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Edited Transcript of RNST earnings conference call or presentation 26-Apr-17 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Renasant Corp Earnings Call

TUPELO May 30, 2017 (Thomson StreetEvents) -- Edited Transcript of Renasant Corp earnings conference call or presentation Wednesday, April 26, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* C. Mitchell Waycaster

Renasant Corporation - President, COO, President of Renasant Bank and COO of Renasant Bank

* Edward Robinson McGraw

Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank

* James W. Gray

Renasant Corporation - EVP, Chief Revenue Officer of Renasant Bank and Senior EVP of Renasant Bank

* John Sidney Oxford

Renasant Corporation - Director of Corp Communication and First VP

* Kevin D. Chapman

Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank

* William Mark Williams

Renasant Corporation - EVP, Chief Banking Systems Officer of Renasant Bank and Senior EVP of Renasant Bank

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Conference Call Participants

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* Bradley Jason Milsaps

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research

* Catherine Mealor

Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP

* Kevin Patrick Fitzsimmons

Hovde Group, LLC, Research Division - Co-Head of Research

* Matthew Michael Sealy

Stephens Inc., Research Division - Research Associate

* Michael Edward Rose

Raymond James & Associates, Inc., Research Division - MD, Equity Research

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Presentation

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Operator [1]

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Good day, and welcome to the Renasant Corporation 2017 First Quarter Earnings Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded. I would like to turn the conference over to John Oxford, Director of Corporate Communication. Please go ahead.

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John Sidney Oxford, Renasant Corporation - Director of Corp Communication and First VP [2]

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Thank you, and good morning, and thank you for joining us for Renasant Corporation's 2017 First Quarter Earnings Webcast and Conference Call. Participating in this call today are members of Renasant's executive management team.

Before we begin, I'll 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. These 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.

Now I'll turn the call over to E. Robinson McGraw, Chairman and CEO of Renasant Corporation. Robin?

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [3]

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Thank you, John. Good morning and thank you again for joining us today. Our first quarter was an active quarter and a great start to what we expect to be a great year. At the beginning of the quarter, we announced the proposed merger of our company with Metropolitan BancGroup, Inc., which will expand our presence in Mississippi and Tennessee. As we announced last week, we've received all federal bank regulatory approvals and are focusing on securing the required approval from Metropolitan shareholders later this quarter. Both Metropolitan and we've experienced a positive reaction from our clients and associates in response to our proposed merger, and we look forward to an anticipated completion of the merger in July as a bank -- and the bank conversion during the third quarter of '17.

Looking at our results for the first quarter of '17. Net income was a record $24 million, an increase of 13% as compared to the same quarter in '16. Our basic and diluted EPS were $0.54 per share as compared to $0.53 and $0.52, respectively, for the first quarter of '16. During the first quarter of '17, we incurred expenses and charges that are considered to be infrequent or nonrecurring in nature. These expenses were associated with merger and conversion expenses and a penalty incurred with the redemption of high cost in TruPS, which, on a combined basis, impacted our EPS by $0.01. Our '17 first quarter return on average tangible assets and return on tangible equity were 1.23% and 13.48%, respectively.

Focusing on our balance sheet, total assets as of March 31, '17 were approximately $8.8 billion as compared to $8.7 billion at December 31 of '16. Total loans, which includes loans purchased in our previous acquisitions, were approximately $6.24 billion as of March 31, '17, as compared to $6.2 billion at December 31 of '16. Non-purchased loans grew $123.7 million to $4.8 billion at March 31 of '17, as compared to $4.7 billion at December 31, '16, which represents an annualized growth rate of 11%. Total deposits were $7.2 billion at March 31, '17, as compared to $7.1 billion at December 31 of '16, representing an annualized growth rate of 10%. Our noninterest-bearing deposits averaged approximately $1.56 billion or 22% of average deposits for the first quarter of '17 as compared to $1.3 billion or 21% of average deposits for the same period in '16. Our cost of total deposits for the first quarter of '17 was 29 basis points as compared to 25 basis points for the fourth quarter of '16 and 25 basis points for the first quarter of '16.

