Renasant Corp (RNST) 2011 Q3 法說會逐字稿

Good morning, and welcome to the Renasant Corporation 2011 third-quarter earnings conference call and webcast. All participants will be in listen-only mode. (Operator Instructions).

Please note this event is being recorded.

I would now like to turn the conference over to E. Robinson McGraw, Chairman and CEO. Please go ahead.

Thank you, Valerie. Good morning, everyone. Thank you for joining us for Renasant Corporation's third-quarter 2011 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 the expectations expressed in our 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.

We are pleased to experience the successful 2011 third quarter and believe expansion activities completed during the quarter will further enhance our future performance. Highlights for the third quarter include net loan growth, a link quarter increase in net income, capital ratios and net interest margin, along with three de novo market entrances into completion of our acquisition of RBC USA's Birmingham-based trust unit. all of which should have a positive impact on future earnings results.

Looking at our financial performance for the third quarter of 2011, net income was $6.5 million or $0.26 per basic and diluted share as compared to $5.8 million or $0.23 per basic and diluted share for the second quarter of 2011.

For the third quarter of 2010, the Company's net income was $19.6 million and both its basic and diluted EPS were $.81. The Company's third-quarter 2010 net income in EPS included a bargain purchase gain of $42.2 million from the Company's FDIC assisted acquisition in 2010. This gain was partially offset by acquisition expenses of $1.95 million and a prepayment penalty of $2.7 million from the early extinguishment of debt.

Net interest income was $32.9 million for the third quarter of 2011 which was a slight increase as compared to the second quarter of 2011 and represents a 21% increase from the third quarter of 2010. Net interest margin increased to 3.92% for the third quarter of 2011 from 3.12% from the third quarter of 2010.

As planned, we have steadily improved net interest margin over the past four quarters. This improvement in net interest margin continues to be driven by our strategic efforts to restructure our funding mix and deploy cash into higher yielding alternatives. Further expanding on our funding costs, our cost of funds declined to 99 basis points for the third quarter of 2011 as compared to 117 basis points for the second quarter of 2011 and 175 basis points for the fourth quarter of 2010.

The reduction of our funding cost has been driven by the climbing interest rate environment and our focus on restructuring our deposit mix. Reflecting on our deposit mix, our non-interest-bearing deposits now represent 15% of total deposits as compared to 11% on December 31st of 2010.

Non-interest income continues to be derived primarily from multiple lines of recurring income which include, but are not limited to, wealth management, treasury management, insurance and mortgage along with income from deposit loan products. We continually analyze and seek alternative sources of non-interest income.

Our completion of the RBC USA trust unit acquisition is a direct result of those efforts. As previously discussed, the terms of the acquisition provide us protection through adjustment of the purchase price if revenue is lost during the first 12 months of operation. We are pleased to report that our reception by our new clients has been overwhelmingly positive.

Since the enactment of new regulatory rules which directly impacted the banking industry, we have been analyzing our products and services to determine alternative ways to enhance or replace these critical revenue streams. One result was our decision not to charge a monthly fee for our customers' use of their debit cards. We will continue to evaluate the other products and services in the future and determine what changes are warranted.

Non-interest income was $19.6 million for the third quarter of 2011 as compared to $13.3 million for the second quarter of 2011 and $54.5 million for the third quarter of 2010. Non-interest income for the third quarter of '11 included a $5 million gain from the sale of mortgage-backed securities. With the steep climb in interest rates, these securities were trading at unusually high premiums and we were at risk of accelerated payment speeds. A portion of the proceeds have been reinvested in loans and securities with the remainder to be utilized in funding future loan growth and the repayment of high cost in borrowings scheduled to mature in the near future.

Non-interest income for the same period in 2010 included the aforementioned bargain purchase gain of $42.2 million which was related to the Crescent transaction. Non-interest expense was $38.1 million for the third quarter of '11 as compared to $32.6 million for the second quarter of '11 and $39.6 million for the third quarter of 2010.

The increase in non-interest expense on a linked quarter basis was primary due to costs associated with OREO. This increase was also impacted by additional salary and employee benefits due to new hires from our entrance into the markets of Starkville, Mississippi, Montgomery and Tuscaloosa, Alabama, and our acquisition of RBC USA's Birmingham-based trust unit.

