Renasant Corp (RNST) 2011 Q1 法說會逐字稿

Good morning and welcome to the Renasant Corporation first-quarter 2011 earnings conference call. All participants will be in 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, Renasant Corporation Chairman and CEO. Please go ahead.

Thank you, Andrew. Good morning, everyone, and thank you for joining us for Renasant Corporation's first-quarter 2011 earnings conference call. Participating in this call today with me 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 actually cause results to materially differ from the anticipated results or other expectations expressed in the forward-looking statements.

Those factors include, but are not limited to, interest rate fluctuation, regulatory changes, portfolio performance, and other factors discussed in our recent filings with the Securities and Exchange Commission. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

During the first quarter of 2011 we successfully completed our second FDIC-assisted acquisition in North Georgia. We improve net interest margin and experienced our lowest levels of net charge-offs since 2008. Even as the current banking environment remains challenged, many of our markets are beginning to show positive signs as we grew net loans in Oxford, Columbus, and De Soto County of Mississippi, Nashville, Tennessee, and in Decatur and Birmingham, Alabama, and Alpharetta, Georgia.

In February of this year the Company, through our bank subsidiary, Renasant Bank, acquired certain assets and assumed all the deposits and certain other liabilities of the former American Trust Bank in Roswell, Georgia, which gave us three new branches and expanded our branch network to 14 full-service locations in North Georgia.

To recap the transaction, the FDIC retained all of American Trust's non-performing loans and other real estate owned at the time of closing. The loans acquired, except for a small portfolio of consumer loans, are covered by a loss share arrangement in which the FDIC will reimburse us for 80% of the losses incurred on these loans.

Also in our North Georgia markets, during the first quarter of 2011 we successfully completed the systems conversion of Crescent Bank and Trust, which we acquired in an FDIC-assisted transaction during the third quarter of 2010. We are now able to offer Renasant's full array of banking, lending, and wealth management products to our North Georgia clientele.

Our North Georgia markets have some of the highest household incomes and projected population growth outlooks in the Southeast. After entering these markets in the third quarter of 2010 we immediately began the process of transitioning these operations back to traditional banking activities.

Building on the infrastructure in place at the time of acquisition, we have realigned relationship managers and hired mortgage lenders and wealth management advisors. As a result of these efforts, we are well positioned to capitalize on future opportunities in these markets.

Looking at our financial performance for the first quarter of 2011, net income was approximately $7.5 million as compared to approximately $4.7 million for the fourth quarter of 2010 and $3.6 million for the first quarter of 2010. Basic and diluted earnings per share were $0.30 for the first quarter of 2011 as compared to basic and diluted earnings per share of $0.19 for the fourth quarter of 2010 and basic and diluted earnings per share of $0.17 for the first quarter of 2010.

Our results for the first quarter of 2011 included several items which we consider to be one-time or non-recurring in nature. First, we recognized an $8.8 million gain and incurred $1.3 million in acquisition-related costs associated with American Trust.

Secondly, we repaid $50 million of Federal Home Loan Bank borrowings during the quarter. By doing so we will realize interest expense savings over 22 months totaling $2.7 million while incurring a prepayment penalty of $1.9 million.

Finally, our non-interest expense during the first quarter of 2011 includes an impairment charge on other real estate loans totaling 969 -- on other real estate, not loans but other real estate, totaling $969,000 in higher-than-normal losses from the sale of other real estate. We are aggressively working to dispose of other real estate owned, particularly real estate which is likely to incur further declines in value over time.

During the first quarter of 2011 we sold approximately $14.3 million of other real estate recognizing a loss of $1.6 million. The losses recognized during the quarter were primarily a result from the sale of a special use property with a limited group of potential purchasers, the auction of vacant residential homes, and the sale of custom high-end single-family residences.

In the future, we expect to have somewhat elevated levels of OREO expense; however, we do not believe the expenses will be near the levels experienced during the first quarter of 2011. We currently have an additional $4.7 million currently under contract that is expected to close at a slight gain during the second quarter of 2011.

Net interest margin was 3.55% for the first quarter of 2011 as compared to 3.43% for the last quarter of 2010 and 3.27% for the first quarter of 2010. Net interest income was $31.1 million for the first quarter of 2011 compared to $29.8 million for the fourth quarter of 2010 and $24.4 million for the same period in 2010.

