Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Renasant Corporation (NASDAQ:RNST)

F1Q08 Earnings Call

April 16, 2008 10:00 am ET

Executives

E. Robinson McGraw – Chairman of the Board, President & Chief Executive Officer

James W. Gray – Chief Information Officer.

Stuart R. Johnson – Chief Financial Officer

Harold H. Livingston – Chief Credit Officer

Claude H. Springfield – Chief Credit Policy Officer

C. Mitchell Waycaster – Chief Administrative Officer

Kevin Chapman – Chief Accounting Officer

Analysts

Barry McCarver – Stephens, Inc.

Brian Klock – Keefe, Bruyette & Woods

Brian Roman – Robeco, Weiss, Peck & Greer

Andrew Stapp – B. Riley & Company, Inc.

Charlie Ernst – Sandler O’Neill & Partners

Operator

Good day ladies and gentlemen and welcome to the Renasant Corporation quarter first 2008 earnings conference call. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s conference, Mr. Robinson McGraw, Chairman and CEO of Renasant Corporation. You may proceed sir.

E. Robinson McGraw

Good morning everyone and thank you for joining us for Renasant Corporation’s first quarter 2008 earnings conference call. With me today are Jim Gray, Chief Information Officer, Stuart Johnson, Chief Financial Officer, Harold Livingston, Chief Credit Officer and C.H. Springfield, Chief Credit Policy Officer, Mitch Waycaster, Chief Administrative Officer and Kevin Chapman, Chief Accounting Officer.

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 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 & Exchange Commission. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

During the first quarter of 2008 we believe that our financial results reflect our ability to meet the challenges offered in the current economic environment. Although the Federal Reserved reduced the federal funds target rate 200 basis points during the first quarter of 2008 we experienced only a slight compression in our core net interest margin. Additionally, our mortgage lending division grew non-interest income on record mortgage loan volumes even when mortgage originations declined nationally. In looking into our tri-state markets it’s been over seven months since we integrated Capital Bancorp of Nashville Tennessee in to our systems. With the merger and successful conversion now behind us Nashville looks to be a strong growth market for years to come. While there’s been a definitely slowdown in Nashville housing market we believe that it’s diverse economy and its lack of dependency on any one industry has helped insulate the area against the full impact of today’s economic challenges.

In our other key Tennessee market of Memphis we continue to experience decent growth as we are now the eighth largest bank in the Memphis region based on deposits. We believe the Memphis and Nashville Tennessee markets will bring much opportunity to grow our banking and financial services in years to come.

Moving to our Alabama markets during the first quarter of 2008 we secured a new location in downtown Birmingham’s Park Place Tower. We’re moving our Alabama executive headquarters, our corporate mortgage operations and our Watts branch to this new location. We believe this strategic move will add to our presence in Birmingham not only in physical location but also as we have secured the signage rights for the top of the building found within the city skyline. With this relocation we will be closing our Watts branch and moving it into the downstairs retail space at the Park Place Tower. We believe this move will create better continuity among our Alabama operations as we anticipate the move to take place during the third quarter of 08.

Another one of our Alabama growth markets, Huntsville has been recognized by the January 2008 issue of Forbes Magazine as being one of America’s fastest growing metro areas. The article states that Huntsville is expected to increase its gross metropolitan product by 15% by 2012. Huntsville and Decatur are still experiencing growth in population brought on by the Federal government’s base realignment closure decisions of 05 and we’ve been aggressive in recruiting this new business as it moves into the region.

In Mississippi we continue to be enthusiastic about our DeSoto County market even as the paced slowed during early 08 the DeSoto County growth remained strong according to the census data released in March of 08. DeSoto County remains the fastest growing county in Mississippi and the 33rd fastest growing county in the entire United States. As a note of interest our Oxford Mississippi market was recently chosen by the Commission on Presidential Debates to hold the first debate for the 2008 general election. This will bring not only great national attention to the University of the Mississippi where the debate will be facilitated but also to the State of Mississippi as a whole.

