Renasant Corp (RNST) 2015 Q1 法說會逐字稿

Good morning everyone and welcome to the Renasant Corporation 2015 first-quarter earnings conference call.

(Operator Instructions)

Please also note that today's event is being recorded. At this time I'd like to turn the conference call over to Mr. John Oxford with Renasant Corporation. Sir, please go ahead.

Thank you, Jamie, and good morning and thank you for joining us for Renasant Corporation's first-quarter 2015 earnings conference call. Participating in the call today are members of Renasant Corporation's executive management team.

Before we begin let me remind you that some of our comments during this call may be forward-looking statements which involve risk and uncertainty. A number of factors could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.

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

Now I will turn the call over to Renasant Chairman and CEO Robin McGraw. Robin?

Thank you John. Good morning everyone and welcome to our first-quarter 2015 conference call.

Our first-quarter financial results reflect a strong start to what we expect to be a great year. These results are a continuation of superior returns on profitability metrics as our return on tangible assets was 1.18% and our return on tangible equity was over 15%. Compared to the same quarter in 2014 we increased our net income and earnings per share by 12% by growing revenue while at the same time holding noninterest expense flat.

As we look forward we believe we are well-positioned to improve profitability and earnings growth during 2015. Net income for the first quarter of 2015 was $15.2 million, or basic and diluted EPS of $0.48 as compared to $13.6 million or basic and diluted EPS of $0.43 for the first quarter of 2014.

In addition during the quarter we received regulatory approval to complete the proposed merger with Heritage pending both companies shareholder votes as pursuant to our previously announced agreement and plan of merger. During the first quarter of 2015 we incurred merger expenses of approximately $478,000 or $0.01 and earnings per share related to this Heritage merger. For the first quarter of 2015 our return on average assets and return on average equity were 1.06% and 8.59% respectively as compared to 93 basis points and 8.19% respectively for the first quarter of 2014.

Total assets as of March 31, 2015 remained flat at approximately $5.89 billion. The increase in assets on the linked-quarter basis is due to a seasonal influx of deposits primarily in public fund deposits. Due to the short-term nature of these deposit influxes the funds from these deposits remained in liquid assets such as low yielding interest-bearing cash or short-term investments.

Total deposits were $4.9 billion as of March 31 of 2015 as compared to $44.8 billion at December 31, 2014. Our noninterest-bearing deposits averaged approximately $932 million, or 19.1% of average deposits for the first quarter of 2015 as compared to $949 million or 18.9% of average deposits for the first quarter of 2014. Our cost of funds decreased to 43 basis points for the first quarter of 2015 as compared to 48 basis points for the same quarter in 2014.

Total loans including loans acquired in either the First M&F merger or in FDIC-assisted transactions which are collectively referred to as acquired loans were approximately $3.95 billion at March 31, 2015 and $3.99 billion on a linked-quarter basis. Excluding acquired loans, loans grew 11% to $3.27 billion at March 31 of 2015 as compared to $2.95 billion at March 31, 2014. Non-acquired loans increased slightly compared to December 31, 2014 which is normal for the first quarter when we have a seasonal reduction in many of our revolving commercial lines of credit.

Breaking down year-over-year loan growth by our market by each market our Alabama market grew by 9.1%, our Mississippi market increased loans by 13.7% and our Tennessee market grew loans by 7.5%. In Georgia we grew loans by 28.4% as compared to the first quarter of 2014.

Looking ahead our loan pipelines and opportunities for growth throughout our markets project a more pronounced loan growth for the remainder of 2015 especially in the second and third quarters which are traditionally our heaviest loan production quarters of the year. At March 31, 2015 the Company's Tier 1 leverage capital ratio was 9.75%, Tier 1 risk-based capital ratio was 12.45% and total risk-based capital ratio was 13.5%. Our common equity Tier 1 capital ratio was 10.34% at March 31 of 2015.

In all capital ratio categories our regulatory capital ratios continued to be in excess of regulatory minimums required to be classified as well capitalized. Our tangible common equity ratio was 7.65% as of March 31, 2015.