Net interest income was $74 million for the first quarter of '17 as compared to $70.1 million for the first quarter of '16. Net interest margin was 4.01% for the first quarter of '17 as compared to 4.21% for the same quarter in '16. Noninterest income is derived from diverse lines of business, which primarily consist of mortgage wealth management insurance revenue sources, along with income from deposit and loan products. For the first quarter of '17, noninterest income was $32 million as compared to $33.3 million for the same quarter in '16.

Noninterest expense was $69.3 million for the first quarter of '17 as compared to $69.8 million for the same quarter in '16. Excluding nonrecurring charges from merger and conversion expenses and debt prepayment penalties, noninterest expense remained relatively flat when compared to the first quarter of '16, and on a linked-quarter basis.

Looking at our credit quality metrics and trends at March 31, '17, overall credit quality metrics continue to remain at or near historic lows. Excluding purchase loans, nonperforming loans as a percentage of total loans was 31 basis points and early stage delinquencies, or loans 30 to 89 days past due as a percentage of total loans was 16 basis points as of March 31 of '17. The improvements in these metrics over the past year highlight our continued focus on asset and credit quality.

Looking at our capital ratios, our tangible common equity ratio was 9.16%, our Tier 1 leverage capital ratio was 10.39%, our Common Equity Tier 1 risk-based capital ratio was 11.69% and our Tier 1 risk-based capital ratio was 12.93% and our total risk-based capital ratio was 15.11% for the first quarter of '17. Our regulatory capital ratios are all in excess of regulatory minimums required to be classified as well capitalized. For more information on our financials, I'll refer you to our press release for specific numbers or ratios.

In closing, we're pleased with our first quarter '17 results, which highlights -- include our merger announcement with Metropolitan, record quarterly net income and a continuation of improving returns on profitability metrics as our return on average tangible assets was 1.23%. These results have us off to a positive start to what we believe will be another strong year for Renasant Corporation.

And Francesca, I'll turn it back over to you for questions and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Catherine Mealor of KBW.

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Catherine Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [2]

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Robin, can you give a little bit of some color around your loan growth outlook? It looks like loan growth slowed a little bit, which I know is typically -- it's typical for first quarter. But can you give us some color around how your pipeline is looking going into the second quarter? And what your outlook for the -- your legacy growth rate is for this year?

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [3]

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Sure. Let me let Mitch Waycaster give you that information, Catherine.

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C. Mitchell Waycaster, Renasant Corporation - President, COO, President of Renasant Bank and COO of Renasant Bank [4]

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Our current pipeline is $157 million, and while we did see some slowing in production early in the quarter, production picked up later in 1Q, particularly in March, and which is reflected in our current pipeline of $157 million. That compares to $150 million same period prior year. So we continue to see a good pipeline, actually, in each region and state and business line. So if we break that down by region and state, 29% would be in Tennessee, 22% in the Alabama-Florida region, 30% in Georgia and 19% in Mississippi. 20% of that pipeline is also in our commercial lines, made up by ABL, health care, SBA, leasing and middle market C&I. So our current pipeline of $157 million should result in approximately $55 million in growth and non-acquired loans within the next 30 days. If you look at our first quarter production, actually, totaled $314 million, as Robin mentioned earlier, that resulted in about 11% growth and non-acquired $124 million. If you look at that reduction by region and state, Central Alabama, Florida or the Alabama-Florida region contributed 16%. And as you'll remember, I said their current pipeline is 22%, so you can see that increasing trend. In Georgia, they produced 31% of that production, currently have a pipeline of 30% and Mississippi produced 33% of the production in Q1 and Tennessee, 20%, current pipeline at 29%. So we do have a good pipeline year-over-year. We saw a good increase and feel good about production going forward.

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Catherine Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [5]

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Okay, that's really helpful. And then as we think about the acquired loan balances, how quickly should we see that pace over the next few quarters?

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [6]

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The acquired book -- I mean, if you look at the runoff this prior quarter, it was pretty much in line with what we saw in Q4 and Q3. Maybe a little higher, and that's probably, Kevin, a pretty good run rate going forward?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [7]

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Yes, there is some lumpiness in that, Catherine. Just with -- just depending on the size of the loans that pay down. But think somewhere between $75 million to $90 million per quarter is an accurate run rate.

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Catherine Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [8]

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Okay, great. If I could ask one more on expenses. Really nice reduction in expenses this quarter. Was there anything temporary in there that will come back into the expense line next quarter? Or is this a good run rate to grow from?