The improvement in net interest income and net interest margin was driven by the continued decrease in our interest expense. We reduced our interest expense by continuing to focus on changing our deposit mix by reducing higher cost and time deposits, while at the same time increasing lower cost and retail non-time deposits. These actions, which included the aforementioned Federal Home Loan Bank repayment, resulted in our cost of funds declining to 1.31% for the first quarter of 2011 compared to 1.49% for the fourth quarter of 2010 and 1.95% for the first quarter of 2010.

We expect net interest income and net interest margin to continue to improve as excess cash is deployed into higher-yielding alternatives, deposit costs continue to decrease, and the full benefit of the expense savings of the Federal Home Loan Bank prepayment is realized. Non-interest income was $21.7 million for the first quarter of 2011 which includes the previously discussed gain of $8.8 million from the American Trust acquisition as compared to $14.5 million for the fourth quarter of 2010 and $12.5 million for the first quarter of 2010.

Excluding the gain from the American Trust acquisition, non-interest income was approximately $13 million for the first quarter of 2011. The decrease in non-interest income on a linked-quarter basis reflects the cyclical nature of deposit service charges and mortgage production income.

Non-interest expense was $36.7 million for the first quarter of 2011 as compared to $32.2 million for the fourth quarter of 2010 and $25.6 million for the first quarter of 2010. Non-interest expense for the first quarter of 2011 included acquisition expenses related to American Trust totaling $1.3 million, the aforementioned debt prepayment penalty totaling $1.9 million, and duplicate personnel and operating costs associated with the Crescent Bank and Trust and American Trust acquisitions.

Future non-interest expense will reflect the cost savings from the completed Crescent conversion and the American Trust conversion, which is scheduled for the second quarter of 2011. Total assets as of March 31, 2011, were approximately $4.42 billion, representing a 2.9% increase from year-end and a 21.5% increase from March of 2010.

At quarter-end our Tier 1 leverage capital ratio was 8.77%, its Tier 1 risk-based capital ratio was 13.6%, and total risk-based capital ratio was 14.85%. In each case in excess of regulatory well-capitalized thresholds.

Total loans were approximately $2.58 billion at the end of the first quarter of 2011 as compared to $2.52 billion at December 31, 2010, and $2.31 billion at March 31, 2010. Loans covered under the FDIC loss share agreement totaled $387 million at March 31, 2011, the American Trust acquisition increased loans covered by the loss share agreements by $72.5 million.

Although loans not covered under FDIC loss share agreements were relatively unchanged as of March 31, 2011, reflecting the signs of economic activity in several of our key markets we did experience growth in loans not covered under loss share agreements in Oxford, Columbus, and Desoto County, Mississippi, Nashville, Tennessee, and in Decatur and Birmingham, Alabama, and Alpharetta, Georgia, as mentioned at the beginning of the call.

Total deposits grew to over $3.64 billion at quarter end, a 5.10% increase from year-end and a 34.31% increase since March of 2010. The acquisition of American Trust increased total deposits $154 million as of March 31, 2011.

The loans and other real estate owned acquired in the FDIC-assisted transaction are recorded at fair value, which includes an estimated impairment. In accordance with Generally Accepted Accounting Principles, we have not assigned any allowance for loan losses to these acquired loans at March 31, 2011. Furthermore, the loss share agreements with the FDIC, as well as our adjustments to the balances of these acquired assets recording them at fair value, provides substantial protection against any loss on these assets.

Non-performing loans and other real estate covered under loss share agreements totaled $86.7 million and $59 million, respectively, at March 31, 2011, the remaining discussion non-performing loans, other real estate owned, and the related asset quality ratios exclude these assets covered under loss share agreements.

We recorded a provision for loan losses of approximately $5.5 million for the first quarter of 2011 as compared to the same for the fourth quarter of 2010 and $6.7 million for the first quarter of 2010. Net charge-offs were $3.4 million for the first quarter of 2011 as compared to $5.2 million for the fourth quarter of 2010 and $4.7 million for the first quarter of 2010. The excess provision over our net charge-offs built our allowance for loan losses to loans to 2.17% at March 31, 2011, as compared to 2.07% at December 31, 2010.