Net interest income was $48.8 million for the first quarter of 2015 as compared to approximately $50 million for the first quarter of 2014. Net interest margin was 4.03% for the first quarter of 2015 as compared to 4.04% for the first quarter of 2014. Additional interest income recognized in connection with the acceleration of paydowns and payoffs from acquired loans was $590,000 in the first quarter of 2015 and increased net interest margin by 5 basis points as compared to $2.6 million and 21 basis points in net interest margin in the same period in 2014.

Noninterest income was $21.9 million for the first quarter of 2015 as compared to $18.6 million for the first quarter of 2014 and $20 million for the fourth quarter of 2014. Our mortgage revenue increased 95% on a linked-quarter basis due to increased production as a result of a decrease in rates and new mortgage originator hires made in the latter part of 2014. Noninterest expense was $47.4 million for the first quarter of 2015 as compared to $47.6 million for the first quarter of 2014.

At March 31, 2015 total non-performing loans which are loans 90 days or more past due and non-accrual loans were $48.2 million and total OREO was $31.7 million. Our non-performing loans and OREO that were acquired either through the First M&F merger or in connection with the FDIC-assisted transactions which collectively are referred to as acquired non-performing assets were $29.3 million and $15 million respectively at March 31, 2014.

Since the acquired non-performing assets were recorded at fair value at the time of acquisition or subject to loss share agreements with the FDIC which significantly mitigates our actual loss the remaining information in this discussion on non-performing loans, OREO and the related asset quality ratios excludes these acquired non-performing assets. Our non-performing loans were $18.9 million as of March 31, 2015 as compared to $19.7 million as of March 31, 2014 and $20.2 million on a linked-quarter basis. The non-performing loans as a percentage of total loans were 58 basis points as of March 31, 2015 as compared to 67 basis points as of March 31, 2014 and 62 basis points on a linked-quarter basis.

Annualized net charge-offs as a percentage of average loans remained the same at 11 basis points for the first quarter of 2015 as compared to the first quarter of 2014. We recorded a provision for loan losses of $1.1 million for the first quarter of 2015 as compared to $1.5 million for the first quarter of 2014.

The allowance for loan losses totaled $42.3 million at March 31, 2015 as compared to $48 million as of March 31, 2014 and $42.3 million as of December 31, 2014. The allowance for loan losses as a percentage of loans was 1.29% as of March 31, 2015 as compared to 1.63% as of March 31, 2014 and 1.29% on a linked-quarter basis.

Our coverage ratio or our allowance for loan losses as a percentage of non-performing loans was 223.68% as of March 31, 2015 as compared to 244.06% as of March 31, 2014 and 209.49% on a linked-quarter basis. Loans 30 to 89 days past due as a percentage of total loans were 37 basis points at March 31, 2015 as compared to 25 basis points March 31, 2014 and 32 basis points on a linked-quarter basis.

OREO was $16.7 million as of March 31, 2015 as compared to $25.1 million as of March 31, 2014 and $17.1 million on a linked-quarter basis. In addition during the first quarter of 2015 the Company experienced a significant reduction in costs associated with OREO as OREO expense decreased approximately 69% as compared to the first quarter of 2014.

We see many positives on the horizon, specifically healthy commercial loan pipelines which support our annual loan growth goals and a robust mortgage loan pipeline, both of which should drive continued revenue growth. Concurrently we are working toward a successful merger and conversion with Heritage which after receiving the required regulatory approval during the first quarter we anticipate completing during the third quarter of 2015. As previously indicated we anticipate this merger being immediately accretive to earnings with double-digit accretion in 2016.

Now I will turn the call back over to you Jamie.

(Operator Instructions) Brad Milsaps, Sandler O'Neill.

Hey, good morning. Robin or Kevin, just curious if you guys could maybe talk a little bit more about your NIM outlook for the year.

I know the first quarter can be affected by the municipal deposits that you talked about but I know last quarter you talk about loan yields coming in maybe in the low to mid 4s. Can you talk about what you're seeing as of this quarter and how that winds up with how you see the margin playing out for the remainder of the year?

Brad, this is Kevin and just let's first talk Renasant standalone and then when we close Heritage which we're expecting in Q3 that will change a little bit. But let's just talk about Renasant before Heritage. What we see for the next couple of quarters and really carrying us out through the end of the year is that an opportunity for margin to be flat from where we currently see.

