulk sale, the business continued to retain servicing at a rate of approximately 50%, which yielded a net MSR value at threethirty of $142,000,000 roughly stable with twelvethirty one levels. We expect to continue retaining servicing at a rate of 30% to 50% of newly created servicing assets during 2021 subject to market conditions and we will be looking to potentially execute additional bulk sales throughout the year if market participation remains robust. Moving to Page 14.
Hilltop Securities delivered a pretax profit and margin of $18,000,000 16.2 percent respectively in the Q1 of 2021, driven by structured finance and the public finance services businesses. While activity was strong in the quarter, we have continued to execute on our growth plan, investing in bankers and sales professionals across the business to support additional product delivery, enhance our product offerings and deliver our differentiated solution set to municipalities across the country. Moving to Page 15. In 2021, we're focused on remaining nimble as the pandemic evolves to ensure the safety of our teammates and our clients. Further, our financial priorities for 2021 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 as to our most current outlook for 2021 with the understanding that the business environment, including the impact of the pandemic, could remain volatile throughout the year. That said, we will continue to provide updates during our future quarterly calls. Operator, that concludes our prepared comments and we'll turn the call back to you for the Q and A section of the call.
Ladies and gentlemen, at this Our first question today comes from Michael Young from Truist. Please go ahead with your question.
Hey, good morning. Thanks for taking the question.
Hi, Michael.
Wanted to maybe just start on the mortgage business. Obviously, that's going to be swing factor this year with potentially lower revenue, lower gain on sale. But just on the expense side, I think in the comments you had made mention of sort of the fixed costs across the businesses being stable, but I would assume there's some opportunity there to bring the fixed costs down and obviously variable costs will move in accordance with how they have historically. So any color to add there on the expense side for mortgage?
I think the mortgage business, as we sit here, we've made substantial investments in technology through our loan origination system, some of the digital activities we're launching and continue to launch as it relates to customer engagement. So all of those things are going to allow us to streamline and continue to make good progress on reducing the cost to originate a loan, specifically as it relates to our middle and back office functions. And again, I think to your point, our expectation is that those costs remain stable kind of year on year and that's offsetting the inflationary costs that naturally occur in the business, whether that be increased salaries through merit or escalators in real estate costs or otherwise. So from our perspective, then the ongoing benefits of the investments are going to help us offset inflation and we hope to exceed that, but also again maintain stable cost as volumes rationalize
throughout the year.
Okay. And then maybe a broader question just on new growth or revenue opportunities. Are you guys looking at any new business opportunities or new lending verticals that could help with revenue growth as we move into 2021 in a softer mortgage year?
Yes, I think as far as our business model and the companies and the things that we have, we're not looking to do anything differently and we're looking to grow each business. I wouldn't think there's any new vertical or anything different from what we're doing.
Okay. And maybe just last one, just on kind of customer demand and appetite. I think you guys were still expressing a little bit of caution around credit quality in the back half of the year. But are you seeing any potential signs of growth or new demand coming as well? I think a lot of banks have kind of pointed to that.
So I just didn't know if you guys are seeing that within your customer base or in your geography?
Well, currently commercial loan demand we think is soft, but we think there is optimism and we do feel like we have a pretty solid pipeline for where we're at today.
Our next question comes from Michael Rose from Raymond James. Please go ahead with your question.
Hey, guys. How are you doing?
Hey, how's it going?
Going well. Thanks for asking. Just wanted to get a little color on the buyback. I know this question is kind of asked. Every quarter you guys have a ton of capital.
Can you just kind of update us on your thoughts there? And maybe, Jeremy, just thoughts on M and A. Just we've seen a fair amount of activity here in recent weeks and just wanted to see what your updated thoughts are? Thanks.
Sure. With regards to share repurchases, we only repurchased $5,000,000 in the first quarter that was largely due to limited open window period. And we have a $75,000,000 repurchase authorization. So we have $70,000,000 left that we can utilize before going back to the Board. And that would be our expectation as we sit today.
And we'll constantly evaluate where we feel like we are trading versus intrinsic value. And then on the M and A front, we as we've all long stated, we do have a separate capital that we want to deploy towards M and A. We feel like it's a relatively healthy environment. So that makes it easier to have conversations about deals. There's less distressed deals that we've done kind of historically in the past.
So as I said last quarter, our focus is going to be on trying to find the right strategic partner and something that we think will really enhance our collective shareholder value.
That's helpful. Just switching to mortgage. So you guys reiterated the origination expectations for the year of 'seventeen to 'twenty yesterday, the NBA, big upward revision to 2nd quarter refi. And if I annualize what you guys did in the Q1, it implies much higher than the guide. So I guess the thought is that we know the mortgage is going to come off at some point, but any thought as to why you wouldn't be at the upper end of that range?
Thanks.
