Good morning, and welcome to the Renasant Corporation 2015 Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Kevin Chapman. Please go ahead.

Thank you. Good morning everyone for joining us in our third quarter 2015 earnings conference call. Participating in our 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 risks 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. And now I’d like to turn the call over to Renasant’s Chairman and CEO, Robin McGraw.

Thank you, Kevin. Good morning, everyone. Welcome to our third quarter 2015 conference call. During the third quarter, we completed our merger with Heritage Financial Group, along with related systems conversions and are well on the way to finalizing our integration. This, coupled with strong loan growth, improvement in our funding base and a company-wide focus on achieving excellent profitability metrics resulted in an exciting quarter for Rensant. In addition, last night we announced the signing of a definitive merger agreement to acquire KeyWorth Bank, headquartered in Johns Creek, Georgia. Looking at our third quarter results, net income was $16.2 million or basic and diluted EPS of $0.40, as compared to $15.5 million, or basic and diluted EPS of $0.49 for the third quarter of 2014. During the third quarter of 2015, we incurred pre-tax merger expenses related to the Heritage merger of approximately $7.8 million, or $5.2 million on an after-tax basis, which equated to a reduction of $0.13 in basic and diluted EPS for the third quarter of 2015. Excluding merger expenses, net income was approximately $21.4 million or $0.53 per share. For the third quarter of 2015, our return on average assets and return on average equity were 81 basis points and 6.28% respectively. Including merger expenses, our return on average assets and return on average equity 1.07% and 8.28% respectively and return on average tangible assets and return on average tangible equity were 1.14% and 14.95% respectively for the third quarter of 2015. Total assets as of September 30, 2015, were approximately $7.9 billion, as compared to $5.8 billion at year end. The Heritage acquisition added approximately $2 billion in assets. Total loans, including loans acquired in either the Heritage merger, the First M&F Corporation merger or in FDIC-assisted transactions collectively referred to as acquired loans,…

Thank you sir. [Operator Instructions] Our first question comes from Catherine Mealor with KBW. Please go ahead.

Thanks, good morning everyone.

Good morning, Catherine.

I wanted to first dig into the margin a little bit. The margin came in a little bit higher than the guidance you all gave last quarter for to be about 390 ex any credit release. So, my first question is, can you give us how much of this 405 margin is coming from the interest rate fair value accretion?

Yes, so, Catherine, let me walk you through from where our margin was excluding the accelerated pay down from last quarter. So we were in the low 390s, last quarter. If you exclude the accelerated accretion, the additional interest rate or the additional income mark from interest rate mark related to Heritage is providing about 15 basis points of additional margin. So that’s really where the lift came from as it specifically relates to the Q3 margin. And that interest rate mark is covered in a couple of different components, you do have an interest rate mark from the – on the loans, we also fair valued the liabilities as well. So, there is also an interest rate mark against the deposits. The interest rate mark on the deposits decreased our cost of funds about 3 or 4 basis points, the Heritage interest rate mark. Our cost of funds, I think were 33 basis points compared to 40 basis points in Q2. 2 to 3 basis points of that is just due to our normal repricing, the other 2 to 3 basis points will be due to the interest rate mark associated with the Heritage acquisition.

And how long do you forecast that 15 BPS should last?

So, let’s look at it at the components on the interest rate mark, on the loans, it’s going to be in excess of five years and that really just matches up against maturity of their portfolio. It was a heavily fixed rate portfolio with maturities that were beyond five years. On the time deposit side, we really look to the repricing of the time deposits and that’s more in the 18 month to 2 year range.

Got it. Okay, and then you had, I think last quarter, about 10 BPS coming in from fair value accretion from the first and the last, again was that still about this level or did that come down?

It came in right at 10 basis points.

Okay, cool. Okay. And then, this is just housekeeping, do you have the CD kind of breakdown of the loan yields and maybe CD cost and borrowing cost for the quarter, just we can kind of try to back into the volumes?

Sure, sure. Total portfolio yield, this as a combined company was a 488, Heritage, Heritage on a standalone basis came in at a 550 and total legacy, the portfolio excluding Heritage came in at a 470.

Okay.

And then our total cost of deposits – total cost of interest-bearing deposits were 28 basis points. Total cost of deposits including our non-interest bearing DDA was 23 basis points.

Got it. Okay, very helpful. Thank you, Kevin.

The next question comes from Emlen Harmon with Jefferies. Please go ahead.

Hey, good morning.

Good morning, Emlen.

Obviously really strong legacy loan growth for you guys this quarter. It sounds like, Georgia was a meaningful component of that. Could you give us a sense of how much is coming out of the acquired footprint in that first quarter that you had it and how are you thinking about the sustainability of the growth rate?

