Renasant Corp (RNST) 2010 Q3 法說會逐字稿

Good morning and welcome to the Renasant Corporation third-quarter earnings conference call. All participants will be in a listen-only mode. (Operator Instructions)

After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Robinson McGraw, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us for Renasant Corporation's third-quarter 2010 earnings conference call. Participating in this call with me today are members of our Renasant Corporation 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 the forward-looking statements.

Those factors include, but are not limited to, interest rate fluctuations, 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.

During the third quarter of 2010 Renasant had many accomplishments of which we are proud. On July 23 we completed a successful equity raise in which we issued over 3.9 million shares of our stock, which resulted in net proceeds of $51.4 million. The equity raise further enhanced our already strong capital position as our leverage and total capital ratios grew to 9.03%, 14.8%, respectively.

We also increased our TCE ratio to 7% at September 30, 2010, from 6.52% at June 30, 2010. In all instances our capital ratios remain above well-capitalized thresholds.

During the third quarter we expanded into the North Georgia banking markets through our acquisition of Crescent Bank & Trust through an FDIC-assisted transaction. The acquisition added 11 branches and increased total assets $778.8 million. Total loan was $369.6 million and total deposits $698 million.

The acquisition was immediately accretive and resulted in a pretax gain of $42.2 million with final settlement anticipated during the fourth quarter. Our present core earnings generated from Crescent are in line with internal estimates and will improve as we realize the full benefit of restructuring the deposit portfolio, which includes a change in mix and interest rate.

In addition, as we deploy the excess cash into higher yielding assets our earnings will be further enhanced. Our loan doors are open with emphasis on small business, inclusive of C&I and consumer lending. Further, as we move through the FDIC loss share process we are renegotiating and/or terminating various contracts. The Georgia conversion is scheduled for January 2011. At that time we expect additional cost saves after the completion of the conversion.

In addition to the expansion through acquisition, we continued to expand through branching opportunities. We expanded our presence in Birmingham during the third quarter when we opened our new location in Mountain Brook. We also hired seasoned banking talent in the markets of Memphis, Desoto County, Oxford, and Birmingham.

In looking into the fourth quarter of 2010 we will enter the city of Columbus, Mississippi, which, along with Starkville and West Point, is part of the growing Golden Triangle area. We will be opening our Main Street location within the next four to six weeks. Our market president has over 20 years of experience in the Columbus market and has assembled a team of experienced bankers.

These actions taken together during the third quarter have placed us in position to take full advantage of banking disruptions within our current markets as well as to capitalize on future growth opportunities as they present themselves.

Looking at our financial performance for the third quarter of 2010, net income was approximately $19.5 million as compared to approximately $3.8 million for the second quarter of 2010. Basic and diluted earnings per share were $0.81 for the third quarter of 2010 as compared to basic and diluted EPS of $0.18 for the second quarter of 2010.

Total assets as of September 30, 2010, were approximately $4.26 billion, an 18.43% increase since June 30, 2010. Total deposits were approximately $3.42 billion, representing a 27% increase from June 30, 2010.

In the Company's legacy markets, which are those excluding the North Georgia markets, the Company experienced strong core deposit growth as deposits increased to $2.72 billion during the third quarter. Non-interest-bearing deposits in the legacy markets grew to $322.3 million, which was an increase of 2.86% on a linked-quarter basis. Additionally, the Company continued to successfully reduce its cost of funding by changing the mix of interest-bearing deposits by growing lower cost retail and non-time deposits while at the same time reducing public fund and retail time deposits.

The Company's cost of legacy deposits for the third quarter of 2010 was 1.43% compared to 1.55% for the second quarter of 2010. Total loans were approximately $2.58 billion at the end of the third quarter of 2010 as compared to $2.26 billion at June 30, 2010. Loans from the Company's legacy markets were $2.22 billion for the third quarter of 2010.

The Company continued to focus on reducing its exposure to construction and development loans. In its legacy markets the Company reduced its construction and land development portfolios by $24.1 million or 7.8% during the third quarter. For the nine months ending on September 30, 2010, the Company has reduced its construction and land development portfolio by nearly $130 million or 31.32% compared to the balance of this portfolio as of December 31, 2009.

Net interest margin was 2.81% for the third quarter of 2010 as compared to 3.15% for the second quarter of 2010. The impact of the Crescent acquisition decreased net interest margin for the third quarter by 16 basis points due to the initial generation of excess cash that is in the process of being deployed and higher cost deposits that were either repriced at lower rates or withdrawn by the end of the quarter.

