Renasant Corp (RNST) 2012 Q4 法說會逐字稿

Good morning, and welcome to the Renasant Corporation 2012 fourth-quarter earnings conference call and webcast. 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 John Oxford with the Renasant Corp. Please go ahead.

Thank you, Laura. Good morning, and thank you for joining us for Renasant Corporation's 2012 fourth-quarter and year-end earnings webcast and conference call. Participating in this call today are members of Renasant's executive management team. Before we begin, let me remind you that some of our comments during this call may be forward-looking statements which involve risk and uncertainty.

A number of factors could cause actual results to differ materially from the anticipated results or other expectations expressed in 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.

And now, we'll turn the call over to E. Robinson McGraw, Chairman and CEO of Renasant Corporation.

Thanks, John. Good morning, and thank you again for joining us today. Our results for the fourth quarter of 2012 represent a strong finish to a successful year for Renasant, as we experienced a 26% increase in EPS and net income as compared to the same period in 2011. Contributing to the strong performance during the fourth quarter of 2012 as compared to the fourth quarter of 2011, we increased net interest margin by 13 basis points and grew both net interest income and non-interest income.

Also, loans increased for the sixth consecutive quarter. In addition, we experienced a significant improvement in all of our major credit metrics for the fourth quarter of 2012 as compared to the same quarter of 2011.

Reflecting on our financial performance for the fourth quarter of 2012, net income was approximately $7.3 million, up 26% as compared to the same period in 2011. Basic and diluted EPS were $0.29 for the fourth quarter of 2012, as compared to $0.23 for the fourth quarter of 2011. For 2012, net income was approximately $26.6 million, up 4% as compared to 2011.

Net income and EPS for 2011 included pre-tax acquisition gains of $8.8 million in connection with our FDIC-assisted acquisition of American Bank and Trust of Roswell, Georgia; and $570,000 from our acquisition of RBC'S Birmingham Trust operations. We did not record any acquisition-related gains in 2012.

Total deposits were $3.46 billion at December 31 of 2012 as compared to $3.41 billion at December 31 of 2011. We continue to improve our deposit mix, as non-interest-bearing deposits grew 7% to $568 million at December 31 of 2012 as compared to December 31 of 2011. Non-interest-bearing deposits now represent 17% of the total average deposits for the fourth quarter of 2012, up from 16% of total average deposits at the fourth quarter of 2011.

As a result of our continued improvement in funding mix, our cost of funds was 64 basis points for the fourth quarter of 2012 as compared to 92 basis points for the same quarter of 2011. In addition, our cost of funds declined to 72 basis points to end the year ending December 31 of 2012 from 111 basis points for the year ending December 31, 2011.

Total loans increased 9% to $2.81 billion at the end of 2012 as compared to $2.58 billion at the end of 2011, as loans not subject to loss-share agreements outpaced runoff from the covered loan portfolio. Loans not covered under FDIC loss-share agreements grew 15% to $2.57 billion at December 31 of 2012 as compared to $2.24 billion at December 31, 2011. For the fourth quarter of 2012, non-covered loans increased $33.5 million as compared to the third quarter of 2012.

Breaking down year-over-year loan growth by market, our Alabama markets grew loans by 18.7%, and have now grown loans 11 of the last 12 quarters. Our Mississippi markets increased loans by 8.5%. And our Tennessee markets grew loans by 10%, which is their fourth consecutive quarter of loan growth. In Georgia, we essentially replaced 77% of the decline in non-covered loans with new loan production, primarily from the small business sector.

We believe that we are well-positioned to continue this trend of growing loans as we take advantage of our recent new hires, entrances into new markets, and continued focus on loan opportunities in our existing markets.

Total assets as of December 31 of 2012 were approximately $4.18 billion as compared to $4.16 billion at September 30 of 2012, and $4.20 billion as of December 31 of 2011.

Shareholders' equity was $498 million at December 31 of 2012 as compared to $487 million on December 31 of 2011. At December 31, 2012, our tangible common equity ratio was 7.60%. Tier 1 leverage capital ratio was 9.86%. Tier 1 risk-based capital ratio was 12.85%. And total risk-based capital ratio was 14.13%. Our capital ratios were all in excess of regulatory minimums required to be classified as well-capitalized.