Emlen, I will let Mike Ross to give you a breakdown on that.

All right, thanks.

Hi, Emlen. Yes, of the loan growth for the quarter, roughly – there was roughly $200 million of net loan growth for the quarter. Of that, roughly $40 million came from our new teammates from the Heritage acquisition. And then, the balance of the growth was 40 or so million came from our specialty units and then the balance came from the general – rest of the general Renasant Bank, our legacy bank.

And Emlen, this is Kevin. Very little of the non-acquired loan growth would have come out of the acquired book. That acquired book stayed fairly static. We did had some normal pay downs. Just the normal principal pay down that you would see in the portfolio where we had very little shift from acquired to non-acquired out of the Heritage book.

And Emlen, this is Mike again. We feel, as far as to your question on the sustainability of that, we feel very good about the sustainability of that and frankly, we have the great opportunity to increase that. Our bankers, our Heritage teammates have done a great job of joining our company and continuing to serve their customers both existing and new and we feel very good about the ability to sustain and grow that.

Got it. And maybe if I could kind of flip the question to the – just kind of I guess the rest of the bank outside of the specialty end and that North Atlanta market, it still seems like the growth rate was pretty strong this quarter Robin, any trends that you are seeing that that will also help support just the growth rate in the general bank?

No, we were pleased to see the general growth rate in Tennessee and in Mississippi. Mississippi had a very strong resurgence this year in loan growth and I am pleased to see how well they’ve been doing at Tennessee, obviously with the national market is always strong, but our Memphis market is showing some resilience this year. So that’s helped our legacy loan growth and then, Mike, do you want to comment on the central region?

Yes, glad to Rob and, yes, we had really strong loan growth in the central region for the third quarter on an annualized basis, up about 22%. Most of that came out of Alabama and however, we did had some growth out of our Florida market. So, the great thing and frankly the rate in we achieved the loan growth that we did at the company is, as you can probably tell, we have all of our regions and all of our bankers contributing to that growth.

Great. Thanks, and then, Kevin, how should we be thinking about the starting point for expenses, it appears we are going into the fourth quarter, obviously a lot of moving parts with the acquisition, but just, how should we be thinking about the progression there?

So, just taking our expenses for the third quarter to back up the merger expenses, that moves us into the $68 million $69 million range. As it relates to the – specifically to the Heritage operations, we do have some duplicate cost. We converted Heritage in August of the third quarter. We did – so we had duplicate operations in July and August and then are continuing to maintain post-closing and post-conversion teams to just work through conversion items. I expect another $1 million to $1.2 million in expense save, coming out in Q4 and there might be another $250,000 as we get to Q1, just some, to improve post-conversion clean up. I will also say that we have been active in looking to continuing to build up teams. So as we see opportunities throughout market and this is outside of Heritage, was just throughout our market to pick up quality long-term bankers, we will execute on that. We will do the same thing in the mortgage operations. We lifted out a team in Nashville that enhances our national presence in our mortgage operation. That will offset some of those cost saves that I mentioned that will come out of the Heritage. But again, we continue to look for opportunities to reinvest in quality teams and build more scale in some of our higher growth markets. And we do expect Q4 to provide some opportunities for that.

Great. Thanks.

Just, Emlen, to follow-up what Kevin said, we do expect to add additional commercial banking team for bankers in the Atlanta market along with working with us on our specialty lending areas and across our system and other markets also.

All right. Thanks guys.

Thank you, Emlen.

Thanks, Emlen.

The next question comes from Kevin Fitzsimmons with Hovde Group. Please go ahead.

Hey guys. Good morning.

Good morning, Kevin.

Good morning.

Hey, Robin, can you give us, now with Heritage closing and now KeyWorth being announced, I guess, on a pro forma basis this takes you up to about $8.3 billion or low north of that in assets, so, can you give us a sense on how you are thinking about M&A going forward from here? Do you, with Heritage and now KeyWorth, do you take a pause or do you still see plenty of run rate – runway to do modest size deals like KeyWorth and as you build up toward the $10 billion mark or do you reach a certain point and sit type for a larger more meaningful deal to take you to vault you pass that threshold? Just how you are thinking about that today?