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C. Mitchell Waycaster, Renasant Corporation - President, COO, President of Renasant Bank and COO of Renasant Bank [9]

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Yes. So Catherine, Q4 -- just taking out some of the temporary items that really one-time, the merger and the debt prepayment penalty on the TruPS. As we look at Q2 -- and really, Q2, we're going to have more merger expenses, so the number I am going to give you excludes the merger expenses. We will see an uptick in noninterest expenses, but that's primarily due to day count as well as merit increases that went into place in -- late in the Q1. So we'll have a full quarter impact in Q2 of that as well as just again a day count differential. So we anticipate our expenses to be in the high $70 million, maybe $71 million range. And it could be higher than that, but that variability of being higher is going to be mortgage-driven. If mortgage income continues to pick up, then we could see our noninterest expenses be as high as $72 million, maybe $72.5 million. But that difference is primarily going to come through mortgage commissions and will be more than offset with higher levels of mortgage income.

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Operator [10]

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The next question comes from Brad Milsaps of Sandler O'Neill.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [11]

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Kevin, just maybe stick with the mortgage theme. Can you talk -- or Mitch, can you talk a little bit about what went on with mortgage banking this quarter? I know the fourth quarter was a little bit of a transition quarter. Revenue was up link quarter where a lot of guys are going the other way, just kind of curious what additional color you could add there, kind of, around mortgage banking in the first quarter?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [12]

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Yes. Brad, this is Kevin. I'll give a general comment then let Jim Gray give you some more details about mortgage. Overall, we were pleased with mortgage. I mean, what started out as a very slow quarter, ended very strong. March was very strong for us as far as mortgage production and mortgage income. And then also, layering into that, we did make more investments in mortgage into areas of the country that we expect higher levels of production continue to drive mortgage revenue and sustain mortgage revenue throughout the year. Jim, you want to give some details?

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James W. Gray, Renasant Corporation - EVP, Chief Revenue Officer of Renasant Bank and Senior EVP of Renasant Bank [13]

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Sure, a little more detail. Our lot volume for the first quarter of '17 was $571 million versus $452 million in Q4. Probably more important than that was how that came about, kind of echoing Mitch's theme on portfolio loans. Our lot volume for the -- for March was over 40% of our total lot volume for the quarter, same with closings and same with mortgage banking revenues. So we see that trend continuing. Our daily lot volume has improved and is at or above our target levels now. And most of that increase is coming through purchase. We -- our purchase volume was -- our purchase percentage was 68% in Q1 versus 56% in Q4, and that's in line with -- some of that, you could say was seasonality with -- as the spring comes on, the purchase volume picks up. But as Kevin alluded to, we have increased our number of originators -- new originators from Q -- end of Q4 to end of Q1, it was an increase of 10. We're currently recruiting 10 to 15, expect to pick up another 6 to 10 this quarter. We also brought on a wholesale team in -- out of Greensboro, North Carolina. We're getting the wholesale clients signed up now. We really have not started even seeing any lot volume from that group at this point. And then, as Kevin alluded to, the hires in Destin, Mobile, Jacksonville and Auburn and also we are increasing our team in Atlanta.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [14]

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That's very helpful. And maybe just to switch gears to the margin. Kevin, a lot of moving parts this quarter that a lot of those you kind of call out in the press release. Maybe a couple of questions. One, how quickly do you anticipate the cash balances being reduced? I know a lot of that was deposit driven, but it seemed a little bigger this quarter maybe than a year ago. And then, secondly, just around the accretable yield. I know it's kind of hard to predict, but kind of looking out for the remainder of the year, what sort of pace would you expect kind of between the accretable and nonaccretable to affect? And then finally, how do you expect kind of further rate increases to kind of affect the margin going forward?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [15]

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Yes, so let's talk about margin and just some of the moving parts. We did try to provide some detail. Just again with the moving parts on margins, our as reported margin with the 401 -- if we back out to get to a core margin, when we say core, we're really just taking out items that really aren't driven off of our own loan or deposit production. And so as we've said, the core margin in the past, that really does exclude any purchase accounting as well as some other one-offs. One item we called out this quarter is just interest income that we collect on problem loans. Really, that's interest income that we collect on previously charged-off loans. It does net out -- in that number, we will net out any loans we put on nonaccrual. Any interest income, we have to forego as a result of putting a loan on nonaccrual. But for the most part, that's interest income we collect from previously charged-off loans. As you can see, we had a large amount that we collected in Q4, and that did cause some volatility on the margin. So if we exclude all of that, our core margin from Q1 compared to Q4 was down 2 basis points.