If you look at Q1 we did have some pressure on margin a basis point or two just from the seasonal inflow of that public fund money that was held in short-term securities, held in cash and that just doesn't yield a whole lot. So it did compress margin a basis point or two. That will relieve itself as we get into Q2 and Q3.

When we look at our repricing on our loans for Q1 we came in in the 430 range. That's consistent with what we saw in Q4 and also compared to Q4 we saw more mix of variable-rate loans than we saw fixed-rate loans. And that's a trend that we've seen now for two quarters and a trend we've seen that's been building as an emphasis on variable rate loans, they do carry lower yields but it is part of our strategy to just embed more asset sensitivity into the balance sheet.

All that being said as the yield has been compressing we still have opportunity and are still picking up cost over on the liability side. That's offsetting that yields compression.

That's what's going to hold margin flat. Flat maybe slightly declining, but we don't see a significant amount of compression as we look into Q2 and Q3.

That's helpful, thank you. Then just to follow-up on the loan growth I appreciate the color on the seasonality in the first quarter but anything else in 1Q, were there any elevated levels of paydowns and just kind of curious what production may have looked like versus paydowns in the quarter and how you feel about it as you move into second and third in terms of loan growth?

Yes, Brad, this is Robin. We actually had very strong production during the quarter. We had about $195 million of new loans funded during the quarter as opposed to last your first quarter like $165 million, $167 million.

So a significant increase in that light. We did again going back to the seasonality of some of our revolving lines we saw a decrease of about $65 million on a linked-quarter basis in those lines which may be a little bit higher than normal. But this was exacerbated, the reductions, by some payoffs about $100 million to $110 million of payoffs on some of our loans a lot of which went into the conduit market.

So we did see some significant paydowns in that particular light which is a little bit unusual and I think this was a quarter that it hit us. So that exacerbated the reduction a little bit more so than would be normal in that particular light. But now going forward we see some very robust pipelines similar to what we saw this time last year for both the 30- and 60-day pipelines.

We're in the mid-80s, mid- to high 80s on the 30-day pipeline and have probably a higher 60-day pipeline than we normally see. So we're looking very optimistically at our loan growth in the coming quarters.

Great, thank you guys.

Emlen Harmon, Jefferies.

Hey, good morning guys. I was hoping to hit on just the mortgage outlook. Obviously we've got a couple of factors going on there with the refi cycle, but then you guys are also hiring so really just wanted to get a sense one of just what the sustainability of the current level of mortgage revenue is and just what's the overall profitability of that business today or for this quarter?

Emlen, this is Jim Gray. We did have obviously a good improvement in volume from the fourth quarter to the first quarter, about $207 million in Q1 versus $162 million in Q4, and then the gain the increase in our gain was pretty well driven by that volume. It was somewhat driven by mix in that we did have a little higher percentage of retail that wholesale.

We were about 66% retail, 34% wholesale closer to the 60/40 retail wholesale mix in Q4. Our purchase and refi mix we were 60/40 purchase refi in Q4. We were closer to 50/50 in the first quarter.

But we did see an increase in purchase volume during the first quarter which typically the first quarter is not a strong purchase quarter. And adding on the weather during the first quarter we were very pleased to see that increase in purchase volume. And now we're just now in the second quarter getting into that purchase season was our purchase volume should be strong through the second and third quarters.

We did have an increase related to some lift outs. If you recall in prior calls we mentioned a lift out in Alabama, a team in Alabama and also did a lift out. That team was lifted out about mid-2014 and the Georgia team was lifted out at the end of the third, early first quarter of 2014.

The Alabama lift out is hitting its stride now. Its volume has doubled and that team is probably averaging close to $1 million per month per originator.

The Georgia team is still ramping up. They are probably averaging about $0.5 million per team. Remember we actually have more originators in that George lift out, so we're looking at even more and we're starting to see it through pipelines increasing that Georgia team into the second quarter.

Our pipeline at the end of the first quarter was $121 million. That's compared to a pipeline at the end of the fourth quarter of about $50 million. So we are looking at a strong second quarter and you know even though as you know mortgage is going to be driven somewhat by rates and the 10 year is still hovering around 2% or a little below but refi is more dependent on the rate than the purchase. So even if we did see another 25, 50 basis point increase in rates I think while we would see definitely see a slowdown in refi I think our purchase volume would continue strong and it has continued to grow.

