Renasant Corp (RNST) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2007 Renasant Corporation's earnings conference call. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference.

(OPERATOR INSTRUCTIONS)

I would now like to turn the presentation over to your host for today's conference, Mr. Robinson McGraw. You may proceed, sir.

Good morning, everyone, and thank you for joining us for Renasant Corporation's third quarter 2007 earnings conference call.

With me today are Jim Gray, Chief Information Officer; Stuart Johnson, Chief Financial Officer; Harold Livingston, Chief Credit Officer, C.H. Springfield, our Chief Credit Policy Officer; and Kevin Chapman, our Chief Accounting Officer.

Before we begin let me remind you that some of our comments during assault may be forward-looking statements which involves risks and uncertainties. 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 change [to] assumptions, the occurrence of unanticipated events; or changes to future operating results over time.

Let me begin by saying that we are pleased with our third quarter earnings, particularly since our '07 third quarter results reflect our acquisition of Capital Bancorp Inc. of Nashville, Tennessee. While we successfully consummated our merger with Capital on July 1st, 2007, Capital and Renasant completed the integration of our banking systems and processing applications on August 13th, '07.

Sales training and rebranding is currently underway as we are now moving towards full completion of the overall integration process.

The completion of this merger gives us seven full-service banking offices in the Nashville Metropolitan statistical area. The Capital acquisition follows our previously stated strategic plan to expand our key growth market. This merger is Renasant's largest in our 104-year history.

While Nashville has recently seen a slowdown in new home sales, we believe that its diverse economy and its lack of dependency on any one industry insulates the area from the adverse impact of downward business cycles. According to the Nashville Chamber of Commerce the area continues to see a variety of corporate head quarter relocations and it's consistently ranked by many publications as one of the top cities for business in the United States.

Recently bizjournals.com ranked Nashville as a top 10 metro area per capita income growth and Fortune Magazine named Nashville's one of its top 10 cities for professionals with MBAs.

In our other Tennessee market of Memphis, we continue to see strong growth from our four financial service centers located in Collierville, Cordova, East Memphis and Germantown. Germantown, Collierville and Cordova are distinct affluent suburban Memphis markets that best -- that boast significantly higher incomes than the rest of Shelby County.

All three have average household incomes near or over $100,000 per year compared to just $56,000 per year for Shelby County as a whole. This is according to the onboard LLC Data and the Collierville Chamber of Commerce.

We recently decided to expand our East Memphis location to grow our commercial and private banking business. We see this growth taking place over the next three to five years. This expansion of our facilities is needed to keep pace with the growth of our bank. Renasant has more than doubled in size since our entry into the Memphis market in July of '04 and Renasant is now the ninth largest bank in Memphis.

Our East Memphis bank along with our Germantown location gives us strategic locations in two of Memphis's most wealthy areas. We believe the Memphis and Nashville, Tennessee area markets will be strong for years to come.

Looking at our Alabama markets, Birmingham remains a thriving Southern financial center as Birmingham enjoys the nation's best record of long-term income growth, this according to the American Business Journal Report that looks at 25 years of changes in per capita income in the 100 largest metropolitan areas in the country. Experts in this report say Birmingham's transition from an economy based on heavy manufacturing to one based on a diverse range of growing fields, such as banking and health care, have led to the city's significant income growth over the last quarter-century.

Another one of our key Alabama markets -- Huntsville -- was recognized in the Huntsville Times August 7th article as growing personal income by 7.7% over the past year, which is higher than the 6.6% increase for all U.S. metro cities. Huntsville ranks 16th among America's best performing cities for creating and sustaining jobs according to the Milliken Institute 2007 Index which was reported by the Huntsville Times at September of '07.

In addition on August 7th the American Chronicle reported that Huntsville real estate should remain on target despite the nationwide decline, due to many factors, which include the influx of military families due to the BRAC relocations and a rise in per capita income levels of about 20% during the past six years.

