Renasant Corp (RNST) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2006 Renasant Corporation earnings conference call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. If at any time during the call you require assistance (OPERATOR INSTRUCTIONS). I would now like to turn today's presentation over to your host for today, Mr. Jim Gray, Senior Executive Vice President and Chief Information Officer. You may proceed, sir.

I would like to welcome you to Renasant Corporation's third quarter 2006 earnings conference call. With me today are Robinson McGraw, Chairman and Chief Executive Officer; Stuart Johnson, Senior Executive Vice President and Chief Financial Officer; Harold Livingston, Senior Executive Vice President and Chief Credit Officer; and Corky Springfield, Senior Executive Vice President and Chief Credit Policy Officer.

Before we begin, let me remind you that some of our comments during this call may be forward-looking statements which involve risk and uncertainty. A number of factors could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.

Those 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 Commission. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

And now, Robinson McGraw will begin our discussion.

Thank you, Jim. Good morning, and thank you for joining us today for Renasant Corporation's 2006 third quarter earnings conference call. Let me begin by stating that we're pleased with our Company's 2006 third quarter results. During the third quarter, we were able to increase our cash dividend and also to affect a three for two split for our shareholders as we continued to experience success in what we believe to be our current growth markets within our tri-state footprint of Tennessee, Alabama, and Mississippi.

In Tennessee, the Memphis market continues to receive accolades for its inviting business climate. As Southern Business and Development Magazine's Winter 2006 addition recognized Memphis as one of the top ten cities in the United States for business and industry headquarters in relocation. The Memphis area MSA, which includes DeSoto County, Mississippi, is home to 10 Renasant Bank locations.

The national region of Tennessee is growing at a rapid pace as, according to the National Chamber of Commerce, the region beat goal estimates for new jobs, population growth, personal income growth and corporate relocation during the 2006 fiscal year ending on September 30.

This growth has not gone unnoticed by national media as, for the second year in a row, Nashville received the number one ranking in Expansion Management's annual Hottest Cities issue for business relocation and expansion while Kiplinger's Personal Finance magazine rated Nashville the smartest place to live in America.

We are continuing to analyze locations for our full-service bank at the national region to complement our loan production office located in the affluent Brentwood area of Williamson County. This location should be finalized during the fourth quarter.

In Tennessee, 12 month loan growth was over $80 million or 24.5% and deposit growth was $65 million or 30% growth. Looking at Alabama, in the Birmingham-Hoover region, the housing market bucked national trends and grew an astonishing 18% year-over-year according to the Birmingham Chamber of Commerce.

Noting this high housing growth, during the third quarter we expanded our mortgage operations by hiring the entire staff of the Birmingham office of Pinnacle Financial Corporation, an independently owned, retail mortgage lending company. In addition to our mortgage expansion in Birmingham, Renasant also hired the employees from Pinnacle in Montgomery, Alabama, giving us a retail office presence in the state's capital city.

With Renasant's five combined locations in the cities of Huntsville and Decatur, Alabama, the major focus continues to be on the potential influx of new residents from the BRAC Commission relocation assignment. As reported by the Huntsville Times, a recent University of Alabama Huntsville study estimates that Alabama companies could triple their money from federal contracts after BRAC moves are complete in 2011 and NASA's moon mission is in full swing by 2015.

The Decatur-Morgan County area will join Huntsville in the BRAC relocation of nearly 4,000 military families with incomes ranging from $80,000 to $120,000 per year according to the Decatur-Morgan County Chamber of Commerce. In the Decatur Daily News article, Region Getting Ready For Influx From BRAC, the Daily News notes that an estimated 4,700 jobs will be relocated to this area along with nearly 10,000 additional people.

In Alabama, 12 month loan growth was over $55 million or 12%, and deposit growth was $17 million or nearly 4.5%. Our strategic plans call for expansion in our Huntsville and Birmingham, Alabama growth markets for '07 and '08 and we are presently analyzing multiple locations alternatives.

In Mississippi, DeSoto County continues to be recognized as a rapidly expanding economic area as the U.S. Census Bureau shows that DeSoto is the fastest-growing county in Mississippi and is one of the top 40 fastest-growing counties in the nation. In Oxford, Mississippi, our new full-service location on the historic Oxford Downtown Square will be opening in early '07. In addition, our current Oxford full-service location, which is just over a year old is already profitable.

