Q2 2021 Renasant Corp Earnings Call
[music].
Good day and welcome to the Renaissance Corp, 2021 second quarter earnings conference call and webcast all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing star of the zero. After today's presentation, there will be an opportunity to ask questions to.
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I would now like turn the conference over to Kelly Hutcheson Renaissance Corporation. Please go ahead.
Good morning, and thank you for joining us for Renaissance corporations 2000.
21 second quarter webcast and conference call participating in this call today are members of Renaissance Executive management team.
Before we begin please note that many of our comments during this call will be forward looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially.
The anticipated results or other expectations expressed in the forward looking statement of.
Although the markets in which we operate we opened over the first half of 2021 and connection with the rollout of the COVID-19 vaccines the spread of the Delta variant reminds us of the impact of the pandemic and the federal state and local measures.
Yours taken to arrest the virus may remain significant factors impacting our financial condition and operating results for the foreseeable future either.
Other factors include but are not limited to interest rate fluctuation regulatory changes portfolio performance and other factors discussed in our recent filings with the securities and exchange.
Lee for commission, including our recently filed earnings release, which has been posted to our corporate site Www Dot Renaissance Dot com at the press releases link under the news and market data tab, we undertake no obligation and we specifically disclaim any obligation to update or revise forward looking statements to reflect changed.
Exchange commissions, the occurrence of unanticipated events or changes to future operating results over time.
In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures a reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release and now.
This I'll turn the call over to our President and Chief Executive Officer, Mitch Waycaster.
Thank you Kelly and good morning, we appreciate you joining the call today before Kevin and Jim discuss results for the second quarter I want to offer comments to the 2021 results, thus far and share.
Now our outlook for the second half of the year many of the trends present in the first quarter continued into these last 3 months, we experienced slightly improve credit metrics saw more deposit inflows and produced net loan growth.
Earnings reflected a lower margin.
Jim contribution, which was partially offset by gains elsewhere in the company looking forward. We are optimistic about loan growth continuing despite the headwinds of elevated pay offs. Our team is focused on efficiency gains from both revenue and expense initiatives.
There should be increasingly evident in future periods, we operate in a number of dynamic markets that will give us opportunities for new business Renaissance emphasis on capital asset quality reserve levels and considerable core deposit base remain central.
As to how we manage the company.
I will now turn the call over to Kevin. Thanks, Mitch Our second quarter earnings were $41 of 72 cents per diluted share several factors contributing to our earnings this quarter of worth highlighting first.
Our net interest income held steady quarter over quarter.
Central loan yields remained under pressure, but our ongoing deposit repricing efforts and fee income recognized upon triple P loan forgiveness offset the dollar impact to net interest income second as Mitch mentioned the contribution from mortgage declined in the second quarter as interest rates Rose and housing inventory remains scarce. However, our previously announced.
Of course, you see initiatives compensated for some portion of that decline and we expect the benefits from those and other initiatives to grow somewhat in upcoming quarters know that our work on efficiency is ongoing and we continue to evaluate our operating model and the profitability of our branch network I'll reiterate that our efforts concerning efficiency, our deliberate and we.
Consider the long term impact of any decision before moving forward by focusing on balance sheet growth managing net interest income leveraging our other lines of business to generate additional fee income and reducing excess cost. We believe efficiency goals can be attained our mobile and digital metrics continue to trend in the positive direction, indicating a strong willingness of our customers.
How's that for adopt new technology in this rapidly changing environment. It is essential that we provide our customers with quicker and more convenient access to banking services and we seek investments that deliver the technology of security that they've come to expect wrapping up the Triple P program continues to be an important focus of our team we are assisting our customers.
<unk> 2 of getting this phase of round, 1 triple P loans with around $614 million, having been forgiven during the second quarter at quarter end, we have approximately $247 million of round 1 triple P loans remaining on our balance sheet, we mentioned last quarter that we entered into a referral relationship with another firm.
To utilize this technology platform to originate round 2 triple P loans for our customers in the second quarter, we realized approximately $1.4 million in referral fees from our partner I will now turn it over to Jim. Thank you Kevin as we walk through the quarter's results I will reference slides from the earnings deck, starting with the balance sheet.