As we have previously mentioned, we believe the Federal government's base realignment and closure decisions of '05 may add up to 5,000 military and 5,000 additional support jobs along with thousands of families moving to the area. Huntsville was also made one of America's leading five-star business metros in the Expansion Magazine August of '07 edition.

Just across the Tennessee River from Huntsville the Decatur Morgan County area is home to 20 Fortune 500 companies as well as the busiest port on the Tennessee River. Decatur is expected to join Huntsville in the population and employment gains from the BRAC relocations. Its current city estimates put between 500 to 600 new households arriving in Decatur per year when the relocation peaks in 2009 and 2010.

In Mississippi, we continue to be enthusiastic about our DeSoto County market. As the DeSoto County Economic Development Council reports the DeSoto population has increased 72% over the last 10 years with five to seven households moving into the county every day. DeSoto County's latest unemployment rate, according to the Mississippi Employment Security Commission, is 3.9% -- well below the state average of 5.9% and the U.S. average of 4.6% as well. DeSoto County continues to be the fastest growing county in Mississippi and the 29th fastest growing county in the nation, according to the U.S. Census Bureau.

In Oxford, Mississippi, we opened our second full-service banking location on June 1st, 2007. This office is located off the Historic Oxford Square and complements our Student Union ATM located on the University of Mississippi campus and our other full-service banking office in Oxford, which was profitable within one year of its opening.

We believe that Oxford will be the home to many Toyota executives living to the area in connection with the Toyota operations to be located in Blue Springs, which I will discuss shortly. Oxford is expected to open a Saturday school for Toyota executives and their children. Due to this we believe many Toyota Tier 1 and Tier 2 service providers may be eyeing Oxford as an area of future production locations.

In our corporate headquarter city of Tupelo, the economic news continues to be impressive. As mentioned last quarter, regional excitement over Toyota Motor Manufacturing North America's announcement to build a $1.3 billion automobile manufacturing facility in North Mississippi remains high. Site preparation is well underway; and manufacturing operations are beginning to commence or are expected to commence in late 2009 or early 2010. The plant is expected to initially supply 2,000 jobs with an estimated additional 2,000 jobs provided by Tier 1 and other suppliers.

In addition to Toyota Manufacturing, Toyota Boshiku -- a Toyota interior company -- and Toyota Autobody have both recently announced future plant locations in close proximity to Tupelo, that will bring in over $300 million in capital investment and approximately 1,000 combined new jobs to the region. We believe that the construction and operation of the Toyota plant, Toyota Boshiku, Toyota Autobody and other anticipated Tier 1 and Tier 2 service providers enhance the future growth prospects in our mature North Mississippi markets and may especially help to insulate the Tupelo market from the full effect of any downturns in the Mississippi or national economy.

Toyota's management has leased office space in the Renasant Center for Ideas in Tupelo as their temporary headquarters for 14 months until construction is complete and the manufacturing facility is up and going. As mentioned in previous earnings calls, the Renasant Center for Ideas is North Mississippi's business incubator that we have a naming rights agreement with through the North Mississippi Community Development Foundation.

Again, I would like to point out that our 36 locations within a 60-mile radius of the Toyota facilities should help us to capitalize on the Toyota impact in North Mississippi.

Looking at our financial performance for the third quarter of '07, basic earnings per share and diluted earnings per share were $0.39 compared to basic earnings per share of $0.43 and diluted earnings per share of 42% for the third quarter of '06. Net income for the third quarter of 2007 included approximately $373,000 or $0.02 per share in after-tax expenses related to acquisition of capital. Total assets as of September 30th of '07 were approximately $3.6 billion, representing a 37.3% increase from December 31st of '06, and a 41.7% increase since September 30th of '06. The acquisition of Capital increased total assets by $615 million.

Total loans grew to approximately $2.6 billion at the end of the third quarter of '07, an increase of 41.7% from $1.8 billion at December 31, '06.