We anticipate the recovery of this 16 basis points during the fourth quarter as we realize the full benefits of cash deployment and deposit cost reduction.

In addition, the Company paid off approximately $148 million of Federal Home Loan Bank borrowings with an average rate of 3.45% resulting in a $2.8 million prepayment penalty which further reduced the net interest margin by 36 basis points. We anticipate the result of the prepayment to be a 17 basis point positive impact to margin going forward.

The rationale behind the Federal Home Loan Bank repositioning was that the prepayment of higher cost debt was the optimal use of excess cash generated from the Crescent acquisition as opposed to investing at current historically low rates. Furthermore, the prepayment penalty was less than the interest that we would have actually paid on these advances if we would have kept them to the original maturity.

In addition, interest reversals on non-accrual loans reduced margin by 5 basis points and excess mortgage-backed security premium amortizations caused a 1-point reduction. The Company's net interest margin, excluding the aforementioned items, was 3.39% for the third quarter as compared to 3.38% for the second quarter of 2010. Net interest income was approximately $24.3 million for the third quarter of 2010 as compared to approximately $23.7 million for the second quarter of 2010.

As we continue to reduce rates on time deposit renewals, deploy excess cash from the Crescent acquisition, and realize the full benefit of paying off high-cost Federal Home Loan Bank advances we anticipate core margin to continue to improve. Depending on how quickly we are able to deploy our remaining cash, we anticipate core margin for the fourth quarter to be in the [340] to [350] range.

Annualized net charge-offs as a percentage of average loans were 118 basis points for the third quarter of 2010 as compared to 121 basis points for the second quarter of 2010. The loans acquired in the Crescent acquisition recorded at a fair value which includes an estimated loan impairment. Therefore, in accordance with Generally Excepted Accounting Principles, the Company is not assigned any allowance for loan losses to these acquired loans at September 30, 2010.

Excluding the Crescent loans, the allowance for loan losses as a percentage of loans was 202 basis points at September 30, 2010, as compared to 182 basis points at June 30, 2010. The Company recorded a provision for loan losses of $11.5 million for the third quarter of 2010 as compared to $7 million for the second quarter of 2010.

The increase in the provision of loan losses in the third quarter of 2010 is reflective of the higher net charge-offs incurred during the quarter and potential deterioration in collateral values on certain loans, particularly real estate loans. As a part of our ongoing proactive reviews about credit risk, our central appraisal group, working in accordance with commercial real estate guidance, looked at some underlying collateral performing credits and put back this additional reserve.

Excluding the impact of the Crescent acquisition, non-performing loans were $65.6 million as compared to $64.7 million at June 30, 2010. An additional $67.1 million of non-performing loans were acquired in the Crescent acquisition. However, we expect the loss share agreement with the FDIC as well as our adjustments to the balances of these acquired Crescent assets to record them at fair value to provide substandard protection against loss on these assets.

Furthermore, loans 30 to 89 days past due, excluding Crescent loans, decreased to 1.05% at September 30, 2010, as compared to 1.57% on June 30, 2010. The progress we have made in reducing our past due loans gives us optimism about future improvement in our credit quality.

OREO, excluding OREO from Crescent, was $62.9 million on September 30, 2010, as compared to $66.8 million on June 30, 2010; $58.6 million at December 31, 2009. We acquired other real estate owned with fair value of $49.3 million in the Crescent acquisition. This OREO is subject to the loss share agreement with the FDIC.

During the third quarter of 2010 the Company has sold $9.5 million of OREO in the legacy bank resulting in an approximate 3% loss. Year-to-date the Company has sold $18.3 million of OREO resulting in a 4% loss. The Company already has approximately $6.5 million of OREO currently under contract to sell, which is scheduled to close in the fourth quarter 2010, and we are in the negotiation stage on several other parcels.

Non-interest income was $54.5 million for the third quarter of 2010 compared to $14.3 million for the second quarter of 2010. During the third quarter of 2010 the Company recorded an impairment charge on its trust preferred securities portfolio of approximately $2.9 million and recognized a pretax gain of $42.2 million, recognized in connection with the Crescent acquisition.