In addition, during 2012 and throughout the recent economic downturn, we maintained our annual dividend of $0.68, which equates to an approximate dividend yield of 3.5%.

Net interest income was $34 million for the fourth quarter of 2012 as compared to $32.6 million for the fourth quarter of 2011. Net interest margin was 3.97% for the fourth quarter of 2012 as compared to 3.84% for the fourth quarter of 2011. For 2012, net interest income increased to $133.3 million, up 3.1% from 2011. And net interest margin increased to 3.94% from 3.77% for 2011.

The current interest rate and competitive banking environment continues to put pressure on any bank and financial services institution's ability to grow net interest income and preserve net interest margin. Despite these pressures, we have grown net interest income and net interest margin on both a quarterly and year-over-year basis. As we continue our efforts to grow loans and restructure our deposit mix, we believe we'll be able to increase net interest income while minimizing net interest margin compression.

Our non-interest income is derived from diverse lines of business which primarily consist of mortgage, insurance, and wealth management revenue sources, along with income from deposit and loan products. For the fourth quarter of 2012, non-interest income increased 40% to $18 million as compared to $12.9 million for the fourth quarter of 2011. Non-interest income for 2012 was $68.7 million as compared to $64.7 million for 2011. Excluding the aforementioned gain from our acquisitions, non-interest income increased $13.4 million, or 24% for 2012 as compared to 2011.

Non-interest expense was $38.5 million for the fourth quarter of 2012 as compared to $32.4 million for the fourth quarter of 2011, and $38.6 million on a linked quarter basis. Non-interest expense for 2012 was $150.5 million as compared to $137 million for 2011. The increase in non-interest expense during 2012 as compared to 2011, as well as on a quarter-over-quarter basis, was primarily due to costs associated with our new market expansions, increased health care costs, and commissions paid on mortgage loan originations.

At December 31, 2012, nonperforming loans were $83.4 million, and total OREO was $90.3 million. Our nonperforming loans and OREO covered under FDIC loss-share agreements at December 31, of 2012 were $53.2 million and $45.5 million, respectively. The remaining information during this discussion -- on nonperforming loans, OREO, and the related asset quality ratios -- excludes the assets under the covered under loss-share agreements with the FDIC.

Nonperforming assets were $75 million at December 31 of 2012, a decrease of 28.7% as compared to December 31, 2011. Nonperforming loans, loans 90 days or more past due, and nonaccrual loans, were $30.2 million at December 31 of 2012 as compared to $32 million at September 30, 2012, and $34.9 million at December 31 of 2011. Early-stage delinquencies, or loans 30 to 89 days past due as a percentage of total loans, were 31 basis points at December 31 of 2012 as compared to 71 basis points December 31 of 2011.

We recorded a provision for loan losses of $4 million, and $18.1 million for the quarter and year ending December 31, 2012, respectively, as compared to $6 million and $22.3 million for the quarter and year ending December 31, 2011, respectively. Annualized net charge-offs as a percentage of average loans were 52 basis points for the fourth quarter of 2012 as compared to 156 basis points for the same period in 2011, and 77 basis points on a linked quarter basis. Net charge-offs as a percentage of average loans for the year ending December 31 of 2012 were 67 basis points as compared to 91 basis points for 2011.

The allowance for loan losses as a percentage of loans was 172 basis points on December 31 of 2012 as compared to 174 basis points on September 30 of 2012, and 198 basis points on December 31 of 2011. OREO was $44.7 million at December 31 of 2012 as compared to $48.6 million at September 30 of 2012, and $70.1 million on December 31 of 2011.

We continue to aggressively market the property held in OREO, as we sold approximately $30.4 million during 2012, and $4.7 million during the fourth quarter of 2012. We continue to experience strong outflows of OREO properties. We currently have approximately $4.9 million of OREO under contract, which is expected to close during the first quarter of 2013.