Our non-performing loans were $57.2 million at March 31, 2011, as compared to $53.8 million at December 31, 2010, and $54.6 million on March 31, 2010. Furthermore, loans 30 to 89 days past due, as a percent of total loans, was 86 basis points at March 31, 2011, compared to 98 basis points on December 31, 2010, and 180 basis points on March 31, 2010. Loans 30 to 89 days past due at March 31, 2011, were at the lowest point they have been in since the third quarter of 2007.

Other real estate owned was $71.4 million on March 31, 2011, as compared to $71.8 million on December 31, 2010, and $62.5 million on March 31, 2010.

It's worth noting that despite the recent interruptions caused by natural disasters in Japan, Toyota has indicated at the present time they are still anticipating that production will begin this fall in their North Mississippi plant. And as mentioned in previous calls, we believe this will have a major impact on our legacy market.

In closing, we are optimistic about the improvements that Renasant has made in our net interest margin, loan and deposit growth, and credit metrics, which should result in increased earnings power throughout the remainder of 2011. Moving forward, we will continue to position ourselves to increase future profitability, attract new talent, and capitalize on expansion opportunities as they present themselves.

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

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

Good morning. Would you happen to have the average loans not covered by loss share for both Q1 and Q4?

I think we can get that. Andy, give Kevin just a second.

Okay.

Do you have another question?

Yes, sorry. What was the timing of your FHLB debt prepayment?

Hi, Andy; Jim Gray. We repaid that about mid-February.

Okay. And approximately how much do you anticipate in cost saves related to the Crescent conversion? And if you could also tell us the timing of that event.

The Crescent conversion, Stuart, go ahead.

Andy, once we got through the conversion and displacements were done we were saving about $160,000. Those displacements were done at the end of January so that is about the savings from out there.

That is annual savings?

Yes. We only had those employees for January during the first quarter.

Okay. I will just get back in the queue and let some other folks get on.

Here is your answer.

Andy, following up with you on the average balance of those covered loans -- this is just the loans only. First quarter of 2011 is about $360 million and fourth quarter of 2010 is about $340 million.

Okay, great. All right, thank you.

Kevin Fitzsimmons, Sandler O'Neill.

Good morning, everyone. I was wondering if you could give what the accruing TDRs were in the first quarter. I believe they were just a hair under $35 million in the fourth quarter.

Kevin, this is Corky Springfield. Our accruing TDR balance at the end of the quarter was $33.8 million.

Okay, great. That is very helpful. So I guess the way to think of this, Robin, in terms of the movement of credit, like we saw a few quarters ago, we saw a little more meaningful decline in non-accruals and you could see OREO going up. Now it seemed like non-accruals were just down slightly and OREO balance was kind of stable up at that level.

But I am sensing from your commentary toward the end of the release is next quarter going to be a bigger quarter for disposals. Maybe we could expect to see that OREO balance start to come down?

We actually disposed of about $10.5 million this quarter -- actually overall, including Georgia, about $14 million this past quarter. That is where the $1.6 million loss came in.

We had some specialty property, quite frankly, a church, that we took $0.5 million loss on. We had a brick plant that we disposed of. We had several residential rental properties that we actually sold under auction. These are properties that we felt never would regain value.

Obviously, the church was one of those situations that you have to take advantage of it when there is a church looking for a building. So I don't think that we will meet that $14 million number this quarter. We already do have $4.7 million under contract for this quarter.

Now let me mention this too, Kevin. This does not include some residential lots that we have under contract. Eight have already been taken down under this contract and the balance of them are to close within the next 12 months. In addition to that there is some additional land that the same developers have the right of first refusal on, and we don't have any reason to anticipate that this won't occur.

This is all happening at the price that we had these properties booked for.

In addition to that we have a very large development that we have received two offers on, both of which are in excess of what we have the property booked for, but we are dealing with the right to redeem this property in Alabama. Actually we are within about seven or eight months of that right of redemption passing on there, but we are hoping to get a waiver from the borrower in order that this property can be disposed of. If that is the case that would be a rather substantial sale also.