Through the for coatings grew about $400 million in the quarter. This was largely driven by an increase in deposits as shown on page 9 since the beginning of the pandemic deposits are up over 25% with much of that growth of non interest bearing accounts, we invested some of the excess liquidity of our securities portfolio, increasing the balance.
For $1 million from the previous quarter as of June 30th we had approximately $1.6 billion in cash we expect some of this liquidity will go 1 of the securities portfolio in future periods, we experienced another quarter of loan growth with loans ex triple pay up $75 million from the first quarter.
600 presented the annualized loan growth of 3% Triple P loan forgiveness rapidly accelerated during the quarter was the only $247 million and Triple P loans outstanding at quarter end during the quarter capital ratios continued their belt as seen on page 12, and provide the company with flexibility for loan growth.
Rose buybacks or M&A opportunities, we did not incur a credit provision expense and the ACL as a percentage of loans ex triple P moved down slightly from 1.76% to 1.74%.
Quality metrics are shown on pages 14 through 16.
And we're past dues classified and nonperforming asset measures all remained relatively steady and net charge offs dropped to 3 basis points of loans ex Triple P. Covid related deferrals are now below 25 basis points with nearly all deferrals in our 1 to 4 family mortgage.
<unk> folio net interest income held steady quarter over quarter Triple P revenue was $10 million of the Triple P income accelerated recognition of deferred fees represented $5.2 million and we have approximately $4.1 million in remaining deferred fees.
Which both recognized our core margin, which excludes purchase accounting accretion and interest recoveries was down 13 basis points from the first quarter and after also excluding the impact from Triple P was down approximately 20 basis points excess cash weighed on the margin of about 32 basis points in the quarter excluding.
Used to be in the recovery on our MSR asset recognized in the first quarter mortgage banking income was down $16 million quarter over quarter, primarily resulting from lower margin on sales of <unk>.
For mortgage the company experienced gains in all other fee income categories noninterest expenses with the exclusions.
Excluding out of approximately $6.5 million for the quarter as Kevin mentioned, we continue to see the benefits of expense initiatives announced in the fourth quarter and expect continued realization throughout the balance of the year. We also received benefit from a 1 time state tax credit investment we fully amortized a.
The $3.1 million dollar of investment in non interest expense and recognized a $3.4 million of credit and the tax provision I will now turn the call back over to Mitch. Thank you Jim in closing, while we have more to do I am pleased with revenue and expense trends through the first 6 months.
Months and the prospect for more loan growth in the second half of 2021, our balance sheet is well positioned and affords us optionality as we look forward.
Now I will turn the call over to the operator for Q&A.
We will now begin the question and answer session to ask a question Press Star then 1 on your Touchtone phone.
You are using a speakerphone please pick up of your handset before pressing the keys.
If at any time of your question has been addressed any of the back to withdraw your question Press Star then 2.
At the time, we will pause momentarily.
While our roster.
And the first question comes from Kevin Fitzsimmons with D. A Davidson. Please go ahead.
Hey, good morning, guys.
Good morning, Kevin.
Maybe we could start out with mortgage debt.
I think we've talked about this coming at some point and it was it was definitely a.
Hum.
It kind of normalize from trend from what we've seen and.
Just curious if you can drill down into what your thoughts on when and at what level mortgage revenue was my trough.
I know there were.
This quarter production stayed relatively strong, but you said you had compression in gain on sale margins. So maybe a little detail on that and also how.
Mortgage expenses are are acting I'm, assuming most of the decline in salaries was due to that variable rate cost. So just drilled.
All of them down a little more into your thoughts on mortgage.
Sure Kevin in the.
As you mentioned is going through your question mortgage remains a key part of our business and while we saw many things that we expected. This quarter. There are certainly positives as we look forward, but I'll.
To expand on mortgage Jim.
Kevin.
And as you as you said I mean, we we.
Essentially of returning to more normal times in mortgage and I would say if you look at.
Yeah.
And detail of Q2, and think about where we're going for the second half of the year.