In our corporate headquarters city of Tupelo, Renasant continues to enjoy strong market share. Construction of Toyota Motor Manufacturing North America $1.3 billion automobile manufacturing facility is well underway and operations are expected to commence in early 2010. Joining Toyota in northeast Mississippi related suppliers Toyota Boshoku, Toyota Auto Body, Toyota Gosei, Vuteq Corporation, PK USA and Arvin Sango have all recently announced future plant locations in the close proximity of Tupelo that will bring approximately $375 million in capital investment and approximately 1,800 confined new jobs to the region. We believe that construction and operation of the Toyota plant and other anticipated tier one and tier two service providers enhance the future growth prospects in our mature Northern Mississippi markets and especially help insulate the Tupelo market from the full effect of possible downturns in the Mississippi or national economy. We have over 36 locations within a 60 mile radius of the Toyota and supplier facilities and we believe this provides us with a great opportunity in our North Mississippi market.

Reflecting our financial performance for the first quarter of 08, net income was approximately $8.3 million up 19% compared to approximately $7 billion for the first quarter of 07. Basic EPS was $0.40 down 11.1% and diluted EPS was $0.39 down 11.4% compared to basic EPS of $0.45 and diluted EPS of $0.44 for the first quarter of 07. The decrease in basic and diluted earnings per share was in part attributable to the shares issued in connection with the capital acquisition which was completed on July 1st of 07 and the related equity offering in the second quarter of 07. Total assets as of March 31st of 08 were approximately $3.1 billion representing a 2.4% increase from December 31st of 07 and a 34.3% increase since March 31st of 07. Total loans were approximately $2.58 billion at the end of first quarter of 08, a slight decrease from $2.59 billion at December 31st 07 and an increase of 36.6% from $1.9 billion at March 31st of 07. Total deposits grew over $2.6 billion at March 31st of 08 a 3.1% increase from December 31st of 07 and a 15.9% increase since March 31st of 07.

Net interest margin was 3.52% for the first quarter of 08 as compared to 3.48% for the fourth quarter of 07 and 3.67% for the first quarter of 07. Net interest income for the first quarter of 08 included approximately $531,000 in interest income from loans accounted for in accordance with [AICPASOP 03-3] which increased net margin by seven basis points. Additional interest income from summer loans increased four quarter 07 net interest margin by two basis points and had no impact on the net interest margin for the first quarter 07. Adjusting both the first quarter of 07 and the first quarter of 08 for the impact of 03-3 we experienced a one basis point decrease in net interest margin on a linked quarter basis.

We, as with most financial institutions experienced an increase in non-performing loans and net charge offs in the first quarter of 08. Continuing our proactive approach to credit quality we increased our provision for loan losses during the first quarter of 08 by over $900,000 more than we charged off during the quarter with no additional provision being required for loan growth during the quarter. Our senior credit officers continue to closely monitor all credit relationships so that we can promptly identify any loans that may become problematic and mitigate any potential credit issues.

Annualized net charge offs as a percentage of average loans were 26 basis points for the first quarter of 08 down from 36 basis points for the fourth quarter of 07 and up from four basis points for the first quarter of 07. As we discussed in previous conference calls we generally target our net charge offs to be 20 basis points of average loans. In light of our first quarter charge offs we currently anticipate net charge offs as a percentage of average loans for 2008 to be within a range of five to 10 basis points of this target. The allowance for loan losses as a percentage of loans was 1.06% on March 31 of 08 as compared to 1.02% at December 31 07 and 1.06% at March 31 last year. Non-performing loans as a percentage of total loans were 85 basis points as of March 31st 08 compared to 58 basis points for March 31st 07 and 63 basis points on December 31 of 07. The company recorded a provision for loan losses of $2.6 million for the first quarter of 08 as compared to approximately $2 million for the fourth quarter of 07 and $750,000 for the first quarter of 07. As general economic conditions continue to linger we have increased our provision for loan losses during the last two quarters in order to provide for any unforeseen occurrences resulting from this less than favorable economy.