Several other pieces of property like that that we have opportunities to sell over a period of time that we are in the negotiation stage on. And that, to some degree, is true also with some of our non-performing loans that we are at the stage where possibly the underlying collateral may be disposed of within the next quarter.

Great. One last thing, on the bargain purchase gain that just seemed to come in higher than I thought it was going to be. Did that end up coming in higher than you all originally thought or was there a bit of subjectivity in how you approached that? If you can enlighten us on that, thanks.

Kevin will answer that for you, Kevin.

Our guess as it relates to the gain, not sure what the expectations were, but we did look at the mark that we applied to the loans. Our credit reserve on those loans we acquired came in just right at $17 million.

As it relates to core deposit intangible, there is very little core deposit intangible assigned to those deposits. They were primarily money market and time deposits which carry very little value when you look at the deposit intangible it comes with.

So as it relates to the gain, it's just more calculation of the purchase accounting adjustments and the fact that our discount bid we took very little problem loans associated with it. And I think that just drove a little bit higher gain.

Okay. All right, thank you, guys.

Matt Olney, Stephens, Inc.

Good morning, guys. It sounds like you still believe there is some more tailwinds on the margin going forward and I think you attributed that to FHLB payback, deposit costs coming in, but I think you also mentioned improving earning asset yields. Did I hear that right and can you give us any more details on that?

I don't know about hearing the earning asset yields, Kevin, but I think the balance of it I think is true. Let me let Jim give you a commentary on the liability side.

On the liability side we still have CDs maturing that we should get about a -- we are seeing those repricing at about 50% of what they are maturing at. I think we have mentioned in the first quarter or back at the end of the fourth quarter that we had some of these [Take Charge] CDs that would be maturing in the first quarter. We have a little bit more of that in the second quarter.

We also have some large public funds that are currently in the 3% to 3.5% range that will be up for rebid. Those will either result in a substantially lower cost of funds or those dollars will run off and we will utilize some of our excess funds to fund those.

So most of our benefit, which we still anticipate 5 basis points per quarter of benefit or margin improvement over the remainder of this year, most of that coming from the liability side. If we do start having some positive loan growth that would be in addition to that.

And let me add one more thing to that; back to your question, Matt. Yes, we do anticipate earning assets going up to the extent that we deploy this excess cash that we have that is currently invested in short-term rates, so there will be some additional tailwinds on that side from that cash.

And again, as you know, I have been projecting that the first quarter we would be down in loan growth. We actually, on the core side, ended up basically at a breakeven which we were very pleased at and saw some really nice growth in our Alabama markets, in Nashville. And then we saw some regeneration of lending in our Desoto County and Oxford markets where we have new management in place.

Very pleased with the positive trend in Alpharetta, so we are optimistic. In Mississippi, we had a couple of large loans that we weren't anticipating pay downs on that actually went to non-recourse lenders, actually went to some lenders that you wouldn't anticipate being non-recourse becoming non-recourse lenders and taking those loans away from us. Otherwise we would have been pretty close to a breakeven in Mississippi had we not have had that situation occur.

So, yes, hopefully we will see at worst another breakeven quarter on the core side and at best begin to start seeing some positive growth on the loan, maybe a quarter earlier than I anticipated.

Okay. That is great color, Robin. Then also on charge-offs, it looks like we have been about 1% charge-offs of average loan in 2009, 2010 but we are off to a much better start a first quarter here of 2011. What is your thought on improving that in 2011 for the full year versus the last few quarters?

Give or take, I am looking at maybe $3 million to $4 million a quarter for the rest of the year. Could be better, could be worse if there is a surprise out there. But right now that is kind of what we are looking at the run rate being, which obviously is better than where we have been in the past couple of years.

But we are seeing some positive trends in that direction, Matt.

Okay, great. Thanks, guys.

Joe Stieven, Stieven Capital Advisors.

Good morning, Robin.

Joe, good morning.

Robin, I know you don't like to give guidance but I am going to sort of push you a little bit and have you put some chicken on the bones.

Your OREO expenses in this first quarter were pretty high. I think you said -- I forget the number, so clarify that number. Where do you think those should be running on a go-forward basis? That is question number one.

