Renasant Corp (RNST) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2009 Renasant Corporation earnings conference call. My name is Dan and I will be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call over to your host for today's call, Mr. E. Robinson McGraw, Chairman and CEO of Renasant Corporation. Please proceed.

Thanks, Dan. Good morning, everyone, and thank you for joining us for Renasant Corporation's first quarter 2009 earnings conference call. Participating in this call with me today are members of Renasant Corporation's executive management team.

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 forward-looking statements. Those factors include, but are not limited to, interest rate fluctuations, regulatory change, 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.

Our first-quarter earnings results were solid in light of the continuing economic challenges facing our country. Highlights of the Company's first quarter of 2009 included record gains on mortgage sales and an increase in our non-interest income, while holding total first quarter non-interest expense growth under 1% when compared to the first quarter of '08 even with the increases in both our FDIC assessment and our expenses related to other real estate owned.

Looking at our financial performance, net income was approximately $6 million for the first quarter of '09 as compared to approximately $8.3 million for the first quarter of '08. Basic EPS was $0.29 and diluted EPS was $0.28 compared to basic of $0.40 as diluted, up $0.39 for the first quarter of '08.

Total assets as of March 30, 2009, were approximately $3.8 billion, representing a 2.1% increase from December 31, 2008, and a 2.6% increase since March 31, 2008.

As previously announced in November '08, we declined to participate in the government's TARP initiative and we continue to believe that we made the correct decision as our capital ratios have remained in excess of regulatory well-capitalized thresholds. As of March 31, 2009, the Company's Tier 1 leveraged capital ratio was 8.28%, its Tier 1 risk-based capital ratio was 10.99%, and its total risk-based capital ratio was 12.24%. Again, in each case in excess of regulatory well-capitalized thresholds.

We participated in the FDIC's temporary liquidity guarantee program and on March 31, 2009, Renasant completed an offering of $50 million of 2.625% senior notes due 2012. The proceeds of this issue will be used for general liquidity purposes including funding higher-cost secured debt that will be maturing over the next few months.

Total loans were approximately $2.51 billion at the end of the first quarter of '09, a slight decrease from $2.53 billion at December 31, 2008, and $2.58 billion at March 31, 2008. Our construction and development loans have been impacted by the current economic downturn more severely than other types of loans. Accordingly, we have intentionally reduced this sector of our loan portfolio by 25% over the past 12 months. This strategy accounts for the slight reduction in the Bank's overall loan portfolio.

Our credit officers continue to aggressively analyze our entire loan portfolio and make adjustments as needed. In addition, we are proactively analyzing our commercial real estate credit in an effort to identify potential problems and, if identified, mitigate any potential losses on those credits.

Total deposits grew to $2.69 billion at March 31, 2009, a 14.7% increase from December 31, 2008, and a 2.39% increase since March 31, 2008. As we have discussed in prior calls, management decided to allow deposits to run off rather than to try to match above market interest rates being paid in some of our metropolitan markets.

During the first quarter of 2009 deposit pricing in our markets returned to what we believe to be a more rational interest rate environment and we replaced alternative funding sources that we used in 2008 with deposits that were more appropriately price. As a result, we experienced double-digit deposit growth on a linked-quarter basis.

Net interest margin was 3.19% for the first quarter of 2009 as compared to 3.36% for the fourth quarter of '08 and 3.52% for the first quarter of '08. The decrease in net interest margin was in large part due to increases in non-accrual loans, the reduction in loan volume, especially within the construction and development area, and a decrease in rates on variable interest rate loans that were not completely offset by the reductions in the cost of funds. Current market stabilization strategies include placing floors on new and renewed loans, core deposit growth, repricing of higher-cost public funds and term borrowings maturing over the next three to six months.

Net interest income was $25.3 million for the first quarter of '09 compared with $27.1 million for the same period in 2008. Net interest income for the first quarter of '08 included approximately $531,000 in interest income from loans accounted for in accordance with AICPA SOP 03-3. Annualized net charge-offs as a percentage of average loans were 75 basis points for the first quarter of '09 compared or down from 126 basis points for the fourth quarter of '08 and up from 26 basis points for the first quarter of '08.

The allowance for loan losses as a percentage of loans was 1.40% on March 31, 2009, as compared to 1.38% at December 31, 2008, and 1.06% at March 31 last year. Non-performing loans as a percentage of total loans were 269 basis points as of March 31, 2009, as compared to 85 basis points on March 31, 2008, and 158 basis points on December 31, 2008.

Although loans past due over 90 days and non-performing loans increased on a linked-quarter basis, total loans past due 30 days or more and non-accrual loans only increased by $1 million. In addition, our ORE balances remained flat as we were able to sell as much OREO as we acquired over the quarter. I would like to point out that these sales were on a breakeven basis. Also, we currently have contracts on 13 OREO properties valued at over $2 million at a small gain.