Yes. I think certainly the annualization effort would yield you there. I think our view is the next couple of quarters will start to normalize and become more, I'd say, seasonal in trajectory as they rotate towards a more purchase oriented market. Some of our considerations around how we think about it are the inventory challenges that are in the marketplace and the overall competitive challenges that we believe are going to emerge as volumes do come out of the market and organizations and competition is left to rationalize the outsized operations that they've built over the last 12 to 18 months. So we think the $17,000,000,000 to $20,000,000,000 is a reasonable range.
And again, it's our we'd like to be at the top of that range. But again, from our perspective, there are some headwinds going forward, albeit the market remains certainly on the purchase side remains constructive. And again, we think demand is reasonably strong, but the inventory challenges are real and present today.
Understood. And that's good color. Finally for me, Jeremy, if you can just kind of walk us through different pieces of the fixed income business and how what kind of the push and pull would be as rates rise and then if the Fed actually does increase rates at some point down the road? Just trying to get at because again, I know there are puts and takes within the business based on where rates are, but just trying to get an outlook for expectations for that business over the next couple quarters? Thanks.
For Hilltop Securities, you're talking about?
Yes. Correct.
Okay, great. Yes, sure. I guess that we have 4 primary business lines in that business. 1 is public finance services and I think that just given kind of the backdrop, we're positive on national issuance and we've also had a lot of really strong recruiting. So we feel good about the growth of that business.
What's really been the dominant revenue producer in Hilltop Securities It's in structured finance, which is a mortgage related business. And just like we mentioned, it follows a similar pattern as Prime did in the Q1. So I think that will tie to interest rates like the purchase home purchase market will. Fixed income services, that's our municipal and tax fixed income business. And that will we're enhancing a lot of capabilities there.
I think we've got room to grow, that is subject to sudden changes in the direction of interest rates. And then wealth management is where we when you have any kind of spread in short term interest rates that falls straight to the bottom line. So in the Q1, its revenue was all $4,500,000 solely because of having 0% short term rates.
That's great color. Thanks for taking my questions guys.
So it's kind of the direction of interest rates has occurred as well. But I think in general, like even if rates increase, we're not seeing rates increase at such a level that would preclude public finance issuance or a lot of these first time homebuyers in our structured finance business. And if there and we don't see a period of time before that the short term rates will increase and alleviate the wealth business.
You guys have addressed a lot of my questions. I did want to ask about the balance sheet and kind of how you would expect to manage some of the existing excess liquidity you have. I think on average, it had about $1,500,000,000 in cash. It didn't look like you grew the bond portfolio a lot in the Q1. But just kind of curious kind of how you think about managing that cash, particularly with the loan growth dynamics you're talking about and also the PPP forgiveness on the horizon?
Yes. So you're absolutely right. The excess cash is obviously top of mind for us. I think as we've said historically, we're not looking to take on just excessive amounts of duration exposure right here. And so given where kind of absolute rates are, although they have backed up since prior quarter.
So you saw the investment portfolio with the bank kind of ended the period at about $2,000,000,000 We expect that to continue to drift higher. I don't expect it to take a step function higher, but I do expect it to continue to drift higher as we put some money to work there in places where we feel like we don't have kind of outsized exposure. We are retaining the $30,000,000 to $50,000,000 I think our expectation is we'll be towards the top end of that retention range of prime lending originated mortgages for the balance of the year, notwithstanding stronger commercial demand than we're expecting at this time. And then we do expect again during the Q2 and into the 3rd and 4th, we do expect commercial home demand to pick up. If that doesn't in fact occur, then we'll react to that and make some adjustments to the approach.
But we're going to continue to be prudent and continue to make, I'd say, marginal steps in terms of overall deployment. Lastly, I'd say, and we tried to mention in my comments, we do have a series of broker deposits on the balance sheet and we expect those will mature and all expectations are they will run off throughout the balance of this year. So in terms of kind of overall liquidity and access to rationalization of broker deposits as well as mortgage retention on the balance sheet. And then I'd say the securities portfolio drifting higher over the $2,000,000,000 level quarter by quarter.
Okay, great. That's helpful. And just to follow-up on asset quality. I think you commented in the again this quarter in the slide deck that you expect the provision expense to potentially be elevated in the back half of the year. It seems square that with what seemingly an improving economic picture and credit environment with all the reserve building you've done in the past.
Just wondering if you could maybe frame up sort of what you believe would be an elevated provision expense in the back half kind of given all those factors?
Yes. So I think from a credit perspective, as you noted and we noted in our comments, we are seeing some rays of light and opportunity in certain of the portfolios, but then continue to see challenges in others. So as Jeremy mentioned in his comments, loans on active deferral from a retail and restaurant perspective have now kind of moved to 0. So that is a a substantial improvement from June of last year. And what we're continuing to see is challenges certainly in the hotel space as it relates to those properties that are principally business oriented, those that are a little more destination oriented, which is we do have some of those have outperformed, but those business specific and business kind of targeted properties continue to be challenged.