Now talking about deposits, you mentioned we did have an influx of deposits. Our average balance of deposits were up $200 million. Most of that -- about 55% of that coming from public fund. That is some of the variability that we do anticipate seeing rolling out as we get into Q2, but midpoint to half way through Q2, we do expect some of that public fund money to start rolling out. That excess cash did weigh on margin, at least compared to Q4, did weigh on margin 10 basis points.

So as we look at our core margin, we were pleased to see that our core margin increased 7 to 8 basis points. And positive signs that we're seeing in our margin is new and renewed loan yields are up 10 to 15 basis points from Q4. And more importantly, our cost to funding is staying very stable. It's up 1 basis point compared to Q4 and only up 4, 5 basis points compared to Q1 of last year. We've always viewed that one of our strengths is our deposit base. We feel that our betas and our modeling are very conservative. And in fact, they're proving out, as we've seen this 8 basis point, 7 to 8 basis point increase in core margin, that's largely being driven off being able to hold that funding and those cost deposits stable.

On the accretable yield, a couple of things I'll mention, just as far as the nonaccretable difference recapturing, that's very volatile. It's hard to predict. I would just say that on the average, it's probably about 10 basis points per quarter. On the accretable side, we anticipate that to, at least in the short run for the rest of this year, impact margin positively in the 17 to 20 basis point range. And that is down a couple of basis points from last year. Last year, it averaged more in the 20 to 22 basis point range.

And then, last -- I think, the last thing you mentioned was just how future rate increases should impact us? And again, what we've been able to see with the rate increases we've had so far is a positive impact to net interest income. We would continue to anticipate the same, driven off of an asset mix, that our loan portfolio is 60% fixed, about 30% variable and 10% adjustable. We expect a positive variance on the asset side with, again, our focus on being containing and controlling the cost of funds as rates increase.

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Operator [16]

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The next question comes from Michael Rose of Raymond James.

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Michael Edward Rose, Raymond James & Associates, Inc., Research Division - MD, Equity Research [17]

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Maybe just switching gears a little bit to credit. We've seen some issues pop up in some areas this quarter, like in health care and auto and retail. Any -- can you kind of give us some color on those portfolios? I don't think you guys really have much of an auto portfolio, maybe on the health care side, remind us kind of what you have, and then on the retail side that's getting so much attention.

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C. Mitchell Waycaster, Renasant Corporation - President, COO, President of Renasant Bank and COO of Renasant Bank [18]

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Yes, Michael, this is Mitch. You're correct on the autos. That's almost nonexistent as far as we're concerned. Really, we've not seen any issues in either health care or retail. I mean, we're very focused in our health care division and senior housing, medical facilities. And we've been really focused on that now a little over a year. It is a good part of our pipeline, but in footprint, very focused and selective on those originations, but no issues.

Retail, we've had no issues there, but it's one area, given what's occurring in that space, that we're watching closely. And as a percent of loan portfolio, relatively small. And -- but, I mean, good question, something we're focused on, but approach very cautiously from an underwriting and as we continue to monitor that part of our portfolio, but we're not seeing issues to this point.

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [19]

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Yes, Michael, just one thing to add to that, particularly on the retail side. We've been very focused on just the impact of retail, not only coming out of the last holiday seasons, but really, this has been a focus of ours for a little bit longer than that. And we're just trying to remain very cognizant of how some of the bigger box stores as they collapse stores, close stores, how that may impact rental rates of other commercial space. So we're staying close to that, but don't anticipate any problems or see any exposure or concentrations at this time. Mark, anything you want to add to the discussion?

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William Mark Williams, Renasant Corporation - EVP, Chief Banking Systems Officer of Renasant Bank and Senior EVP of Renasant Bank [20]

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Michael, this is Mark Williams. I'd just add that we routinely in the credit area track our national tenants, regional and across the U.S. And we limit our exposure to that. We equate them to bond ratings and how we track that. And we stay attune to specifically what you're referencing, some of the slowdowns, either in closings and pullouts by region to these national tenants. And we cross check that to our exposure and our footprint.