Here I would anticipate the Q3 will.
If we if we continue the trends that we saw in the latter part of Q2, you'll still see a little bit of the.
The decline in terms of mortgage contribution in Q3, a couple of things there I would comment on.
Efficiency.
We look at the efficiency.
I'll ask the ratio in mortgage it's it's in the upper seventies, and that's the sort of back to where we were in.
The pre pandemic times, and we were running in the fifties for much of for much of last year.
I think of couple of things that we're looking at an inventory remains of a big part.
Of that and as you know, it's not just true for US it's true I think for the industry inventories of real constraint in terms of growth but.
All in I think we've pretty much gotten close to the trough of in terms of mortgage and that would be our expectation of absent meaningful changes in the marketplace.
Okay.
Efficient Kevin.
Kevin I would add a couple of Thomas just don't mortgage the.
For the mortgage operations and what we saw was the significant reversion to the mean.
As you mentioned, we've all been expecting the if.
We break down the expenses.
Had asked about that we did see variability on the expense side related to mortgage.
Just looking at the salaries employee benefits. If you look at about the we had roughly an 8 day.
8 and a half million dollar decline of salaries employee benefits mortgage only made up about half of that it wasn't all of it was only about half of it.
And we've seen this and we've been talking about some of the disintermediation.
<unk> that we've had over the last couple of quarters with fee income in that margin.
Our our originators are based off production that you see we actually had strong production in Q2, we had $1.5 billion in production down slightly from 1.7% in the prior quarters.
But really what's affecting net income.
The line item is the margin compression and as Jim mentioned, we think that we're out of point of view.
Approaching the point of stabilization.
We are enacting measures on the mortgage side that will.
The show that there is more variable costs that can come out of the mortgage operations.
And also would add that although you know compared to the past couple of quarters, Yes mortgage is down but mortgage did contribute $5.6 million for the quarter and pre tax income.
And that's actually several million dollars more than Q2 of <unk> 19, So we recognize that it has.
As you know mortgage optically over the last couple of quarters. It looks like it's underperforming, but if you. If you look at more normalized periods, which again, we think Q2 was income.
A reversion back to the normality.
Were actually up in gross income and pre tax income on the mortgage side.
Kevin.
This is Mitch I would just add as well and as we talk about being opportunistic and hiring talent is.
Jim and Kevin have described Jim Kevin just mentioned relative to expand some variable expense.
We will but we will continue.
To address those we also.
Also the opportunity.
To continue to recruit talent within the mortgage team in.
We've been successful in doing that over time. It does remain a core line of business for us. So as we look forward we.
We will certainly as we remove the expense we will look forward to opportunities.
The senior to grow that line of business.
Okay. Thank you I appreciate all of that detail and just a quick follow up you mentioned loan growth ex PPP was up about 3% linked annualized.
And Mitch you mentioned that you're optimistic going forward some other banks of Heidelberg.
Had a little more.
The pronounced the core loan growth, but the reported this quarter. So I'm assuming from your comments it was much more.
You guys experience of heavier headwind from <unk>.
Paydowns and payoffs so if you could drill down.
Beyond that 3% to give.
What youre seeing is giving you of those signals of optimism then.
How much of the headwind that those paydowns were.
Absolutely and your question is right on point, let me, let me began with the optimism in.
Let me start with the pipeline I'll reflect on.
On the production this quarter and the build in that pipeline and production as we ended <unk> and what we're kind of seeing as we enter into <unk>. That's continuing so our current pipeline is 261 million that's up from $240 million as we started the.
The prior quarter and up from 229 million prior year.
But we do see good growing deal flow pipeline across all of our markets and business lines.
It's reflective in production it's reflective in the.
The pipeline is.
As you look across those markets, 13% in Tennessee, 10% in Alabama, Florida Panhandle, 28% in the Georgia, Central Florida markets, 34% in Mississippi, 16%, and our corporate and commercial business loans. So as I look at the pipeline of.
61 that should result in about $78 million growth in non purchased the outstanding in 30 days.
The this current pipeline would indicate production somewhere in the 575 to $6.25 range.