The city of Oxford in Lafayette County continues to be a highly profitable area as the County population of approximately 40,000 has combined assets estimated to exceed $10 billion according to the Oxford-Lafayette County Economic Development Foundation. In our Corporate headquarters city of Tupelo, located in Lee County, Mississippi, Renasant continues to enjoy strong market share. Lee County is the number one manufacturing County in Mississippi. This is according to the North Mississippi Community Development Foundation.

In Mississippi, 12 month loan growth was $17 million or approximately 2% and deposit growth was $85 million, or 7%. Building on our strong small business relationship reputation, Renasant has recently joined into a partnership with Lee County government in the North Mississippi Community Development Foundation in naming the region's new business incubator, the Renasant Center For Ideas. We believe this new center for small business startups and entrepreneurs will bring new jobs and industry to the region as well as give us an opportunity to grow our small business client base.

Joining in our recruitment of small business clients through the Renasant Center For Ideas and within our footprint, we recently announced a full suite of Renasant cash management solutions, highlighted with Business Check Express which is our remote capture product. This cutting-edge service, along with products such as ACH origination, account reconciliation, wholesale and retail lock box, positive pay, enhanced business Internet banking, payroll cards, multibank reporting, and outbound data exchange gives us a range of high-level cash management solutions that add value to existing relationships and provide a tool to establish new ones as well.

Looking at our current locations for future plans of expansion within these key Midsouth growth markets as well as the current banking consolidations taking place throughout the banking industry, we believe our Company is well situated to build upon our current market share as well as move towards the end of 2006. It is important to note that approximately 72% of our loans and 60% of our deposits are now in what we believe to be our key growth markets.

Reflecting our financial performance for the third quarter of 2006, basic earnings per share were $0.43, up 5% and diluted earnings per share were $0.42, up 5% compared to basic earnings per share of $0.41 and diluted earnings per share of $0.40 respectively for the third quarter of '05. Net income for the third quarter of '06 was approximately $6.6 million, up 5% or approximately $307,000 from the third quarter of '05.

Total assets were approximately $2.5 billion, an increase of 6% from the same period in '05. Total loans grew approximately 10% to approximately $1.8 billion at the end of the third quarter of '06, from $1.6 billion at the end of the third quarter of 2005. Total deposits grew 9% to approximately $2 billion during this same period.

On a link quarter basis, loans grew by over $32 million from the end of the second quarter to the end of the third quarter of '06. However, we closed several large construction loans in Mississippi during the third quarter that will begin to draw and positively impact loan growth during the fourth quarter of this year.

Net interest income grew 10% to $21.7 million for the third quarter of '06 as compared to $19.7 million from the same period in '05, while net interest margin increased from 3.94% to 4.02% for the same period. It is important to note that net interest income from the third quarter of '06 includes $527,000 in interest income associated with certain loans accounted for under SOP 03-3. This additional interest income from these loans increased net interest margin for the third quarter of '06 by 9 basis points.

Credit quality remained strong during the third quarter of '06. Annualized net charge-offs as a percentage of average loans were 13 basis points for the third quarter of '06 as compared to 11 basis points for the third quarter of '05. Non-performing loans as a percentage of total loans were 46 basis points at September 30 of '06 as compared to 45 basis points September 30 of '05. The allowance for loan losses as a percentage of loans was 1.10% at September 30 of '06 as compared to 1.15% September 30 of '05.

Non-interest income increased 14% to $11.7 million for the third quarter of '06 from $10.2 million for the third quarter of '05. Noninterest income for the third quarter of '06 represents 35% of our total revenue as compared to 34% last year.

Noninterest expense was approximately $23 million for the third quarter of '06 as compared to $20.5 million for the third quarter of '05. Salary and employee benefits were up 11% for the third quarter of '06 as compared to the same period in '05. Much of this increase was due to new hires; the opening of new offices in Oxford, Mississippi, East Memphis, and Collierville, Tennessee; the expansion of the Company's mortgage operations; and an increase in incentive and performance benefits.

I would like to mention that nearly $800,000 of this increase resulted from abnormal expenses which are over our normal quarterly accruals. Included in this amount was extra marketing expense, higher than normal fraud losses, an increase in our longer term and short-term incentive plans, and 60 days of 90-day guarantees to the new members of our mortgage team without any income to offset this expense.

We are pleased to note that we have been able to diversify our Company's revenue sources by increasing our noninterest income generating product line. In addition, we are controlling our expense growth while absorbing the expense related to the addition of three offices along with 21 production and support staff members to our new mortgage lending team.