As we advised during the fourth-quarter call, based on the provision we had in the fourth quarter of '08, our first-quarter provision, and our budgeted provision of $4.5 million per quarter for the balance of the year we could absorb any potential losses that we foresee on all loans including those more than 30 days past due, over 90 days, and on non-approval loans. This is based on input from our senior credit staff's analysis of potential losses under current and anticipated conditions.

I would also like to point out that several of the loans contained in the non-accrual bucket, including some large credits, are the balances of loans on which we had previously charged off a portion of the balance. Based on this analysis, we would anticipate maintaining a minimum allowance to loan losses of 1.30%.

Continuing to closely monitor our credit quality, we recorded a provision for loan losses of approximately $5 million for the first quarter of '09 as compared to approximately $15 million for the fourth quarter of '08 and $2.6 million for the first quarter of '08. As stated, we believe that we are adequately reserved for potential loan losses absent any unforeseen events.

Non-interest income increased 6.5% to $14.8 million for the first quarter of '09 from $13 million for the same time in 2008. The growth in non-interest income occurred primarily in our mortgage lending division as mortgage loan financing spurred by the near record lows in mortgage interest rates and increases in volumes from our Tennessee markets helped to fuel a record first quarter for '09. The Company's mortgage division achieved record income on mortgage production of approximately $262 million for the first quarter of '09 as compared to approximately $191 million for the first quarter '08.

Included in other non-interest income for the first quarter of '09 was a gain of $427,000 within the Company's securities portfolio. During the first quarter of '08 non-interest income included a $409,000 gain related to the redemption of shares as a result of the Visa initial public offering. Non-interest expense was $26.9 million as compared to $26.8 million for the first quarter of '08.

During the first quarter of '09 we had a 4% reduction in our workforce within markets where employee service capacity was greater than projected growth. In addition, we have renegotiated various contracts with suppliers and vendors while at the same time reducing our non-essential expenses. These management actions allow us to keep non-interest expense growth relatively flat during the first quarter of '09 as compared to the first quarter of '08. Again, despite the aforementioned increases in our FDIC assessment and expenses related to OREO.

As we move towards the middle of 2009, a quick look into our key markets reveals some noteworthy points of interest. According to HousingTracker.net and in-market real estate association data, Memphis, Nashville, Birmingham, and Huntsville have all seen a significant reduction in housing inventories during the first quarter of '09 as compared to the first quarter of '08. In addition according to market graphics we have seen housing inventories in DeSoto County, Mississippi, cut in half from this same period in '08.

Also noteworthy is that Tupelo, Mississippi, our headquarter city in the heart of our legacy market, was recently recognized by Site Selection magazine as the second-most active metropolitan area in the United States for business and industry expansion. We are still anticipating that the future opening of the $1.3 billion Toyota Prius plant and Toyota's multiple supplier plants will have a major economic impact in our legacy market territory when production commences.

We believe Renasant Corporation is well-positioned for long-term growth and viability. We will continue our efforts to properly adjust our loan portfolio concentrations for the current economic environment, implement initiatives to increase non-interest income, keep non-interest expense growth to a minimum, and maintain capital ratios in excess of regulatory well-capitalized thresholds.

Now, Dan, I will turn it back over to you for questions.

(Operator Instructions) Brian Klock, KBW.

Robin, I apologize. I got on a little late so I am not sure if you covered some of the credit inflows in your prepared remarks. But can you give us an idea kind of what happened with the increase in non-performing loans in the first quarter?

Basically what we had, Brian, were several loans that were in the 30-day bucket that we moved to the non-accrual bucket and some moved over to that over 90 bucket. Again, we are basically where we were in total loans past due over 30 days at the end of the year, just some of them have migrated a little farther down the line.

I will give you a little color on those loans that moved into that NPL category. We had about $960,000 of first mortgage loans, all of which were in Mississippi, that moved into that category. We had about $585,000 of second mortgage HELOCs which were basically in Alabama and one in Mississippi.

Residential construction and development type lending, which obviously was our biggest, had $22 million. Of that $6 million was in Alabama, $9 million of it was in Memphis, $600,000 basically was in Mississippi, and another $5.8 million was in the Nashville market. Had one multi-family in Alabama for about $900,000; in total about $950,000 in one-to-four family rental property, of which $700,000 was in Mississippi and $200,000 in Alabama.

Commercial development, income-producing type properties; we had about $3 million in Mississippi, about $0.5 million in Nashville. Totaled about $3.6 million. And owner occupied and C&I type loans we had a total of $4.4 million of which $1.8 million of it was in Mississippi, $250,000 in Memphis, and $1.8 million in Alabama and about $400,000 in Nashville.