And we've got about the $130,000,000 the hotel portfolio of those active deferrals makes up about $108,000,000 of that. So I think that's important to note. On top of that, we're looking at the office portfolio across the state of Texas. I think it's reasonably well known. There are growing trends of vacancy and subletting kind of going on.
And so we remain cautious on that portfolio as well. So there's while there are clearly reasons to be more optimistic, there's also some places where we continue to have a heightened focus on our credit measurement and evaluation. As it relates to kind of charge off in the second half, again, I think if we look at it, we do there's just an expectation currently that some of these loans on active deferral once they kind of run through this deferral window here, there'll be some tough decisions that have to be made and that likely will yield some charge offs in the second half of the year. And again, we continue to be aggressive in working with our clients and trying to help every client get through what has been an unprecedented environment. With that said, our expectation is there will be some charge offs in the second half.
Kind of under that framework, I mean, do you think you'd be in position to sort of move kind of general reserves to maybe some of these specific situations? Just trying to think about the P and L impact, I suppose.
Yes, I think that's right. I mean, as you get more clarity into which properties and kind of which entities you will be more specific about that. I think you'll see that matriculate over time kind of outside from general.
Okay, great. Thank you, guys.
Thank you. Thanks.
Our next question comes from Matt Olney from Stephens. Please go ahead with your question.
Thanks for taking my question. I want to circle back on mortgage. And I think in the Q1, typically each year, we see mortgage volumes build each consecutive month as we move into the spring selling season. But this year, obviously, we have the falling reified volume. So curious if you can provide any commentary on volumes in recent months and what you're seeing more recently?
Thanks.
Yes, I'd say through the Q1 and Jeremy mentioned his comments, it was certainly seasonally high with a we had a 47% purchase percentage. And so the refinance volume was high. That we saw that start to deterior decline, if you will, in March as the 10 year rate backed up for 160 basis points, I know it's settled back in the 150 basis points. But that portion of the volume is obviously very rate sensitive and we saw that pullback in the month of March. And I think that's continued into April.
So we continue to believe that this market is going to roll towards and move towards a more purchase oriented market, which from my perspective is strength of ours and how we've positioned our business over time. But again, we do believe that refinance volume will be more challenged even in the Q2, but certainly in the second half of the year.
Okay. Thanks for that, Will. And then on the gain on sale margins, I think what we're seeing from the marketplace, pretty considerable divergence of margins, getting a lot harder on the wholesale side versus retail. Just remind us of your mix of wholesale versus retail on the mortgage side.
We're 100% retail. We don't have any wholesale or correspondent business.
Okay. And then just lastly for me on the MSR, just update us on the strategy. I saw you executed the sale in the Q1. Was there any material impact on the financials in the Q1? And then thinking about the outlook there, are you just trying to manage that asset around that $140,000,000 level moving forward?
Yes.
So we did have a sale. We had a positive outcome there. So I'll take you back a little to last year. So the strategy last year was to retain that servicing as the market for servicing really deteriorated to the point where there were periods of kind of no bid for servicing assets in the Q2 and early Q3 of last year. That has started to heal.
Obviously, you saw the MSR balance increase during the period of 2020 as a result of that strategy. We were able to do that because of our liquidity and balance sheet strength, so we were able to be opportunistic in doing that. It's not our long term objective to have $140,000,000 $150,000,000 MSR asset. That will likely move lower over time. In my comments, I tried to note, we do expect to continue to execute additional bulk sales to the extent the market is there for that and the market is robust.
And I currently, it has been favorable for that. But again, I think our target historically has been in that $50,000,000 to $75,000,000 range. It may travel a little higher than that for the balance of 2021. But again, objectively, it's strategic objective of ours to maintain an outsized MSR. But again, we did we do believe the strategy that we executed last year and into the Q1 has borne favorable outcomes both in terms of kind of price recognition and gains through some of these executed sales.
Okay. Thanks for taking my question.
And our next question comes from Ed Woody Lee from KBW. Please go ahead with your question.
Hey, good morning guys.
Good morning. Good morning.
So on the PPP front, do you have the amount of net origination fees that are unearned at this point and expect to recognize over the forgiveness process?
As of threethirty one, it was about $13,900,000
Okay, got it. And then last for me, could you just remind us the average yield on these consumer mortgage loans that you plan to retain?
The loans that were locked during the quarter that will come on the balance sheet over the coming months, about 287 basis points.
And again That's great. Thanks, guys.
And that will as with each period now that mortgage rates are higher, we do expect that will drift over 3% on locks into the future and loans come on the balance sheet. But again, for the Q1 locks, that's going to be 87 basis points.
Got it. That's helpful. All right. Thanks, guys.
Thank you.
And ladies and gentlemen, with that, we'll conclude today's Hilltop Holdings First Quarter 2021 Earnings Conference Call and Webcast. We do thank you for attending today's presentation. You may now disconnect your lines.