Non-interest income increased 9.3% to $13.8 million for the first quarter of 08 from $12.7 million for the same period in 07. The growth in non-interest income occurred primarily in deposit fees and mortgage lending. The company’s mortgage division recorded record income on mortgage loan production on approximately $191 million for the first quarter of 08 as compared to approximately $141 million for the first quarter of 07. The non-interest income for the first quarter of 08 included a $409,000 gain related to the redemption of shares as a result of the Visa Initial Public Offering. Non-interest expense was $26.8 million as compared to $22.5 million for the first quarter of 07. The increase in non-interest expense during the first quarter of 08 can primarily be attributable to the expenses associated with the addition of Capital’s employees and other costs resulting from the integration of Capital’s operations.

In conclusion, let me reemphasize that we remain ever vigilant in watching our credit relationships and we have implemented strategies to proactively manage the challenges presented by the current economic conditions. Through active and responsive asset and liability management, continued inspection of each construction and land development loan and by carrying out measures to control non-interest expense we believe we are positioned to react to today’s ever challenging economic environment.

We are now ready to take your questions.

Question-and-Answer Session

Operator

Please stand by for our first question. Our first question comes from the line of Barry McCarver. You may proceed sir.

Barry McCarver – Stephens, Inc.

Robin, my first question is I wonder if you could touch a little bit on what gross loan production looked like in the quarter since period end loans were basically flat? And, at the same time, talk a little bit about what the pricing for loans look like in 1Q?

E. Robinson McGraw

First quarter gross production was about $114 to $115 million. Obviously, we had pay downs. From a positive standpoint we saw our construction and development loans decrease by about $7 million during the quarter net. From a pricing standpoint maybe let Stuart give you an answer to that on both sides of the ledger.

Stuart R. Johnson

Okay. We’re seeing merely on the loan side processing in the neighborhood of probably depending on the credit the 575, on probably the good credit maybe around 575.

Barry McCarver – Stephens, Inc.

So relative to 4Q has that improved any at all?

Stuart R. Johnson

No.

Barry McCarver – Stephens, Inc.

Okay. Then, on the other side of the balance sheet I was wondering if you could talk a little about the pretty strong deposit growth in the quarter, what you’re seeing on money market, CD rates in some of your markets? At the same time it looks like you used some of that excess funding to move in to some securities?

E. Robinson McGraw

That’s correct Barry. We’re seeing very aggressive pricing in some of our markets so what we have made a determination to do is basically to maintain our core relationships and hot money, especially hot money that goes out for any period of time to utilize wholesale funding, mainly home loan buying money as a replacement for that money we felt like – obviously hot money will recycle and we’ll take another look at it as it comes back up in the future. But, we’re seeing some rather significant rates being paid in some of our markets. We’ve been pretty aggressive in our pricing as evidenced by our margin being basically flat and obviously a part of that was due to the fact that we had that huge 125 basis point drop that took us a while to catch up but we’ve basically at a breakeven point at this stage of the game in that pricing scenario on both sides of the ledger. We are seeing some very aggressive pricing in our markets, especially the Memphis market, to some degree the Nashville and Birmingham markets.

Barry McCarver – Stephens, Inc.

Just to make sure I understand the working parts of the margin there then, could you give us maybe the monthly margin or at least give us some sense to where you feel like you are in bringing those deposit rates down? Obviously, I’m thinking about the margin 2Q and going forward?

E. Robinson McGraw

We basically have – and I don’t have – Stuart has the monthly in front of him Barry.

Stuart R. Johnson

Barry, what we’re doing on our margin right now certainly you go back and look at the quarter we’re down total about 44 basis points on our total liability processing, 79 basis points on our debt but we did bring our deposits down by 37 basis points. So, we continue to work off the deposit side and bringing those rates down with the quarterly margin pretty close to what we were doing on the last month if you put 03-3 in there. We’re running about a core of 340, 345, and 346.