Okay. I am trying to keep up. I might have to ask you for a couple of these. Now the last one -- the owner occupied, the C&I, the $4.4 million -- you said $1.8 million was in Mississippi, $250,000 in Memphis.

Right. $1.9 in -- no $1.8 million was in Alabama.

Oh, that is Alabama.

Yes. We had then $1.9 million in Mississippi; it was pretty much the same. $400,000 was in Nashville.

Okay. You said there was $3.5 million, was that commercial C&D? It was right before that that had --?

Yes, that was in commercial.

I guess what I am wondering is with what you are seeing there, I guess, first I know that we have got the residential construction so you had the $22 million there. Still that seems like the biggest part of where the weakness is. But I guess with the commercial construction are you starting to see any sort of signs that maybe the weak housing market and the weak economy is starting to kind of ripple over into the commercial construction projects that are out there?

We have really -- and I am going to let Harold Livingston, who is our Chief Credit Officer make a comment in a second -- but one of the things that we have done is proactively looked --. Going back, if you will remember, to mid-2007 we did this with our residential C&D. We are doing the same thing on our commercial property right now, analyzing it.

That was kind of basically what my remarks were as to what we have provided for is any anticipated losses that we may have in that category. Let me let Harold make a comment.

We haven't seen anything systematic in our portfolio. We have seen an occasion, for example, with a strip center that was built that isn't fully leased out and we have read, as I am sure you have, accounts of this on a nationwide basis where that has become a bigger and bigger concern. We are very aware of that. We are talking to our RMs through our regional president.

And if one of those type loans is presented we are analyzing it very carefully looking for equity in the deal, trying to analyze the market. So we have seen spotty things here and there. It hasn't been, as I have said, significant in our portfolio yet but we are certainly aware of what we have read about it on a national basis.

Brian, let me point out that we don't have any commercial development loans or construction loans that are past due at this point, over 30 or otherwise. And less than 10% of our construction bucket is actually commercial.

Okay. So that $3.5 million, Robin, that you talked about -- $3 million in Mississippi and about $500,000 in Nashville -- what was that? Was that commercial?

It was commercial but it was actually a completed commercial. It was not development; this was actually income producing property.

Oh, I got you. Okay.

And $0.5 million of it actually was a governmental deal that we were a participant with all of the banks in Nashville on that we don't know what the city and otherwise is going to do in order to pay this loan off. And for that reason we went ahead and put it on non-accrual not knowing the answer to it.

But we were a participant with several -- I think one of the large regionals was the leader on the deal, and I think most of the banks in Nashville had a piece of this particular project. The other two were basically income-producing property.

Okay. So is that the one that is in Nashville?

Yes, the Nashville one is the smallest of the group; it was $0.5 million. We had one for a couple of million dollars in DeSoto County and that was or still are in the commercial and in the development process. And then the other one was a strip center; it was in DeSoto County.

That loan has been on the books a long time. It was a struggle. It was partially owner-occupied.

Got you. Okay, okay. Let me ask another quick question and I will let some of the other guys get on. But Stuart, with the fee and commissions line it was up to about $1 million from the fourth quarter. How much of that was driven by the good deposit in flows? How much of that was service charges on deposits? Actually that is the line below deposit service charges. So how much of that is maybe a non-recurring item or is there something seasonal in there that I just am missing?

On your fees and commissions line the primary driver of that change there is the fees related to our mortgage division.

Could you hear Stuart, Brian?

A little bit. Yes, I guess so.

I am sorry Brian. You are relating to your fees and commissions line and the primary driver of the increases in that from the fourth to the first quarter is driven by mortgage fees. In conjunction with our financial services those are the two areas that drove that fee increase over the quarter. We have had some good business in the urban markets with our financial services as well as a lot of refis driving our mortgage division.

Brian, a portion of our increase in mortgage revenue came obviously from the refi business. But a portion came that over the course of the last half of last year we had several key hires in both our Memphis and Nashville markets bringing in teams from some large regionals in each of those two markets. And we have seen a rather significant ramp up in our revenue from those two markets in our mortgage area.

Heretofore we would defend it by pretty much on the Huntsville and Decatur and Birmingham and Tupelo markets I think more than anything else. But with the addition of these teams in Nashville and Memphis we are seeing a significant increase in volume.

Just to add to that Brian -- this is Jim Gray. Last year and early this year we were seeing kind of refi to purchase volume about 80% refi, 20% purchase. That has been changing, that mix and actually as of last month that mix had gone to 60% refi, 40% purchase. So as Robin had mentioned we are seeing, starting to see more retail activity, purchase type activity in those markets.

Okay, great. Thanks for that extra color, Jim. I don't know if you have the data for the continuation into April, but how our application volumes sort of trending I guess early April?

Pipeline is still strong. Obviously, this last move down in rates getting down into the 4%s again on 15-, 30-year conventionals has reinvigorated I guess some of those who were on the sidelines. So we have seen our pipelines pick up.