As we move into 2013, we're excited about our many opportunities to build upon our success from 2012. We're well-positioned to continue our positive trends, which enhance our earnings potential through our strong team of community bankers and favorable banking markets. Additionally, we will continue to take advantage of external opportunities to expand our market share and cultivate new relationships.

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

(Operator Instructions). Catherine Mealor, KBW.

Good morning, everyone. Robin, the pullback in end-of-period loan growth was a little more than we had expected. Can you talk about the pipeline and the pricing dynamics in your market? Do you think you can get back to the double-digit loan growth we saw earlier this year? Or do you think the pricing is just too thin to make that achievable?

Fourth quarter -- we talked about third-quarter being an anomaly because of the large growth we had. The same is true with the fourth. And it basically was based on some payoffs and paydowns and some other situations.

I'll run through a little bit of the math on it. We had about $187 million of actual production during the quarter, new loan production. But what happened this quarter was -- normally, the first three quarters we averaged about $86 million of payoffs during the quarter. We had $133 million this quarter, which is $47 million more than average. Normally during the quarter we have paydowns of about $90 million, but had $120 million this quarter. We actually had average production of about $63 million, which was pretty much in line with what we thought our -- for 30 days; $63 million a month on average, which is pretty much in line with our 30-day pipeline at the end of the quarter -- or, at the beginning of the quarter.

We actually had -- advances were a little bit larger than normal. But when you go through this whole basis, we ended up in double digits; around 10% growth. We would have, for the quarter, had things been on a normal basis. But what we actually saw happen was on the large amount of paydowns is we had quite a few of our customers selling their businesses at the end of the year, from a tax standpoint. It was significant, quite frankly.

In addition to that, the good news was is we were able to resolve quite a few problem credits over the course of the year, or the last quarter, especially the month of December. We saw our watch list drop about $13 million during the fourth quarter, due to payoffs. Some of these were nonperforming loans. One, actually, was a TDR that went on during the quarter and then was sold. It was about a $2.8 million credit. So we saw some real positive news in that front.

With that in mind, I think loan production was good during the quarter, but we just had some instances that occurred, both good and -- I guess we hate to pay down the gain from the sale of businesses and losing those good customers in that respect. And then we had the normal amount of payoffs coming in, with some of the larger banks coming in with some long-term fixed rates that we lost some credits that way, in addition to some going into the conduit market.

As far as our pipeline for the future, I'll let Mitch make some comments about that.

Catherine, our current 30-day pipeline is approximately $50 million. Breaking that down by state, 48% of that would be in Tennessee; 13% in Alabama; 10% in Georgia; and 29% in Mississippi. And as Robin mentioned, we don't foresee the paydowns that we saw in the fourth quarter. So this pipeline should result in approximately $12 million in growth in noncovered loans.

Another point of note, if you go back to the same period in 2012, our pipeline was approximately $38 million, first quarter of 2012.

Okay, great. So, basically, if you don't read into the slowdown, the pipelines still look really strong. And pricing is still at a level where you're comfortable growing the portfolio at a fairly reasonable pace.

Right. As we've said, we don't think that we'll have, obviously, the growth that we had in the third and fourth quarters on an annualized basis. But we do think that we'll be around that double-digit number, the low-double-digit number that we had projected over the course of the year.

First quarter last year was a lot slower than the second and third quarters, so we're probably seeing about the same thing now; although the pipeline is greater than it was in the first quarter of last year.

All right. Thank you so much for the color. This is really helpful. And then maybe one follow-up on your mortgage revenue. You had another really nice quarter in mortgage earnings. Can you talk a little bit about what percentage of that -- of your originations were refi versus purchase, and what your outlook is on this business line?

Catherine, I'm going to let Jim Gray comment on that.

Okay, thanks.

Hey, Catherine. Our refi is actually pretty acceptable to us. We're running about 65% refi. That's actually down from the fourth quarter of 2011, which was running closer to 70%. In talking with peers, we've seen peers up as high as 75%, 80% refi. So we feel very comfortable with the a refi percentage at that level.

Okay, great. Thank you.