Barry McCarver – Stephens, Inc.

Okay. Then last question Robin, I was looking at non-accrual loans are up a couple of million bucks and it looked like foreclosed assets came up a couple of million, can you tell us what those were?

E. Robinson McGraw

Let me give you a little color on that. Actually, following month end we have or are in the process of seeing about a 19 basis point drop in the non-performing loans. We have about $2.4 million of loans – well, $1.8 has already been paid off and we have additional loans with a total of the already paid off and those to be brought current are at $2.4 million level or about 19 basis points off that 85. Non-performing assets we have contracts to sell about $3.4 million of the non-performing assets at this point in time. So, these were just the things that didn’t occur before month end that should have that ran those up. In addition to that, of our 90 day past due loans first I mentioned a while ago that non-accruals were $2.4 million are turning around and then of 90 day past due we said another $1.6 million are in the process of being brought current and we should see another $1 million loan brought current prior to month end based on what we see so I think there will be a substantial reduction in that during the month of April.

Operator

Your next question comes from the line of Brian Klock from KBW. You may proceed sir.

Brian Klock – Keefe, Bruyette & Woods

Robin, can you give us a little more color on the net charge offs, the $1.79 in the quarter by loan type and geography?

E. Robinson McGraw

Brian, a substantial portion of that was the conclusion of the Birmingham loan that we’ve been talking about for a while. That was close to half of what that total was. In addition to that, we had about another $700,000 in Mississippi plus the Alabama loan that I mentioned which was the major portion of what we had.

Brian Klock – Keefe, Bruyette & Woods

The loan in Mississippi was that a construction loan or C&I loan?

E. Robinson McGraw

They were construction type loans I think mainly.

Brian Klock – Keefe, Bruyette & Woods

Okay. I guess just to follow up on just to make sure I’ve got all the math correct, from Barry’s question in the second quarter you’ve mentioned that there’s $2.4 million of NPLs that you expect to be cleared out in the second quarter?

E. Robinson McGraw

Let me go back and tell you what – non-accrual loans we have about $2.4 million that have already either cleared up or will this month. We have about $1.6 million of 90 day past dues that either have or will this month with another potential of $1 million that should clear up this month, that we think will clear up this month.

Brian Klock – Keefe, Bruyette & Woods

So, I guess if all goes well the $16.1 million of non-performers that were there at the end of the first quarter that should go down by $2.4 million and the past due that was $5.9 could go down by $2.6 million?

E. Robinson McGraw

Of total non-performers that includes non-accrual and 90 day past dues, that would be about $5 million; $4 million with the potential of being $5 million. Now, that’s during this month and that doesn’t account for anything that could come up and I’m not making predictions on that over the course of this month but right now that’s what we see at this stage of the game.

Brian Klock – Keefe, Bruyette & Woods

But, the $2.4 that’s not relieving anything out of the REO it’s just –

E. Robinson McGraw

No. The REO we’re looking at a potential of $3.4 million coming off of that based on contracts we have assuming the contracts close which we don’t anticipate that they won’t, another $3.4 million.

Brian Klock – Keefe, Bruyette & Woods

Okay. Then maybe Stuart if you can give us a little color within the gain on sale of mortgage loans? I know Robin you mentioned it was a strong record production quarter. Can you give us the gain on sale margin and value of loans sold?

E. Robinson McGraw

Jim is going to answer that, mortgage lending falls under him.

James W. Gray

Margins typically run on wholesale volume of about half to five eighths and then on our retail volume is running probably about 1 to 1.25.

Brian Klock – Keefe, Bruyette & Woods

I guess within the other operating items there anything non-recurring other than what you’ve already broken out with the Visa gains and the other fee income?

E. Robinson McGraw

On the income side?