Okay, great. Thanks, guys.

Matt Olney, Stephens Inc.

Good morning, guys. Robin, you touched on this in some other remarks you made earlier but some of your peers have reported some credit deterioration in the middle Tennessee market over the last few days and weeks. Can you give me your assessment of the middle Tennessee market as far as Renasant's credits and remind us what your exposure there is?

I will have to check on the total exposure to the middle Tennessee market, but I think we are talking about $400 million in loans, $450 million in loans in that market. Actually probably closer to $0.5 billion in loans in that market.

We, as of right now, have not seen any significant deterioration. One of the things that we see as a positive for us today that we may not have seen as a positive at the time of the acquisition is we have very little exposure to the Williamson County and Murfreesboro area. Most of our exposure was in old Nashville for the most part. We have not seen as big of a decline. I think up there that have been not immune but we have been rather fortunate in what we have there.

Some of the credits that we have seen as slow or otherwise are credits that we have eventually worked our way out of. They have had a pretty good client base and a very diversified client base up there. Capital was -- of the two mergers -- of the three mergers Capital was more like we are than anyone else. They have operated the same way we have over the years and their credit metrics are very similar to ours.

They make up about 25% of our total loans and only 1% of their loans are rated substandard or worse. So they are in fact a good, strong quality and, as I mentioned, of those loans that we added to the non-performing list only about $6.7 million of those loans were from Nashville. Actually we had about $1.4 million that came out of that category so the net result in Nashville is only about $5.3 million. So we feel pretty good about where we are there.

Of course, we are guarded about every market that we are in, Brian. You never know what is going to happen but we feel like our credit staff has done a really strong job of analyzing and identifying credits that are coming up ahead of the game.

Now we did in the fourth quarter have some where people were showing significant liquidity not long before that quarter all of the sudden they had some issues and we immediately moved them into the non-performing category as a result of that. Some of which we anticipate possibly moving back out of that as time goes on, but we felt it a prudent and conservative thing to do to go ahead and do that during the quarter.

As a result of that we have made a preemptory provision that quarter that coupled what we have budgeted for this year; should in fact keep us in very good stead as far as being able to withstand whatever issues pop up during the course of the year.

Okay, that is good detail, Robin. Sneaking down even further in terms of types of credits that are in Nashville you said that the Nashville market kind of mirrors Renasant and other markets as well, so can we assume that construction piece makes up about 20% of the overall portfolio there similar to the overall Renasant piece?

Matt, it's probably less than the Memphis or DeSoto County market, and I will give you an exact number on that. Going back to what I said, Matt, a while ago about those loans that migrated to this list, I think of that group about $5.8 million was in that residential C&D category. Looking at it I see one or two of them that possibly will in fact come back off of that list just depending on what develops on there, but as a conservative measure we moved them into that category.

We did have in Nashville several loans, one of which paid off. Some others that were in that category that migrated off the list to the tune of about $1.4 million. So they are doing a good job up there and for the most part they did a good job in their margins on these loans that we are able to come out of fairly well. And if you will remember, we were able to identify the issues that were kind of hanging in Nashville to some extent like we did in Alabama at the time of the final due diligence.

A lot of them were brought in in SOP 03-3 and so we had those. We still have about nine basis points, I think, of allowance in that 03-3 bucket that we have had from both Alabama and from the Capital Bank. So when you look at our 140 we are not taking any participation of another eight or nine basis points of provision -- actually of allowance that we have in that 03-3 bucket.

Okay. Do you find the balance there at the --?

Just a second, Matt, I will give it to you. Smokey has it.

You are talking about on construction loans, Matt?

Yes.

It's running around $38 million of residential construction in the Nashville market and about $43 million on commercial construction in the Nashville market. So you add them together you are talking about $80 million out of a total pool of somewhere over $600 million.

Okay. Yes, you are right, Robin. That is quite a bit less than the overall Renasant level there.

Again, they were more diversified -- Nashville was a mature bank with about 12 years of hold as opposed to a less mature bank, let's say in the Memphis market. The more mature, the more diversified. For the most part I think start-up banks; obviously growth through construction and development type blending. That was an integral part of their lending in Nashville but it was not something that they were totally dependent on.

Okay. That is helpful. Lastly, on the loan loss provision about $5 million in the first quarter. I think you have said, Robin, in the past in '09 the provision will be somewhere at least $4.5 million, $5 million each quarter going forward. Is that still true?

That is true. You know, we thought the first quarter we wanted to upload a little bit and we made this quarter just depending on what we see. But, again, we are holding pretty close to that guidance as to what our provision for the year will be.

And that was the -- you mentioned the 130 reserve ratio guidance by year-end, too. Is that correct?