I will say yes to both questions. I think we are still continuing to look for some modest sized deals that gets us up close exceed $9 billion to $9.5 billion in that general area and we are looking for a meaningful transaction, whether or not it’s one or two or more to get us across the $10 billion barrier in a meaningful manner. As we stated previously, we’ve started the process back with that to the first M&F merger of preparing ourselves with a $10 billion barrier and we already have significant cost in our run rate that puts our infrastructure in a position in order to be able to cross that barrier in addition to the infrastructure we’ve hired, personnel, that we feel like it helps in the compliance area, the BSA area and also we expanded our IT group significantly with what we think are quality IT individuals that can in fact carry us across the $10 billion barrier. That being said, we are going to kind of work our way up to the point of being able to cross it and we do felt like that there are quite a few opportunities out there that would be the size of KeyWorth maybe a little larger that would get us up close to that level and then look for that strategic acquisition that would get us across the $10 billion barrier.

Kevin, just to build on what Robin discussed, one thing they are also looking at is, not only what takes us over $10 billion, but what do we look like once we go beyond $10 billion and do we have the right investment for density in areas that can continue growth beyond $10 billion. So we continue to evaluate not only the operational side, but also our frontline and do we have the right teams in the right areas that can continue to provide above average growth, so that when and if the day occurs that we go over $10 billion, that we can continue a trajectory beyond $10 billion.

And then a good point that Kevin makes, we want to get across the $10 billion line even if we are $2 billion or $3 billion over that and stop there, we need to continue the trajectory once we do it. And let me point out too as we look at opportunities for expansion, we are not limiting ourselves just to banks. As Kevin mentioned a while ago, we’ve been doing some lift outs of teams in markets which is what we’ve been doing there for several years, not only on the commercial side, but we are doing it on the mortgage side. We are looking at wealth management team opportunities and we are not opposed to acquiring additional non-interest income type opportunities also. So, we are looking along that line too. So we are not limiting ourselves just to banks. We are looking for ways to increase our revenue, increase our earnings per share and shareholder value. And also diversify revenue to provide being – if you are a retail bank and you go over $10 billion, the Durban Amendment cost you more than if you are a commercial bank and so, - but we’ve invested in areas that provide less reliance on debit card or service charge fee income.

These other opportunities you prefer to that are like KeyWorth size or larger that take you up toward that $9 million to $9.5 million, can you give us a sense on what markets you are going to be look at most closely like Metro Atlanta seem very consistent with what you’ve said before. Are you at a point where you’ve got what you need in terms of on the ground infrastructure or will you be looking for lot more and then if you could list a few other markets that are kind of high on your wish list to build up?

We’ve always said that we felt like the Metro Atlanta was important to us. We like our footprint in Metro Atlanta today. But, we would not pass on a real good opportunity there. By the same token we think that Tennessee is still fertile ground in that regard and we think that the areas of Alabama that would be important to us. We are not looking for generally a Mississippi expansion, but we wouldn’t hesitate to acquire a bank that may have in addition to the presence elsewhere have some presence in Mississippi from that particular regard. But, Florida is an area that we are looking for expansion basically right now through adding teams and/or commercial bankers in certain markets in Florida and we think that that’s a real opportunity for us there. Mike, Ross, is over the central region and his background has been both with the south trust regions in Florida and Mike has been looking to add to our teams in the Florida markets. Do you want to comment on that Mike?

Yes, sharing to the light to Robin, we’ve been actively looking at adding bankers and as a matter of fact we have already added - just joined us a couple of weeks ago a gentleman by name of Andy Tapsi and we’ve opened up an LPO in Orlando. And that’s in Andy’s array looking to several deals. Andy is a thirty plus year banker in the Orlando market, primarily commercial real estate banker and he is going to lead our commercial real estate businesses in the larger metropolitan markets in Florida namely Orlando and at some point hopefully, Tampa and Jacksonville.

Okay, great. Thanks guys. Very helpful.

Thanks, Kevin.

The next question comes from Michael Rose with Raymond James. Please go ahead.

Hey, good morning guys. How are you?

Good morning, Michael.

Hey, just wanted to touch base on mortgages a little bit stronger than I had modeled for which is kind of different than the lot of the bankers that have reported. Can you just give us kind of the outlook and I know you’ve added some producers, can you give us the outlook for mortgage into next year, at least what you can see today? Thanks.

Yes, Mike, let me let Jim Gray comment on that.