Also during the third quarter of 2010 the Company experienced a 64% increase in mortgage fee income on a linked-quarter basis. Non-interest expense was $36.7 million for the third quarter of 2010 as compared to $26.1 million for the second quarter of 2010. Non-interest expense for the third quarter of 2010 included normal operating expenses of Crescent, merger expenses related to the acquisition, and an impairment charge on the write-downs of other real estate owned of approximately $3.3 million for the quarter.

Our central appraisal group performed its regular evaluation of OREO which resulted in this impairment on mainly raw land and lots.

In closing, we look towards a strong finish in 2010 as we will enter a new banking market in Columbus, Mississippi, deploy excess cash to help grow margin, and continue to realize the benefit of stabilization of non-performing loans. In addition, through our actions this quarter we believe that we have mitigated future interest rate and credit risk on our balance sheet.

This coupled with our highest loan pipeline this year, along with the previously mentioned positive events occurring in our markets, makes us believe that we are now positioned to take advantage of opportunities to expand our market share and footprint as they present themselves in the future.

Now I will turn it back over for questions.

(Operator Instructions) Andy Stapp, B. Riley & Co.

Good morning. You mentioned that Crescent decreased the net interest margin by 16 basis points. Is this purely due to excess liquidity or was it also because Crescent had a lower margin?

Both, Andy. As we said, once we took Crescent over we had to give notice to shareholders to reduce the interest rates on some very high-priced CDs.

Okay. I came in late I apologize.

Deposit holders -- to do that we made that notification and on September 6 we were able to reprice. We saw the expected run-off that we had budgeted around $200 million. It was actually a little bit less than that and we have now in fact repriced those deposits in that market.

And how close have you repriced it relative to the rates in your legacy markets?

Andy, this is Jim. We brought those rates down to the all-in cost of deposits from a 220 approximately a 150, which is pretty much in line with our legacy cost of deposits that Robin mentioned earlier.

Okay.

Andy, also we had $337 million of cash in that transaction and we weren't able to start reducing that until September. Those combined factors caused that.

Okay. And what was the timing of the prepayment of the FHLB borrowings?

It was in mid-September.

Okay. And one last question and I will get back in the queue. You gave some color on the increase in the provision. Was there another factor? Specifically were you proactive at building reserves, especially given that you had the bargain purchase gain to offset the higher provision?

Let me answer that this way, Andy. Again, we evaluated the underlying collateral in some loans but, you know, we have always been proactive in building our reserves to take care of potential losses that could be one, two, or so years away. That we like to be in a position where those have, in fact, been taken care of and we feel this is just another incidence of that.

Okay. All right, thank you.

Kevin Fitzsimmons, Sandler O'Neill.

Good morning, guys. Robin, I am just going to ask probably the same question a little different way. I know it's a tough one to be very specific in how you answer it.

But my impression, and I think some investors' impressions, are that you had a very noisy quarter, you had a bargain purchase gain, and you were -- it provided you an opportunity to look a little further out and be a little aggressive on that front. And you just mentioned, I guess, looking several quarters down the line things that could come in.

So I guess what we are trying to gauge is what would -- this seems like a provision level in an OREO write-down level that is not going to be something we expect to see in the next few quarters provided something unforeseen coming out of left field. Is that a decent conclusion to reach? That you were able to be opportunistic and pull some potential problems forward in the sense of reserving for those? Thanks.

Yes, Kevin, I think what we feel like is that this is definitely not something that -- unless there is something unforeseen, we will be using our normal processes in the future. As we said a while ago, we feel like that our margin now is in a position to move into the 340 to 350 range.

We don't anticipate our provision for loan losses to be more than what our normalized rate for the fourth quarter; it's about $6 million. We don't see that being any different than that. And we feel like that during 2011, based on what we see today, that our provision on a quarterly basis should be less than that $6 million number.

Now part of that equation is to some degree I hope that the provision will be a little bit higher in that we are seeing the highest loan pipeline that we have had in some time. Our 30-day pipeline in the legacy bank is a $162 million and we have a $13 million, 30-day pipeline in Georgia. Mark Williams and his group over there have gotten back to normalized banking and we are seeing the opportunity to maybe even grow good loans in that particular market.

But let me emphasize again that in that we used our normal processes this quarter in order to look at these items. We just feel like that proactive -- we have always been proactive and we feel like this was no different in that particular regard.

And, Robin, that $6 million is that the normalized number for the third quarter or what you view as over a longer period of time?