I was just going to make a comment that looking forward, I think the industry as a whole is projecting refis to decrease about 20% over the course of 2013. Based on our pipeline, we're certainly not seeing any slowdown of refi coming into the first quarter of 2013. But over the course of the year, we could see a decline of that. And we really have factored that into our forecast for 2013.

However, we believe that we've been pretty aggressive through 2012 in hiring additional originators. I was just listing the markets. We hired additional originators in Birmingham. We're actually opening a new retail origination office in Birmingham. We've hired originators in Starkville and Columbus, Mississippi; Tuscaloosa and Montgomery, Alabama. Hired some new ones in Georgia; and East Tennessee -- Maryville, Johnson City, Bristol. We project hiring originators in Memphis. We've hired new originators in Huntsville and Oxford, Mississippi.

And then we're also starting to see our wholesale volume improving in the fourth quarter. We had some bottlenecks in production, just because our production was so great. We've resolved those, the early -- late summer, early fall. And as a result of that, we saw our wholesale volume picking up. We had signed up a lot of new wholesale clients in Georgia. And they had not started doing business with us because our turn times, frankly, were a little long. But those turn times have gotten acceptable now. And we've immediately started seeing that volume occur.

That's great. Thanks so much.

David Bishop, Stifel Nicolaus.

Good morning, Robin. In your commentary, it seemed like there was pretty good optimism in terms of the growth -- or the outlook for growth -- in overall spread income, with modest amounts of NIM pressure there. Should we think about the overall balance sheet strategy here as continuing to use some of that liquidity from the security portfolio to fund that loan pipeline as we move forward in 2013?

Not as much as we did this year. We're going to try to keep our security portfolio at about levels that we have it today. So you won't see as much of a runoff from the security portfolio as you did last year. We probably will see balance sheet growth this year as a result of that; not as much growth on the balance sheet as you will on the loan side, but you will see some balance sheet growth.

Kevin has a comment to make, too.

Yes, Dave, some of the loan growth is going to be funded by other balance sheet categories on the asset side. We are anticipating OREO to continue to come down, and that's both on the covered and noncovered portfolio. That's going to provide cash for loan growth, as well as just NPLs. We are anticipating in NPLs continuing to come down. So, less funding coming out of the security portfolio, and looking at some of those other categories on the balance sheet to help fund some of that loan growth.

But, as Robin mentioned, we're at the point that we will start seeing some incremental growth in the balance sheet. It won't be in line with the pace of loan growth, but it will be incremental growth in the balance sheet.

Got you. And then following up to Catherine's question regarding the loan pipeline, as you talk to your client base out there, have you seen any sort of drag or negative effects from the ongoing, never-ending discussion regarding the fiscal cliff decision, that's been pushed off a couple months? Have you seen any fallout there in terms of your loan pipeline or potential fundings for borrowers who are just sitting on their hands and delaying projects; that is also serving to dampen loan growth?

I'm going to let Mike Ross, who is our Eastern Division -- Eastern Region President, which covers Alabama and Georgia -- answer that question for you, Dave.

Dave, we have seen a modest amount of that going on, no question about it. However, I must say, in the last couple of three weeks we've started seeing some pickup in activity, such that our current pipelines are closer to where they were toward the end of the third quarter. So we feel like that was a temporary phenomenon. And we're very encouraged by what we're seeing out there, going on right now among our banking teams.

Great. Thank you, gentlemen.

Michael Rose, Raymond James.

Good morning, everyone. A decent amount of loan growth over the past couple of quarters has come in, 1- to 4-family mortgages. Have you all made a conscious decision to portfolio more of that production? And what's your thought process going forward?

I'm going to let Mitch Waycaster answer that for you, Michael.

Michael, that's primarily driven by 1- to 4-family residential consumer portfolio credits that would have a typical maturity of five years or less. And that's driven by the consumer demand for that type of product in lieu of a secondary market type mortgage. So, we have seen pickup there just from consumer demand for that type product in lieu of that typical secondary mortgage type solution.

Okay, that's helpful. And then -- I'm sorry if I missed this, I got on a little bit late -- but can you walk us through the accretable yield portion of the margin and the trends in the noncovered loan portfolio yield? And what you are putting new money or new credit credits on the books at, and would you expect that -- I would assume to continue to come down as competitive pressures weigh on.