Brian Klock – Keefe, Bruyette & Woods

On the income side.

E. Robinson McGraw

No, nothing else on the income side other than the 03-3 and the Visa gains.

Brian Klock – Keefe, Bruyette & Woods

The Visa gain.

Stuart R. Johnson

One of the things we do and it’s a timing is we do have our contingency income that we recognize from an insurance agency during the first quarter that we will not typically get in the second, third and fourth quarter.

Brian Klock – Keefe, Bruyette & Woods

And how much is that typically Stuart?

Stuart R. Johnson

That’s around approximately a couple of hundred thousand.

Brian Klock – Keefe, Bruyette & Woods

Robin, earlier you mentioned the moves in Birmingham to the Park Place Tower, were there any costs in the first quarter related to that? Or, are those costs going to be more in to the third quarter when you said the move will actually take place?

E. Robinson McGraw

Actually Brian those costs, any expenses we have will be minimal and it will only relate basically to a small portion of the improvements. Most of the improvements were done by the landlord. We have a little that will have very little impact on the expense side. On the other side of the ledger though, we actually will end up with a reduction in rental expense as a result of this move. We consolidated multiple locations, our mortgage loan back office was in one location, our mortgage loan production office was in another location, we had two floors in the same building but two separate rental situations for relationship managers and plus our executive offices plus the Watts Tower downtown retail space. We combined all of those into this one building and actually there were some slight efficiencies which would offset any expense involved in this move. That includes the signage rights on the building so there will not be any uptick in expenses as a result of it.

Brian Klock – Keefe, Bruyette & Woods

Great. Last question and I’ll let someone else jump on in, in the [inaudible] invested expenses how much of that is sort of seasonal first quarter FICO [inaudible]?

E. Robinson McGraw

Let me go back. If you’re looking at a link quarter basis Brian, and I think we mentioned this last quarter, our salary expense last quarter declined I think about $240,000. That was adjustments in incentives based on what had been approved prior to year end and our not entirely hitting targets. Therefore, in the fourth quarter we saw a $240,000 decline in that. This quarter as obvious from the mortgage quarter that they had you saw incentive expenses go up as a result of that because of the outstanding quarter they had. So, the mortgage originators incentive picked up as a result of that. Also, if we look on a linked quarter basis, and we mentioned this last quarter, we have $300,000 credit on our core processing bill that had an impact on the fourth quarter and in addition to that this quarter we had some expenses, legal expenses and taxes, we have to pay taxes on other real estate and some of those items that cropped up during the first quarter this year. Plus, as you know the FDIC everybody’s pretty much exhausted their credit that they had and therefore we had to start accruing for a higher amount for our FDIC premiums. So, those are where we saw some changes from the fourth quarter of last year. But, fourth quarter was a low quarter and not a good run rate to look at.

Operator

Your next question comes from the line of Brian Roman with Robeco, Weiss, Peck & Greer. You may proceed.

Brian Roman – Robeco, Weiss, Peck & Greer

Most of my questions have been answered but that doesn’t stop me from coming up with new questions. I just want to clarify these numbers, let’s see if I can get the release here, it was $35 million in non-performing assets and at the end of the quarter and you’re saying in the current quarter without assessing new non-performers coming on I see $4, $5, about $6 million of cures, is that correct?

E. Robinson McGraw

On NPA?

Brian Roman – Robeco, Weiss, Peck & Greer

Yeah.

E. Robinson McGraw

We’re anticipating right now some of which have already occurred.

Brian Roman – Robeco, Weiss, Peck & Greer

What do you mean it’s occurred? It’s occurred in the second quarter?

E. Robinson McGraw

Yes. It occurred just right after the end of the month. For example, we had a $1.8 million non-accrual loan payoff a couple of days after the end of the quarter. That’s what I’m talking about. We have right now seen or are seeing about $7.4 million reduction in that NPA number.