No, no. That is kind of what we saw our normalized number was. Going into last quarter we actually were $1 million over that. We were looking this year at that type of number. Over time we feel like $6 million could be normalized to maybe even a little less. It just depends on what loan growth and what occurs in the portfolio in the future.

As you see, we have our OREO. We had a really good quarter on OREO sales. We already have a very strong pipeline based on contracts on OREO for this quarter and in addition we are even seeing some potential based on negotiations and otherwise with this being even better. We have some loans that are being foreclosed that we already have interest in at the loan level. So we are very optimistic about our non-performing assets going forward in the legacy bank.

Obviously, as we look to the loss share opportunities, those loans and OREO covered by off-share in Georgia, we feel like that we should be clearing that plate pretty quickly over there. Georgia sold $1 million of OREO with a loss of $34,000 this past quarter. And obviously we see that moving out quite quickly along with their non-performing loans.

Excuse me, but my -- with the weather changes my sinuses are acting up a little bit.

Okay. Thank you very much.

Joe Stieven, Stieven Capital.

Morning, Robin. My question was almost along the exact same lines. Essentially, my question was did you use this deep bargain purchase gain to very legally try to frontload some things. And I think you have answered it, so thank you from both fronts.

Thanks, Robin. You answered my question already.

All right. Thank you, Joe.

[Charlie Wolhuter], Howe Barnes.

Good morning, gentlemen. Curious how the integration of Crescent has gone so far and if you could touch upon kind of the big surprises, both positive and negative.

Crescent has been a real pleasant surprise for us. We have actually seen the integration from a human standpoint go much, much better than ever anticipated. As I mentioned a while ago, Mark Williams has gone over there as our market president and Mark has really done a great job of integrating himself in the community. Been very participatory in civic and other events and has brought together the team that was there.

I think one of the things, Charlie, that we have mentioned before, one of the great surprises of this acquisition has been the talent level that was there. Most of the talent was assembled post when the problems occurred and they have kind of reconstituted that group over there that was there before the problems occurred.

But let me let Mark -- Mark is here with us today. Let me let Mark kind of tell you a little bit about this integration process and where we are along the way. I think he can do it better than I.

Good morning. We really have had a good time in Georgia in our first roughly 90 days. We have spent a lot of time getting the Renasant name recognition out in our communities. That has been well received. Oftentimes maybe some of the other banks that have done the FDIC assisted has not spent as much time as we have.

We felt that is important for Renasant because of being our first step into the state of Georgia, getting that out there. The team that Robin has spoke of, a lot of the management team that was at Crescent Bank was there starting basically in 2007. They were brought in to help start diversifying that bank. Unfortunately for them it was a little too late.

Fortunately for us there were some management group in there that was experienced in C&I lending, retail banking. We have been able to try to take advantage of that group there, re-emphasis the type of banking that Renasant is known for, and we are very comfortable with what we are doing and how we are approaching that market at this time.

Okay.

Charlie, let me point out that, unlike many of the other Georgia banks that have failed, this bank has been around 21 years and they have a very strong core customer base. We have been able to build off of that.

I compliment Mark for the job that he has done on bringing this group together and getting, as we talked about today, they have kind of gotten their heads up and they are back out. As I mentioned, we have a 30-day loan pipeline over there of $13 million; these loans that are going to close within 30 days. They are actively out soliciting loans and we are very pleased with how things are going over there.

Okay. And you said you plan to be fully integrated in January?

Conversion will be in January.

Okay. And then approximately what do you foresee the timeline for cost saves to be fully implemented?

By the second quarter of next year we should have full implementation of cost saves.

All right, great. All right, thank you.

We actually, Charlie, going back to that the problem is our core provider has so many mergers that are occurring that we originally put back in March but we were able to negotiate that up to a January, early January conversion date. So we would have preferred to have been able to convert a little bit sooner than that but January is not all bad.

Okay, thank you.

Dave Bishop, Stifel Nicolaus.

Robin, getting back to that question in terms of the cost saves. Obviously there was some effect from the Crescent acquisition. You alluded to the merger charges; I think there was $2.2 million. But any sense here in terms of a good core run rate for some of the core operating expenses here for the year?

Yes, I think you can see -- for the coming quarter you will see that the core operating expenses drop off by about [three point], close to $4 million. Then you will have in January -- excuse me, follow in January another drop and then by April you will have a more significant drop. We can kind of cover that again off-line as we kind of go through and get the cumulative totals on that.