At September 30 of '11, the Company's tier 1 leverage capital ratio was 9.48%. Tier 1 risk-based capital ratio was 13.63%, and total risk-based capital ratio was 14.89%. The Company's tangible common equity ratio was 7.47%. During the third quarter of '11, all of the Company's capital ratios increased and in all regulatory capital ratios the Company continues to be in excess of regulatory minimums required to be well capital -- classified as well-capitalized.

Total assets at September 30 of '11 were approximately $4.136 billion, down 2.88% from June 30th of '11 and 3.74% from December 31st of 2010. Total deposits were $[3.42] billion at September 30th as compared to $3.5 billion in June and $3.5 billion in December. The decrease in total assets and total deposits are in the third quarter of '11 was expected and is primarily due to a $130 million runoff in public funds which we discussed in our second-quarter 2011 earnings call.

Total loans which include both funds covered and not covered by the FDIC loss share agreement were approximately $2.565 billion at the end of the third quarter as compared to $2.563 billion at June 30, '11 and $2.525 billion on December 31st of 2010.

Must not covered under the FDIC loss share agreement were $2.205 billion at September 30th of '11 as compared to $2.185 billion on June 30th of '11 and $2.191 billion at December 31st of 2010.

Our loan growth during the third quarter of '11 is reflective of our continued focus on taking advantage of business opportunities. This loan growth was achieved primarily from our existing branch network prior to our third-quarter expansions.

Looking ahead, we anticipate additional loan growth from our de novo markets as well as continued loan growth from our existing branch network.

It is worth noting that all the initial expenses associated with our expansions were charged to the third quarter of '11, but the new branches were not open long enough to generate any significant revenue during the quarter. We expect these new locations to be revenue-neutral in the near future.

Turning to our asset quality metrics, the loans and other real estate owned acquired in FDIC-assisted transactions are recorded at fair value which includes an estimated impairment. Furthermore, the loss share agreements with the FDIC as well as adjustments to the balances of these acquired assets to record them at fair value mitigate the impact of further losses on these assets.

Non-performing loans and other real estate owned covered under all share agreements total $96.6 million and $44 million, respectively, as of September 30th, '11. Our remaining discussion on non-performing loans, other real estate owned and the related asset quality of ratios exclude these assets covered under loss share agreements.

We provided a provision for loan losses of $5.5 million for the third quarter of '11 as compared to $5.35 million for the second quarter of 2011 and $11.5 million for the third quarter of 2010. Annualized net charge-offs as a percentage of average loans were 70 basis points for the third quarter of 2011 as compared to 82 basis points for the second quarter of 2011 and 1.18 basis points for the third quarter of 2010. The allowance for loan losses as a percentage of loans was 2.20% at September 30, 2011 as compared to 2.18% at June 30, 2011 and 2.07% for December the 31, 2010.

The Company's non-performing loans were $49 million at September 30, 2011, as compared to $52 million on June 30, 2011 and $53.9 million on December 31, 2010. The Company's troubled debt restructurings were $35.8 million for the third quarter of 2011, as compared to $40.2 million for the second quarter of 2011 and $32.6 million for the fourth quarter of 2010. Loans 30 to 89 days past due as a percent of total loans were 75 basis points at September 30, 2011 as compared to 80 basis points on June 30, 2011 and 98 basis points on December 31st of 2010.

OREO was $72.8 million at September 30, 2011 as compared to $68.4 million at June 30th of 2011 and $71.8 million December 31st of 2010. During the third quarter the Company sold a total of approximately $4.1 million in OREO. An additional $4.9 million of OREO that was under contract is expected to close during the fourth quarter of 2011.

Our credit quality metrics continue to improve as we work problem assets through the resolution process. Our nonperforming loans and past due loans continue to decline during the quarter of 2011 -- during the third quarter of 2011. This decline, along with our efforts to build reserves, resulted in our highest coverage ratio since the second quarter of 2008.

The Company announced three de novo banking expansions during the third quarter of 2011. On July 1, the Company announced its entrance in the banking market of Montgomery, Alabama. On June 26 the Company announced its entrance into the Golden Triangle Mississippi market of Starkville which is home to Mississippi State University. Nearing the end of the third quarter, on August 21, the Company announced its entrance into the Alabama market of Tuscaloosa, home of the University of Alabama. All of these new market entrances were built around the addition of experienced and successful bankers joining Renasant.