Just from a profitability standpoint we're running for the first quarter we were running about I was going to give you our efficiency ratio -- running in the 70%, 75% range on efficiency ratio. We do see trying to bring that efficiency ratio down a little more. But so net profit, net pretax income for the first quarter was $1.7 million off of our revenue, total revenue was $5.8 million.

Got it. Perfect. A ton of information there so I feel like I used my two questions already. Thanks guys.

Emlen, one thing I would add just talking about Jim mentioned the efficiency ratio and mortgage is going to carry a higher efficiency ratio than our core bank. But the offset to that is the amount of capital we have to allocate to that line of business is minimal and so the returns that that minimal amount of capital investment drive exceed other returns in other business lines. So it is less efficient but the returns that we get off that capital allocation is tremendous.

Got it. Thank you.

Kevin Fitzsimmons, Hovde Group.

Hey guys, good morning. A quick question on credit.

I noticed this quarter it looked like you had built reserves a little versus past few quarters underproviding relative to charge-offs. So are we at a point where you are looking to keep the allowance stable here or what is your target on that front?

Kevin, what we've been doing over the last year, even the year before that is really just maintaining an allowance to cover what we -- it covers two things, one future charge-offs that we project and then loan growth. And that's really been our allowance methodology.

We do our internal risk ratings and have our migrations up and down through their internal watchlist. And what we've seen over the last several years is an improvement in credit and we as that improvement in underlying credit metrics have materialized we've been slow to release reserves and really have been challenging the current economic environment, current economic factors and how that impacts our allowance methodology.

So for example are there economic drivers that may be driving loss today that aren't going to show up until the year, two years from now and so that's why we been a little bit slow to say release reserves. But our allowance methodology is really to provide for loan growth and to replenish into charge-offs that we project.

All right. That's fair. And in theory with what you were saying about the loans for your allowance to loan ratio you probably view that denominator as being a little understated just because of the seasonality and paydowns relative to the pipelines that you see going forward?

Correct.

That's correct. I was going to point that out, Kevin. We had close to $200 million of loan originations during the course of the quarter and if you look at the quarter as compared to the fourth quarter actually total loans on average we were up about $55 million during the course of the quarter.

So you have that $65 million paydown our net paydown on those revolving lines during the quarter. So that distorts it little bit as you look at the lines.

All right. Make sense. Just one quick follow-up Robin.

With the Heritage deal coming to close I guess in third quarter, can you remind us where you guys stand on M&A? Like are you all really on the sidelines as you put it or as I put it I guess for until you get through that deal or are you still pretty active in conversations and maybe remind us what is top of your priority list? Thanks.

Yes, we're still back as far as conversations, we're looking at this stage of the game as we anticipate a close early in the quarter. We don't see integration risk being high.

We've just completed an integration with a bank of similar size with First M&F and we've been working on integration with Heritage since the beginning of the year. Quite frankly we've had teams in both -- well all three states quite frankly Alabama, Georgia and Florida.

So we don't see that being an inhibiting factor as far as going forward with any acquisitions. So if we can find the right partner we certainly would not hesitate to move forward with an acquisition at this stage.

Kevin, just to build on that in Q1 we announced the receipt of all the regulatory approvals. Right now we are in the process of printing and mailing our materials for the special shareholders meeting which is scheduled for June.

So that puts us at a Q3 close date and really gives us a final time frame for us to work around as far as a legal merge. And the benefit of that is it allows us to now focus on the conversion which we're anticipating in August.

So really we're able now to look and focus our efforts more towards conversion and integration rather than uncertainty about when the deal will actually close. That's where our focus and efforts are right now is more towards conversion and making that seamless for the customers.

And when is that going to happen again, Kevin?

Mid-August.

All right, great. Thanks guys.

David Bishop, Drexel Hamilton.

Good morning gentlemen. Robin, just following up on Kevin's question, maybe appending that, maybe just an update on or refresh my memory in terms of cost saves you're looking at out of the Heritage deal again?

Kevin?