But there should be a significant drop over time as we move through the one-time expenses, as we get the -- experience some of the -- some of the cost saves will, in fact, continue as a result of the fact that we have the human resource expenses that will continue on. But a lot of the -- we have already negotiated out of some contracts. We have already negotiated out of some leases. Things of that nature will start being impacted during the fourth quarter.

But for the most part we will see the big, the full run rate of about $17 million annually hitting about -- for Georgia hitting at about April of next year.

Any update on the Toyota plant gear up?

Yes. Things are moving along at a very strong pace. Let me let Mitch Waycaster, our Chief Administrative Officer, who is our Toyota contact, let Mitch make a couple of comments about that. He can give more color than I.

David, we are -- Toyota is expecting production to begin in October of 2011 and it should be producing around 160,000 units a year. In relation to jobs, we are still expecting 2,000 jobs by production in October of 2011.

On the management front that will be about 200 jobs; they are currently at 76. Probably that will be increasing to around 170 by the end of the first quarter of 2011 and, like I say, going on up to 200 by October.

On the production side there will be about another 1,800 jobs and probably 70% of that number should be employed by May of 2011. As far as tier companies, we are still expecting about 2,000 additional jobs. Of course most of those will be employed during the first or second quarter of 2011. So things are going well.

Great. Thank you, guys.

Brad Evans, Heartland [Sons].

Good morning, everybody. Thanks for taking the questions. I was curious if you could just give us the number for the 30- to 89-day past dues for the end of the quarter.

The dollar amount?

Yes, sir.

Stuart?

There are approximately $23 million.

That is down from about $35 million in prior quarter.

That is great. Stuart, you wouldn't happen to have the 90-day past due number handy, would you?

Ninety-day past due number was $8.9 million.

So it looks like, Robin, your commentary last quarter that you had hoped to see for legacy bank, the credit situation, I guess credits start to improve meaningfully here is coming to pass?

We believe that, Dave. Of course, in the economy that we are in I always have to throw out that little caveat, depending on surprises that occur. Interestingly enough, this was really the first quarter this year that we did not have a major negative surprise hit us. We had some smaller ones but we have also had some positive surprises that have come about during this quarter.

So I think that we are on target with that. That we are seeing improvement there and we are optimistic about where we are going.

That is great. Was just curious with respect to Reg E and NSF fees, your experience there through the -- to the period since August, the enforcement of that regulation?

I am going to let Jim answer and it's an interesting answer.

Brad, actually we felt pretty good about that. Out of the clients that we contacted, which were basically the clients that have utilized the service, we have experienced about a 70% opt-in rate. Looking at our new accounts going forward, we are -- over half of our new accounts are opting in. But, as you know, less than half of your accounts actually ever utilize the service so we feel pretty good about the opt-in rate on new accounts.

As far as the impact to fee income, we had anticipated that that would run less than 10%. We still feel like that. We are somewhere in the -- I believe we are --although we are only a couple of months into it, we are probably more in that 5% range than the 10% range at this point.

Okay, that is helpful. I am sorry; if this was discussed I apologize, but just in terms of your experience with Crescent. Does that -- from an appetite perspective for further consolidation opportunities does it reinforce or further build upon your desire to continue to look at that route, either whole bank or FDIC assisted?

Most definitely. At this stage of the game we will certainly look at whole bank but I think the FDIC is still the preferred. We think that there will be some more opportunities that come. The fact that we are building our loss share team; our team is built, software is on the way, and we are starting the process.

We still, as I mentioned, have a few outstanding issues with the FDIC, which in talking with some others that even after almost a year they still have some outstanding issues. But we are working our way through that and the final resolution, we feel, on most of those issues will come this quarter.

We like these types of transactions. For the most part we are going to be looking for those that are like Crescent. We are, as I said a while ago and as Mark said, we are very pleased with the fact that we got a core bank. We received a core bank in this transaction as opposed to this being a transaction.

It was a strategic move on our part. We feel like we are going to be a major player in that Northwest Georgia market. We already are; Crescent was. And Mark has done a great job of putting Renasant's face in the market and showing that we are not there just as a transaction but we are there on a permanent basis. This is going to be one of our soon-to-be legacy markets going forward.

We feel like that we can take advantage of opportunities in the Northwest Georgia, Tennessee, Northern Alabama, and Northeast Mississippi area that will in fact continue to enhance our footprint. Not only are we looking for opportunities like that, Brad, but we still are looking like -- we mentioned our Columbus opportunity.

