Renasant Q1 Earnings Call Highlights

Key Points

• Q1 results outperformed management's goals: adjusted EPS was $0.93 (+41% YoY), adjusted return on tangible equity rose to 16.3%, and the efficiency ratio improved to 55.7%.
• Balance-sheet mix shifted toward liquidity: deposits jumped $626.4 million while loans declined $71.8 million (management says ~50–60% of the deposit inflow was seasonal/public funds), leaving a roughly $4 billion securities portfolio about $1 billion above its comfort level to be deployed as loan growth materializes.
• Merger savings largely realized and capital/credit position stable: non‑interest expense was $155.3 million with only modest expense declines remaining and an expected low single‑digit percent cost drift as hiring continues; the bank took an $8.1 million loan loss provision and saw NPLs rise about $24 million, while CET1 capital sits near 11.25% with share buybacks managed within guardrails.

Renasant NYSE: RNST executives told investors the company delivered a first quarter that “exceed[ed] our goals,” pointing to improved profitability metrics and operating efficiency following what management described as its largest merger, conversion, and integration.

Quarterly performance and profitability targets

President and CEO Kevin D. Chapman said the company set “aspirational goals” two years ago and targeted the first quarter of 2026 as a key milestone to demonstrate progress. “Frankly, the strong results for the Q1 exceed our goals,” Chapman said.

Chapman highlighted several adjusted performance metrics for the quarter, including:

• Adjusted earnings per share of $0.93, up 41% year over year
• Adjusted return on assets of 133 basis points, up from 95 basis points in 2025
• Adjusted return on tangible equity of 16.3%, up from 10.3%
• Efficiency ratio improvement to 55.7% from 65.5%

Chapman said management remains focused on growing customer relationships and hiring talented bankers as the company moves beyond the integration work.

Balance sheet trends: deposits up, loans down

EVP and CFO James C. Mabry IV said loans declined $71.8 million from the prior quarter, which he quantified as 1.5% annualized. Deposits increased $626.4 million from the fourth quarter, or 11.8% annualized.

Mabry reported net interest margin decreased modestly: the reported margin fell 2 basis points to 3.87%, while adjusted margin slipped 1 basis point to 3.61% on a linked-quarter basis. On funding costs, he said adjusted total cost of deposits decreased 3 basis points to 1.94%, while adjusted loan yields declined 7 basis points to 6.04%.

In response to analyst questions about the sharp deposit increase, Mabry said a meaningful portion was seasonal and tied to public funds. He estimated “50% or 60% of the growth that we saw in Q1 came from public funds,” with the remainder coming from core deposit growth. He said management expects public fund inflows to moderate through the year but maintained a goal of mid-single-digit deposit growth, “roughly parallel with the loan growth.”

Chapman added that the company has seen a pickup in deposit account openings early in the second quarter. He cited internal figures showing 340 deposit accounts opened over four days, compared with a 2025 “normal trend line” of “a couple of hundred accounts per month,” describing it as a sign the bank is benefiting from market disruption and customer uncertainty.

On securities, Mabry said the bond portfolio grew in the first quarter partly because deposit growth outpaced loan growth. He said the securities portfolio is “roughly $4 billion plus or minus” and “comfortably $1 billion above where we feel comfortable,” adding that management would “expect and hope” the securities portfolio trends downward as loan growth materializes and liquidity is deployed.

Expenses, merger savings, and hiring priorities

Non-interest expense was $155.3 million in the first quarter. Mabry said that excluding fourth-quarter merge and conversion expenses of $10.6 million, expenses declined $4.9 million linked quarter.

On the outlook for costs, Mabry said the company has largely achieved its expense saves tied to the merger with The First and he does not see “a lot of savings associated with the merger…from this point on.” He noted expected upward pressure from merit increases in the second quarter and a day-count factor, and said expenses could drift “up moderately.” In response to a question about near-term run rate, Mabry said a “low single-digit % increase” from first-quarter levels is a reasonable base expectation, with hiring activity as the key variable.

Chapman provided additional details on workforce reduction and hiring. He said that in June 2024, combined full-time equivalent employees were “just shy of 3,400,” and by March 31 that figure was expected to be “about 2,950,” representing a reduction of 420 employees. Chapman emphasized that not all reductions were merger-related, citing pre-merger efforts around “accountability.”

At the same time, Chapman said the company has been hiring revenue producers and will be opportunistic in recruiting. “We won’t flinch at the opportunity to hire A-rated talent,” he said, citing 18 revenue producers hired in the first quarter, six in the fourth quarter, and nine in the third quarter of the prior year. Management described broader market “dislocation” as creating opportunities to add bankers across the Southeast and deepen existing business lines rather than launching new lending verticals.