In addition to these new markets, during the third quarter we completed our acquisition of the RBC USA's Birmingham-based $680 million asset trust division.

During the third quarter, we took advantage of several opportunities to expand our reach within our current footprint. We believe these new market entrances, coupled with the experienced banking talent that has joined Renasant, will enhance our already strong presence in Mississippi and Alabama.

Moving into the fourth quarter, we believe our basic banking metrics are positive and we anticipate a strong finish to 2011.

Now Valerie, I'll turn it back over to you for questions.

(Operator Instructions). Catherine Mealor of Keefe, Bruyette & Woods.

Good morning, everyone. Can you talk a little bit about your inflows into NPL and also what came out of NPL and into OREO this quarter?

I will, in fact I can point to let Harold Livingston talk about the inflows into NPL and then Mitch Waycaster will talk a little bit about what went into OREO as a result of that.

First, on the additions, the net difference was about $3 million to the good which was a continuation of the decline that began a couple of quarters back. Most of the additions were in -- we had some and this was in the Memphis market that were commercial development income-producing properties that had been problems for a good while, and we knew there were probably headed to that. And that was about $4.5 million of the additions to the non-performing.

We also had about $3.5 million of one to four family and about $3 million of some additional residential that we are still cleaning out.

But on the good side, we had about $5.8 million of residential C&D that moved out of nonperforming. One to four family rentals was about $3.6 million and then owner-occupied real estate was about $2.6 million.

Now, when I say on the good side, a lot of that did go on into OREO. But the good news is that we are moving it on out and it is not coming in as fast as we are moving it out.

So with that, I am going to turn the rest of it over to Mitch to talk about what went into ORE.

Catherine, following up on the inflows into ORE and as Smoky mentioned I'll give you the percentages, but they do match up with what the outflows and what we've been selling. First of all in inflows and residential lots and developed land that was $4.9 million or about 35% of the inflows. The good news there, of that $4.9 million there was a deed in [lieu] property, a subdivision with 25 lots that is now under contract.

That was $3.7 million of that $4.9 million and about 60% of that will close by the end of 2011 with the remainder closing by the second quarter -- end of the second quarter of 2012. In one to four family residential that made up 45% of the inflows, about $6.2 million. There was one property in that number for about $2.5 million residential property. Another deed in lieu which is where our current appraisal is about $500,000 above our GL balance on that property.

Again, that made up 45%. Our outflows this quarter was 48%. So again we have been moving those properties.

Another 3% was in commercial land development, and then about another 17%, $2.3 million in other commercial property. That made up our -- about $13.9 million in inflows into ORE.

Let me expand on something Mitch just mentioned. In our press release, we noted in the call I noted that we had $4.9 million of other real estate is under contract. That $3.7 million that Mitch mentioned is not included in that.

We received that actually today. That contract basically calls for all of this property to be sold between now and end of next year with the majority of it -- 60% of it -- being closed by December 31st of this year. And this will be at a gain to what it is booked at on our books. So that is in addition to that.

And let me mention this too. Also not included in that $4.9 million that we have under contract, there is another property that we mentioned last quarter that we took as a deed in lieu, is actually a participation that we are not the lead on, but we did at that time we announced it was a 40 lot subdivision that we had booked at about $1.2 million. And we indicated that there was a schedule for all of those properties to sell between September 1 of this year and September 1 of 2012.

Actually nine of those 40 lots have already closed and there is a possibility because of the way the price is structured that the more they take this year is at a little bit lower price than next year, about $5,000 per lot difference. There has been some indication by the purchasers that they may go ahead and take out all of these lots this year.

But again, that was not included in the $4.9 million that I mention. And while we're on that topic, let me go ahead and Kevin and I will expand on that a little bit more.

That $4.9 million that is under contract for the fourth quarter of the OREO losses and impairments that we took this quarter, Kevin, I think about $1.5 million of that was on this $4.9 million that is going to close. And so the losses on it is there's not that much loss embedded in that $4.9 million under contract. You want to expand on that, Kevin?

Yes. On that $4.9 million as Robin mentioned, $1.5 million of our OREO expenses showing up in the quarter, $1.5 million of that is impairing that property down to the contracted sales price. And then again those contracts are [as far as in the fourth quarter].