The acquisition of Capital increased loans by $516 million. The Company's organic growth in loans totaled $246 million, representing an annualized growth rate of 18.05% since December 31st of '06. On a link quarter basis we grew the loan portfolio $95 million, or 19.04% annualized, since June 30th of '07. We are pleased with this loan growth and we are particularly satisfied that each state in which we operate contributed to the loan growth with $38 million from Tennessee of which $17 million came from our Nashville region, $37 million from Alabama and $19 million from Mississippi.

We are especially pleased to see the loan growth from Nashville which occurred during this conversion and integration period.

Total deposits grew $2.66 billion from September 30th of '07, a 26.3% increase from December 31st of '06 and a 34.2% increase since September 30th of '06. The acquisition of Capital increased total deposits by $490 million. Our organic deposit growth totaled $85 million, representing a 4% increase since December 31st of '06.

On a linked quarter basis, deposits decreased organically. Most of the linked quarter decrease in deposits was due to an intentional runoff of approximately $20 million in brokerage CDs and $25 million in public funds. Little if any of the remaining runoff was intruded to core deposit clients.

Net interest income grew to $26.7 million for the third quarter of '07 as compared to $21.7 million for the same period in '06. Net interest margin declined to 3.52% for the third quarter of '07 compared to 4.02% for the third quarter of '06. On a linked quarter basis, net interest margin was 3.52% for the third quarter of '07 as compared to 3.66% for the third quarter of '07 -- second quarter of '07. Excuse me.

As discussed in previous earnings calls, net interest income for the third quarter of '06 included $527,000 in additional income from certain loans acquired in connection with our acquisition of Heritage Financial Holding Corporation. This additional interest income increased the Company's third quarter '06 net interest margin by nine basis points and earnings per share by $0.02. Annualized net charge-offs as a percentage of average loans were six basis points for the third quarter of '07, down from 13 basis points for the same period in '06.

Nonperforming loans as a percentage of total loans were 57 basis points at September 30th of '07 as compared to 62 basis points at December 31st of '06, and 46 basis points at September 30th of '06. Nonperforming loans were $14.8 million at September 30th as compared to $11.3 million at December 31st of '06 and $8.1 million at September 30th of '06.

The increase in nonperforming loans on September 30th of '07 as compared to prior periods is attributable to the addition of two large loans in our Alabama market and the acquisition of Capital. Approximately $1.5 million of this increase resulted from the Capital merger and the two Alabama loans consist of a $3.9 million [lap] lot acquisition loan in [Trussville], a suburb of Birmingham and a $1.8 million loan on four completed condominiums in Perdido Key, Florida.

I would like to point out that neither of these loans were 90 days past due when we put them on nonaccrual. And we are encouraged that we have several buyers who have expressed interest in each project.

The allowance for loan losses as a percentage of loans was 1.04% at September 30th of '07 as compared to 1.07% at December 31st of '06 and 1.10% at September 30th of '06. Although net charge-offs were only $377,000 the Company accrued $1.3 million in the provision for loan losses in order to provide for our significant loan growth and the aforementioned increase in nonperforming loans.

Again, I would like to point out that we are not making any subprime loans in our retail bank or through our mortgage lending department. During '06 approximately one-third of 1% of all loans originated by our mortgage loan deposit department and sold in the secondary market were subprime; and none of our '07 loans have been subprime.

Noninterest income increased 14.8% to $13.4 million for the third quarter of '07 from $11.7 million for the third quarter of '06, which was derived from multiple sources including insurance, mortgage lending and loan and deposit fees.

Noninterest expense was $26.7 million for the third quarter of '07 up 15.8% compared to the $23 million in the third quarter of '06. The acquisition of Capital increased noninterest expenses $3.65 million including merger and other onetime-related expenses of $604,000. Excluding these noninterest expenses, the Company's noninterest expense decreased $13,000 as compared to the third quarter of '06.