You want me to answer that one first? We had a $3.5 million expense first quarter. We anticipate that being a little over -- probably with normal expenses related to OREO in the probably $800,000 or so range.

And we anticipate losses, impairments, whatever in the neighborhood of $300,000 or $400,000, $500,000 -- not like what it was this quarter -- to the extent that you could maybe look at somewhere between $1 million and $1.5 million run rate rather than the $3.5 million run rate going forward.

Okay, that is question one. Question two, your provisions were $5.5 million, your charges were $2 million less than that.

And we built about 10 basis points in the allowance as a result of that.

I guess my question is if -- and this gets to your NPAs. When do you think you can really start seeing the NPAs move on to the downside? And it sounds like maybe we are here, but I want to hear you sort of talk about directionality and sort of just some of the plans with some of your bigger ones.

Joe, we are on the verge, hopefully, with three or four large non-performing loans of seeing some positive things happening. We are negotiating or in the process of working with the borrowers and negotiating a disposition of the underlying collateral to the extent that if it works under the scenario we are talking we would see a substantial reduction in non-performing loans.

We have one, for example, that is in litigation that we feel very confident that we should see some positive outcomes on in the near future, which should return that one back to a performing basis or boost the credit, whichever the situation is. The law is on our side.

So we feel like that our non-performing loans, hopefully, are -- definitely it said they had peaked several quarters ago. We feel like we are in a range right now that we should not see exceeding unless there is a surprise.

In the near term, other real estate we feel like that based on what we are seeing on the inflows and the outflows that we should start seeing that beginning to eat away to a lower level and throughout the rest of this year, with next year hopefully being at much lower levels on both categories.

Well, Robin, with that said then, your provisions were $5.5 million for the quarter. And I don't think you address this, but maybe you did and I didn't hear it. Doesn't that -- I mean don't you think that has room to start moving down?

It does, Joe. It does and, as you know, in the past I have kind of indicated that this year we would probably start the year off at a level provision to the fourth quarter and then start seeing it taper somewhat on a quarter-by-quarter basis. It could be as much as $0.5 million next quarter and then flatten out and then another drop. But we do anticipate lower provision cost in the last three quarters than we had in the first quarter.

Okay. Okay, that at least puts a little meat on the bones. Thanks, Robin.

Catherine Mealor, KBW.

Good morning, everyone. How much of your OREO is vertical versus land, and are you seeing more opportunities to dispose of your vertical properties? It sounds like you are seeing some opportunities to move the land as well, which was surprising to me. Can you talk a little bit about the composition of your OREO portfolio and where you are seeing opportunities within that?

It's pretty much basically half and half. I think in the core bank, to the extent that we -- Catherin, a lot of what we took some losses on in the first quarter were some vertical properties.

We disposed of about $14 million when you include Georgia, about $10.5 million of Mississippi property. We had, as I said, a church, a vacant brick plant, some things of that nature that you have a real hard time finding buyers for. And a lot of the other was vertical also.

But on the other side of the coin, we are starting to see some movement in lots. We have been looking at one-offs for the most part on OREO lot sales but two fairly large developments we are negotiating for potentially takedowns of the entire development over the course of the next 18 months to two years. One of them within the next 12 months and the larger one in the course of 18 months to two years. So we feel like that there is a lot of opportunity to reduce that OREO balance that we have.

On the other hand, on the vertical those properties continue to sell. Again, it depends on what you have. If it's rental property sometimes that property is more difficult to dispose of than owner-occupied commercial and/or income producing commercial property and residential property where it has been an owner-occupied type residence.

But, again, we have another $4.7 million already under contract for this quarter to close at the end of this quarter, and it's at an actual gain as a result of that. And by the way, part of that was vacant land too; it just dawned on me. We had about an $800,000 vacant land piece -- actually it was farmland -- that is in that mix.

Great, thank you. Can you also talk a little bit about your outlook for mortgage revenues for the rest of this year?

Sure. Let Jim talk about that.

Thanks.

Hi, Catherine. Mortgage volume definitely was down from the fourth quarter but that is seasonal. If you go back and look at our mortgage volume for first quarter of 2010, we were only down about 4%.