All right. Thank you for all the color. And maybe a little bit more on the OREO cost this quarter. It was about $6 million. So you just talked about $1.5 million of that is related to the $4.9 million of OREO that is under contract right now. Where does the rest of the OREO write-downs come from?

Kevin and I will double-team on this again and, Mitch, you can pipe in also if he wants to.

We had two actual lot developments that were actually outside of the Memphis Metro area that basically because of their distance as of right now, although they were very promising subdivisions at one time, the recent appraisals actually appraised these as raw land. And so we took about a $2.1 million impairment on these two properties, which was about 42% of the overall impairment itself. Then you had the $1.5 million there. Losses on sales that occurred during the quarter were --

They were about $600,000 and that -- those were contracts that closed during the quarter not included in any type of impairment.

And the balance of it were small impairments on other properties.

And what was the unpaid principal balance of the two lot developments in Memphis that you took the $2.1 million impairment on?

It was about a 50% write down. It was significant. We thought it was very aggressive, so yes, it was --. But we don't see that happening. These properties were actually in Fayette County. And that area, while at one point in time was growing significantly, it has slowed down now.

The other sign of the coin is we are somewhat optimistic on these properties for the future with the issues that are going on in the Shelby County school system that, based on recent reports that we've heard that there could be a revitalization of this particular area. By the same token, our DeSoto County property is benefiting from the issues in the Shelby County area.

And on the other hand, as mentioned, the Germantown area obviously we're making progress because those lots are all under contract and are moving. And on a he positive note, too, for Nashville, that subdivision I mentioned, the $3.7 million is in the Nashville area, actually in the Franklin area. It seems to be making a real resurgence right now, I think, in that particular area. I think the number of houses in the $0.5 million to $0.75 million range in that area have been absorbed pretty much that there's not but a very small supply left on the market.

So therefore these lots are being taken down, and we have noticed that into some other subdivisions that we have that are in the performing loan category as well as what occurred here.

This $3.7 million one, we mentioned in previous calls that we've been working to in fact get possession of this property because we've had interest from buyers, but they didn't want to buy if the actual borrower was in bankruptcy. They wanted to actually buy it from us.

We have other properties very close to this that are doing quite well right now also.

All right, thank you, Robin. And one other question switching topics a little bit. Do you have the loan yield broken out for the quarter on your legacy loan portfolio and then for your covered loan portfolio just so we can get a sense of how much your covered loans are positively impacting your loan yields?

Our total all in loan yields are about a 5.40%. And when you break that down between covered versus noncovered, our noncovered loan yields were around 5.35%, 5.30% to 5.35%. And on the covered portfolio they were upwards of 5.80% to 6%.

Great and I'll let others take the rest of the call.

Bill Young of Macquarie.

You alluded to just being with some of the de novo expansion, that you have taken on an [acquirer] that expenses are a little front end loaded. Could you just talk about maybe what kind of a normalized run rate would be going from here and how much of that expense base is front end-loaded with the initial cost of the de novo activity?

Stuart Johnson will take that, Bill.

What we captured in the third quarter related to both the Starkville, Montgomery, Tuscaloosa and Trust, our RBC acquisitions was about 115 basis points of our total expenses for the quarter. In capturing all of that information for the third quarter on a full quarter basis, that number is going to about double. We captured about half of that for the first -- during the third quarter on a weighted basis.

So we expect the run rate in the fourth quarter to be down somewhere in total operating expenses somewhere between 12% and 13% or -- yes, a reduction of 12% to 13%.

And that excludes the OREO write-downs --

That's correct.

Okay.

That will include the initial expense of salaries and benefit on a full quarter basis for these new operations as well as making adjustments from the ORE expenses.

Thank you. That's helpful and then --

Hang on just a second. Kevin is going to add something to that.

Just on the new operations, again, Columbus -- not Columbus -- Starkville, Tuscaloosa, Montgomery, and RBC the -- all the non-interest expense for them for the quarter was about $425,000. And as Stuart mentioned that that wasn't a full-quarter impact, but that was the impact for the third quarter was $425,000 of expenses.

Thanks, that's helpful. And last credit you kind of -- the guidance was for 2.5% loan growth over the back half of this year. Could you just comment maybe on pipeline and whether that outlook still kind of holds or if you see any kind of change in activity there?