Kevin will answer that, Mike.

Yes, Michael, we are holding new and renewed loan yields in the high 4s, say 4.70-ish, and that's been consistent throughout 2012. So, incrementally, the loan portfolio is pricing down. The loan yields, quarter over quarter, dropped a couple of basis points; not significantly, but we are seeing some pressure on just the loan yields as the existing book reprices down.

We are augmenting that with new loan growth, and that's driving growth in net interest income. And we are still incrementally picking up margin improvement as we reprice deposits. We still have some room in time deposits. And then also on the mix side, that's been a focus of ours going on two years now; and incrementally improving the cost of funds to augment some of the pressures we're seeing on the yield side.

When you look at accretable yield -- all-in for the third quarter, accretable yield accounted for about 8 basis points. And that's been declining. In the third quarter, it was 10 basis points. And if you go back to the second quarter, it was 12 basis points to margin.

Okay, that's helpful. And one more, if I can. I know you guys -- I think it was last quarter -- mentioned that OREO expenses, you would expect to come down pretty significantly in 2013. Obviously, they bumped up here in the fourth quarter. Is that still your expectation as you continue to churn through your pipeline of OREO?

It is. And we had $2 million of impairments, fourth quarter. Of that $2 million, $1.4 million were based on contracts for sale in the first quarter of this year. So we impaired the OREO that will, in fact, sell first quarter; so there will be actually a slight gain on $4.9 million that's under contract. In addition to that, through two quarters -- through the second quarter, we already have $7.5 million under contract to close in the first two quarters. And there are several other pending potentials that are there.

And also, we don't want to lose sight -- we have this $4.4 million entire subdivision under contract to incrementally close over an 18-month period that has been tied up in some litigation, based on the homeowner association rights, in approving the actual houses to be built. Those should be resolved -- that issue should be resolved this quarter. So those sales should be starting. And that's at a no-loss situation. So we do continue to feel that our OREO costs should drop off during the 2013 year.

Okay, that's helpful. Thanks for taking my questions.

Matt Olney, Stephens.

Good morning, guys. Robin, most of my questions have already been addressed, but more of a strategic question -- seems like over the last few years you've been very opportunistic with some new hires, whether it's lenders or it's guys on the mortgage team or trust team. What's the strategy for 2013 regarding new hires? Are you going to continue to be opportunistic? Or is now the time to pause and let some of these new hires become more accretive at the bottom line?

We will be opportunistic, as opportunities present themselves. We don't anticipate a lot of de novo openings. But we will be, I guess, hiring new relationship managers as both replacements and/or additions. We just added a three-person team in our Memphis operation that we've been talking with for two or three months, that are more commercial orientation; C&I, commercial real estate type lenders.

This is basically, as we have somewhat -- as we did in Alabama two or three years ago, Mike Ross started the process of pretty much replacing the entire team. We have pretty much done that in our Memphis operation now, with the addition of these three new hires up there. What you'll be seeing will be on a very small basis, as far as that goes. We don't anticipate any large-scale lift outs at this stage of the game.

And what about on the fee income side, Robin? Anybody in the pipeline there, as far as new hires?

Obviously, Jim was talking about the hires last year in mortgage. And we'll continue looking for some wealth management personnel in some markets outside of Birmingham and Tupelo. I think that will be your big additions as far as that goes. We'll continue hiring people in the annuity sale and mutual fund sale area across the system. But we don't have any big lift outs there, either. It will be on a one-off basis, for the most part.

Jim has a comment.

Matt, as you know, on the mortgage hires, the mortgage originators -- you may have to give them a 90-day guarantee. But if they're not paying for themselves in 90 days, we opt them out, or they opt themselves out. We're not committing on those hires to a long-term -- a fixed overhead.

And Matt, the only other comment I'd make -- I'm going to let Mike Ross comment on a new hire in the Georgia/Alabama area.