Looking at our pipeline at the end of the first quarter, our pipeline is actually higher at the end of the first quarter of 2011 than it was at the end of the first quarter of 2010. So we should be positioning ourselves to make up -- hopefully, can make up that 4% that we were down compared to first quarter of last year in the second quarter.

We have hired -- I mentioned at the last conference call that we were working on Georgia. We have hired a production manager for Georgia. We have also hired a wholesale rep for Georgia.

If you recall, about 50% of our volume, mortgage volume, is wholesale, 50% is retail. That production manager has already hired two or three originators to complement the existing staff, which was not -- there wasn't much in the way of existing mortgage staff in Georgia.

So we are building our Georgia infrastructure and anticipate that, at least by the latter part of the second quarter into the third and fourth quarter, we should be seeing our Georgia volume increase. And that can, hopefully, account for some of the refile volume that we had in 2010 that we don't anticipate having in 2011.

All right. Thank you, Jim.

Sure.

Kevin Reynolds, Wunderlich Securities.

Good morning, everyone. Robin, if you strip out the non-recurring items -- the gain on the acquisition, prepayment penalties, etc. -- it looks like your efficiency ratio is kind of in the mid-70% range right now.

And I was just kind of curious, I know you don't get all your cost saves from these deals on day one; it takes time. Where do you think your efficiency ratio could go and how long do you think it might -- or over what time period do you think it might get there? I know you mentioned your conversion in Q2 coming up.

And then beyond just the integration of the deals are there any initiatives on the horizon at the legacy Renasant Bank to improve efficiency, like enhanced mobile banking via iPad apps and things like that?

Well, in answer to that last part, that is something that we are definitely working with right now is mobile banking and getting customers moving in that direction. We have done a pretty good job, as far as just regular Internet banking and bill pay and things of that nature, but I think mobile banking will be something that will in fact continue to grow. As you know, younger customers come on board I think that is where we will start seeing the mobile banking aspect of it come.

As far as the efficiency ratio, we are targeting getting back below 60% first and then gradually reduce it back down into the mid-50%s. As we continue to see net interest income, non-interest income go and expenses somewhat stabilize, we should in fact see that occur, Kevin.

Okay. And so it sounds like --.

Take Kevin Chapman.

On the efficiency side, as the opportunity presents itself to hire new individuals we will incur that cost immediately and as they bring business with them their cost will be offset. So there is a bit of a lag. We are seeing opportunities to hire talented individuals and bring those books of business, but there will be a lag associated with that.

Could you maybe describe what those opportunities are? Like, are they specific to certain markets or certain institutions out there in terms of the recruitment effort?

Kevin, over the past two years our Alabama President Mike Ross has done an excellent job of bringing in new talent. And basically we have reconstituted every market in Alabama from the President down to the Senior Lender down to the Relationship Manager to the Senior Credit Officer Wealth Management.

Every aspect of the process in Alabama basically has new leadership in it and we think that is one of the reasons we have seen a 3.5% increase in loan growth last year, a significant increase in deposit growth last year, and continuing growth in both areas in 2011 as a result of the new hires that Mike has brought in.

By the same token, our Mississippi President Scott Cochran has hired new leadership in De Soto County and Oxford, Mississippi, and in one of our larger North Mississippi markets, Boonville, we have new leadership. And as a result of this, plus bring in some new relationship managers in a couple of those markets and some other markets, we are in fact seeing additional opportunities there.

Plus the fact we were able to put together a de novo bank in Columbus, Mississippi, and we are very excited about the team that we were able to hire there. We will be looking to do that in other markets also.

Memphis we have added a couple of new relationship managers there. We think that we will be announcing a new West Tennessee President within the next couple of weeks, which I think will be a real positive move in that particular market. In Nashville we are in fact in negotiations with a couple of potential relationship managers there.

By the same token, we have seen some additional hires in the Georgia markets and anticipate hiring a -- Mark Williams has been our Market President in Georgia in combination with that and running the loss share. We said in the beginning Mark would be over there about a year and he will be coming back to Tupelo. We have been in the interview process in Georgia and anticipate bringing in a Market President there in the not-too-distant future also, within a quarter or so.

So, yes, we are seeing a lot of opportunities to bring in some real talent and I think that that will have a big impact on future loan and deposit growth in our company.

