Renasant Earnings Call Highlights Profitability Gains Amid Risks

Renasant ((RNST)) has held its Q4 earnings call. Read on for the main highlights of the call.

Renasant Earnings Call Signals Strong Profitability Amid Cautious Credit and Funding Backdrop

Renasant’s latest earnings call painted a picture of a bank that has materially strengthened its core profitability and efficiency following its recent merger, even as it navigates elevated credit costs, modest loan growth and persistent funding pressure. Management highlighted double‑digit earnings growth, sharply better returns and a more efficient cost base, while acknowledging that higher provisions, lumpy loan growth and stiff deposit competition warrant a constructive but decidedly cautious stance.

Material Profitability Improvement Year-over-Year

Renasant reported a clear step-up in profitability for 2025, with adjusted EPS reaching $3.06, up 11% versus the prior year. Adjusted return on assets improved to 1.10%, a nearly 94-basis-point jump, and adjusted return on tangible common equity rose to 13.79% from 11.5% in 2024. The adjusted efficiency ratio improved by roughly 900 basis points year-over-year to 57.46%, signaling that integration benefits from the merger and tighter cost control are flowing through to the bottom line.

Strong Fourth Quarter Operating Results

Fourth-quarter results underscored the earnings momentum. Net income came in at $78.9 million, or $0.83 per diluted share, with adjusted earnings excluding merger-related charges at $86.9 million, or $0.91 per share. Adjusted ROA reached 1.29%, up 20 basis points sequentially, while adjusted ROTCE climbed to 16.18%, nearly 200 basis points higher than the prior quarter. These metrics indicate that the bank is exiting the year on a stronger operational footing.

Net Interest Income and Margin Resilience

Despite a competitive funding environment, Renasant delivered an increase in net interest income of $3.9 million quarter-over-quarter. The reported net interest margin expanded by 4 basis points to 3.89%, while the adjusted margin held steady at 3.62%. The stability in adjusted margin, combined with higher net interest income dollars, suggests the bank is managing asset yields and funding costs well even without a material benefit from interest rate changes.

Expense Discipline and Integration Benefits

Cost control and merger integration are central to Renasant’s story. Excluding $10.6 million of merger and conversion expenses, Q4 noninterest expense was $160.2 million, down $6.2 million from the prior quarter. Management reduced headcount from roughly 3,400 employees in mid-2024 to just under 3,000, eliminating about 400 positions. These actions helped drive the improved efficiency ratio and reflect an ongoing push to streamline operations while preserving growth capacity.

Deposit Growth and Strong Capital Position

On the balance sheet front, deposits grew $48.5 million from the third quarter, equating to a modest but positive 0.9% annualized increase. Regulatory capital ratios remain comfortably above required minimums, with CET1 around 11.25% at year-end. This solid capital position underpins a deployment strategy that includes continued share repurchases and potential debt redemptions, giving management flexibility to balance shareholder returns with growth and risk management.

Strategic Portfolio Actions and Diversified Pipeline

Renasant continued to reshape its balance sheet post-merger, selling a non-core $117 million portfolio of loans secured by life insurance cash values. Management emphasized that, despite this pruning, the bank maintains a healthy and diversified loan production pipeline across markets and product channels. This supports its mid‑single‑digit loan growth target for 2026 and signals confidence in underlying demand and the bank’s competitive positioning.

Noninterest Income Strength

Noninterest income provided a meaningful boost in the quarter, rising to $51.1 million, up $5.1 million sequentially. The increase included $2.0 million tied to the exit of certain low-income housing tax credit partnerships. While some of this uplift is transactional and may not repeat, the overall strength in fee-related and other noninterest streams adds another leg to earnings beyond traditional spread income.

Pre-Provision Net Revenue Supports Investment Capacity

Adjusted pre-provision net revenue reached $118.3 million for the quarter, providing ample cover for credit loss provisions and leaving room for continued investment in the business. A strong PPNR base is particularly important in a period of elevated credit costs, as it allows Renasant to absorb losses while still funding growth initiatives and technology or efficiency projects.