We continued the trend of growing loans, deposits and noninterest income at a faster rate than non-interest expense. This is representative of our commitment to control our overall expenses while at the same time significantly growing loans, deposits and non-interest income.

This complete -- now concludes my prepared remarks and now [Carisa] I will turn it back over to you for questions.

(OPERATOR INSTRUCTIONS). Barry McCarver from Stephens Inc.

Good morning. Good quarter. Robin, I wondered if you could go over again on the increase in nonperformers? I was trying to write that assessment but I didn't catch all your color, but just the difference between this quarter and the second quarter, that increase one more time?

We actually had some loans that were on the nonperforming list in the second quarter payoff. So, therefore, they dropped out. So your net result is going to be different if I give you these gross amounts. But as far as this quarter, we had $1.5 million of additional nonperforming loans came on as a result of the national merger.

Then in Trussville, which is a suburb of Birmingham, we added a nonperforming loan which was a lot acquisition loan to that number. That came on during the quarter as opposed to the -- let's see, if I can give you that number here. I have it in front of me. The Trussville number was $3.9 million. And then the -- that's lot acquisition loan. We do have buyers that are interested in purchasing those lots.

Then a $1.8 million loan on four completed condominiums in the Perdido Key. These condos are completed. They are in the leasing program, rental program and we do have interest in purchasing those.

Okay. So first off, just the loans that came from Capital Bank, is there anything going on there? Just you being conservative because it's an acquisition?

Correct. Those came over basically from Capital.

Okay. Then secondly just sort of your overall opinion of asset quality in your markets today versus the first half of the year. Have you seen any big change? I mean obviously you put a couple here that -- on nonperformers, but just your overall thoughts on any deterioration in the markets?

We -- I will talk a little bit about that Trussville loan. The developer there was doing fine as far as our project went. His problems came from a project he was doing in Florida which we had no relationship with that. Another financial institute was financing that which kind of was a domino effect which put him in a position that he couldn't continue with this project.

We are very pleased with the location of our project. It is right across from a new school. Trussville is a growing area, that Birmingham market. There's a very large mall going up very near there. So we are pretty comfortable with where we are as far as that loan goes.

We -- again, that other loan that we have on there is in Florida and this is the situation with the person just financially couldn't continue supporting it. And we do have some interest down there. These are good condominiums and we don't see any problems with that particular loan itself.

As far as all of our other markets are going, I'm interested in that Huntsville is really one that is not seeing any type of slowdown. We are seen some slowness in our other markets. We feel like that the North Mississippi area will pick back up as a result of Toyota and we are already starting to see a pickup as a result of that.

DeSoto County, as I mentioned, is still growing like it has been. It is probably not growing as fast of a pace as it has in the past and we are seeing a little more slowness in Memphis, but the markets that we are in in that Memphis area are all high network markets and are still experiencing some descent activity up there.

So it sounds like that these couple of loans here are really more isolated events and no real change in the quality of the market so far?

Yes although things are slower the good news is -- and I will give credit to our credit folks in this particular instance. We -- as we go through the process we pick builders with the liquidity and equity to be able to take care of slow situations like that. That's of extreme importance to us and it trumps a lot in slowdowns such as this.

But the other factor in there, too, is that we like to pick project in areas that aren't -- nobody is immune to it, but in areas that probably will continue to not necessarily thrive but proceed on in slower economies.

Okay.

Hoping that this will pay off for us.

And then just moving over to the margin for a quick second. I'm assuming that these changes in nonperformers had an effect on the margin as well. Could you go through a couple of the moving parts on the decline versus the second quarter there?

Of course Capital coming in had an impact on it, Barry, and I don't have the exact number there. But $100,000 of interest was reversed on those two loans that I mentioned. That had about a one basis point impact on margins for the quarter too.

Let Smoky Livingston -- Harold Livingston, our Chief Credit Officer, wanted to make a comment, too, on the credit issue.