Hey, Matt. We're real excited to have Mike Knuckles join our team from -- he has joined us to head up our asset-based lending line of business, which is obviously exclusively a C&I loan business. We're in the process during -- right now, of doing all the groundwork and laying all the groundwork to be able to process that business. And we anticipate some fairly significant lift in the second half of this year coming out of that initiative. So we're delighted to have Mike on our team.

Okay, great. Thanks for the data points. That was my only question.

Christopher Marinac, FIG Partners.

Thanks. Good morning. Robin, I wanted to ask you a little more about the FDIC covered portfolio. And to what extent with the loss-share -- even though you may have still a few years left on the loss-share agreements -- will that runoff be any faster on that particular portfolio? And then I'm also curious on the ability to look at some of the few remaining failed deals -- if they're still loss-share available for you on new bids?

Chris, it's Kevin. I'll start with the second question left. What we're seeing on the FDIC-assisted transactions -- there's going to be more bank failures. We're having a difficult time making the existing terms that the FDIC is offering off on these franchises, to meet our economic thresholds. And so we're a little bit cautious about our opportunity to be successful in future bids.

There is some that we're analyzing or preparing -- anticipate that we will have the opportunity to analyze. But, again, the terms are changing such that it's difficult for us to make economic sense.

As it relates to the remaining portfolio, I'll let Mark Williams answer that question.

Yes, Chris, we're pretty pleased with how we've been able to run out those problem assets. And we stay on track to our budget, and really our forecast that we did when we first really got into the loss-share. You're right, there's about a 2-, 2.5-year window left on that commercial side. So we have a heightened awareness, if you will, that we are still analyzing those that are on the watch list; to make sure they're properly identified, those that we need to have that resolution and get out in that time frame remaining. We certainly have a strategy, and we'll keep employing strategies to get those out of the bank.

Okay. Very good. That's great color. I appreciate it, both.

Kevin Fitzsimmons, Sandler O'Neill.

Good morning, guys. Most of my questions have been answered, but quickly on expenses -- I heard the discussion before about OREO expenses being a lever for 2013. But non-credit-related expenses, is there any -- with the environment being what it is -- is there any program or any effort to really scrutinize some of the expenses more? Or is it simply a matter of waiting for some of these new market entries to season, and those revenues to kick in?

And then, secondly, if you guys could share what accruing TDRs were this quarter -- I believe it was about $30.9 million last quarter-end -- if you have that number available. Thanks.

Go ahead and address TDRs.

Yes, Kevin, I'll answer the TDRs question first. They dropped about $1.5 million to $29.4 million.

Okay, thanks.

Kevin, on the expense side, one of the biggest levers that we have is obviously the credit cost of the OREO. We also have problem loan expense that is running us somewhere between $600,000 and $700,000 a quarter this past year. We expect that to continue to subside as well. When you look at more of the operational costs, we are we re-negotiating contracts with some of our primary vendors.

And upon resolution of that, we'll have some operational expense saved; as well as when you look at our salaries and employee benefits, we had an unusually high year of health insurance costs. And not necessarily due to regulatory changes, but just because of some -- just internal cost of employees. We just had higher levels of healthcare costs, and would hope and expect that that number would come down from the high that we saw this past year.

We are self-funded on our health insurance, so that's based on claims as opposed to any type of premium, is the reason for it. So it's not something that would carry over to this year from a premium standpoint. But the only thing there would be anticipation of future claims in that particular regard.

Yes, it's more of a function of actual loss experience being much higher than we had experienced any other year.

The other portion of that salary and benefit expense, obviously, that we want to continue to be at a high level is the commission side of it, payments for mortgage loan originations. That's obviously going to be high when originations are going to be high.

But aside the from expenses you mentioned, the de novos, we still have several of the de novos that haven't fully matured. They still are seasoning. And we will see some continued buildout in those de novos. We are not yet a mature state yet. And there will be incremental revenue that is driven by the expenses that are already embedded in our run rate.

Okay. All right. And a quick follow-up to that. Robin, earlier before I heard you mentioned there would probably be no major lift outs this year. Should we take that to mean there probably wouldn't be any new market entries, apart from the markets you are already in, in 2013?