Michael, this is Jim. Our production for the third quarter was $659 million combined, $275 million of that was Renasant legacy, but that’s up about $10 million from Q2 and Heritage was $383 million, which is based on prior quarters is, what I would consider a fairly normal run rate for them. Although it probably did pull back a little bit just getting through the merger and the conversion and then a little disruption there, kind of put them on hold on some of their recruitment efforts. All of - with that being said, during the quarter, we did pick up additional originator hires in Jackson, Mississippi, Auburn, Alabama, Huntsville, Alabama, Nashville, Tennessee and that was all on the legacy side. On Heritage, we picked up some originators in Atlanta and Columbus, also the Colorado mortgage operation picked up some originators in Colorado Springs and Grand Junction. Also, the Heritage wholesale group picked up some additional TPO relationships during the quarter. And now that we’ve kind of gotten through the merger and the conversion, they are kind of getting back on track as far as improvement efforts. So we should see some continued growth in acquiring talent within the – particularly in the Atlanta, Colorado and just the overall Georgia and we do have some opportunity in Florida. We did lose some Florida originators and we are working on kind of rebuilding in that Ocala Gainesville area in Florida. So, we had good production for the quarter. Our top-line actually did drop a little during the quarter, both divisions dropped a little bit as rates kind of kicked up during the quarter, but now the rates have come back down and we are kind of getting back on stride on recruitment and starting to see the benefit of some of these – this talent we brought in on – in the third quarter. We are starting to see our top-lines build back up. Our daily log volumes are up. So we are looking very positive right now into the fourth quarter and into 2016.

All right. And then just as a follow-up to that, give a sense for the split between legacy Renasant and – between purchase and refi?

Yes, overall, our purchase, refi for the third quarter, we were 73% purchase, 27% refi. But there is a little difference on the two divisions, Renasant legacy purchase was 64%, refi 36%. Heritage, and this is one of the real advantages of Heritage is, if I do a higher or the Heritage division does have a higher purchase volume for the third quarter, Heritage was 80% purchase, and 20% refi and going forward, we see pretty much staying in that range. Our top-line mix for Renasant legacy was 70-30. So we are seeing, that’s probably going to be pretty good run rate for Renasant legacy, the 70-30 range and the 80-20 for Heritage.

All right. Just one final question from me, I guess you gave your 30 day pipeline. I might have missed it if you gave it, but if you can give it to us, I think it was 146 at the end of last quarter, thanks.

Sure, Mitch Waycaster will give you that Michael.

Michael, the 30-day long pipeline at the beginning of the quarter was $111 billion and has been stated in the past, if you break that down by state it reflects the potential that has been talked about earlier, 20% is in Tennessee, 23% in Alabama, 33% in Georgia, 21% in Mississippi and 3% in Florida. And this pipeline should result in approximately $41 million in non-acquired loans in the next 30 days. And as Robin had mentioned earlier, this level of pipeline which does compare favorably to the same period of the prior year, seasonally adjusted it stand a little from the third quarter, but to be expected, but we should continue at this level to experience strong growth as we go into the fourth quarter.

Great, thanks for taking my questions guys.

Thanks, Michael.

The next question comes from Brad Milsaps with Sandler O’Neill. Please go ahead.

Hey, good morning guys.

Good morning, Brad.

Kevin, I wanted to follow-up on the expense question. You guys have talked a bit about hopefully pushing the efficiency ratio to below 60%, maybe as it relates to the first quarter of 2016, certainly the first half of the year, do you still feel good about that and if so, could you kind of help me maybe understand how you get there? I think you said, maybe another $1 million to $1.5 million in cost coming out of the run rate? But just kind of curious beyond that, what you see that would help drive that number materially lower?

Yes, so a couple of things. The additional cost saves will help, that will take our current ratio which is in the 64 – which has a 64 handle, it will move it down to the low 63s, just releasing those expenses. To be honest with you that I underestimated the impact that the mortgage was going to have and I do think that this quarter it is magnifying just with the pullback we saw in the mortgage, it is amplifying the impact the mortgage is having on our efficiency ratio. If I exclude mortgage, we are in a – we have a 60 handle on our efficiency ratio just for the bank excluding the mortgage. Our goal is to continue to get – as a total company get down below 60%. I still think it’s achievable in 2015. It may take us into the end of Q1 or the beginning of Q2 to achieve that. We also had the opportunity to continue to grow into some of our expense base. As I mentioned earlier, we have hired additional lenders and there is opportunity for them to build scale into their book of businesses that will help on the efficiency as well. And then also the other thing Robin mentioned, just some of the investments we’ve made in going over $10 billion, to put a little bit of a number behind that, I think it’s important and relevant to talk about, just some of the infrastructure we’ve built. Robin mentioned the IT team that we’ve added. This year alone, we’ve added in cyber security and IT annual expense upwards of $1 million and that’s really just building infrastructure to – as an investment for future growth. We are about to go online. We’ve completely re-hauled our IT datacenter and we made a $4 million, $5 million investment in a new technology center that will allow us to – that will provide us enough infrastructure that we will be able to grow to $15 billion at its current size and it’s scalable to where we can add on to that building very low cost and it could take us well in excess of $20 billion just in that investment that we are making. On the compliance side, we’ve – over the last two to three years, we’ve probably doubled the size of our compliance. We’ve added individuals that are high caliber individuals that are astute and in tune with compliance BSA, CRA, fair lending. All of that is included currently in our run rate that should help provide additional opportunity to lever up that expense base as we go into the future.