As I said, we continue to see that bill.
The 2 that compares to production of 572 million. This past quarter that is up from $534 million in Q1.
So we continue.
Again to see the pipeline build production.
And the.
Certainly pointing.
Wanting toward positive loan growth in <unk>.
You made mention of pay offs, which is of very good point, we did see in this prior quarter pay offs elevate.
A little over $100 million and if you look at just the last 4 quarter average is a little lower.
$50 million, if you were to adjust that to our net growth.
Pay offs had normalized just at the prior quarter, the 3% net would have been 7% net or if it's simply been at the average it would have been at 5%.
But if you look a little deeper to your point in.
You examine those pay offs, we continue to see.
The reasons for those pay offs being the bar settled the underlying asset of about 57% are we lost it to <unk>.
Term rate or the permanent market in many cases that was about 25% so the attractive pricing.
<unk> of assets the demand for those.
With the liquidity that.
And the market as well as what the permanent market is offering relative to cash out non recourse type financing youre seeing some of those deals.
Go to that market earlier I think.
The thing the areas, we're not losing those cloths it's.
We're seeing some of these pay offs pick up but it just going back again to the pipeline. The production deal that we saw of this quarter.
They are in laws, our optimism and it comes back to market and talent and in our ability to continue to recruit talent, which we saw continue of this quarter with an addition of 7 Purdue.
Producers so.
Again talent markets pipeline Bill reflective of the production last quarter and how we saw that continued to the bill going into this quarter, we remain optimistic about net loan growth.
That's great. Thank you guys. Thank.
Thank you.
The next question comes from Jennifer That's true Securities. Please go ahead.
Thank you the morning.
Good morning, Jennifer.
Uh-huh.
I have 2 questions first of of Jim Jim could you talk a little give us a little bit more detail on the expense outlook for the next 2 quarters Oh from what clever Saddam on Europe for Black branch network on the <unk>.
I'm going for still coming.
Yeah, Hey, Jennifer Kevin I'll go ahead, and and take that so as we look out if if if you look there there was significant the significant decline in expenses quarter over quarter.
Down about 7 million, we talked about where some of that is just their build in the in the mortgage the the.
The mortgage operations, but as we look at the core bank. We are still realizing some of the benefits of 2 program. You know 2 initiatives that we announced the early retirement program of branch consolidation since we've announced that we've identified the another handful of branches of that are in the process of of being consolidated it's less less.
Getting the market and taking multiple locations.
And consolidating them in the 1 we have approximately another 5 locations that we're looking at doing that we have and then an additional.
Dish and they're still additional cost saves on the accountability measures that'd be reflected in the salaries and employee benefits that that that that occurred in Q2, and we will see more realisation of that in Q3 and Q for so as we look out.
The as we look out we expect non-interest expenses to continue to decline.
But a a real quick comment just on the efficiency ratio of if you look at our reported the fish the ratio of it's about 67, 68% if.
If you if you're normal if you back out mortgage and just kind of of the reversion to the normal mortgage the the banks efficiency ratio is more of the 63, 62% range of been holding flat there for the last several quarters, although the reported numbers bounced all over the place with mortgage the banks efficiency ratios.
It's kind of holding in there and that 63% range and the and again with efforts that we have on the expense side and I I do think we have momentum on our expenses as we're realizing Ah just starting to realize the call says from the initiatives. We've enacted you'll continue to see that line item come down.
But again, it's not all about the expenses, where we have identified and are working on ways to improve revenue.
We talk a lot about.
Pre tax.
Tax preprovision.
Income.
There's a lot of noise in the numbers, but underlying of what we what we're excited about is a solid trend line of continue on steady increase in the pretax Preprovision line item and that comes from expensive for that also comes from the revenue side, which of.
Which again if you look at the earnings release, we saw nice improvement in service charges and and in fact come from on the service charges line item. We are actually slightly ahead of where we were of Q1 of last year and and almost every line item, whether it's wealth management insurance fees and commissions.
To help all said, what's happening with mortgage we're seeing small and steady improvements in each of those other line items that will help all set.
Okay.
My second question is on merger interest there seems to be almost of friends who.