Okay, thanks. And I guess one other question and then I will hop off. Have you -- how do you view the markets? I apologize; I have been kind of all over the place this morning with calls.

How do you view your markets? Where you have acquired into North Georgia, into Tennessee, are there any new markets that you are kind of looking at now? Is it still the same stuff?

What are the opportunities out there and would those opportunities be only failed bank type acquisitions, or are you starting to lean in the direction of maybe some open bank deals if you can get them at the right price?

We are looking both ways. We have had a great opportunity to look at some failed banks; some we have bid on, some we haven't. But we also are receiving inbound calls on open bank opportunities and would be certainly open depending on what the credit metrics are in those situations.

If in fact the credit metrics are such that we feel comfortable with them and the reason that they are looking for a friend is basically to have cost saves that they feel that they aren't going to be able to operate as they have in the past because of the regulatory burdens placed on them, then we are in fact open to some of those opportunities. And we are beginning to receive some inbound calls in that regard.

Haven't found anything yet that we would pursue, but we do anticipate that happening, Kevin. We see that happening in our markets of Northeast Mississippi, the state of Tennessee, North Alabama, and Northwest Georgia.

Okay. You think that could happen in 2011?

Potentially. Kevin Chapman has a comment to make about it, too.

One other thing other than just whole bank is in addition to the material that is out there, there is opportunities to acquire branches, various lines of businesses. There is just a lot of books floating around right now.

Okay, thanks. I have taken too much of your time; I will hop off.

Thank you, Kevin.

Bill Young, Macquarie.

Good morning, guys. Most of my questions have been answered, but I guess can you quantify how much maybe excess liquidity you kind of expect to invest this year and maybe kind of the pace of investment? And also maybe the type securities you are investing are if there is no loan growth.

Bill, this is Jim Gray. Really the excess liquidity is working itself down; should be worked out by the end of the second quarter either through investing it or using it to cover outflow and deposits. We are just buying agencies, mortgage-backed securities, munis, pretty typical things that we have always purchased for the portfolio.

Okay. Then secondly, could you just talk a little bit about your performing TDRs just in terms of what some of the metrics there are, such as redefault rates, etc.?

Bill, our performing TDRs we have all them performing now. We have two that are past due but all are within 1 to 89 days and currently 89 days because at 90 we take them off the TDR list and put them on non-accrual.

And those are only $800,000.

Yes, and that is $800,000 of the $34 million.

Okay. I guess I meant more for your total TDR balances just in terms of what redefault rates there are?

Bill, this is Harold Livingston. We don't -- when we put loans on TDR they are all under a performing agreement. If they fail to perform we move them to non-performing, so we don't have any loans on our lives that are not performing loans. Some of them are rate adjustments, some of them are term adjustments, etc.

If your question is what percentage of them work out, is that what you are asking?

Yes.

I don't know that I have that exact -- it has been -- we have been fairly successful. We haven't had a lot of them fall out once we put them on there, but certainly some do. Have you got it?

Yes, just historically we have had about 10% of those go back to normal terms, so the workout period lapsed and it worked out as we intended. About 30% ended up going to non-performing, so during the period of concession the plan that we had worked with the borrower didn't work out on about 30% of those. And that is historically.

Got you. Great, thanks, guys.

Thank you, Bill.

Dave Bishop, Stifel Nicolaus.

Good morning, gentlemen. Robin, you alluded to some of the green shoots you are seeing in some of the local markets there in terms loan growth there. When you are talking and doing your loan reviews and loan committees and talking to the relationship managers are getting a sense there is any sort of -- is this reflecting borrower optimism out there? Any sort of commentary you can provide and sort of what is sort of generating that new demand across some of those markets?

Our relationship managers are coming back giving indication that you have businesses that are beginning to want to invest in themselves again. There is a lot of potential opportunity in growth in some university towns within the markets in student housing type projects. We are seeing some opportunities in the medical arena in a lot of our markets.

We are just seeing a lot of opportunities in Georgia, for example, that small businesses have really been underserved over there. If you think about what has been happening there with so many of the community banks failing and some of the regionals kind of being on the sidelines, there are a lot of small business opportunities there.