We have hired an individual that we have been looking at and talking with for some time to be our market leader there. We think that we have a huge opportunity in that area. We think that there is a lot of activity going on in some of these markets that would give us an opportunity to step in and really pick up a strong customer base.

So we are looking at a lot of opportunities, whether they be FDIC assisted, open bank, or de novo type activities at this time. We feel that we are well positioned to do it. And we think a lot of things that happened this quarter are putting us in a position where we can step in and really take off.

Just last question. Robin, I realize that we are still in a pretty volatile environment so there is possibility for surprises of course. But just considering where we stand right now, in terms of visibility into your business do you think you are in a position as we get to the end of this fiscal year will you be able to give guidance on 2011? Or do you think things are still too opaque where you won't be able to provide guidance to investors for the full year?

You know, we have never given actual earnings guidance. I can, I think, at the end of the year be able to give some pretty good guidance about certain segments of earnings, like provision and margin and things of that nature, which give you a pretty good indication of where we are going next year.

Again, going back to what we were saying, I think that the repositioning of the Home Loan Bank borrowings and other things that occurred this quarter are going to put us in a good position for 2011. I like where we are and don't know that I would trade places with anybody else. I think we are well positioned to return to really good earnings in the future.

Okay. Thank you, Robin. I appreciate it.

Bill Young, Macquarie.

Good morning, guys. Sorry I missed this, but could you tell me again how much (inaudible) you have under contract to sell in the fourth quarter?

Yes, right now we had $6.5 million under contract. We are still in the negotiation stage on others that we are close on. Even some that have not even been foreclosed yet we have offers on. We had one that we just foreclosed the other day that we are within striking distance of actually getting a nice contract on it.

Continuing to see a tremendous amount of interest in our vertical OREO and some interest, which is a positive note, in some of the land. So we are very optimistic along that line.

Okay. And can you also -- that was helpful, thanks. Could you also disclose what NPL inflows were this quarter versus last?

Sure. Let me let Harold Livingston, our Chief Credit Officer make a comment, Bill.

Bill, we had inflows and outflows were about equal right around at about $11 million. Residential C&D was the biggest item, both in and out; about $5.5 million out and about $7.3 million in.

Within the regions the amount of NPLs coming in was largest in the Nashville region and second in the Memphis region, which are the two regions where we have had our most difficulty. Particularly Memphis.

Thanks, that is helpful. My last question; you may have disclosed this earlier but I hopped on late on the call. What was the average cost of the FHLB borrowings you paid down?

Bill, this is Jim Gray. They were 3.45% and they were maturing over the next 18 months.

Great. Thanks, guys.

And, Bill, we mentioned that the penalty was less than the interest would have been on them had they continued.

Great. Appreciate it, guys. Thank you.

Joe Maloney, Sterne Agee.

In terms of OREO expense you guys noted I think that costs on OREO disposition was about 3% this quarter compared to 4% year-to-date but that collateral values were declining. Are there like regional differences in OREO valuations or types of --?

Well, types. About 80% of those pieces of OREO that we recognized an impairment on was land, either raw land or developed land. The other 20% mainly -- one of them was one particular specialty property that we felt had some pressure on it.

Okay. So outside of land, in terms of I guess like you said vertical construction, are you seeing improved pricing trends in OREO?

For the most part we are coming out of that, the improved portion, pretty close to what we buy it in at. We have had some experience even on some land that we actually were able to sell in excess of what we bought it in at. So we are seeing, I guess the best word would be, Joe, a little life in that area.

Okay, great. Thank you very much.

Brian Klock, Keefe, Bruyette & Woods.

Good morning, gentlemen. I dialed in a little late and it's not just because I am out here on the West Coast. I think most of my questions have been answered already.

But maybe Robin, I don't know -- if you did this earlier, I apologize. But I know that [Smokey] just talked about the inflows into NPL on the C&D book, residential C&D coming still related to Nashville largely and then Memphis. Maybe you can kind of talk about what is going on in those two markets.

Do you think we are starting to see any sort of stabilization in those values? And I guess from the loan side is there any sort of volume uptick that you could see or are both markets still somewhat soft? If you could just kind of comment on those things.

Yes, we think we are close to the bottom in values in those markets. Now Nashville, as you know, was a little bit late to the dance in deterioration and if you look at the inflows and outflows for NPLs to NPAs to ORE between our four regions, you can see very vividly that Nashville was the last one to experience the recession, if you will.