Loan growth outlook and competitive dynamics

Despite first-quarter loan contraction, Chapman reaffirmed the company’s longer-term growth expectations. “We think we are squarely a mid-single digit grower,” he said, attributing the quarter’s softness to March slowdown after stronger growth in January and February.

Chapman cited two main factors: macro events that pushed some opportunities into later quarters—he said the pipeline at the start of the second quarter was up 30% from the beginning of the year—and “very aggressive pricing and terms” from incumbent banks seeking to retain customers. Chapman said Renasant will continue to operate in a competitive environment and will decide case by case whether to match competitor terms.

On commercial real estate (CRE) exposure and growth, EVP and Chief Credit Officer David L. Meredith said CRE is “not an area we intend to shrink,” acknowledging “noise” in the segment and a level of expected payoff activity. Meredith said the bank has increased commitments in construction over the last couple of quarters, noting that because of equity levels in construction projects it can take “6-9 months” before fundings appear. He described the bank’s growth approach as broad-based across CRE and C&I, including areas such as factoring, asset-based lending, and corporate C&I.

Margin, fee income, credit, and capital actions

On net interest margin, Mabry said guidance is unchanged and the company’s current forecast “does not have any rate cuts in it.” He said the outlook is “stable” for core NIM through the balance of 2026 and that even if the Fed were to cut a couple of times, he does not expect it would “influence it very much.”

Regarding funding costs, Mabry said he sees limited additional repricing benefit on deposits, noting the company has “exhausted much of what we’re gonna see” on deposit repricing. He pointed instead to loan repricing, citing $1.2 billion to $1.3 billion of loans maturing over the next 12 months at roughly 5% to 5.1%.

On fee income, Mabry said non-interest income was $50.3 million in the first quarter, down $0.9 million linked quarter, primarily due to the absence of a one-time $2 million gain in the fourth quarter related to exiting Low-Income Housing Tax Credit partnerships. He said the impact was partially offset by strong SBA loan sale performance. Looking forward, he described the first quarter as “a pretty good jumping-off point,” with potential for modest improvement. He cited mortgage and SBA as areas that performed well, and said capital markets revenue was lower than typical in the first quarter but could improve as production converts into loan growth. Mabry also described wealth management as steady, with potential for “solid single-digit, mid-single-digit growth.”

Chapman added that mortgage activity responded quickly when rates briefly moved lower in February, saying the pipeline “popped” and the quarter reflected some of that. He said the company believes it is well positioned in mortgage “if rates ever cooperate.”

On credit, Mabry said the company recorded an $8.1 million credit loss provision on loans, including $4.2 million for funded loans and $3.9 million for unfunded commitments. Net charge-offs were $2.3 million, and the allowance for credit losses increased to 1.56% of total loans, up two basis points from the prior quarter.

Meredith addressed nonperforming loan trends, noting a “little bit of an inflow” and describing a quarter in which NPLs increased by about $24 million, driven by approximately $69 million of new NPLs and $45 million of outflows. He said inflows were centered in a handful of larger transactions, including about $7 million in CRE and $19 million in C&I, and said the NPL composition remains broad-based without a single concentrated geography or asset type. Chapman said the bank plans to keep reserves at what it views as an appropriate level given macro uncertainty and cited volatility in consumer and business cash flows, including rising energy costs.

On capital management and buybacks, Mabry said regulatory capital ratios remain above well-capitalized minimums and indicated the company is using buybacks while maintaining capital “guardrails.” He said the bank began the year with a CET1 ratio of “roughly 11 and a quarter” percent and aims to finish the year “somewhere in that range,” while balancing balance sheet growth and share repurchases. Chapman framed the approach as a broader capital plan designed to preserve flexibility, describing the company as positioned to be “opportunistic in a good environment or defensive in a bad environment.”

Management closed the call by reiterating its focus on organic growth opportunities and engagement with investors through the quarter.

About Renasant NYSE: RNST

Renasant Corporation operates as a bank holding company for Renasant Bank that provides a range of financial, wealth management, fiduciary, and insurance services to retail and commercial customers. It operates through three segments: Community Banks, Insurance, and Wealth Management. The Community Banks segment offers checking and savings accounts, business and personal loans, asset-based lending, and equipment leasing services, as well as safe deposit and night depository facilities. It also provides commercial, financial, and agricultural loans; equipment financing and leasing; real estate–1-4 family mortgage; real estate–commercial mortgage; real estate–construction loans for the construction of single family residential properties, multi-family properties, and commercial projects; installment loans to individuals; and interim construction loans, as well as automated teller machine (ATM), online and mobile banking, call center, and treasury management services.

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