I am going to give you a general comment and then I am going to let Mitch Waycaster give you a little pipeline specifics. Yes, we are holding based on the $20 million of growth this quarter in net of about 30 plus next quarter, we should be in the 2% to 2.5% annualized range for the last quarter of this year.

But, Mitch, do you want to speak specifically to the pipeline?

Yes. Currently our 30-day pipeline is at $50 million. 36% of that in Alabama, 14% Georgia, about 18% in Tennessee and 32% in Mississippi and this 30-day pipeline would generate about $10 million in net loan growth. And we expect a similar pipeline for the remainder of the fourth quarter which would yield approximately $30 million in net growth.

We have very robust pipelines in the three new markets that we mentioned in addition to some of our existing markets. We actually only booked about $3 million to $3.5 million of loans I think in Montgomery. None in Tuscaloosa. And I don't believe any in Starkville during the third quarter.

Immediately following the quarter in the first week or two of this quarter, we have already booked quite a few funds in each of those markets. And those pipelines are quite robust for the balance of the year.

Let me go ahead and make a comment to while we are talking about the new markets. As of right now out of our RBC transaction, we have only lost seven accounts. So the revenue stream we are anticipating being upwards of 90% on the retention as of right now and, again, we have 12 months from August 31st before September 1 of next year, our price would be adjusted for any revenue that is lost on a pro rata bases over the course of the year. But right now we are quite optimistic that we will exceed even our own expectations on this particular transaction.

So quite a bit of --. We are anticipating some very nice revenue coming in not only from the existing bank prior to third quarter, but our new markets and our new trust division in Alabama.

Great, thanks. And then do you feel there is more -- just going to the margin outlook, do you feel there is more -- you've done a good job over the last few quarters lowering funding costs, but do you still feel that there is more juice there in terms of the municipal?

I am going to let Jim Gray answer that one for you.

We really feel like we said we had done about 80 basis points of improvement in margin over the last four quarters and most of that has come from the funding side simply because we haven't had the loan demand that we actually use to access funds to pay off borrowings or reprice deposits. And that has also led to a deleveraging of the balance sheet.

Looking forward, we believe that our margin will maintain at the levels it's at. We believe we are somewhat ahead of our projections on margin. We still have a little juice left in retail CD renewals. We have one fairly large borrowing, a $50 million borrowing that will come due in the first quarter at a 3.8%. So that will help a little bit.

Then, with the anticipated loan growth and deploying our excess cash, we believe that should help margin. But on the other side, we are seeing lower loan yields. So we believe those two will kind of offset each other. So over the next few quarters, we are looking at maintaining margin in the 3.95% range where we are now.

But back to the deleveraging of the ballot sheet with the anticipated growth in loans and the fact that we don't have a lot of liabilities left to repay, we do see a gradual relay ridging of the balance sheet which should lead to improvement in net interest income even with just a maintaining of net interest margin.

Got it. I'll hop off now. Thanks.

Andy Stapp of B. Riley & Co.

Good morning. Actually my remaining questions just got answered. So thank you.

Dave Bishop of Stifel Nicolaus.

Good morning. Robin, as you looked out into the use of capital here moving forward, obviously loan growth seems to have some good tail winds there. What's your view in terms of maybe the dollar amount in terms of excess capital maybe to employ in terms of the M&A market there or additional FDIC deals? I am curious in how you envision that.

We -- and I am going to let Kevin work with me on this a little bit too, but we are exploring I guess or continuing to explore FDIC opportunities. The Georgia pricing has become very competitive with the older and now new entrances into the platform world in Georgia. So therefore we have not been a factor in the recent FDIC-related failures over there.

Hopefully, we will see some opportunities in some of our other markets in the future and we would certainly take advantage of those if, in fact, they come. But based on what we have seen recently, there have not been any opportunities that have excited us.

And just to add to the specifics about how much capital we have. If you look at our balance sheet and you look at our capital structure, anything -- anything that say under $0.5 billion in assets, we could easily absorb without additional capital and in some of the thought process behind that is our capital ratios. If you look at our capital ratios, leverage has grown to almost 9.5% and then, also, if you look at our balance sheet mix, we have excess liquidity, unpledged securities that, if need be, you can swap assets that those lower earning assets into higher earning asset in the form of an acquisition and not affect those capital ratios.