We think that the Nashville economy will probably afford it to come out a little quicker than Memphis. Memphis has lingered for quite a while. Values have dropped, as you know, significantly but we feel like we are pretty much at the bottom in what prices that we are seeing.

As Robin pointed out, on our vertical construction we are coming out pretty much what we are buying in for and have been for really the last two years. The raw land and the lots, we are aware that the issues have occurred but we are finally starting to see at least some interest in buying some of those lots and even some of the raw land. Not in great bulk purchases but more like one-off deals here and there, and that has been encouraging for us.

Okay, great. Thanks for that commentary, Smokey. I guess thinking forward, Robin, I guess looking at the loan portfolio and the loan mix on a linked-quarter basis the construction portfolio -- I guess it didn't drop as much as I would have thought. So are you seeing some new business in certain markets that are actually kind of offsetting some of the run-off in the portfolio? And if so, what markets are you seeing some of the new construction?

We are. We are seeing it and then the construction would be commercial type property obviously, not speculative type property. It's mainly in the Alabama and Mississippi markets, a little bit in Nashville. Very little in Memphis at this stage of the game.

Okay. All right and thanks again.

Although we do have some loans in the Memphis pipeline, which I think are -- starting this quarter we started seeing a little bit of life in that Memphis pipeline too which gives us a little light for optimism there. You were just in Memphis so you could see that there is a little bit more life in Memphis than it has been.

Yes, I agree. I guess with all the noise in this quarter with the BPO and all that stuff it seems like to me, looking at where your margin is coming out and talking about some of the trends in the provision level, it seems like you are -- snap back in the fourth quarter to core run rate sounds pretty good. And if you have got a good pipeline building in the loan portfolio it sounds like you could be heading into the end of the year on a good -- on some momentum.

That is why I am optimistic right now, Brian. I think that we are finally back to being able to be proactive bankers as opposed to on the defensive side of the ball. And, again, you couple the legacy market with all the positive things that we are seeing happen there with the positive news that we are having in Georgia in our actual -- we were very, very excited about the Georgia opportunity when it came up.

Our expectations have even been exceeded and they were pretty high at that stage of the game. Obviously we were disappointed in the length of time it takes to reprice under agreements CDs and some other things and the amount of cash that we have and based -- and the low interest rate environment that we are in today the difficulty it is deploying that cash at what we consider to be an acceptable rate.

But we felt that we took advantage of other opportunities by going in and restructuring those Home Loan Bank borrowings and getting a lot of that debt off the balance sheet to the extent that we are now in a position to really move forward in a very positive manner.

Great. Great, sounds good. Again, thanks, guys, for taking my questions.

Kevin Reynolds, Wunderlich Securities.

Good morning, everybody. Most of my questions have been asked and answered I think. Very good quarter, Robin.

But I guess one thing I would like to ask, and I apologize; I got on late so I apologize if you have already addressed this. FDIC-assisted deals, I know they are still compelling, but what do you think is going to happen in the next several weeks, months, quarters in terms of the pace of bank closings from the FDIC.

Do you think you are going to see more of those because it has been a little bit slow recently or do you think that they are starting to taper off?

I believe all indications from the FDIC even are that they think that there are going to be less than they ever anticipated in the beginning. Obviously in this market you saw the Cadence open bank transaction. I think we are going to be seeing more and more of those occur.

There is still a lot of risk in those transactions. You have to be awfully careful as to where they are in the examination cycle and otherwise if you look into those. We certainly will be proactive in taking a look as those opportunities arise.

We do feel like the next 12 to 18 months there still will be some FDIC-assisted transactions. I think you are going to see, Kevin, the process going like this. You will see some of these banks trying to raise capital, unsuccessful in raising it.

They will try an open bank transaction. If successful that is wonderful, but if not you will see the FDIC stepping in right after that process is over and shutting the doors. And so the FDIC-assisted transaction will in fact continue along that line.

They are going to be, I think, much more competitive than they have been because, as you saw the bid on the Cadence transaction, that got pretty competitive between two bidders. And I think the Cadence shareholders ended up with at this stage of the game pretty darn good price at $2.50 a share. I think that was a -- I am sure they are disappointed as to what they got based on what they paid for the stock and where it was worth, but I think that the shareholder came out pretty good right there.