In concluding my prepared remarks, let me again reemphasize our enthusiasm for the growth markets that we are currently in and our excitement about our expansion plans to further our presence in these markets. Now, [operator], I'll turn it back over to you for any questions that anyone may have.

(OPERATOR INSTRUCTIONS). Brian Klock, KBW.

I did have some of my notes. I was trying to write down as you were talking about the new mortgage team. Can you give us the details again? I guess, where did that team come from? How many people came over? And at what point in the quarter did they come over?

I'm going to let Jim answer that question as mortgage area is under his area.

The Pinnacle Group was an independent mortgage group in Birmingham and there were about 14 members of that team, about 10 of them are originators, four support staff and then the Wholesale Group out of Corinth, Mississippi, is about an eight member staff with two Wholesale reps and six support staff.

And I guess, the salary and the benefits increase was $710,000 linked quarter. How much of that is attributable to this new team?

In excess of $100,000, but now, Brian, a portion of that, all of the originators, the nonsupport staff, we only have a 90-day guarantee for them and there's only one month left on that guarantee. So that any additional expense will be offset by income from those. We were unable to -- although there were some closings, we've not booked any income from either of these during this quarter; that will come in the fourth quarter.

Brian, we anticipated that it would take us about 90 days to break even on both of these. We're pretty much on track for that. As you know, the way the mortgage income works is you get, on a closed mortgage loan, you get about half your income from origination fees at the closing date. The other half of the income is the SRP, which you derive when you sell that loan, which comes approximately 30 days later.

So, some of those loans that were closed in the month of September, we only received part of the income while we were -- we had to go ahead and pay the commissions related and the guarantees related to those loans in the month of September, though there's kind of a lag on the receipt of the income.

So we can expect -- maybe we can jump into the gain on sale of mortgage loans in the quarter, it was up quite significantly. I guess can you talk about how many loans -- what was the volume of loans sold and what kind of margins you sold at?

Our margins are still running about where they have run in the 50, 60 basis point range on the SRP. That's average for all loans, both wholesale and retail loans. But that gain that we booked in September was primarily related to the gain on loans that were originated by -- prior to the acquisition, because those loans were originated by both the Wholesale Group in Corinth and the retail group in Birmingham will be received in October.

In each of the three months in the quarter, the income was basically the same in the mortgage area. There was not one large month, if that was what you were asking, Brian.

And I guess just knowing that it was up substantially from the linked quarter, the gain on sale, just trying to get a feel for what was the volume of loans sold and I guess would we expect that to go up now you've got a new mortgage team that's going to be generating originations into the fourth quarter?

We're anticipating, out of those two mortgage groups, probably 75 to 100 million annual additional loans out of both of those groups, so approximately 150 million additional volume for -- in a 12 month period. And, of course, as we said, it will take 90 days for that to ramp up in both of those operations.

I guess with that I noticed that the loan growth looks like it was driven a lot by residential mortgages. Can you give us an idea about geography, I guess, and how strong that mortgage pipeline is, I guess, going into the fourth quarter.

Are you referring to portfolio loans now?

Yes.

Most of our growth, obviously, in the residential area is going to be in the larger Metropolitan areas, primarily in the Memphis area. We've also got good growth in Birmingham and Huntsville. Oxford is seeing some good growth. But it's pretty much going to be centered in those same markets that we've always experienced our primary loan growth in.

So do you think that that pipeline still looks solid going into the fourth quarter?

Yes, we've seen a little bit of softening with some of the builders as far as the number of homes that they're building which is a reflection of the market, but we haven't seen -- in the markets that generate most of our mortgage loans -- we haven't seen the decline that you hear about that some of the major metropolitan markets in certain areas around the country. We're watching that very closely, though.

And I'm not sure if, Robin, you want to talk about -- it looked like the commercial loan growth, both C&I and commercial real estate was down from the good selling growth in the first half of the year. Now, you mentioned something about that there's some construction loans in the pipeline that will close in the fourth quarter?

Yes, and this is commercial real estate that we're talking about. During the third quarter, we booked several commercial real estate loans that there have not been any draws on, or very minor draws during the third quarter that we anticipate occurring during the fourth quarter of this year. In addition, we've seen a rather strong pipeline in that commercial real estate area in some of our growth markets including the Memphis, Nashville, Birmingham, and Huntsville areas.

During the quarter there was $32 million of total loan growth. Can you break that out by Tennessee, Alabama, Mississippi?