Brian Roman – Robeco, Weiss, Peck & Greer

That’s just from the cures. Are there new assets coming in to that classification, NPA?

E. Robinson McGraw

Not that have not been added at this point. That’s not to say that there couldn’t be some that could occur and I’m not making a prediction one way or another as far as that.

Brian Roman – Robeco, Weiss, Peck & Greer

We’ve got a lot of the second quarter to go, I realize that.

E. Robinson McGraw

Exactly. But, what happens – this is just things that could have or should have occurred during the first quarter but didn’t on the other real estate. These are the $3.4 million I mentioned, those are actual properties on which there are contracts that should close generally this month, not anything that will close in later months. These are only items that will close this month or are suppose to close this month. The non-accrual loans that we’re talking are in fact loans that were not on non-accrual that have either already come off by way of payoffs or for example, somebody’s infused some capital in to one of the situations we’re talking about.

Brian Roman – Robeco, Weiss, Peck & Greer

Okay. Without being too forward-looking and we were told at the beginning of this call that you might make forward-looking statements so you’ve got a Safe Harbor here, on that $34.78 million of non-performers at the end of the first quarter, you’ve got $7.4 going off, something is going to go on, as you look in your crystal ball at the end of the second quarter is up or down, the $34 million?

E. Robinson McGraw

We’re not going to get forward-looking on that. I think where we mentioned we would be forward-looking is we gave a little bit of color on what we thought our run rate would be on charge offs for the year.

Brian Roman – Robeco, Weiss, Peck & Greer

What was that number again, I missed it?

E. Robinson McGraw

Well, what my comment was was that we had 26 basis points in the first quarter. We look at our normalized charge off run rate to be around 20 basis points. The last couple of years we’ve been under that. We anticipate this year looking at maybe five to possible 10 on the outside at this point in time.

Brian Roman – Robeco, Weiss, Peck & Greer

So it’s 25 to 30 basis points for the year?

E. Robinson McGraw

That’s correct.

Brian Roman – Robeco, Weiss, Peck & Greer

Okay. Next question, staying on the theme of non-performers, it was up $10 million in the quarter sequentially. It’s actually doubled since the end of September, what’s actually flowing in to the non-performing categories at this point and where?

E. Robinson McGraw

Are you talking about types?

Brian Roman – Robeco, Weiss, Peck & Greer

Types and geography too.

E. Robinson McGraw

To give you a weighting it would be more heavily towards the construction and development type lending.

Brian Roman – Robeco, Weiss, Peck & Greer

C&D is how big again total portfolio?

E. Robinson McGraw

Today it’s a total of $718 million. That’s all commercial, that’s all CRA. Construction development but it is commercial and residential a combination of the two not just residential.

Brian Roman – Robeco, Weiss, Peck & Greer

So the markets where you’re seeing – I’m very glad, I’m heartened here that we’re going to see an improvement that we’re going to see $7.5 million go off that are there right now but it still went up $10 million again. Or, you could say $17 million over the last two quarters. Can you say again, which markets and what type of projects and I think you answered the project part.

E. Robinson McGraw

In the markets would mainly be in the area of the Memphis MSA and the Nashville MSA. Some of the Nashville were loans that we identified prior to the merger and actually were brought in under SOP03-3.

Brian Roman – Robeco, Weiss, Peck & Greer

Last question, outlook for the net interest margin, [inaudible] you were saying you saw like a core run rate of about 340, is that correct?

E. Robinson McGraw

No, in the mid 340s, 345, 346.

Brian Roman – Robeco, Weiss, Peck & Greer

That’s for the year?

E. Robinson McGraw

That’s what we’re anticipating right now and we feel like we can be give or take three or four basis points. Either way we’re being very aggressive in trying to make up for the lack of loan growth. We’re being very deliberate in our lending. We are in fact adding a little bit stronger commercial lending group with a credit side devoted strictly to that commercial side. We put a floor on rates on many of our loans, most of our loans, as many as we can. So, we’re being pretty aggressive in what we’re doing on the loan side as far as covering ourselves both from a credit and interest rate standpoint.