Well, that is the minimum. Going back to what I said before is if in fact we were to for some reason bring it, which we won't, bring to fruition the basically $90 billion of credits that are on the 30-day bucket out that the worst anticipated result we would see would be such that with what we have provided this quarter and last quarter and what was already in the allowance and what we will provide over the course of the year we would end up with no less than 130 basis points in our allowance for loan losses.

We don't anticipate that happening. But as we started our credit metrics and looking forward in our strategic plan we wanted not only to set worst-case scenario, because you never know what the worst-case scenario is but an aggressive scenario, what would that be. And so we looked at what would happen if we charged off between 20% and 25% of those loans that were in that 30-day bucket forward.

Again, those have not changed that much at all since the end of the year. What would we end up charging off? And if in fact we provided what we discussed providing, where would we be and it would be a little bit north of that 130 basis points.

Okay, Robin. That is good commentary. Thank you very much.

Brian Rohman, Robeco Investment Management.

Good morning. Bunch of questions here. What is the status of your Prius plant?

The Prius plant is on hold. As late as yesterday, while in Oxford making the talk, they continue to say that they are coming. They continue to say that in the course of that they were saying that they would be a strong neighbor. They would be a good citizen from an ecological standpoint.

I am going to lead Mitch Waycaster -- Mitch is our Chief Administrative Officer, but he at present is the Chairman of our Community Development Foundation and has been working closely with Toyota and suppliers for the last several years in this project. So I am letting Mitch comment on that.

Brian, good morning. Brian, I think simply said it's not a matter of if, it's when. Toyota is a very strong company, strong financial plan, and when the sale of cars pick up we will begin to produce cars in North Mississippi.

Let me remind you, Brian, that they do have 100-plus employees working in the plant today in the office, and so they have no intention of not starting up. A couple of things that are indicative of their intention is that they are paying the first installment of $10 million in the debt to the state of Mississippi. They will pay -- they have already said they would pay at the first of the year another $5 million.

You may remember this if you heard me say this previously, when they first announced they were coming they made a commitment of $50 million for education in the three county area that Toyota encompasses. As part of that create, which is a foundation in Tupelo, we will in fact administer this fund. They will be making a contribution of $5 million a year for 10 years.

That first installment is going to be paid, they have already indicated in January of '10. And that was when they were originally going to make that payment when they opened, so they are in fact going to make that payment.

So it's when. What is the outlook for net interest margin?

We feel like --

And maybe make a comment about the positive pricing, because you reference that.

Right. We are seeing deposit pricing much improved over what it was. Where we had the drop in margin in the first quarter we had started putting floors in toward the end of the year. But we still have loans that are without floors that obviously -- in December that last rate drop dropped the rates on those variable rate loans more rapidly than we were able to drop deposit rates because of competition.

Over the course of the last half of 2008 deposit pricing in a lot of our urban markets was very irrational. We had a lot of large regional banks that were illiquid and needed deposits obviously more so than we. We are pricing at very high rates and we took alternative funding sources during that time frame, utilizing wholesale funding and home loan bank borrowings, overnight borrowings during that time.

Those borrowings have all gone away now because of the substantial increase in deposits we have had first quarter. These have been very well priced to the extent that we don't anticipate our margin dropping further than where we are. And we are with the repricing of some of these loans anticipating that margin moving back toward a more normalized rate.

I would assume these are CD rates specifically you are talking about?

They were. Those rates in the third and fourth quarter that we did not try to compete with were CD rates.

And you are saying that some of the other guys who were more aggressively pursuing funding have backed off?

They have. They have. There has been a significant change I think in just about all of our markets as far as that irrational pricing is what we have seen.

Again, I want to just spend a little time on the uptick in non-performers and the reserve. I am trying to understand the discussion you had with a prior person. I think you were saying that if you went through all the non-performers you would have no more than 130 basis points of charge-offs. Is that correct?

No, no. What I said was, Brian, if we looked at -- right now we have around $90 million that is past due 30 days or more and that is inclusive of the over 90 past dues and the non-performing loans.

Which you said implied, because that -- I don't have the number in front of me -- said was about the same at the end of the fourth quarter. It's just that a lot of them were in the 30-day bucket.

That is correct, that is a correct. We had a migration of loans. There is about $5 million more in a linked-quarter basis in that category.

But the 30-day bucket, according to I don't know whether it is accounting rules or convention, you really wouldn't have had a reserve against. Is that correct?

No, we reserve against all of our credits. We have a reserve against every loan we have on our books.

So what you are suggesting is that the uptick in non-performers from your standpoint is just optics as far as the Street looking at the numbers, because from your standpoint the gross number of loans hasn't really changed they have just moved around?