Yes, as a matter of fact we do have that. I don't have that right in front of me. It's -- hold on just a second, I can tell you. I thought I did have that, but Mississippi's growth was, I think, for the quarter --

Mississippi had about going from June to September in the third quarter, we had about a $3 million loan growth which was slowed obviously from the second quarter where most of our [growth comes from]. You get into Tennessee, they had a $14 million loan growth. And then Alabama would have finished the remaining part out with --

About another $15 million.

Well, Alabama is --

I guess the math is 15, so, great. I'll let someone else get on the call.

Barry McCarver, Stephen's, Inc.

Good quarter. Robin, I missed part of the commentary on the expense discussion on the compensation line. Did I hear you say that the new hires were about 100,000 of that increase?

Yes, what happened during the course of this quarter, we hit some incentive targets that triggered a catch-up. So we had in excess of $300,000 other than normal accrual in that area. We had $100,000 plus in that new area. Plus, on a '05, '06 comparison, a large portion of that increase was due to the fact of the new offices that we put in during the latter part of 2005 that we have a full year of salaries on for 2006 which would include Oxford, Collierville and East Memphis.

But on a linked quarter basis, between $400,000 and $450,000 of that increase was directly resultant on those two items. I think the point we're making is we had a little over $500,000 of 03-3 this quarter of additional income as a result of that, but that was not quite enough to offset the in-excess of $800,000 of unusual expenses that we experienced this quarter.

That was very helpful. And then, just going back to the discussion on the loan growth, the mortgage operators that you picked up during the quarter, it seems like that's a little bit more of a focus on the mortgage market than you've had in the past. Is that just what came up opportunistically or is that really more of a change in focus?

A combination of the two. You know, actually, we had wanted to expand our presence in that Birmingham market and we had very few originators there. Most of our mortgage originators were in the North Alabama part and we felt that this was an opportunity because it did come up that we were able to do it. And so we were actually looking for a few mortgage originators but we had the opportunity of taking on a whole group and they had been quite successful in that area. We truly have a great mortgage lending group headquartered in Birmingham and I think that's how we were able to attract this group.

Their offices -- and we retain the offices they're in -- they're in Hoover by the Galleria Mall. I don't know if you're familiar with that area, but it's a real growing area of Birmingham, and the office is a really strong presence for us. It's a second-story level in an upscale shopping area. It looks right over a four-lane interchange, so just that alone gives us a lot of presence in the Hoover area where we don't have a retail bank presence at this time.

I will comment also on the Wholesale Group that we acquired in Corinth, which you wouldn't really think of a Wholesale Group being in Corinth but this was a group that our wholesale manager in Birmingham, who has many years experience in the business, was very familiar with, we're very familiar with this person and her staff. They're top-notch. They have clients all over northern Mississippi, northern Alabama and western Tennessee. So it was a natural fill-in for our wholesale operation because primarily right now our wholesale operation is pretty much concentrated in the Birmingham area and in some parts of Mississippi.

So, both were just really a natural fit that we -- it was an opportunistic -- we just had this opportunity and we decided to jump on both of them and it just so happened that the timing worked out where both of them became available at the same time.

From the expense standpoint, once we finish paying out the guaranteed portion of the current lease, that will be the end of that expense because we were able to move them into one of our locations in Corinth because we had some vacant space there. So there won't be any additional lease expense after that guaranteed part runs out.

Yes, Robin, we've seen you grow the mortgage piece before like this on the new retail locations in Birmingham. Would that be a prelude to potential de novo growth in the future -- additional de novo growth in the future?

Again, as Jim said, we don't have a presence right now in the Hoover area and Hoover is one of the areas of Birmingham that we would in the future look toward moving into.

Just quickly a question for Stuart on the tax rate -- somewhere around the 29 to 31% level still a pretty good bogey for the fourth quarter?

Yes, it is.

And then, just lastly, Robin, I always got to ask about acquisitions, particularly now that you've got a multiple in a currency that lends better to making some investments. Can you give us an update on kind of the outlook there and what you maybe saw during the third quarter?

We are very active in this area and are looking and hopefully between now and '07 we will have worked out or found some ideal partners.

Andy Stapp, Cowen & Co.

Excuse me, but I came in late on the call, but did I understand correctly that your -- the strong link quarter loan growth that you had on the gain of sale mortgages was not related to these acquisitions of these two groups?

That is correct.

What was driving such a strong growth?

Part of that is just seasonal year-over-year. Typically the third quarter is one of the strongest quarters in the mortgage. Summer, housing activity is pretty strong. So I think part of that's just seasonal plus we do have more originators this year than we had last year and then we had the prior quarter just in the, I guess, same-store sales you'd be looking at. So it was just kind of a natural growth.