So, just within our balance sheet mix and our capital structure we think we have room to do some expansion and not have to generate capital to do so.

in terms of a --. I know you addressed the operating expense side, but you know as we look at the fee income side of the ledger, obviously with the late quarter addition of the trust assets, give me a sense what may be a good run rate from a normalized run rate for the fee income side once you get those operations fully integrated?

Kevin will give you a response to that. We -- I will indicate the last year's revenue on the RBC portion of it was in excess of $2 million. So basically, we are looking to -- depending on the percentage that we retain and hopefully we will retain the balance of what is not runoff, but we do anticipate probably some smaller runoffs over the course of the year. But that's another $1.5 million to $1.8 million of additional gross revenue that would come from the RBC portion of it.

A good run rate is probably that $14 million range when you add in the additional quarterly revenue from RBC.

And then, Robin, with the noncovered credit quality metrics, you know, find some stabilization here. As we look at the provision moving forward there, do you think that this is similar to a normalized range or do you see further room for improvement to bring that down as well?

Let me just give you a -- look we -- my memory and our memory is such that we have seen what can happen. And so, for the near term we would like to continue to run between 200 and 220 basis points, in that area as we kind of see what happens. And, Dave, going back we are continuing through the process of flushing through the nonperforming assets. We have been able to get our arms around some of these credits just recently that we've been wanting to take control of so we could in fact dispose of like the $3.7 million development I talked about while ago.

There are some others that we have in our nonperforming bucket that we would like to do the same with because we can dispose of it more quickly. I think Mitch mentioned that we had a residential piece of property that is valued -- appraised at the time that we took it in. We took it in for the loan amount, but it was appraised at $0.5 million over that.

We feel like that will be able to sell that piece of property rather quickly. The actual owner was asking significantly more than the appraised amount for it, quite frankly, when he was trying to sell it.

So just getting our arms around a lot of those nonperforming assets will enable us to push on through the system. I think we've mentioned before we have a significant asset about a $5 million plus subdivision in our OREO that the right of redemption runs out after the end of the year. There's substantial interest in that particular piece of property. The value of it quite frankly is much greater without the right of redemption than with the right of redemption. So we are in the process of the legal -- of taking care of all of the legal aspects of getting that property ready to be disposed of early next year.

So again, just getting our arms around a lot of these pieces of property that are -- that have been in that nonperforming bucket puts us in a position that we can run a lot faster in the future getting those anchors from around our neck. But again, lots of times today is very difficult to take possession of the property because of the bankruptcy courts and moving through that process. But we are optimistic that, as I've said before, that by midyear, we will be in much, much better position in those credit metrics.

Again, we are continuing to see our or nonperforming loans, noncovered, nonperforming loans decrease. We have continued to see our 30 to 89 days early stage delinquencies decrease. So our credit metrics are continuing to improve and we again this quarter were able to go ahead and absorb OREO losses that on sales that will occur in the fourth quarter.

So we are very optimistic as to where we are going in the future. And again our revenue is continuing to improve.

[Taylor Broderick] of Guggenheim Partners.

Good morning. First question has to do with the C&I book in Georgia. I know in the past you had mentioned that was an impetus for moving into that market. Any color to provide on that?

We --. Again the new credits that we are adding have been in the commercial area. C&I and commercial real estate. We have just again during the third quarter we added Ken Davis as our Market President. Ken was a C&I type lender in his former life with SouthTrust and most recently has been the North Georgia Market President for the Synovus operation over there but is a C&I related lender.

That Georgia operation is part of our Eastern division that reports to Mike Ross who was formally our Alabama President and now has the responsibility for both those states. Mike is a long-term C&I type lender.

He and Ken are in negotiations right now with some of their former cohorts at SouthTrust coming on board with us. These are, in fact, a C&I type lenders.

Great, thanks. Lastly you mentioned continued looking at FDIC deals. Any comment on non-FDIC deals? Do you see deal multiples coming down and becoming more attractive for you in the near term or midterm?

I think you are probably within the next 18 months, Taylor, you'll see more opportunities in the open bank. We are seeing -- we are getting inbound calls for open bank transactions weekly. Unfortunately, most of those are in the troubled category that we don't have any interest in looking at from an open standpoint right now.

I think those that are not in the troubled category still have higher expectations as far as pricing than what we are willing to play. Kevin, you want to follow up on that?