We, today, have no immediate plans for any de novo openings during 2013. Obviously we've opened up in East Tennessee; in Maryville, Johnson City, and Bristol. And we anticipate that those markets will be ongoing this year. The actual Johnson City opening is not till March 1, as far as the facility itself. But the other markets have, in fact, opened at this stage of the game. So as far as any additional personnel as a result of that, there won't be.

Okay. Thanks, guys.

Zachary Wollam, Sterne, Agee.

Good morning. I just had a couple of questions. On loan mix, can you talk about what you're seeing in terms of region and type, and then the change by region this quarter?

Yes, actually, this quarter from the standpoint of originations, about 75% of our originations were in our old, legacy market, and about 19% were in the de novo markets. And about 6.5% of the originations (technical difficulty) we saw a pretty good bit of originations by market (technical difficulty) had new originations of about $5.5 million and Starkville about $4 million. East Tennessee had $20 million of loan originations (technical difficulty).

Can you talk about where you're seeing payoffs still negating origination activity?

Pardon me. We have a lot of static on the line right now for some reason. Could you ask that again, Zachary?

Yes. Where are you still seeing payoffs still negating originations?

Mainly, in all of our legacy market markets this quarter -- again, this quarter was an anomaly from the standpoint of the end-of-year business sales and tax planning activities that occurred. We saw quite a bit of payoffs in the Nashville market. I think they had about $14 million total. Of that, though, over $6 million of that were in problem credits that we wanted to see paid off, and we're very pleased to see paid off.

But we also saw it across the system. Mississippi had one large $11 million payoff, and we don't anticipate that being the case this quarter for the rest of this year. These were all special circumstances, I think, a lot of those. As I was saying before, normally we run payoffs on average of about $80 million to $90 million a month -- a quarter. But we were exceptionally high in the fourth quarter. And normally paydowns run about $90 million a quarter, but they were about $30 million over that in the fourth quarter, also. We don't anticipate seeing that.

As far as new originations, we saw about 18.5% of our new originations were commercial, non-owner occupied investment type property. But these are all -- normally these run as major, national tenants. 1-to-4 rental property, about -- a little over 5% to 6% there. Non-commercial real estate type properties were about 40%. So we had about 80% of those were real estate related. And probably about 20% were non-real-estate-related originations.

Okay. And can you talk about how the closing ratio has changed over the past year?

The closing ratio being the percentage of our pipeline that closes?

Right, right.

Actually, it really hasn't changed. The numbers that we report to you guys are actually the ones that are accepted (technical difficulty) the customer, approved by the bank, and are in the process of closing. So our closing rate, really, is really close to 100% on the pipeline numbers we give you.

Okay. All right. And just a couple more, if you don't mind. How much residential do you guys want to have, by mix? And what types are you putting on the balance sheet right now?

I think Mitch, to some degree, answered that before. Mitch, to go back to the types -- we generally are looking at maturities of five years or less on these residentials.

Mitch is going to comment on that.

Zachary, in the last quarter, that was about $19 million net. And it is 1- to 4-family residential portfolio credits, with -- the typical maturity would be five years or less; and that being driven just by consumer demand for that type credit in lieu of the secondary market. You're talking about fairly short terms in first mortgage consumer residential.

Zachary, to expand on that a little further, we're not really aggressively seeking those types of credits. For the most part, individuals who are looking for residential mortgages are looking for longer-term fixed rates at this time, based on where rates are today. And we're not interested in those types of credits. Where this happens is that where we have customers who are not interested in getting into the secondary market for various reasons. I guess more than anything else the hassle factor, or they aren't planning to stay in their house that long; and, therefore, they are looking for the type of credit that we're able to offer. But we don't try to compete with those longer-term fixed rates. We try to cut it off in that five-year range.

Okay, all right. I think that's all I have. Thank you very much.

And at this time, we show no further questions. I will conclude the question-and-answer session. I'd like to turn the conference back over to Robin McGraw for any closing remarks.

Thank you, Laura. We appreciate everyone's time and interest in Renasant Corporation, and look forward to speaking with you again in the near future. Thank you, everyone.

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