We projected that there are about 36,000 small businesses that fit our criteria in that market in North Georgia, but especially that little band that is really Metro Atlanta. We are in north of Atlanta, north of Highway 285, the perimeter highway there. So we are seeing -- that is where we are seeing that type of loan growth there.

In Memphis, we are actually seeing some growth in the medical arena and some other C&I type opportunities. Nashville has been kind of a combination of several things but we had about $13 million of loan growth in Nashville in the first quarter and around $10 million net in Alabama in the first quarter.

Now the big thing about the Alabama $10 million growth is we had an OREO takedown of about $6 million, a loan that -- we had foreclosed about a $6 million loan. So they actually had substantial growth in Alabama even over and above what we reported on a net basis. This is mainly in the Birmingham and Decatur, Alabama, markets that we are seeing a lot of life.

We feel like that those -- as you did express, there are those green shoots coming up. I know Nashville was one of the markets that was really the latest, I guess, to the game. Their chamber -- and, of course, a lot it you consider was propaganda -- but their chamber was saying that by the second quarter or so this year, third quarter, that they would in fact be coming out. Again, with what we have seen there, we are very optimistic about that Nashville market again.

Great, good color. Thank you, Robin.

Thank you, Dave.

Andy Stapp, B. Riley & Co.

I think you mentioned that you indicated that loan growth might occur a quarter ahead of where you anticipated it. If memory serves me correct, you were previously talking about the second half of the year so you think you might be able to get some loan growth this quarter?

There is a potential, Andy. We had projected that we would be negative in the core bank in the non-covered category in the first quarter. We actually were breakeven, so that gives me some optimism that we will be breakeven or better in the second quarter. Hopefully that will be the case.

Okay, great. Thank you.

You bet.

Michael Rose, Raymond James.

My questions have been answered, thanks.

Matt Olney, Stephens, Inc.

Just a follow-up on credit quality. There was an article in the local Memphis newspaper talking about a bankruptcy of a developer there in Memphis with some exposure level banks and it mentioned Renasant. Can you give us any details as far as the borrower or confirm the amount that was in the paper?

That is past history with us. We have -- that is all -- any exposure we had for the most part is in other real estate. He is a participant on another loan that he is one of several guarantors on, but otherwise that is all past history with us. And in fact, we have a judgment against him from one of those transactions at this stage, Matt, but that is history.

Let me go back, too, while we are talking on credit quality following back up on a question I think Joe Stieven was asking. One thing -- again we continued with a higher provision than maybe some had felt like that we needed to this quarter because of the level of charge-offs and we were able to build our allowance by 10 basis points.

But 2008 still rings in our mind and so we felt like that we would like to run at this level of somewhere between 215 and 220 basis points in our allowance for loan losses in the future. Just I think sometimes it's better to be safe than sorry, and that is the reason we went ahead with that higher provision this quarter.

Did I answer your question on the developer?

Yes, thank you.

You bet.

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

Robin, do you think you are done with the reserve build now or what should we expect in that regard?

Well, of course it all depends on the economy, Andy. If the economy continues on, we would like to keep that allowance in that 215 to 220 basis point range. We are at 217 basis points right now and our build would basically be, depending on charge-offs that we have, whether there are any surprises or not.

We feel, as we said, pretty comparable where we are right now. I think, as you can tell, we are very optimistic about the future of Renasant. With the great build that we have had in margin, net interest income, the fact that we are about hopefully to see some loan growth, that we are seeing loan growth in a lot of these key markets, the fact that we will see some expense saves. We have had a lot of one-time hits this particular quarter that we don't anticipate happening again. Doing the math I think we are very optimistic about the Company and where our opportunities lie.

We have some great new hires on board. We are looking forward to announcing our new West Tennessee President and the additional relationship managers in some of these other markets. So we are very optimistic about where we are going, Andy.

Okay, great color. Thanks.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to E. Robinson McGraw, Renasant Corporation Chairman and CEO, for any closing remarks.

Thank you, Andrew. We appreciate everybody's time today and your interest in Renasant Corporation. We, of course, look forward to speaking with you again when we report our second-quarter results for 2011. Thank you, everybody.

This concludes Renasant Corporation first-quarter 2011 earnings conference call. Thank you for attending today's presentation. You may now disconnect.