Yes, David, we projected 20% of Heritage -- 20% cost saves from Heritage. And I just would remind everybody that 20% includes the investments that they've made in mortgage and we really did not assume any cost saves coming out of that mortgage group. So if we were to strip that out of the core bank we're looking more in the 27% range of true cost saves off the commercial bank.

We didn't project any mortgage cost saves but there will be some synergies over time back-office wise. But we did not include anything in our projected cost saves.

Got it. And then any potential adds maybe in the wealth management area there, you touched upon the mortgage banking but just curious if there's any other lift outs or any other markets or teams out there on the wealth management side that could be enticing or present a logical expansion opportunity?

Yes, that's something we're always looking at, Dave. In fact our director of wealth management is very aggressively looking for opportunities along that line. We just have not found the right fit yet but we could expand through acquisition but we're also looking for opportunities for limited lift outs or in some cases larger lift outs to enhance what we already are doing.

We have in fact with that in mind expanded into the national market with a business development officer in the 401(k) retirement plan arena and are starting to see some success in that area right now. We will be doing the same thing in the Georgia markets and eventually into the Florida markets. Right now our main concentration in the wealth management other than annuity mutual fund and equity sales is in the Mississippi and Birmingham markets as far as the trust divisions go.

But we're seeing the expansion in Nashville, to some degree in the Atlanta market we're looking to expand in the not-too-distant future. So we're looking for opportunities there and we see that as a good line of business.

And then following up on that in terms of the Atlanta market there I think you noted the originations this quarter were up, but maybe just an update in terms of the commercial lending growth in those markets or in the Atlanta market.

Yes, we have been very pleased with the growth that we've seen in our Atlanta market. Obviously our Georgia production is 90% -- 95% is coming in the Atlanta market as opposed to some of the North Georgia markets.

One of the features of the Heritage merger is we pick up another location with about $120 million to $140 million of deposits with a good opportunity for some additional loan growth in that Atlanta market. We're very pleased with where we are there and we definitely look to expand in that area.

Great, thanks for the color.

John Rodis, FIG Partners.

Good morning, guys. Most of my questions have been asked and answered, but Robin maybe just to follow-up on M&A. You've talked about potentially expanding into the Carolinas and I was just wondering what your thoughts are on those markets today?

You know, John, the question I think that I responded to the Carolinas was in the future do you see yourself going outside of the markets that you're in? And we still feel like there's a lot of opportunity in the five states that we're in right now.

But if I think the eventual move outside of those markets would be to the Carolinas as opposed to west Louisiana, Arkansas, and Texas or north to Kentucky. We just kind of see that the Carolinas being a little bit more like the current markets we're in. We don't see any expansion there in the immediate future but that could be a possibility for us down the road.

Okay and then Robin just one more question on M&A as far as I guess potential size of a deal going forward, just because at some point you're going to be up against the $10 billion threshold. So can you just talk a little bit about that?

Yes, right now we probably will be concentrating more on smaller deals. The deals of $1 billion, $500 million to $1 billion as we get our feet on the ground.

One of the things that we've done, John, going back to the M&F merger is we felt like that there was a real need for us to go ahead and spend some money to put ourselves in a position from a cost standpoint that when we go over the $10 billion number that we're in a position from an infrastructure standpoint to be able to have the I guess the IT infrastructure which we've done. As you know we've mentioned previously we utilize some of the cost saves from the M&F merger to hire a new chief information officer and several other IT specialists at that point in time. Also we have and are in the process of doing all the infrastructure needed for a bank much larger than $10 billion at this point in time from a standpoint of equipment buildings wiring.

We also have hired a significant number of individuals in the compliance area both from a BSA fair lending compliance, all aspects of compliance, added a new lawyer specializing in compliance so we feel like from that standpoint that we have put ourselves in a position to cross over the line. We want to be in a position that when we do cross over that $10 billion barrier to have everything other than the actual hard costs as we see interchange fees change and/or the additional enhanced FDIC premium, we want those to be really the only additional costs we see at that point in time.

As a result of having we've added some new software and with new IT personnel we're in a position that going forward that we should be able to handle any issues that pop up along that line. So hopefully as we move up slowly that we will be in a position when we do cross over with somewhat larger deal that it won't have any real negative financial impact on us.