Just a couple of comments on that. As far as the timetable it's difficult to target some of these open bank deals. But there is an expectation on our end that the regulatory burden, as well as the new interest-rate environment we find ourselves in, is going to put -- may accelerate some of those discussions.

Great, thank you very much.

I don't think it will accelerate it to the fourth quarter, but it is going -- I think it will drive further conversation as earnings are eroded to regulatory and interest-rate risks.

Great. Thank you very much.

Robert Madsen of Stephens.

Good morning. It looks like you had an increase in your covered loan runoff and I'm just curious if anything changed during the quarter that maybe impacted that runoff and what your expectations are going forward for that right now?

We will still continue to work that book pretty aggressively and work those loans to resolution as quickly as possible. The time frame on that is -- for the majority of that book -- is commercial so it is a five-year window, and we are looking to work through that pretty aggressively. If you look at Georgia overall from their loans, we break out the Georgia loans not subject to loss share. But if you look at them in total, they were relatively flat. And so the new production from the Georgia operations were able to offset that runoff that we had.

Thank you.

Thank you.

Matt Olney of Stephens.

Good morning. You are getting two questions from Little Rock today. I want to follow up on a previous discussion you had on the reserves and provisions. Your reserve ratio is around 2.20 and if that's your highest level and I assume historical highs, not too many banks have reserve ratios that are still near their highs. And there are different ways to interpret that.

How should we think about this, relative to your reserve ratio? Is it based off the general economy and what you are worried about or is it more attributed to a few credits that you see in your portfolio that you are somewhat worried about going forward?

Matt, I will address it. It is not specific to concerns within our portfolio that are known, it is more of the unknown. And just some of the inherent risks that we think are still in the economy that we see that's very tepid. Uncertainty about government regulations and that's not specific to banks but just all across the board.

And there is just uncertainty about the economy. Every time you hear positive news, there seems to be negative news that follows it the next day and just trying to find where the foundation is. Just general uncertainty throughout the economy, the inherent risk in the economy. Not anything specific to our portfolio.

We have mentioned on a lot of occasions that we have a lot of qualitative reserves in our allowance for what Kevin just said for the economy for if, in fact, real estate prices start another downward spiral. Part of it is fuel prices, the uncertainty and the unknown.

Obviously we are beginning to feel pretty comfortable about a lot of our markets. Again, Mississippi, Toyota, you know is -- will be seeing the first cars roll out early next month. They will have 1,500 employees by the end of the year. There will be up to full capacity of 2,000 employees sometime next year. The Tier 1's will be matching those numbers. So a lot of good things are happening in northeast Mississippi as a result of that.

We are seeing improvement in some of the other markets as well. Nashville, again, I will give a Chamber of Commerce speech, but they said from the beginning that Nashville was going to be the last in, first out and that it would be a much shallower recession than in a lot of other areas, especially in other areas of the state.

Memphis, we feel like quite frankly that we are getting close to having identified all the credits in Memphis that are going to fall by the wayside. Getting real close there, which is a very positive thing.

Alabama. You know, the economy is still looking good in Alabama, so we are just being overly conservative if you want to know the truth of the matter right now. Now we are not planning on getting -- we are not planning on seeing our allowance getting over that 220 basis points. But we would like to stay between that 200, 220 basis points in the near future.

And just following up on the concerns about the economy, it is definitely a more macro look not a micro look of each of our individual markets. As Robin mentioned, I think if you look in our markets they are performing well. But it's just more macro concern, overall concern about the economy.

Thanks for the color.

Kevin Reynolds of Wunderlich Securities.

Sorry that you got this onslaught of Arkansas questions ahead of the big game.

Hey, as long as I don't hear from Alabama I am okay.

I had a question for you about the unification of Shelby County schools with Memphis City city here. We have heard some stories locally that DeSoto County's public schools were preparing for a fairly significant inflow of people out of Shelby County into DeSoto County.

Are you guys hearing the same thing and do you think -- what kind of impact do you think that could have gone the movement of properties not just for you, but just in general and DeSoto County if that does come to pass?

We hear that just as you do. You know, they have really a great public school system down there with DeSoto Central. It's a various state-of-the-art facility and they are expanding it with DeSoto County schools as we speak. We think they will have a positive impact on property values in DeSoto County and, obviously, we have quite a bit of OREO down there and it felt that it would in fact come back.