But as we move forward I think the FDIC sees a lot more of this happening because they just sent out a notice that they are not going to be increasing assessments as they originally said they were going to. I think there was originally like a 3% increase that was going to be out there and now they have notified us that that is not going to be the case.

So I think you are going to be seeing more open bank transactions, but there will be some that probably won't be able to complete an open bank transaction. And they will, in fact, still fall into the FDIC-assisted bucket.

Okay, thanks. And then I guess offer you good luck for the tough game between your Black Bears and my Razorbacks this weekend.

I tell you what; we will just see who is tougher along the way. We found out last week a Black Bear can't take down an Elephant.

Matthew Olney, Stephens Inc.

Good morning, guys. I was just trying to get some more color on the net charge-off mix in 3Q. Anything you can tell us of note, whether it's by loan type or by geography, and is there any significant change from previous quarters? And then, secondly, I guess maybe an outlook for charge-offs in the next few quarters.

I think on the outlook side we are not anticipating charge-offs at the level that we saw the last two quarters. We think that we are going to be back down to a more normalized type charge-off rate. This quarter we saw about $4.2 million of charge-offs fall in the land development side; about $400,000 in the construction; about, let's see, non-owner occupied was about $240,000; and I think --

Production and development was $4.6 million.

Yes, $4.6 million total construction ended up, which obviously was the major portion of it. The rest of it was fairly equally distributed down through the (inaudible). Owner occupied one-to-four family was about $1.3 million but that is mainly HELOCs.

And anything to note by geography at all?

Again, most of it's coming out of Memphis or Nashville.

Okay, that sounds great. Thanks a lot, guys.

Andy Stapp, B. Riley & Co.

Could you provide some color on the Crescent branch network? For example, do you foresee the need to do any branch relocations?

For the most part, Andy, we are pleased with the locations. We would consider a couple of potential relocations, but we think that they did a very good job, for the most part, of the site selection for the locations that they have. They are very well distributed around the market. We like the communities that Crescent is in.

The good thing about the Crescent footprint is we don't consider it a metro Atlanta footprint. It's more like the Mississippi, Alabama, and Tennessee banks that we have. Some of these towns are just like Mississippi and Alabama, smaller towns. They have downtown areas. Although people may work in Atlanta, they live in these communities and bank in these communities.

So it's very similar to what we are used to and that goes back to what I was saying a while ago, it was a 21-year-old bank and for the most part there are a lot of strong core banking relationships there.

Okay. And do you have the balances of TDRs at quarter end?

We do. It was very similar to the prior quarter.

Yes, it's down to about $800,000 from the prior quarter and $400-and-some-odd-thousand of that was actually a payoff.

Okay. And to what extent are they performing or is that in line with Q2?

All of our TDRs are performing. If they reach a certain degree of past due, we will move them to non-performing and put them on non-accrual. That is usually going to fall somewhere around 60 to 90 days depending upon the situation; 60 to 90 days past due.

And are you seeing any slowdown in mortgage refinancing activities?

I am sorry. Mortgage refinancing activities; they -- actually we have seen pretty strong refinancing. Our pipeline is up, has been up for the last quarter. Pipeline is running about $80 million or $90 million right now.

About 70% of our activity right now is refi. We did have an increase in volume for the third quarter over the second quarter of about 38%, which resulted in about a 58% improvement in fee income, mortgage fee income, for the third quarter.

Okay.

And Georgia, just a comment on Georgia. We have talked about the opportunities in Georgia on the bank side.

We feel we have tremendous opportunities on the mortgage side in Georgia. Georgia does have a relatively small mortgage operation, retail mortgage operation. We do see opportunities to expand and see our existing footprint in Georgia to be $50 million to $100 million annual mortgage operation.

Okay. And do you happen to have the accretable yield on the Crescent loans?

Are you talking about for the quarter?

Yes, for the quarter.

It equated to about $300,000.

What is that in percentage terms?

Net interest margin?

Or the yield on your Crescent loans?

Yield on the Crescent loans --.

Now the accretable yield, talking about from the fair value or are you talking about the yield as far as the --?

Fair value.

The fair value -- the accretable yield and fair value was approximately about $300,000 for the quarter. Net interest margin-wise that is about four basis points.

Okay, thank you.

Gentlemen, at this time we have no further questions. Do you have any closing remarks today?

No, thank you, Andrea. I would say that we appreciate everyone's time and interest in Renasant Corporation and look forward to speaking with everyone again when we report our year-end results for 2010. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.