And one other thing too, to point out, last year we had the entire Huntsville retail group leave to go with another group and we have restaffed that and so Huntsville's kicking on all cylinders again which -- I don't know if you were in on it awhile ago, we made the comment when Barry asked about hiring this group out of Birmingham, we felt like that Huntsville, after we restaffed that group up there, some of whom were our former originators that came back to work for us, was hitting on all cylinders and we needed to restaff in Birmingham in order to get it hitting at a higher level, but a good portion of this third quarter income came as a result of having the full staff in the Huntsville market.

When you look at such things as your bars financial condition and absorption rates amongst your developers, are you seeing any slippage there? Just provide some color on that.

Harold Livingston is our Chief Credit Officer and he's going to answer that for you, Andy.

We have seen some slippage. We've notice that with certain of our builders, their inventory is a little bit higher. We're watching that closely. It doesn't seem to be concentrated in any one particular area as much as it is just from one builder to the next.

We also have observed that houses for sale on the market are staying out there longer before they're selling. So what we're trying to do is we're particularly focusing on [stack] houses that some of our builders are building and how many we would allow them to build. We're concentrating more on that and then looking at their liquidity position to see how long they could withstand the downturn.

That's helpful. In looking at your loan growth link quarter basis, the average loan growth was much higher than the end of period loan growth. Was there some end-of-quarter paydowns?

Just the opposite. The period loan growth was higher than --

Do I have it backwards?

I may be wrong.

Yes, I think end-of-period was higher than link quarter, Andy.

Okay, never mind I was wrong.

I thought it was something like 3.3% or --

End-of-period loans third quarter was $1.761 billion versus a $1.729 billion, am I looking at that correct? That was end-of-period. That's correct. Yes, on the average was $49 million. Okay, I'm sorry.

Yes, and we did have some paydowns. As a matter of fact, in Mississippi, we've had paydowns for various reasons in Mississippi during this quarter and over the course of the year over and above what we would normally -- in Mississippi, we normally see paydowns for the first nine months of around $130 or $40 million, but we had abnormal payoffs of about $30 or $40 million for various reasons, but your business sales and things of that nature which has had an impact on Mississippi and a portion of those did occur during this quarter.

Andy, also, too, on that average, does include loans held for sale. If you look at adding the loans held for sale to the portfolio loans, we would be end-of-period $1.793 billion compared to $1.770 billion on the average.

Let me see. The deposit growth was not as strong as I thought it might be. Could you provide some color on that as well as the competitive environment?

Andy, that's to some degree intentional. As you know, we had such a robust first quarter with a lot of public funds, that we have intentionally not been as aggressive as we may be. We're to a stage now where we're looking to be a little bit more aggressive in deposit pricing because we have had some runoff of that. Our loan deposit ratio had dropped off rather dramatically as a result of that huge influx of public funds that we had basically in Mississippi for the most part during the first quarter. So we have not been as aggressive in pursuing deposits the second and third quarters as we normally would be. In the fourth quarter we're now back in a position where we will be.

Andy, I will comment that the dollar amount distorts a little bit the fact that we continue to grow a core checking account. They're low-cost dollars, but they're some of those big fluctuations in public funds and things like that [with the stores that] core growth that we continued as far as numbers of accounts in both business and consumer checking accounts to grow through the third quarter about the same as we grew in the second quarter.

Charles Ernst, Sandler O'Neill Asset Management.

I've got another question on the mortgage line. I think it's taken everybody a little bit by surprise. Were there any sales out of your normal portfolio -- your normal loan portfolio?

Our mortgage operation -- we sell everything as quick as we possibly can and so that's just normal pipeline. Just our normal pipeline sales. We don't have anything that we hold in the pipeline over maybe 30 days.

So the single family loans that you have on your balance sheet that you keep on your balance sheet, there were no sales out of that portfolio?

No, that was normal portfolio loans. We don't sell those.

And then, on the margin, you saw a little bit of core compression, I believe, this quarter if you back out all the moving parts. Any thoughts there, given the shape of the yield curve and what do you think?

I think it was like 1% from a 394 to 393 -- one basis point. And we pretty much see that 393, 394 as our run rate. We're not anticipating much of a change in that.

And then in terms of net charge-offs, do you all consider this level to be pretty normal for this environment or how would you characterize it? It's been bouncing around a lot.