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Michael Edward Rose, Raymond James & Associates, Inc., Research Division - MD, Equity Research [21]

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Okay, that's really helpful. Maybe just another one on deposits. Looks like interest bearing costs were only up 1 basis point. Was there any sort of trends, either higher or lower than that, in -- by market? And what would you expect as we move through the year, just in terms of cost of funds, given your DDA mix and low-cost deposit composition?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [22]

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Yes. So the only thing I think is really significant is just the influx of public funds. And again, that will flow back out. And so we typically don't tie that money up in long-term assets just due to the seasonality and the short-term nature of it. We would anticipate hitting a bottom of public fund as we get into the -- as we get into June and bottoming out really in early Q3, that's the August range. Just some positive trends that we see on the funding side is, again, a focus on low costing stable deposits with relationships. We see a lot of advertisements in the market today for teaser rates, which will put pressure on funding, but as we've discussed in the past, we have really shied away from trying to garner deposits just purely off of rate. Our thought has always been, if you get it for rate, you'll lose it for rate. And so our focus has really been on core deposits with relationships and also, this was tied to our asset growth strategy. As we grew assets, we want to assure that we're growing it with the proper funding. That trend continues. And if we look at our average deposits, again, 55% came from public funds, 45% came from those types of relationships, those types of deposit accounts that I mentioned. And we feel, one of our biggest strengths, in addition to being able to grow on the asset side, our biggest strength, we think, is our funding and our ability to maintain a stable, low costing funding base. And we think, as rates rise, the value of that deposit franchise will continue to show itself in our number.

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Michael Edward Rose, Raymond James & Associates, Inc., Research Division - MD, Equity Research [23]

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Yes, that's helpful. Maybe just one final one for me. Just any updates on Metropolitan in terms of closing date and systems integration, all that stuff.

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [24]

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Yes. We're looking -- Michael, it's closing on July 1st. Systems conversions, set for September 25th. Integration is going very well. We've had very positive response from team members at Renasant and Metropolitan. So we see that moving to a very positive closing and pick up during the second half of the year.

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Operator [25]

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The next question comes from Kevin Fitzsimmons of Hovde.

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Kevin Patrick Fitzsimmons, Hovde Group, LLC, Research Division - Co-Head of Research [26]

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Guys, it's Hovde Group. Just wanted to have a follow-up question on the margin. How -- Kevin, how should we think about long term the moving parts both ways? On the one hand, there's kind of a waning of accretion income that will occur at some point. Granted with future deals, such as Metropolitan, that gets -- the bucket gets refilled to some extent. But you have the positive effect of rising rates and that working through the balance sheet as well. Should we think long term about the long-term margin being modestly -- some modestly amount below where we are right now in terms of the reported margin, but you're going to have the accretion income waning off, but maybe partly or mostly offset by the positives of rising rates? Is that a good way to think of it? How would you think about it?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [27]

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Yes. So just -- great question. So just looking at it right now, even pre-Metro, and don't know what the purchase accounting adjustments will be on Metropolitan, but let's just look at where we stand right now. Right now, we have over $60 million of purchase accounting adjustments tied to acquired loan portfolio. About 1/3 of that is accretable yield, about 2/3 of it is nonaccretable difference. And so that accretable yield piece, as I mentioned, is coming in at about 17 basis points in Q1 on an annualized basis. So that -- just that piece alone has a life of another 18 months. Although -- it's going to continue to slowly come down as far as the contribution. The nonaccretable difference is just hard to predict. We just try to guide to about 10 basis points.

To your question to as reported, over time, as we see rate increases, expect the as reported in the core margins to start matching one another. And that's -- those rate increases that we see, as we continue to see modest, steady improvement in our core margin, then that core margin will ultimately become -- and blend into that as reported margin. Again, taking up a lumpiness of the nonaccretable difference recapture, where we stand right now in the 4% range, as we see rate increases, those 2 should start blending into one another.