Going on in the normal so not started lack of where you're at <unk> dot com for for.
Mmm quite installed.
Yeah. Thank you Jennifer and we certainly continue to evaluate opportunities that that drive shareholder value for.
Of course remaining disciplined and as.
As we look at at those crop those opportunities and.
As always we.
We began will culture and business model and risk appetite and just making sure of line that exists but to always the answer that question are we better together so.
As we have been opportunistic and for the past.
And of course for us.
That certainly new talent of referred to that I mentioned, the 7 this last quarter's actually up to 13 for the year.
And also.
You've seen in our past just new markets or new business line says we have continued to build out some of our commercial and commercial specialty in corporate but also just back to your point, it's certainly strategic partnerships and we.
We continue to the.
Continue to evaluate those opportunities and certainly we will be doing the going forward.
Thanks for months.
Thank you.
Uh-huh.
The next question comes from Brad Millsaps with Piper Sandler. Please go ahead.
Hi, good morning.
Good morning breath.
Maybe I wanted to start with the the the balance sheet uhm it looked like the period.
Appeared in Securities portfolio is closing in on $2.2 billion up quite a bit of the average you guys have quite a bit of cash likely to get more back with.
You know like the P. P. P long drawn off just kind of curious how are you thinking about.
Typing the bond portfolio of going forward and the.
Stuff that you are buying kind of of what what average rates are those coming out of the books at.
Yeah.
The morning, Brad So as you know that we put on about $600 million in the quarter.
In terms of growth in the securities portfolio and anticipate.
We will contain of grow that portfolio, albeit maybe the more moderate pace.
And of that so we got 1 billion 6 in cash and I think you know.
We would sort of consider anything above 3 or $400 million of be access so the.
The course of the hope is that we've got lung growth.
That will.
Continue to to be president and will absorb some of that liquidity, but bottom line is I do think you'll see that's the curious portfolio increase in terms of the the yield that were put net door. It's roughly just above 1% and that's kind of 3 or 4 year duration on it [laughter]. So [laughter].
I think that's what we see in terms of liquidity I mean, when we look at our balance sheet compared to pairs were.
I think our investment portfolios about 12% of earning assets and.
That would imply that if we're appear levels that we'd have another $700 million or so and the securities portfolio I'll note that we'll get there, but we will certainly probably.
Increase that percentage of over the coming quarters.
Got it that's helpful. And then of this back for the mortgage business of this kind of curious what the.
The amount of loans that you actually.
Sold during the quarter, just kind of curious what the pull through right on the pipeline was and can you refresh my memory I know.
In terms of the commissions.
Do you pay those based on the lock pipeline and then retract some of that depending upon what solo or is that an actual loans sales just kind of curious if you've got you know maybe maybe more of come there. Thanks yeah.
Hey, Hey, Brad May answer the last question for.
Oh, no we pay on actual units closed and sold.
Now we will we will accrue just for accounting purposes will accrue at the time of lock income and expense, but but we don't actually pay until the loans is closed and sold.
I'll I'll need to follow up with you on the actual amount of what we sold I don't have that right at my fingertips 2 of them I'm not sure of your Ah down, but Brian we can follow up with you on the the the amount that's actually sold.
Okay, Great and then maybe nickel violence of mental Thank you mentioned new hires of 7 in the quarter just kind of curious I know you've you've had volunteer retirement, you're looking for cost saves what what was kind of the net number of of of maybe new hires you know in the quarter you know versus maybe people I know you are always sort of calling the bottom you know for.
510 per cent or whatever just just kind of curious what that net number might be.
Yeah, so for the quarter, Brad it's net down for so we had 11 exits and to your point.
Most of those exits are driven around the expectation an hour of discipline around the production.
We expect so.
Like I say I think the positive thing they are certainly that discipline remains that's been true. If you look back at 19.2021, we've been very opportunistic with talent, particularly as we've added business lines as we've grown of their lines of business, but it's certainly true in our core bank as well so.
Definitely opportunistic and hiring but.
The discipline is in place and the expectation of production.
Great. Thank you.
Thank you.