Operator

Our next question comes from the line of Andy Stapp from B. Riley & Company. You may proceed.

Andrew Stapp – B. Riley & Company, Inc.

I was wondering if you could just provide some color on the economies you serve and whether you see a light at the end of the tunnel and whether or not it’s a train? If you could do that for me I’d appreciate it.

E. Robinson McGraw

Whether a train is coming from the other end? Let me throw a caveat in to the last answer when we were given Brian his answer. Anything we say based on future Fed rate cuts and the impact there, each time that happens there’s catch up time on the liability side so I will through that little caveat in. Looking at our market’s end and I’ll start with our legacy market here with the activity happening related to the automotive industry we’re not seeing a huge slowdown here but we’ve seen slowness I guess in housing starts to some degree and we’re seeing slowness in the sale of existing homes to some degree. But, the market itself, the economy itself is pretty good based on what’s going on. There’s a huge amount of construction going on just around the Tupelo area with the active construction going on right now with Toyota and Toyota Auto Body and Toyota Bokoshu, all three of whom have steel up at this point in time. So, as far as this part of our market, it’s doing well.

DeSoto County, although we’re still seeing population growth occurring in DeSoto County that’s where we’ve seen the most slowness and one of the main reasons is that DeSoto County has been impacted in the past as far as growth by people exiting the Tennessee side of Memphis, DeSoto County, obviously the southern part of Memphis MSA. When subprime lending hit and some of these national lenders upped their credit standards it slowed down these first time home buyers from being able to acquire some homes and a lot of DeSoto County market was in fact for first time home buyers. So, that’s had an impact on that DeSoto County side.

We’ve seen some slowness in the Memphis market; it has not impacted us as much because of where we’re located in Memphis. We’re located on the eastside of Memphis, Germantown, Cordova, [inaudible] plus our main office is right inside the 240 loop in Memphis and East Memphis which is the strongest commercial area of that Memphis market right now so we’re not seeing some of the negative impact that’s impacting the Memphis economy at this point in time, although obviously, it impacts everybody in the Memphis area. Nashville is seeing a slowdown I think to a degree it was quoted yesterday and don’t hold this quote as true but I heard the quote yesterday that although housing sales have slowed down housing pricing may have even up ticked a notch and I don’t know if that’s from the Nashville Chamber of Commerce or wherever I did hear that yesterday. But, we’ve seen some impact in that Nashville market as a result of the economic slowdown. Basically that north Alabama market has seen less slowdown than anywhere else mainly I think because of the relocations under the base realignment closure situation. In Birmingham we have seen some slowdown but not as significant as possibly DeSoto County and the Memphis markets. In each area we see promise at this stage of the game.

Andrew Stapp – B. Riley & Company, Inc.

[Inaudible] on your 30 to 89 day delinquencies compared to the fourth quarter?

E. Robinson McGraw

They were up in the fourth quarter. We commented that we had – let me give you a little run here. In the fourth quarter we had of number of loans past due we had about 1.7% and at the end of this quarter we had 1.66% as far as number of loans. We had a decrease in the number of past due loans but we saw the actual dollar volume jump up a little bit from 2% to 2.75% and basically that was a couple of loans that we were hopefully in the process of renewing. Those were 30 days or more.

Andrew Stapp – B. Riley & Company, Inc.

Your mortgage banking revenues were stronger than I expected. Could you give me some color there? Is it a good run rate? Whatever color you can provide there.

E. Robinson McGraw

I would like to say it’s a good run rate. I don’t know if we can sustain that for the full year. There was refinance activity accounted for about 60% of this volume. Again, Andy going back to what I said as far as what the Fed does and what happens otherwise, you get a big uptick in mortgage rates and that will certainly slow it down but there’s a lot of refinance activity right now. We’ve had resurgence in conventional government type loans after the subprime meltdown these conventional and government loans accounted for about 95% of our volume.