We feel like our normal run rate annualized is somewhere 20 to 24 basis points.

And so do you think that this quarter is even a little bit better than we should expect for this environment? Or is this about where it should be for, kind of, today's environment?

We feel like it's pretty normal. We'll have a quarter that will have a little uptick and a quarter that will have a little downtick, but on average we should be running in that 20 basis point range.

And then you all made the decision to hold reserves -- reserve the loans flat for the quarter. Can you talk about why that is? I'm assuming your model would have told you, given how good NPA's are, and that you can continue to drop that.

Well, psychologically, we're at that psychological level that we just hate to be below. We feel pretty comfortable with where we are with the economy. At this stage of the game, we feel good about the loans that we have, Charlie, but with the noise out there in the real estate market and other things, we have, I guess what you would call, special reserves set for the occurrence of a real estate bust that in the event that were to occur, that we would not be totally destroyed.

So that is what we consider to be an extraordinary case, but we have a special reserve set for that particular situation. So, we feel like that the level that we are is adequate and not excessive.

So is it fair for us to think about that 110 mark going forward as sort of a target rate?

It could drop below that. Now I'm not saying that 110 is it. As we move forward, it will continue. It possibly and probably will drop as we work with our accountants on what an acceptable level is, we anticipate a little bit of leakage off that 110 number. If our quality continues as it is, we just kind of anticipate that being the case. Loan growth has an impact on it and it will drive really where we go. As we set aside money for these -- for loan growth, we probably will see a little bit of seepage on it.

(OPERATOR INSTRUCTIONS). [Joe Stephen, Stephen's Capital].

First of all, good quarter. I think Barry probably got almost all of my stuff, but I guess, it's sort of a bigger picture question -- your asset quality is remaining very good. I guess when we model out going forward, how do you sort of -- how do we as outsiders try to model in your provision? Because obviously your loan quality is remaining very sound. And if we have to guesstimate, is $900 million a quarter sort of an on-average, maybe a fair place to be?

And I know it gets more complicated with how the SEC wants nobody to have any planning like that, but just from an outsider's perspective. Again, thanks guys. Good quarter.

Joe, I think -- and by the way, congratulations on the Cardinals win last night. I think you have to look at several things -- our charge-offs, loan growth, risk rates on our loans in our portfolio that we have.

I would say, in fact, this quarter $900 was a little bit over our normal accrual and I didn't mention that in those extra expenses. Our normal accrual this year would be in the neighborhood of $750 a quarter -- $750,000 (multiple speakers) -- just a few zeroes. My guys would let me know that. $750,000 a quarter. You didn't realized that quality was that good, did you?

So it was probably $150,000 over what our norm is. Again, our run rate is probably somewhere in that range between that 750 and $900,000 and with the wild card's being extraordinarily loan growth, charge-offs, above what our norm is, and if our risk ratings change on some of our large credits.

Brian Klock, KBW.

I had two quick follow-ups. On the gain on sale of loans, I just wanted to double check -- if I do my math right, if you guys had a 60 basis point gain on sale margin in the quarter, I guess that would mean that there was $171 million of loans sold. Does that sound correct?

No, that's not correct. It should be in the 30 -- probably the $30 million range. That's about -- we'll run 30, $35 million -- oh, I'm sorry -- that's a month. I'm sorry. What number did you say again, Brian?

$170 million for the quarter.

That sounds a little bit high, but we probably -- I didn't bring my numbers as far as what we actually closed, but I want to say for those three months, we probably closed between $30 and $40 million each month. You're not far off of that. This will be somewhere in that range.

And then just one last question. Stuart, I'm wondering on the deposit service charges? They're up about 14% from the linked quarter annualized. And I guess when you look at total deposits being flat and even I guess the non-interest-bearing being down $15 million, I guess is there anything in there? Any new programs, NSF charges or things like that why the deposit service charges were up, and is that a good run rate going forward?

We didn't include anything else other than growth in DDA through our HPC program, and those, while they're up, usually third quarter is pretty good but fourth quarter we expect to be very good too. You've got the holiday season coming on. So we do expect a good fourth quarter as well.

(OPERATOR INSTRUCTIONS). There appears to be no additional questions at this time. I would now like to turn the call over to management for any closing remarks.

Thank you. We appreciate everyone's time today and all of your interest in Renasant Corporation. We again look forward to speaking with you when we report our fourth quarter and year-end results in January of '07. Thanks, everybody.

Thank you, ladies and gentlemen, for your attendance in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.