Renasant (US:RNST)2022-07-28 02:34Financial Data and Key Metrics Changes - The second quarter earnings were $39.7 million or $0.71 per diluted share, compared to $33.5 million or $0.60 per diluted share in the first quarter, with year-to-date diluted earnings per share at $1.30 compared to $1.75 in 2021 [10][11] - Net interest income increased by $13.9 million quarter-over-quarter, with the core margin up 29 basis points from Q1 [18][19] - The adjusted efficiency ratio declined to 62%, a decrease of approximately 5 percentage points on a linked-quarter basis [14] Business Line Data and Key Metrics Changes - Strong loan production led to total loans increasing by $290 million from Q1, with net loan growth across nearly all categories [15] - The mortgage division faced volatility but remained profitable, while wealth management and insurance divisions produced solid results [12][20] - Non-interest expenses increased by approximately $2.2 million for the quarter, with salaries and benefits rising by $3.3 million due to annual merit increases and minimum wage adjustments [21] Market Data and Key Metrics Changes - The average deposit account on the consumer side is less than $20,000, indicating a granular deposit base that supports funding stability [26] - Core loan yields improved to around 4.07% in June, up 30 to 40 basis points from the previous quarter [65] Company Strategy and Development Direction - The company remains focused on core deposits as the primary funding source, contributing to first-half success [8] - There is an emphasis on expense control and profitability improvement, with expectations for further enhancements in the second half of 2022 [8] - The company continues to seek opportunities to add talent while reallocating resources to maximize revenue [55][58] Management's Comments on Operating Environment and Future Outlook - Management anticipates loan growth to continue but at a more moderate pace for the remainder of the year, with a focus on maintaining good liquidity and asset quality [7][8] - The company is prepared for potential economic headwinds but remains optimistic about its ability to produce net growth [35] - Management expects non-interest expenses for the full year of 2022 to be less than 21% despite inflationary pressures [13] Other Important Information - The company recorded a credit provision of $2 million and net charge-offs of $2.3 million, with the allowance for credit losses (ACL) as a percentage of total loans declining from 1.61% to 1.57% [17] - The company is comfortable reducing excess cash and liquidity from $1 billion to a floor of approximately $450 million to $500 million to fund loan growth [62] Q&A Session Summary Question: Thoughts on deposit costs and betas moving forward - Management has focused on improving the deposit mix, increasing non-interest-bearing deposits by about 10 percentage points over the last few years, but expects costs to rise in Q3 and Q4 [26][28] Question: Outlook for mortgage portfolio growth - The current pipeline shows an increase, with $297 million compared to $290 million the previous quarter, indicating potential for continued production despite expected moderation [30][32] Question: Efficiency ratio in the mortgage business - The mortgage efficiency ratio was about 85% in Q2, expected to remain steady or increase slightly in Q3, with a focus on maintaining profitability [40][42] Question: Credit quality and ACL ratio outlook - The ACL ratio is expected to hold steady as loan growth continues, with no significant deterioration in credit quality observed [49] Question: Dynamics of net interest income and margin expansion - The outlook for margin expansion is positive, with expectations for meaningful improvement in Q3 driven by rate moves rather than balance sheet growth [46][51]