Renasant (RNST) - 2025 Q2 - Quarterly Results

Q2 2025 Earnings Announcement Quarterly Highlights Renasant Corporation's Q2 2025 results were significantly impacted by the merger with The First Bancshares, Inc., driving balance sheet growth despite merger-related expenses affecting GAAP net income - The Company completed its merger with The First Bancshares, Inc. on April 1, 2025, adding approximately $7.9 billion in assets, $5.2 billion in loans, and $6.4 billion in deposits[4] - Net interest margin for Q2 2025 was 3.85%, an increase of 40 basis points from the linked quarter, with adjusted net interest margin (non-GAAP) at 3.58%, up 16 basis points[8] - The combined company achieved net organic loan growth of $311.6 million (6.9% annualized) and net organic deposit growth of $361.3 million (6.8% annualized) during the quarter[8] - A provision for credit losses of $81.3 million was recorded, including a $66.6 million Day 1 acquisition provision related to the merger[8] Q2 2025 Key Financial Results | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $1.0 million | $41.5 million | $38.8 million | | Diluted EPS | $0.01 | $0.65 | $0.69 | | Adjusted Diluted EPS (Non-GAAP) | $0.69 | $0.66 | $0.69 | Financial Performance Analysis Income Statement Net income for Q2 2025 significantly decreased to $1.0 million due to increased provisions for credit losses and noninterest expenses from the merger, while net interest income grew substantially Selected Income Statement Data (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $218,859 | $134,197 | $125,026 | | Total Provision for Credit Losses | $81,322 | $4,750 | $3,300 | | Noninterest Income | $48,334 | $36,395 | $38,762 | | Noninterest Expense | $183,204 | $113,876 | $111,976 | | Net Income | $1,018 | $41,518 | $38,846 | | Adjusted Net Income (Non-GAAP) | $65,877 | $42,111 | $38,846 | Performance and Capital Ratios GAAP performance ratios were depressed in Q2 2025 due to merger costs, while adjusted non-GAAP ratios indicated stable core performance, and capital ratios decreased post-merger Key Performance Ratios | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on average assets (ROA) | 0.02% | 0.94% | 0.90% | | Adjusted ROA (non-GAAP) | 1.01% | 0.95% | 0.90% | | Return on average equity (ROE) | 0.11% | 6.25% | 6.68% | | Adjusted ROE (non-GAAP) | 7.06% | 6.34% | 6.68% | | Efficiency ratio (FTE) | 67.59% | 65.51% | 67.31% | | Adjusted efficiency ratio (non-GAAP) | 57.07% | 64.43% | 66.60% | Capital and Balance Sheet Ratios | Ratio | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Tangible book value per share (non-GAAP) | $23.10 | $27.07 | $23.89 | | Common equity tier 1 capital ratio | 11.09% | 12.59% | 10.75% | | Total risk-based capital ratio | 14.99% | 16.89% | 15.15% | Noninterest Income and Noninterest Expense Noninterest income increased to $48.3 million in Q2 2025, driven by merger-related growth in service charges and mortgage banking, while noninterest expense sharply rose to $183.2 million due to merger costs and increased operational expenses - Total noninterest income increased by $11.9 million linked quarter, with notable growth in service charges on deposit accounts (+$3.3 million), fees and commissions (+$2.9 million), and mortgage banking income (+$3.1 million)[12] - Total noninterest expense increased by $69.3 million linked quarter, largely driven by a $27.6 million increase in salaries and employee benefits, a $7.8 million increase in intangible amortization, and $20.5 million in merger and conversion related expenses[8][12] Mortgage Banking Income Mortgage banking income for Q2 2025 reached $11.3 million, an increase from $8.1 million in Q1 2025, supported by higher net gains on loan sales and increased fee income Mortgage Banking Income Components (in thousands) | Component | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Gain on sales of loans, net | $5,316 | $4,500 | $5,199 | | Fees, net | $3,740 | $2,317 | $2,866 | | Mortgage servicing income, net | $2,207 | $1,330 | $1,633 | | Total | $11,263 | $8,147 | $9,698 | Balance Sheet and Portfolio Analysis Balance Sheet The company's balance sheet significantly expanded in Q2 2025, with total assets reaching $26.6 billion, driven by substantial increases in loans and deposits following the merger Selected Balance Sheet Data (in thousands) | Account | Jun 30, 2025 | Mar 31, 2025 | | :--- | :--- | :--- | | Total Assets | $26,624,975 | $18,271,381 | | Loans held for investment | $18,563,447 | $13,055,593 | | Goodwill | $1,419,782 | $988,898 | | Total Deposits | $21,582,637 | $14,772,095 | | Total Shareholders' Equity | $3,778,854 | $2,727,105 | Net Interest Income and Net Interest Margin Net interest income on a fully tax-equivalent