Hi Barry. I just wanted to let you know the -- I have all of my senior credit officers in each of the major markets that we are in are out going through every one of the subdivisions and projects that we have financed, and are getting me a report back on the condition of each of those and those reports I should have this week.

So we are actively trying to make sure that there aren't any surprises out there. We are not naive enough to think that there aren't some problems out there, you know, here and there. But we are trying to make sure that we know about them as early as possible if they are there.

That's good to hear. Thank you.

The Capital. Back to Capital that approximates about three basis points of the margin decline and the balance of it we (technical difficulty).

Going back if you will recall, Barry, in the second quarter, we had an increase in margin as a result of the funds from the equity offering that we invested during that time frame and that accounts for the balance of that.

So it is really more on a core operation. It sounds like margin was probably flattish to slightly down. Is that fair?

And we anticipate our margins for the rest of this year, the balance of this year being around the same number give or take a basis point on either side of that. But in looking ahead we don't anticipate a significant move of any direction for the balance of the year. Should be around the number where we are.

Then just lastly, and then I will get off and let somebody else ask some questions, but I think we know that Nashville is performing extremely well. Alabama has as well. I think the surprise probably year-to-date has been the Mississippi market in Tupelo, in particular. Given your comments it sounds like Tupelo is still performing pretty well relative to the past couple of years. Is that fair?

Tupelo and interestingly enough we have had some decent loan volume out of a couple of our other Mississippi markets outside of Tupelo, Oxford and DeSoto County. That is our bread and butter in Mississippi and, again, those markets have performed better this year than they have last year. But in addition to that we have had a couple of surprises in some of these other markets as far as being able to pick up a little loan volume.

We feel like that the impact of Toyota is going to have a marked improvement on our North Mississippi markets; and as you know Toyota Tier 1 suppliers are located within a 60-mile radius of the plant. And I think 80% of our Mississippi deposits taking DeSoto County out of the mix, which we consider part of that Memphis MSA, are located within that 60 miles. And 100% of our Mississippi deposits are located within 100-mile radius of the plant which is where the Tier 2s and 3s will be located.

Yes. Okay, guys. Thanks a lot.

Kevin Reynolds of Janney Montgomery and Scott.

Quick question. I was trying to keep up as well and I want to thank Barry for asking most of them for me, but you mentioned I think charges related to or expenses related to the merger of Capital and I think the number was 377 (multiple speakers) just wondered if -- ?

After-tax.

After-tax, 377 and was that prior quarter or did that actually fall in this quarter?

That fell in this quarter.

Okay. That's the only question that I had. And I think a good quarter, guys.

Thank you.

David Scharf of FTN Midwest Securities.

Also once again, good quarter. I just wanted to also touch on the Capital acquisition. You guys had highlighted that 20% cost save pretty realistic. Now that you have integrated everything, do you still feel comfortable and if you can also comment on how much of that was realized this quarter and what we should expect the next six months?

That number is actually probably a little bit, maybe a little bit over 20%, but we did achieve what we anticipated. And going forward those costs should be in play after this quarter. It's starting with the fourth quarter of this year.

There will be a little carryover cost, but not anything significant. Pretty much all of it was out the door by the end of the third quarter.

And were there any other non-recurring noninterest gains during the quarter that weren't highlighted, maybe lumped together?

We had a small insurance payment on a building that we had, very small, and we also had a small -- in our BOLE we changed BOLE policies. And we had a little bit of an accrual increase in that, but neither one of them were significant.

Great. Thank you, gentlemen.

Charlie Ernst of Sandler O'Neill Asset Management.

Question for you on the margin. I mean given that the Feds cut rates, are you guys -- but you still seem to be giving flattish guidance on the margin and my historical perception is that you're liability sensitive. Is that not true anymore? How are you thinking about that?