That's -- the way we have explained this before, the way we look at our OREO, we will dispose of that property that we don't think will improve in value. But that property that we feel like that will come back, we do in fact feel that it is worth keeping. And we have between $11 million and $12 million in DeSoto County that we feel like will be good property.

Memphis, on the other hand, for the most part, thank goodness right now Kevin, our Memphis property other than the property we mentioned earlier in Fayette County that we impaired is in that Germantown/Collierville area and is, in fact, doing relatively well considering. So that consolidation issue I think will positively impact DeSoto County and will not have as negative of an impact on the property that we have and the loans that we have secured by property in that Germantown/Collierville area.

So I think we have taken most of our licks in Memphis now with the others that we have identified and made provision for.

Okay, thanks a lot. Good luck this weekend.

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

In addition to the project you discussed, do you have much other in lots or undeveloped land that are in the outskirts of metropolitan areas?

Andy, it would be very small if any. This was -- these were two projects that were, I think as it turns out, a lot more speculative than were indicated at the time the loans were made quite a few years ago. And again, Fayette County probably will come back, so we probably won't dispose of this property at these levels.

The appraisals just brought it that way and actually as I said, took it from being appraised to subdivisions to raw land at this point in time. We don't have any other property in Fayette County. All of our other Memphis-related property is in that Shelby County area and a high percentage of it is in Germantown and Collierville, which are both still in pretty decent shape. All the DeSoto County property for the most part is in that area.

And of course, the Nashville area property is basically in that Williamson County area with some larger homes in the Nashville area, the Belle Meade and Green Hills area that are fairly well valued at this point in time. So we don't anticipate that issue coming up again.

And how much of the growth in CRE loans was attributable to owner-occupied versus investor properties?

About 30% was owner-occupied and about 70% was investor and a lot of that, if you look you might have had a single tenant for just as an example a Dollar General store. Dollar General is doing very well and growing and we do have some customers that finance us. That's the type, that would be a good example of some of the growth there.

Most of our income-producing real estate is in fact single tenant and is in fact national in nature.

All right, thanks.

Thank you.

Michael Rose of Raymond James.

Good morning. I got on the call a little bit late, lake, so sorry if I missed this, but wanted to talk about potential acquisition opportunities outside of FDIC or traditional bank in general. We have seen several larger banks like BB&T purchase some insurance agencies recently.

Is that something that interests you on a go-forward basis? I know you just did the wealth management buy and kind of what are your thoughts there? And then is your wealth management insurance, are they rolled out in all of your markets and fully integrated?

In answer to your question from that standpoint, we would obviously be interested if the opportunity presented itself. What the RBC acquisition allows us to do is to be able to roll out our wealth management services in our metropolitan markets. We felt a little bit behind the eight ball in rolling out those services out of Tupelo whereas out of the Birmingham Metro area, we have I think the talent and sophistication that we can, in fact, roll out these services in Nashville and Atlanta metropolitan areas, areas, Memphis metropolitan areas in addition to the Alabama markets that we are already serving with it.

So in answer to that question, yes.

From an insurance standpoint, we are exploring opportunities there. As far as acquisitions, we haven't seen any opportunity that would be attractive; but we are obviously looking for talent that can, in fact, help us expand into those metropolitan markets with our insurance business.

As far as -- and we've answered this before you got on the line, Michael, but as far as open bank M&A at this stage of the game, we are getting a lot of inbound calls. But for the most part these are crippled institutions and so therefore we haven't had interest. As far as the institutions that are in pretty decent shape, we feel like those $0.5 billion and below banks are beginning to start to feel the crunch of the new regulatory issues and the lower interest rate environment is going to put have another impact on them also.

So we feel like that within the next 18 months and maybe sooner rather than later, we should start seeing those institutions having more realistic views of their values than they do today.

Okay, thanks.

Thank you.

(Operator Instructions). At this time I am showing no further questions. This does conclude our question-and-answer session. I would like to turn the conference back over to E. Robinson McGraw for any closing remarks.

Thank you, Valerie, and thank you, everyone, for joining us today. We appreciate your time and your interest in Renasant Corporation and look forward to speaking with you again when we report our fourth-quarter results in January of 2011. '12, excuse me.

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