Okay, makes sense. Thanks, guys.

Eric Grubelich, who is an investor.

Hi, good morning. Most of my questions were answered, too, but I did have one about the just the mortgage banking.

I think you quoted a number of about $5.8 million in revenue. I assume that was the gain on sale plus the spread income from the carried loans?

That's correct.

Okay, and the efficiency ratio I think you said it was about 77% on that business. Is it fair to assume that 80% of that is comp and is that what drove the linked-quarter increase in the comp and benefits line this quarter?

Kevin will comment --

It is. If you look at our salaries and employee benefits it's up $900,000. $600,000 of that is related to commissions. The other $600,000 is related to FICA, just an increase in FICA with the start of the new year.

If we look at our salaries and employee benefits just pure just the salary line item it was down $400,000. So the increase is due to commissions and then FICA.

Okay great. And then just one other thing on some of the 30- to 60-day pipeline numbers you were talking about. Does that tend to be concentrated more in the commercial real estate than the C&I or how does that mix of business look going forward?

Actually the mix is getting better from a C&I standpoint. Especially in that 60-day bucket that I was talking about we're seeing some significant improvement as we try to expand the C&I business so we don't have nearly the concentration in the commercial real estate.

Okay great. Thanks very much. And sorry I won't see you next week at the Gulf South Conference but I hope you have a good time down there.

Matthew Olney, Stephens.

Hey, thanks, good morning guys. Robin, you just mentioned the discussion about the buildout of compliance cost, more people, more software, more technology and I'm sure it feels like this investment is never complete and that being said, where do you think the bank is on the most expensive part of this compliance buildout? Is it behind you or is it still in the thick of it as we speak?

I would say the most expensive part is behind us. I think all you'll be seeing is incremental cost going forward, Matt.

Okay. And then going back to the efficiency ratio, can you remind me what kind of impact you expect on that ratio from the HBOS acquisition?

And obviously it being a business mix it's pretty heavy in fee income at HBOS. I'm trying to understand at the momentum on the efficiency ratio you've had the last few years if that's going to flow at all as you integrate this in the back half of 2015?

Matt, it's Kevin. It will slow in the back half of 2015. It doesn't really change our projections with what we stated about our efficiency goals.

What it really changes is to what degree we can move it beyond 59% and the timing of rapidly moving it past 59% to a lower number. That will change. We won't be able to move it as quickly and it's really just because to your exact point Heritage's if you look at the contribution of their total income just from their mortgage group it is a far larger proportion than ours and it drives a higher efficiency ratio.

It doesn't mean it's necessarily less profitable or unprofitable line of business it is just less efficient which is the nature of mortgage. But it really doesn't change our goals but it will change our ability to incrementally move it down in 2016 and 2017 and beyond just with that mix of fee income.

And Jim's comment about the efficiency ratio, our mortgage division is indicative of the higher efficiency ratio and he said it was at 77%. So that will weigh obviously as Kevin said the high concentration of income they have from there.

Sure, yes, that make sense. Okay, that's all for me. Thanks guys.

Andy Stapp, Hilliard Lyons.

Good morning. I got on the call late so if any of my questions have been addressed just let me know and I will look at the transcript. First question, any update when you might if you do decide to consolidate the mortgage platforms of Renasant and Heritage when that might occur?

Initially we will run both mortgage divisions as separate divisions of the bank and at least through 2016 but along the way we will start looking at efficiencies, one in particular being the platform. We're on two different computer platforms so we will be looking at getting on a common platform, continuing to run the division separately but getting on a common platform. That will be efficiency.

We're looking at vendors, secondary market investors, we're looking at QC vendors. We're looking at secondary market accounting vendors. All the different vendors we utilize on both mortgage divisions we're looking at all those and looking -- we're not making snap judgments on that.

We're taking our time, running on parallel, deciding which is the best whether it be one of the two that we're using or possibly even another one given the increased combined volumes. So we'll take our time on that but ultimately we will be on common platforms.

So at this point you don't know if it will be a 2016 event?

I would say we would have everything on common platforms by the end of 2016 and we'll be working on it during this period of time.

Okay. And with regard to both well I think you addressed salaries and benefits but in occupancy any unusual line item there or is it a good run rate?