The next question comes from Michael Rose with Raymond James. Please go ahead.
[noise] Hey, guys. The most of my questions have been asked and answered but wanted to just touch on capital if I if I Miss I know you guys have the buyback and place you haven't really used any of it I think it's expires at the end of October any near term thoughts to using and then just separately I did see that you have the 2 series of.
Of that that are common do would the plan be too.
Redeeming replace or just pay it down thanks.
Yes, good morning, Michael Jim share some Michael on the on the buybacks Sir.
Certainly with the with the bank equity 7 pulled back the.
The relative merits of of buyback have become more attractive and you are correct.
We did not have any buybacks and Q2 and non thus far in Q3, so no buybacks yet but at.
Do under score they become more attractive relatively speaking and then in terms of the day for you right. We've got the I think July 1st.
Was of $15 million a piece of that that was collarbone and we've got another piece. It's I think it's $60 million in size of September 1st and both of those are at.
[noise] higher rates and so I would anticipate that that's something that we will we will act on at some point.
Okay. That's helpful. And then maybe just on the reserve front, we've seen a lot of Big reserve reversals this quarter of negative provisions and.
I know you've talked about growing into it and being a little bit more cautious and conservative I would assume that still the plan can you just confirm that and then can you just remind us again.
Again, what a day 1 posts day post useful day, 1 reserve is and if you think you can get back to that level of overtime. Thanks.
Yeah, Michael I'll make a comment I will turn it over to the gym and.
Or saw reflected earlier on.
Loan growth and the the.
The certainly the prospects there and I think those are good but.
At the same time as we continue to evaluate.
The reserve as we walked through the model.
Jim expand kind of what we're seeing today relative to the model and what we're looking for sure so and I'm moving.
When you look at at the model. There was why there was no change in terms of the.
Expense or released in the quarter of there was lots of activity within that model I would say if you looked at the at the buckets there was considerable activity.
And if things do not change materially 1 way or another.
Lone Grove of the economic environment et cetera. It does the data does 0.2 releases in coming quarters. So we were we were a little slow to taper off last year in terms of of.
Providing for allowance and it feels like our models is just working lease versus peers, it's gonna be a little slower to release than than pier. So at the.
Do anticipate that you could see releases and.
And coming quarters as it relates to day, 1 I think we were just a touch below 1% on the ACL day 1.
Philosophically, we're in no hurry to get back there.
And.
Again, our preferences I'm sure of for most people is to is to grow into this allowance with lung growth.
But I don't I don't I would not anticipate we get back the day 1 reserves anytime soon.
Okay. That's very helpful. Thanks for taking my questions.
Thank you Monica.
The next question comes from Matt only with Stevens. Please go ahead.
Thanks for pointing guys.
More than that.
1 of them took it back on the outlook for operating expenses I believe Kevin you mentioned that we could see a continued decline.
Of of operating expenses of can you just clarify if that include or exclude the that tax credit of amortization I guess the question is kind of of what what's the baseline that you're assuming when you say should decline from these these level yeah.
Yeah. So so thank you for clarifying that because of that if you just look line item non-interest expenses are down.
7 million, but if you back out the tax benefit.
Or the tax amortization of the benefits and the effect of tax rate of actual expenses are down 10 million. So so again, what I would say the answer your question of both but we continue to expect non-interest expenses to come down a quick call of non-interest expenses to come down which would.
Also be the reported as well.
Got it okay. Thank you and then also gonna ask about the core of alone you I think we were down around 7 basis points, if I take out the discount accretion any color on the the the new loan you'll production Ah that we saw in Tokyo.
Sure, Matt and Q2, new alone yields were were about 390.
And just for comparative purposes, they were about 370 in Q1.
And then in terms of what their we're placing if you look at loans maturing over the next 90 days that is loans are those loans the yield in those loans is about for 20.
Okay.
Thanks for that Jim and then last question for me is around deposits I think interest bearing deposits are now around the 36, the how much how much more room do you guys have to bring that down from here.
[noise] so cost of the deposits in the corner I think it was 27.
<unk> Ah went from 27 of 24 bps and our goal there is to get that below 20 by year and there's about a billion 6.