Well, yes. What I am getting at is we did not see a lot more loans that moved into that over 30 day category to the extent that the troubled loans remained about the same. We did have a lot of those over 30s, several of those over 30s that migrated into the non-performing category. These were loans that we elected to go ahead and stop accruing interest on and then some that moved into that 90-day bucket.

We do see them as more critical and would have a higher reserve probably than those other loans. But what we do is we look at FAS 5 and FAS 114 and those loans that are what we consider substandard we call it or basically impaired would be in that 114 bucket. All of those loans that were in that over 90 and non-accrual bucket would be in that category.

Some of those loans that are on the over 30 category would probably be in that FAS 5 bucket that would have a smaller reserve in the neighborhood of 5% or something of the nature, whereas the others would be 15% or more reserved against those loans some of which have specific impairments. But what I was also saying was of those loans in that non-accrual bucket we have several of those, some of which are of large dollar volumes, that we have already taken charge-offs against.

Just for example, you may have a loan that -- have a relationship that is a $12 million relationship that we have already taken a $3 million charge-off against. And so that remaining $9 million you wouldn't expect to have a large reserve against it, because you have already charged off an anticipated loss. That is the case in quite few situations over the last three quarters that we have in fact taken some charge downs on some of those credits that we consider to be troubled. It may be for various reasons we can't foreclose on that property.

I will give you one example is we have a property -- one piece of property, for example -- that has been in bankruptcy for a while. We, in fact, could sell or could foreclose and come out of it at no loss and that is an issue. Quite a few of these credits are in bankruptcy. In the bankruptcy court if in fact there is equity in the property, we will not remove the stay and so therefore you cannot foreclose on that property. So it's going to hang in the non-performing category for quite some time.

You get some credits, as we have, that are fairly substantial that you will have little or no loss on there are going to hang in there for a long period of time. Some of which we have gone ahead and charged off, the portion that we would anticipate a loss, gone ahead and done that in anticipation of eventually getting the credit out of bankruptcy and moving forward on it. That would be the case on a lot of these other credits.

But what we have done is we have gone in and made an analysis of our entire portfolio taking special consideration of those loans that were past due at the end of the year and continue to be past due at the end of the quarter and look at -- and I hate to use the term a worst-case scenario -- but what we think to be an aggressive scenario as far as what a charge-off would be. Based on that if we continue with the budgeted provision that we have for the next three quarters that by the end of the year our allowance for loan losses would be no less than 130 basis points. That is where the 130 basis points comes in.

Right. Last question -- I am sorry to ask so many but --.

We love for you to ask as many as you want.

There you go. It ain't your dime so --. You made some reference to housing conditions and home markets for some of your markets. Could you just repeat those again?

Yes, we are starting to see a significant drop in the inventory of houses that we have. An example, in Memphis we have in March of '09 inventories at 12,000 as opposed to about 15,000 in March of '08. In Nashville inventories have dropped from about 15,500 down to below 15,000 in the Nashville market. Birmingham, again, we have seen drop from about 12,000 to about 10,500. Huntsville has dropped from in the mid-6,000 down to below 6,000. In DeSoto County we are talking from about 1,700 houses down to around 800 houses or below right now.

And that goes back to my comment about the other real estate. We have had -- even with the charge offs and foreclosures that we had the first quarter of this year, we basically stay the same in other real estate because of the migration in and out. We have sold over the course of the year 20 properties for about -- proceeds of about $2.3 million. Presently we have 13 properties under contract for $2.116 million. That has been about a $56,000 gain over what we had that property booked at.

A lot of that is coming in DeSoto County and some of these other areas where we have had a lot of houses. We are seeing a pickup in a lot of these markets on some of these houses that are on the lower end of the spectrum and so, therefore, we are starting to see some activity. To some degree I think especially DeSoto County as small as it is that $8,000 credit, I think first-time homebuyers, is in fact helping pick up some of that market.

Actually, I have heard the same thing in other places.

Actually, we have captured about $0.85 to $0.90 to in some cases $1, $0.95 on the dollar pretty much on the property that we have sold out of the OREO portfolio. We don't want to be in that business, but so far we have been really successful at it and I commend our folks for what they have done.

Great. Thank you very much.

Peyton Green, Sterne Agee.

Good morning. A couple of questions. One, what would you anticipate the tax rate doing going forward?

Peyton, this is Stuart. I anticipate based on kind of the level of earnings that we had that we are going to be somewhere between 27% and 28% indicated tax rate going forward.

Okay. All right, and then Robin if you can talk about the C&I shrinkage that you all reported I guess year-over-year and linked quarter. Is this mainly due to your efforts to kind of cull the portfolio or simply -- or are borrowers just simply paying it back? And then what is your outlook for C&I going forward?