Part of it comes down that the repricing of some trust preferreds, a reprice quarterly and those are repriced on the 13th and they're priced based on the LIBOR index. And as you know LIBOR was at a pretty good high at that point in time.

So the fourth quarter will continue to have that interest expense and they won't reprice again until December 13th. That will have an impact on us to the extent that it hit us pretty heavy as a result of that.

So if you kind of back out what is going on with LIBOR and you look at the underlying margin do you still feel like you are liability sensitive or how do you feel about that?

We are pretty neutral to be perfectly honest when you take it all into account as opposed to liability sensitive. We appear to the liability sensitive on the surface, but we -- when you take into consideration everything, we consider ourselves pretty much (technical difficulties) positive.

Then can you give any detail in terms of your loan devalues on the NPAs that you highlighted?

Yes. We are -- in the lot loans that we mentioned on appraised values, we are like 85% loan to values and on the condominiums that I mentioned, we are I think we are

Charlie, we are below the appraised value. We have an individual interested at this point at buying the notes at par. So if we did that, all we would lose would be the interest approved to date.

Which in fact we have none since it's on nonaccrual.

Well, yes, and we've already charged that off, but we would have lost whatever we had accrued before we took it to nonaccrual. We feel reasonably good that may happen. That individual is known to us and can certainly get the financing if he needs it.

As we said those condominiums are already in the rental program so there's not -- and the condominiums are 70% loan to value.

And those condominiums are built. They've actually been rented out. They are not out just out there for sale, although the owners would certainly like to sell them.

And then the Nashville or the $1.5 million loan?

Oh Nashville? That was just -- those were there on accruals that -- (multiple speakers) .

Yes right. Yes, I was all of a sudden not understanding what I had written. And then just to clarify on the cost savings, where do you stand in terms of how -- what percent of cost savings have you gotten to date?

We feel the cost savings -- we gave a number at the time of merger of around the 20% cost save and we are achieving that number.

Has that already happened? Or I guess what is in the run rate right now?

Okay. In the run rate this quarter it did not happen, but in the fourth quarter that pretty much will all be in the run rate.

And can you remind me what the dollar amount is on that 20%? Ballpark, do you remember?

Yes. Stuart can give you that number. I could've told you that a couple of months ago.

It was -- go ahead -- about $2.5 million, I think.

$2.5 million. Great. Thanks a lot.

Brian Klock from KBW.

Hey Brian.

Good morning, Robin. Nice quarter, guys. Most of my questions have already been answered. I guess I just want to doublecheck and follow up on questions that Charlie just hand. On the two most recent increases or additions to your [NPOs], the lot loan -- is any development that is a residential development or is it know for commercial or do you know that?

It's a residential development and, again, it is in a very well-situated area. It is in a growth area of Birmingham and it's -- we feel good about it from the standpoint that there is a brand-new school going up right next to it. And in addition to that there's a new Galleria that is being built out in that Trussville area near here. So it's, I think, desirable property.

And the loan to value on that property is what?

85%.

85%. And the condos that are down in Florida so you said that there were four condos.

That's correct and the loan to value on that is 70% and we do have a potential buyer for the note right now. We have not really negotiated anything on that. I think the owners would like to sell it and there has been no problems with that. It's just -- and again neither one of them had actually gone 90 days past due before we put them on the list.

So these four condos are part of a bigger high-rise condo or -- ?

That's correct. And back to the lot development that we were talking about, again, the developer did not get in trouble on this particular development. He got in trouble on other developments he had down in Florida and as a result of that he could not continue with this because of his other problems.

Okay. I guess quickly, too, you talked about the loan growth. Again good solid loan growth despite all the noise going on with the acquisition and integration. I guess, with the Nashville there was $516 million in loans that came on from Capital. How did that grow from July 1st to the end of the period -- end of the quarter?