An interest bearing deposits the re price in the next 12 months and those funds of roughly at 90 basis points.
The total cost of funds went from 38% to 34 and much like.
The cost of the deposits week see some further opportunity there would hope that would get below 30 by year end.
Okay. Thank you.
Thank you Matt.
As a reminder of if you have a question press the star of it and wanted to join the account.
The next question comes from Katherine with a K VW. Please go ahead.
Thanks, Good morning.
Good morning Catherine.
Just 1 last follow up on mortgage can you.
Any indication of our most of the lower mortgage revenue it's from a decline in the for value of the lots of pipe line Uhm or is it just.
It looks like from your commentary that the origination volume with 1 of them, but not all of that match instead of just curious on what I'll say the pipeline get linked corner and if that kind of of factored into the estimate of form of night does that mean that we've kind of got further down south of that Paul from start to normalize.
Even further on the bottom half of the year.
I I would say Kevin much as we said I guess an answer the earlier question and and certainly happy to to get into more detail with you.
After the call, but I think generally we're pretty close to the trough of mortgage when you look at the results for Q2, and I think there's some downside of.
But it's pretty close to where you know.
Normal.
Profitability outlook would be in Q3, yeah, Katherine I would just add the.
The the drop in gross mortgage income was more of the value of that the of the 1.5 billion.
At lower margins.
So yes, if we get in the future quarters, if there's variability in that production there's variability in the margins.
If it's less production of lower margins, yes, it will drive.
Lower levels of of growth income, but but I think what we saw this colder again as of a large swing back to the me.
Which is where we've been operating kind of prepandemic.
I think it does speak to how strong our mortgage operations are 2 of just all of that accrual accounting in the pipeline and still have almost $6 million of profitability, but I do think as we go forward, we're going to see more of the cyclicality of mortgage as we typically see in that is cute.
2 and Q3 being the stronger quarters.
Q for Q1 could be just weaker quarters, because that's typically when homebuy slows down.
It just feels like we're we're returning more to normal there are external factors interest rates have pulled back a little bit and so we are seeing a little bit more refined opportunity.
As Jim mentioned housing inventories are gonna be of significant variable in this as far as new home sales.
We're not completely back to normal, but we reviewed Q2 as 1 large step back to returning to normal mortgage operation and its usual, it's usual cyclicality that comes with it.
Alright, and then.
Cause I think for what.
Normal.
Look look back for the 2018.2019 and told her mortgage revenue Eric.
50 million in 2018.57 million in 2019, but there was the acquisition of the first of all <unk> kind of correspondent P. So how much.
Actually we think about kind of adding onto revenue of just from that acquisition of for trying to compare.
I'm a normal idea, yes, I think the good proxy is comparing you to cute 2 Q of 90.
And if you look just over those 2 period I think we have the.
And it will be of proximate cause I don't have the exact numbers, but I think in gross revenue, we had about call of $15 million in gross revenue come.
Compared to this cold for about $20 million to $21 million.
For pretax income I think is up.
The almost double over the same time period.
So I I think I think 2019 will be a good proxy for what.
More normalized operation looks like but at the same time, we're operating more efficiently. We've added new team members, whether it's wholesale or additional team members that will drive growth in that line item and growth in the profitability.
Great. Okay. That's very helpful. Thanks for the pattern.
Oh, My last Christmas of kind of a.
Questions of can you remind us about how much of that lesson P. P. P E.
Yeah, that's my clothes from for by consulting fee and are there any kind of like Wow.
So around 1 triple pay Catherine there's about $4 million left and around too.
That program of course is terminated and we've recognized all of the referral fees there in queue too.
Great no more of kind of thrill.
The right from wrong Unround, yeah around 2 that's correct.
Okay.
Right. Thank you so much.
Thank you Catherine.
Uh-huh.
This concludes our question and answer session.
Now, let's from the confidence back over to management for any closing remarks.
Thank you Tom and to each of you on today's call. We appreciate your time your interest in Renaissance Corporation, we look forward to speaking with you again soon thank you.
Uh-huh.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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