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Kevin Patrick Fitzsimmons, Hovde Group, LLC, Research Division - Co-Head of Research [28]

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Great. Very helpful. One just follow-up question. I know we have the Metropolitan deal about to close. Robin, could you just remind us longer term how you're thinking about utilizing M&A in maybe markets, where you would look most to use it, either whether it's in-market or entering markets that you're not in currently?

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [29]

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Yes, Kevin. We continue to look to be acquisitive in the future. We feel like that we have proven ourselves to be excellent acquirers, that we feel like we have a team that's done a great job of integration in these acquisitions and look forward to continuing with the acquisitions in the not too distant future. We certainly would like to look within the states that we're currently in, but at some point in the future, I think we would be looking to expand outside of that 5 state area that we're currently in.

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Kevin Patrick Fitzsimmons, Hovde Group, LLC, Research Division - Co-Head of Research [30]

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Any states, Robin, that would be higher on the priority list in terms of adjacent to the 5 states that would make more sense for you?

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [31]

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Yes, obviously, adjacent states, the Carolinas probably would be of more interest than going West or North. We only have a small presence in Florida, so we would continue to look at what opportunities might be in that particular state.

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Operator [32]

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The final question comes from Matt Olney of Stephens Inc.

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Matthew Michael Sealy, Stephens Inc., Research Division - Research Associate [33]

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This is actually Matt Sealy on for Olney. Want to circle back on the margin, particularly around remaining loan floors. So looks like core loan yields were up just modestly in 1Q. Should we expect this to take kind of another step up in 2Q with the March hike? Or would you say 1Q trends are pretty good indicator? Any insight there around the core trends would be pretty helpful.

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [34]

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Yes, Matt, this is Kevin. We continue to expect to see loan yields increase. The number that you're looking at in the margin, that's the total portfolio. What we are seeing, if we just look at our new and renewed loan yields for Q1, we're seeing larger increases in our new and renewed loan yields than we are seeing in the total portfolio. So the total portfolio's going to lag a little bit. You will see an uptick in Q2 compared to Q1 just with the rate increase being latter -- being in the later part of the quarter. But our new and renewed loan yields are at 450 in Q1 of '17. That's up 21 basis points from Q4 of '16 at 431. If we look back to this time last year, new and renewed loan yields are up almost 40 to 45 basis points. So we continue to see improvement on our new and renewed loan yields and are approaching a point where new and renewed loan yields are at or slightly higher than the maturing loan yields. So we're also reaching an inflection point on that loan portfolio where the rollout rate is lower than the roll-in rate on new and renewed loans. So we see several positive trends in our margin, not only on the funding side, but also on the asset repricing side.

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Matthew Michael Sealy, Stephens Inc., Research Division - Research Associate [35]

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And staying on the margin with security yields, they were up pretty nicely during the quarter. Doesn't look like composition changed much. Are you just getting better pricing on new purchases? What's maybe the dynamic going on there?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [36]

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Yes, really just adjusting the prepayment speed, which is the movement in the rates. That's mainly what's causing that bump in the investment portfolio.

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Matthew Michael Sealy, Stephens Inc., Research Division - Research Associate [37]

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Okay. And lastly, on mortgage. Were there any valuation adjustments to the logged pipeline? I think, last quarter, there was a larger $5 million negative adjustment. Anything this quarter worth noting?

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Kevin D. Chapman, Renasant Corporation - CFO, EVP, CFO of Renasant Bank and Senior EVP of Renasant Bank [38]

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We did have -- with our log volume being up, we did have an improvement in our mark-to-market because our pipeline was actually up from -- I don't think I mentioned this earlier, pipeline at the end of Q4 was $148 million. Pipeline at the end of Q1 was $232 million, so we did have some positive mark-to-market adjustment associated with that.

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Operator [39]

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(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Robin McGraw for any closing remarks.

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Edward Robinson McGraw, Renasant Corporation - Chairman, CEO, Chairman of Renasant Bank and CEO of Renasant Bank [40]

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Thanks, everyone, for joining us today. Let me leave you with these positive trends going into the second quarter: we have improved core margin; improved new and renewed loan rates; strong loan pipelines in both the commercial loans and the mortgage loan pipeline; and relatively stable expenses as we look into the quarter with the mortgage commissions being the only variable that we see going into the second quarter.

So with that, we appreciate everybody's time and interest in Renasant Corporation and look forward to speaking with you again. Thanks.

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Operator [41]

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