We added $17 million additional and the important thing about this is that if you go back and I think you all -- probably everybody on here has heard me say this before -- it took us eight months before we started growing in the Memphis merger and again we've doubled there since that time. In the Birmingham -- in the Alabama merger it took us a year before we had any loan growth. And as a result of that we -- it grew -- we have been growing at a 20% compound annual growth rate since that time.

So having a $17 million growth during the integration and conversion quarter, we thought was extraordinary.

Great. I wanted to make sure that I heard you say $17 million, but I was writing my notes so fast I wasn't sure if that was Capital or part of your normal Tennessee market, but great.

No, again, it was $38 million in Tennessee total and Capital was $17 million of that.

And I guess, do have the -- and Stuart I don't know if you have the FTE count at the end of the quarter?

No we don't.

I do not.

I guess maybe with the integration seems like it's moving ahead pretty quickly. Their cost saves seem to be on track maybe even a little bit sooner than expected. The personnel expenses were about $15 million in the third quarter. Now is that a good run rates? Is there any other expenses or things that actually may be in the fourth quarter or that's a good solid run rate here going forward?

(inaudible) good run rate.

And with the deposit runoff you mentioned that there was $20 million of brokered deposit runoff from Capital?

That's correct.

Is there any more broker deposit runoff you expect there?

They don't have a lot. I think they've got around $5 million allowed and those rates need to be pretty competitive at this time. It depends upon what loans do as to how we need that money pricing between Federal Home Loan Bank and those deposits.

And the $25 million of public funds, I know you've been talking about that for a while and the expectation that that would run down as well. Is there anything left there, too, that we should expect to run off in the fourth quarter or is that about done?

Well, we will have some runoff but we will add some because we generally add public funds during the fourth quarter.

Okay.

Again, the expensive public funds that we have been mentioning will run off into June of '08 and those funds if, in fact, we retain them will be retained at a different index than where we are today.

Great. Thanks again. Great quarter.

[Kevin O'Keefe] of Jefferies Asset Management.

Great-looking quarter. Well done.

Just one nitpicky question. It looks like you handled the expenses and the loan growth well on the Capital acquisition. Can you comment just as far as the initiative is as going on, on growing the (inaudible) income piece? I know that's one area that you mentioned where you think you could see some real justification in the merger if you can grow that out. Can you just kind of comment if you've seen anything there or when you think you could start to gain some traction?

Yes. We've already started the process of integrating our products and services into that market. We don't anticipate any substantial growth in that area during the fourth quarter, but over the course of 2008, we should in fact see them have a substantial increase.

In going back and looking at the other two mergers, it took us about six months before we started seeing that noninterest income growth showing any substantial changes.

Do you have an internal goal of where you would like to get that just on a pro forma of where Capital was or is just grow what you can and it should be positive in '08?

We have -- what we are doing is looking back at the other two markets and where we have gotten with them. You know, our non-interest income to assets has been running in that -- or the total income has been running in excess of 30% of total income and we want to start moving that up in that direction. The initial goal is to get them up closer to 15 to 20% of their income and then gradually working their way on up. They were very low to start with.

Right. Good. Then finally can you just comment, the loan growth was actually stronger than I expected at 19%. Do you have any kind of targets going into '08? I know you don't give official guidance, but just do you think you can keep that pace up there or throttle back a little bit?

Our budget is conservative for '08 because of the softening out there. Not knowing what is going to happen, we are looking at probably closer to 12 to 13% growth in '08, but anticipating that that -- that should, again, the economy change and we see the opportunity to do it, we see the ability out there to continue along at a pace of 15 to 20%. But whether or not we want to do it or not is the other question right now, Kevin.

Well in this environment anything double digits is fine by me. Listen, guys, you had a great quarter and I look forward to talking to you again soon.

Thanks a bunch.

(OPERATOR INSTRUCTIONS). You have no further questions at this time.

Thank you, Carisa. We appreciate everyone's time and interest in Renasant Corporation and we look forward to speaking with you again when we report our fourth quarter results in January of '08. Bye, everybody.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.