Andrew Stapp – B. Riley & Company, Inc.

Okay. How do you see loan growth in coming quarters? In other words are you going to be cautious? Should we expect rather modest loan growth until the economy turns around?

E. Robinson McGraw

Yeah. We would look for modest loan growth in the second quarter to flat. We’re looking at a decent pipeline but it’s below what it’s been. As we budgeted this year we anticipated whatever loan growth that we had would occur in the third and fourth quarters. We’re still seeing positive growth like in the national market they grew at about over 13% for the first quarter and we saw some growth in the Memphis market in the first quarter. Interestingly enough, Mississippi has shown some positive signs in the month of April but I’m still going to say we’ll see modest to flat for this quarter.

Operator

Our next question comes from a follow up question from Mr. Brian Klock from KBW. You may proceed sir.

Brian Klock – Keefe, Bruyette & Woods

It looks like Andy got my loan question has been answered. For the second quarter you’re looking at modest to flat and earlier you were talking about the full year guidance for 08 might have been sort of up or single digits. Do you think that’s something that maybe pulls back a little bit because of the second quarter being a little bit slower growth and first quarter being a little modest as well? Should we expect full year growth to sort of be in the mid to upper single digits versus upper single digit guidance we had previously?

E. Robinson McGraw

Brian, we’re still hoping to see, and again, it all depends on what’s happening in the economy, we’re very deliberate in our loan approval process right now. Quite frankly, some of the lack of volume is not due to opportunity but due to pricing and/or conservative credit approval on our part. We’re hoping that as the economy goes on others may not be as aggressive on their pricing and therefore some opportunities will arise from that side but we will not be compromising our credit posture no matter what happens in our second quarter. But, we think that we’ll probably be seeing some loans that we’ve been looking at right now – maybe not looking at right now as the borrowers being a little bit stronger later on in the year as the economy moves on too. A lot of it is too that we’re having some volume but we’re encouraging pay downs and obviously not seeing construction draws and things of that nature at this stage of the economy.

Brian Klock – Keefe, Bruyette & Woods

I think that’s a prudent thing to do especially in this environment.

E. Robinson McGraw

Right.

Operator

Your next question comes from the line of Charlie Ernst from Sandler O’Neill & Partners. You may proceed sir.

Charlie Ernst – Sandler O’Neill & Partners

I just want to confirm a number that you mentioned, the 30 days past due number you said went from 2% to 2.75?

E. Robinson McGraw

That’s correct.

Charlie Ernst – Sandler O’Neill & Partners

Then you also said a number before that that was around 1.7, what was that number?

E. Robinson McGraw

Let me give you those two again. It’s differentiating between numbers. We look at past dues two ways; we look at the number of loans that are past due and the dollars. The number of our past due loans dropped and therefore as a percentage of total loans we went from 1.7% of our loans being past due to 1.66% and this is 30 days or more. Dollar wise we went from 2% to 2.75% and that was based on a large relationship that had not been renewed that became 30 days past due because it had not been renewed at the end of the quarter, it slipped over in to the fourth quarter.

Charlie Ernst – Sandler O’Neill & Partners

Was it past due for reasons of delinquent credit? Or, was it something technical? I guess I’m having a hard time why you would be quick to renew a loan that is showing signs of stress?

E. Robinson McGraw

It’s not necessarily showing signs of stress. It’s a partnership and there are some issues that are being worked out among the partners that are delaying the renewal.

Operator

At this time we don’t have any further questions in the queue. I will pass the call over to management for closing remarks.

E. Robinson McGraw

We appreciate everyone’s time today and your interest in Renasant Corporation and we’re looking forward to speaking to you again when we report our second quarter results for 2008. Thank you everybody.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Renasant Corporation F1Q08 (Quarter End 03/31/2008) Earnings Call Transcript
This Transcript
All Transcripts