Elevated Credit Costs and Charge-Offs

Credit metrics were a clear watch item. The bank recorded a $10.9 million provision for credit losses on loans in Q4, split roughly evenly between funded loans and unfunded commitments. Net charge-offs totaled $9.1 million, including $2.5 million related to the sale of the $117 million loan portfolio. While these actions partly reflect strategic balance sheet cleanup, they also highlight a more costly credit environment that investors will monitor closely.

Allowance and Coverage Trends

The allowance for credit losses stood at 1.54% of total loans, down 2 basis points from the prior quarter. This slight decline represents a modest deterioration in coverage, which management is keeping under close review. With charge-offs and provisions running higher, the trajectory of reserves and overall credit performance remains a key risk factor in the story.

Modest Loan Growth and Lumpy Payoffs

Reported loan growth was minimal in the quarter, with balances increasing just $21.5 million, or 0.4% annualized, from the prior period. Management attributed the subdued growth to elevated loan payoffs in late Q4, which created lumpy quarter-to-quarter dynamics and added uncertainty to near-term growth figures. While the forward pipeline is described as solid, investors should expect some volatility in reported loan growth.

Funding Cost Pressure and Deposit Competition

Renasant, like many peers, is facing intense competition on the deposit side. Management pointed to a sticky five-month special deposit product effectively paying around 4%, which they would prefer to reduce but have not yet been able to meaningfully reprice. This dynamic keeps funding costs elevated and represents a vulnerability for net interest margin if competitive pressure does not ease or if rate cuts compress asset yields faster than deposit costs can be lowered.

Noninterest Expense Still Elevated

Although expenses are moving in the right direction, they remain high by management’s own admission. Total noninterest expense for Q4 was $170.8 million, including $10.6 million of merger and conversion costs. Even after stripping out those items, the $160.2 million underlying quarterly run rate leaves room for further improvement. Continued discipline will be needed to push efficiency closer to top-tier levels as merger-related noise fades.

Consumer Segment Pullback

Management noted a modest pullback in consumer lending, driven more by the bank’s deliberate choices than by weakening consumer demand. This more cautious stance in consumer credit may temper growth in that segment but reflects a risk-aware approach as the cycle matures. The trade-off suggests Renasant is prioritizing asset quality and returns over headline volume.

Merger and Conversion Costs Distorting Comparisons

The quarter’s results still carry some non-recurring items tied to the merger and integration. Q4 included $10.6 million in merger and conversion expenses, partially offset by $2.1 million of gains related to branch consolidations. These one-time costs and gains introduce noise into expense trends and complicate year-over-year and quarter-over-quarter comparisons, but they should fade going forward as integration winds down.

Guidance and Forward-Looking Outlook

Looking ahead, Renasant guided to mid‑single‑digit loan growth for 2026, underpinned by its diversified pipeline. Management expects core noninterest expense to decline by roughly $2–3 million in the first quarter, with no material merger or conversion costs anticipated, which should further enhance efficiency. Capital levels are expected to remain strong, with continued share repurchases planned and CET1 targeted to finish 2026 around current levels despite an expected 50–60 basis point regulatory capital build. On the revenue side, the bank expects net interest margin to remain broadly stable even if interest rates decline modestly, and net interest income dollars to grow as the balance sheet expands. Taken together, the guidance points to continued profitability improvement off an already stronger 2025 base.

In summary, Renasant’s earnings call showcased a bank that has successfully translated merger synergies into higher earnings, better returns and improved efficiency, while remaining vigilant on costs, credit and funding. Profitability metrics and capital strength were clear bright spots, and the loan pipeline and expense guidance support a constructive medium-term outlook. At the same time, elevated provisions, modest loan growth and stubborn funding costs underscore that the operating environment remains challenging, arguing for a cautiously optimistic stance from investors tracking the name.