basis rose to $222.7 million in Q2 2025, with the net interest margin expanding by 40 basis points to 3.85%, driven by the merger and a decrease in the cost of total deposits - The six-month net interest margin for the period ending June 30, 2025, was 3.68%, compared to 3.30% for the same period in 2024[16] Net Interest Margin Analysis | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 3.85% | 3.45% | 3.31% | | Yield on Interest-Earning Assets | 6.01% | 5.61% | 5.77% | | Cost of Interest-Bearing Liabilities | 2.96% | 2.99% | 3.38% | | Cost of Total Deposits | 2.12% | 2.22% | 2.47% | Loan Portfolio The total loan portfolio expanded to $18.6 billion at the end of Q2 2025, primarily due to the acquisition of The First's loan portfolio, with significant growth in commercial real estate, 1-4 family mortgages, and commercial loans Loan Portfolio Composition (in thousands) | Loan Category | Jun 30, 2025 | Mar 31, 2025 | | :--- | :--- | :--- | | Commercial, financial, agricultural | $2,666,923 | $1,888,580 | | Real estate - construction | $1,339,967 | $1,090,862 | | Real estate - 1-4 family mortgages | $4,874,679 | $3,583,080 | | Real estate - commercial mortgages | $9,470,134 | $6,320,120 | | Total loans | $18,563,447 | $13,055,593 | Credit Quality Credit Quality and Allowance for Credit Losses on Loans Credit quality metrics in Q2 2025 were mixed, with nonperforming loans to total loans remaining stable at 0.76%, but total nonperforming loans and criticized loans increasing, while the allowance for credit losses on loans rose to 1.57% due to the Day 1 provision - Total nonperforming assets increased to $153.6 million from $107.4 million in the previous quarter, primarily due to the merger[18] - Net loan charge-offs for the second quarter of 2025 were $12.1 million, representing 0.26% of average loans on an annualized basis[18] Key Credit Quality Metrics | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Nonperforming loans / total loans | 0.76% | 0.76% | 0.78% | | Allowance for credit losses / total loans | 1.57% | 1.56% | 1.59% | | Allowance for credit losses / nonperforming loans | 204.97% | 206.55% | 203.88% | | Criticized loans / total loans | 2.66% | 2.45% | 2.62% | Supplementary Information Conference Call and Company Information The company will host a conference call on July 23, 2025, to discuss Q2 results, with Renasant Corporation operating 300 offices across the Southeast and holding approximately $26.6 billion in assets - A conference call is scheduled for 10:00 AM Eastern Time on Wednesday, July 23, 2025[19] - Renasant Corporation, parent of Renasant Bank, has assets of approximately $26.6 billion and 300 banking, lending, mortgage, and wealth management offices[22] Forward-Looking Statements This section provides a cautionary note regarding forward-looking statements, emphasizing that actual results may differ due to various risks including acquisition integration, economic conditions, and regulatory changes - The press release contains forward-looking statements subject to significant business, economic, and competitive risks and uncertainties[23] - Key risk factors include the ability to efficiently integrate acquisitions, the effect of economic conditions and interest rates, competitive pressures, and changes in laws and regulations[24] Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures The company uses non-GAAP financial measures like adjusted net income and adjusted diluted EPS to provide a clearer view of core operating performance by excluding merger expenses and acquisition provisions - The company uses non-GAAP measures to exclude certain charges like merger and conversion expenses and the Day 1 acquisition provision for credit losses to facilitate period-to-period comparisons and show meaningful indicators of operating performance[28][29] Non-GAAP Reconciliations This section details the reconciliation of GAAP figures to non-GAAP counterparts, showing how Q2 2025 GAAP net income of $1.0 million adjusts to an adjusted net income of $65.9 million by adding back merger expenses and acquisition provisions Reconciliation of Net Income to Adjusted Net Income (in thousands) | Description | Q2 2025 | | :--- | :--- | | Net income (GAAP) | $1,018 | | Merger and conversion expense | $20,479 | | Day 1 acquisition provision for loan losses | $62,190 | | Day 1 acquisition provision for unfunded commitments | $4,422 | | Gain on sales of MSR | ($1,467) | | Tax effect of adjustments | ($20,765) | | Adjusted net income (non-GAAP) | $65,877 | Reconciliation of Diluted EPS to Adjusted Diluted EPS | Description | Q2 2025 | | :--- | :--- | | Diluted earnings per share (GAAP) | $0.01 | | Adjusted diluted earnings per share (non-GAAP) | $0.69 |