I think you are talking a combination, Peyton, is that we are being very particular about the type of loans that we make. We do anticipate C&I lending picking up; that is one of the areas that we are in fact looking. And, again, these are good C&I credits. We are not talking about ABL type stuff that is in left field. We are talking about good strong C&I type credits. We are talking about owner-occupied type real estate credits, things of that nature that we see with strong borrowers with high net worth and good balance sheets.

Obviously, we are not going to be in that C&D bucket on new credits so we are looking to C&I and, quite frankly, we are looking at a lot of small-business type lending. You know, that was our sweet spot; that has been the sweet spot for the Nashville and to some degree some of the Alabama markets on the whole. And so we have seen a nice ramp up in that type of lending over the course of the first quarter.

The great part about that lending is that you get a substantial portion of those loans are funded with their own deposits.

Sure. Then on the CRE side, the CRE growth was pretty strong and the C&D book continues to shrink. Was there any rolling of C&D loans into CRE loans?

Yes, some of that was the case on the commercial side. You may have seen some, for example, some owner-occupied property would have been in that construction bucket. But in fact it would roll into the owner-occupied bucket after that was all said and done.

Commercial owner-occupied last March 31 was $468 million. Today it's $538 million so it has had a $90-plus million increase. Obviously, the C&D has dropped $179 million, so a good portion of that droppage in C&D was actually pay off, in some instances charge-off or whatever as the case may be.

Sure.

But we did have about $70 million rolled into that owner-occupied bucket.

Okay.

We still consider that as good loans that we like to make.

Sure, sure. And then in terms of the C&D book how much of it is residential related now? How much of it is commercial in nature?

Let me give you an update on that as of 3/31. Do you have that somewhere --? Harold?

(inaudible) Peyton, of the $539 million in total construction, and that includes land and land developments --.

Yes.

You have got commercial construction of $93 million and you have commercial development property of $31 million and you have commercial property of $64 million and somebody will add those three up.

Okay.

About $185 million.

Out of $538 million, so the rest is residential.

Okay. Then in terms of working your way through the residential, how do you feel about it going forward? Do you think the C&D portfolio is still going to throw more NPAs your way or do you feel about it now than you did 90 days ago?

I think you are going to continue to see pressure in that market. We have identified the ones, as Robin said, they are progressively moving through the past due from 30 days up to 90 days and NPLs, and we are addressing those. Obviously, if we reduce that portfolio and if you look at the trend it's nothing but reductions for the past 15 months, then the bad part of that obviously is going to start to wind down unless the economy just takes a horrible turn for the worse.

But of those that are not in that 30-day bucket and above, we feel like that we won't see as many dropping off the cliff so to speak. That for the most part they have made it this far. The odds are that they will continue to be able to make it, of those that haven't been identified. And quite frankly, there is promise for some of those that are in that non-accrual and/or over 90 bucket that we have at this point in time. But just to be conservative we have moved those in there.

I will give you an example. For one, we have a fairly large credit that we put on non-accrual, but at this point in time they are negotiating a contract to sell off about 25% of the lots at a very strong market price. But we have moved into the non-accrual bucket just from a safety standpoint, from a conservative standpoint and we have others that are just like that. But we feel like that at this point in time we felt like -- we started becoming more aggressive from the middle of the year forward, from last year on those that if there was a slight chance we went ahead and moved them into a larger reserve type bucket.

Okay, great. Thank you very much.

Andy Stapp, B. Riley & Co.

Good morning. I was wondering if you could provide the balance of both raw land and developed land?

This is Harold, Andy.

Andy, these are going to be combined. I don't have the breakout of absolute raw versus -- well, we coded as developed properties within a 24-month period we will call it developed. There is probably some just raw land within there too. But you are talking out of the $539 million figured, you are talking about commercial of about $64 million and you are talking $110 million of residential.

Are you saying the bulk of that is developed land or can you give me some order of magnitude of what percentage might be raw?

Yes, you are talking about raw land of about $38 million.

Okay, that is helpful. This may have been addressed before, I have been sort of multitasking, but a lot of people are saying CREs not construction development-related, CRE is going to be the next shoe to drop. Are you seeing any troubling signs there?

As I said earlier, we have seen issues with -- spite issues, if you want to call them that, with certain types of, like for example strip centers that have been built and have not been fully leased out. We are watching that very closely. In fact, we have pared back on our loans on those type of facilities. We just turned down a huge request just last week because of our concerns.

What I am trying to say is we haven't seen it to a great degree in our own portfolio, but we know that everything you read says that may be the next shoe to fall. Also, we have talked with people in that business who tell us that they either partially or with someone they know in that business had experienced request from the renters to lower the lease payments of the tenants. And we know that is going on as well.

So I guess that is the best answer I can give you at this point. We are watching it very closely and probably won't be making very many of those kind of loans in the future until we see some improvement.

Do you feel pretty comfortable, though, I take it with what you have now?