Andy, there is not a lot of noise in that number. What the linked-quarter increase reflects is we had several facilities that we've had in the works come online in late Q4 early Q1. That just reflects the operating cost of those new lines of business or those new operating facilities.

Got you. And did you provide the Q1 yield on loans?

Yes. So the yield first quarter on loans all-in and this includes the additional accretion from M&F of the 481. If we back that out, if we back out the additional accretion from M&F and back out any other fair value adjustments related to M&F that yield is a 458 on loans.

Okay great. Thanks, guys.

Kevin Reynolds, Wunderlich Securities.

Good morning everybody. Same deal as Andy. I got on here late so I apologize if my questions have already been asked and answered but I have a couple.

One is Kevin I think I got on the tail end of the conversation about mortgage. I believe it was you talking about it but I may have missed that but mortgage took a big jump this quarter.

I know that there was obviously some refinance activity and some producers that have come online. But do you think that you're able to because seasonal business will be stronger in Q2 or at least maintain the strength in Q2, do you think you can hold that level of production as you go into the second and third quarter, the summer selling season, or do you think that we're due for a little bit of a pullback to slightly lower level that you can sustain?

This is Jim Gray. And we believe that we will be able to sustain the volumes, as I noted earlier the purchase volume which is typically slow during the first quarter and ramps up in the second and third quarter we see that continuing to pick up particularly with the two lift -- the Alabama and the Georgia lift outs. And in addition to that I should mention we've hired some other originators in the Jackson area and some and done some fill in in some of our other markets.

So we believe we're well-positioned to increase purchase volume even if we do see a falloff in some refi volume. At current rates refi is still pretty strong but if we did see a 25, 50 basis points back up in rates then we still and given our pipeline, our pipeline at the end of the quarter was really strong so that that pipeline is carrying us through well into the second quarter.

Okay, thanks for that, Jim. And then Kevin on the margin I think you were just talking about core versus reported loan yields. I think last quarter wasn't your core margin around 3.98% or so and then what was that in this quarter and then versus the reported margin that you had for the quarter?

Yes, so we reported a 4.02% margin. If we exclude the 5 basis points from the M&F accelerated payoffs that gets us down to about 3.97% compared to that 3.98% in Q4.

Got you. So relatively stable there.

The question, the final question I have is the call we were on just before this somebody made an acquisition into the Memphis market last night or at least announced it and did a big lift out. Do you have any thoughts on that and how maybe not so much the specific competitor coming in, although you could comment on that if you want to, but just maybe the changing dynamics of that Memphis market? What does this -- we've had some other out-of-state competitors that have done lift outs in prior years that are probably making some progress.

Now you got a new one coming in that's been pretty aggressive in other urban markets in the state of Tennessee. How does that make you feel and where do you see your place an office in the Memphis market because you've been there for a long, long time.

Kevin, it's Robin. No comment on the new competitor coming in. They do a very good job and I'm very complimentary of them but we don't see anything changing as far as we're concerned.

We feel like we have a very good team there, a very strong team. That's an area where we see some good C&I-type business growing for us along with a good commercial real estate team that we've had there.

So we still -- and what we see and obviously I used to live there, we're seeing that Memphis is improving economically. So I feel much more optimistic about Memphis today than we have in the future.

Honestly our West Tennessee pipeline is one of the strongest that we have right now. So I'm very optimistic about that market.

I mean it sounds like with some of the local developments going on there with the bait shop opening up today it seems like there's some real opportunities for that market to maybe transition from something that had been constantly challenged to perhaps making the turn, hitting that inflection point where there might be some additional business opportunity. Do you get a sense that that's the case going on there that maybe the market is finally making a turn?

Yes, we do and we're hearing it even from the homebuilding standpoint that one of our directors is a homebuilder and he was commenting on the positive trends in that direction, too. So our 30- and 60-day pipeline in that Memphis area is very strong.

Good. Thanks, good quarter guys.

Ladies and gentlemen, at this time I'm showing no additional questions. I'd like to turn the conference call back over for any closing remarks.

Thank you, Jamie. Thanks everybody. We appreciate your time and interest in Renasant Corporation and certainly look forward to speaking with you again in the near future.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.