That’s great. And then, just in terms of the mortgage, is it kind of fair to think about maybe for every dollar change and mortgage revenue, maybe you get a $0.50 pick up in kind of salary expense or is there kind of a better way to think about it?

Just on salary expense related to mortgage, it’s probably closer to 65% increase in expense for every dollar of revenue that comes from.

Okay, that sounds good.

Thanks, Brad.

The next question comes from Matt Olney with Stephens Inc. Please go ahead.

Hey, thanks. Good morning guys.

Good morning, Matt.

Hey, most of my questions have been addressed, but I want to go back to loan growth. It sounds like the commentary there around new production sounds pretty positive. I wanted to ask about pay downs. Pay downs were not a problem, it seems like late last year and early this year, I am sure the visibility there is kind of rough, but what’s the updated thoughts on the pay downs in the three quarters?

Hey, Matt, this is Kevin. We did see a slowdown in pay downs just in Q3. I may have to follow-up with you on exactly with what the total pay downs were. But we did see a pull back in the level of pay downs. Just going back to some of our prior quarters to explain some of the volatility, in Q1 for example, we had a significant amount of pay downs and upwards of 20%, 30% increase in pay downs as far as what we are projecting. This quarter it was a little bit more in line with our projected pay downs. We didn’t had as many – we didn’t had as many liquidations of property or sellers or borrowers selling their business. What we actually saw was a little bit more of a positive tone coming out of our borrower base, funding up online and looking to invest more in their operations rather just liquidating it out.

And Matt, to add further to that, our bankers that focus more on real estate have continued to produce really solid new loan volumes outpacing the pay downs and also we continue to diversify our loan portfolio into other credit types namely C&I and in one to four family and those are going to be a little less volatile in terms of pay downs than the commercial real estate bucket.

Okay, thanks. That’s all for me.

Thanks, Matt.

The next question comes from Andy Stapp with Hilliard Lyons. Please go ahead.

Good morning. Nice quarter.

Thank you, Andy.

Thanks, Andy.

How much do you expect at merger-related expenses in Q4?

Yes, our merger-related expenses, just specific to Heritage, we’ve recognized the majority of the merger expenses either as an actual merger expense on Heritage books, our books or that is flowing through purchase accounting adjustment. There will be some residual related to severance on professional fees that will flow through in Q4. I would estimate on the high end, that to be between $1 million to $1.5 million.

Okay. And I don’t know if anybody cares anymore, but how is your interest rate sensitivity position changed after the Heritage acquisition?

Andy, this is Kevin, I’ll let you know, I still care kind of on that.

Yes, I care, but just I don’t know, dragging up.

Yes, I mean, if we go back to September, I think the consensus was, everybody was fully expecting a rate change or a rate increase. Really overall, we haven’t changed our position. We are still remaining neutral. We continue to be slightly asset-sensitive. Heritage did not changed that significantly.

Okay.

And we are still running our bank as I’ve discussed before, that we are asset-neutral or that we are rate-neutral and there is an urgency to get more asset-sensitive. That has not changed with us. That is still our mindset. We all know rates are going to increase. The timing of it is a little bit fungible. But the urgency to get more asset-sensitive or the need to get more asset-sensitive is still relevant and that’s what our focus has been.

Okay, great. That’s all for me. Thank you.

Thank you, Andy.

The last question comes from John Rodis with Fig Partners. Please go ahead.

Good morning guys.

Good morning John.

So, one quick question from me, Kevin, just the tax rate was up to around 32% this quarter. Where do you see that going forward?

Going forward that will pull back a little bit. We’ll settle back in the 31% to 32% range. It was a little bit elevated, because some of those are - merger expenses were non-deductible. So it did pushed the tax rate up a little bit, but tax rate will come back down and settle in the 31% to 32% range.

Okay, and then just one other question, on the Heritage loan portfolio, July 1st you said that portfolio was right around $1.1 billion, where did that end the quarter?

Just the acquired piece of it?

Yes, it sounds that like it was right around that level too.

Yes, it was right around that level. I think it’s still rounded to $1.1 billion.

Okay, fair enough. Thanks guys.

Thank you, John.

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

Thank you, Zelda, and thanks everybody for joining our call today. We appreciate your time and interest in Renasant Corporation and look forward to speaking with you again in the near future. Thanks everyone.

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