So far. We haven't seen -- we had that one that Robin mentioned earlier, but that loan was a small strip center that was partially owner-occupied. And that loan has probably been on our books seven or eight years and it has struggled for a long time. I don't know that that was not more of a management issue than anything.

The only other one that we had that fit into that category other than the one in Nashville I mentioned, Andy, is one in Oxford. It's actually a medical office building and we feel like that they are -- possibly that one could in fact work out.

Actually we have developed a credit committee that's main responsibility is in fact looking at good and troubled credits that are in that commercial area to be able to do an early warning identification of those in order to be certain that we are adequately reserved or that if we can help them to migrate out of our portfolio, whatever we need to do. They meet weekly. Part of that process is they meet with each of the four regions each week in identifying those types of credits.

So working with the relationship managers and the regional presidents in those markets we feel like this is prudent time well spent in order to be certain that we don't have issues that catch us by surprise.

Okay. Do you have handy your total retail and hotel loans?

Yes, I can get that for you. The number for hotels is $35 million.

Okay. And retail?

Retail is $102 million.

$102 million. Okay, great. All right, thank you.

Brian Klock, KBW.

Thanks, guys, for taking my follow-up. Stuart, I am sorry if you guys might have talked about this already earlier, but with the 4% workforce reduction were there any severance costs that were in that first quarter? And I guess maybe do you have the updated FTE headcount at the end of the first quarter?

I can tell you the severance costs. There were severance costs of about $250,000 in the first quarter.

Okay.

And the FTE count should be around 820 to 825 people right now.

All right. Robin, I know you commented about the net interest margin and obviously it seems like the outlook is for funding -- the pressures on the funding side to abate a little bit here I guess. Did you see the margin at one point during the quarter, did you see it bottom and then start to move up or were you starting to maybe see some recovery maybe a little bit here in the second quarter? What do you guys see from January, February, March, going into April?

We actually -- and I can't answer today -- we actually Friday morning have a meeting on this very topic that we will in fact see where or if margin has bottomed. The biggest question is the floors on loans as to what that impact has been and lack of impact. We feel like that that is probably the case.

One of the issues that we have right now, and it's actually the reason I am a little bit evasive, is we have all of a sudden like a lot of others been flooded with cash. And so, therefore, when you are earning about 50 basis points or less on funds that you can't commit for a longer-term basis it's impacting our margin. That is why I can't give you a definite. It has bottomed because we may have just a little bit longer period of time of it.

But what we have anticipated, I mentioned the temporary liquidity money. That is to replace some term home loan bank borrowings that are maturing, so those funds are committed for that particular purpose. We are looking at some of these public funds that are in fact rolling off over the course of this quarter and maybe in some instance a little bit into next quarter. But those were funds that were at some fairly high rates.

We are looking at how or if we do in fact continue to go after those funds there is a possibility we may let them roll off. And as we have some prepayments coming in on some investments not reinvest those funds either; that is what the anticipation is there. But the main thing that we are looking at is we have had an analysis going on is the impact of the floors and where we are as far as that goes on repricing.

We have a substantial amount of loans that are variable rate loans that are maturing and that will be repriced with floors if they have not already had floors added to them. We are continuing to see that happen at a very rapid rate. We have got about another $300 million that will reprice this quarter, so we should see an uptick obviously in those. Because if in fact they didn't have floors obviously where prime and LIBOR are today -- those have dropped to a rather low level and that has had some of the impact on us.

So in answer to your question, we definitely over the course of the second quarter will be seeing an uptick. But those are the factors that we are playing with right now as far as margin goes.

All right, great. Thanks. Appreciate it, Robin.

Matt Olney, Stephens Inc.

Just one more question; Robin, could you reconcile something for me? I thought you said initially there weren't any OREO write-downs in the first quarter, but then you mentioned later on talking about getting 90%, 95% of the price on some of the homes that you are selling?

That was in '08. First quarter we actually first quarter ended up with a slight loss. It was pretty much a wash. In the second quarter thus far of the 13 that we have under contract, the amount of the gain on those basically offsets the amount of the loss that we had in the first quarter. So in answer to your question we have pretty much broken even year to date on OREO sales of close to $4 million or $5 million -- about $5 million.

Perfect. Thank you very much.

Okay. Now, Brian -- I mean, Matt --.

Yes.

We did -- if you will remember, at the end of the fourth quarter we took an impairment of the $700,000 on some developed subdivisions in the DeSoto County market. One of them at $0.5 million and two of them at $100 million a piece -- I mean $100,000 a piece, excuse me.

Okay, that is right. Thank you.

At this time there are no further questions in queue. I would now like to turn the call back over to Mr. McGraw for closing remarks.

Thank you, Dan. We appreciate everyone's time and interest in Renasant Corporation. We look forward to speaking with all of you again when we report our second-quarter results for '09. Thank you, everyone.

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