Renasant Corporation 2026 Q3 Earnings Call

Please go ahead. Good morning, and thank you for joining us for Renasant Corporation's quarterly webcast and conference call.

Participating in the call today are members of Renasant's executive management team. Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.

Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance, realization of the projected financial metrics from our recently announced merger with Commercial Holding Company, and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release and the press release announcing the proposed merger, both of which have been posted to our corporate site, www.renasant.com, at the press releases link under the news and market data tab. We undertake no obligation, and we specifically disclaim any 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. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures.

A reconciliation of the non-GAAP measures and our earnings release to the most comparable GAAP measures can be found in such release. Now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman.

Thank you, Kelly, and good morning. Third quarter results continue to show momentum in achieving our financial goals, adding talent and gaining market share. Adjusted earnings per share in the third quarter were $0.86, up 12% from one year ago. Adjusted return on average assets was 1.16% in the quarter, compared to 1.09% in the same period last year. Similarly, adjusted ROTCE was 14.5% versus 14.2% in the third quarter of 2025. The efficiency ratio also improved to 57.7% this quarter. Our core business continues to perform well. Highlights this quarter include strong loan and core deposit growth, a record level of loan production, a stable core net interest margin, a reduction in problem credits, a reduction in expenses, and continued buybacks. While EPS declined linked quarter, this was primarily due to a higher provision driven by the ramp in loan growth.

In addition, we are pleased this morning to announce the merger with Commercial Bank & Trust Company, which will strengthen our presence in Memphis and provide solid, long-tenured deposit and wealth management relationships throughout Western Tennessee. We are looking forward to welcoming Mott Ford and the Commercial team to Renasant, and importantly, we do not believe this deal will distract us from the market share opportunities we continue to see across our footprint. Altogether, Renasant is in a great position to continue to improve financial performance and capitalize on growth opportunities, and the Commercial acquisition will be added into that momentum. I will now turn the call over to Jim to provide more details on the financial results.

Thank you, Kevin, and good morning. Looking at the balance sheet, loans were up $555.9 million on a linked quarter basis or 11.5% annualized. Deposits were down $73.2 million from the second quarter or 1.3% annualized, primarily due to outflows of public fund deposits and a couple larger non-core, higher-cost relationships, offset by about 8% annualized growth in consumer and commercial deposits. Reported net interest margin decreased six basis points to 3.77%, while adjusted margin was down two basis points at 3.58%. Excluding the accelerated bond discount accretion last quarter, core net interest margin was up two basis points linked quarter. Our total cost of deposits increased by only one basis point to 1.97%, while our adjusted loan yields increased five basis points to 6.08%. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized.

We recorded a credit loss provision on loans of $13.3 million, comprised of $10.1 million for funded loans and $3.2 million for unfunded commitments. Net charge-offs were $10 million, and the ACL as a percentage of total loans declined four basis points quarter-over-quarter to 1.50%. Turning to the income statement, our pre-provision net revenue was $112.6 million. Net interest income was $228.6 million, an increase of $0.9 million quarter-over-quarter. Excluding fair value accretion and the accelerated bond discount accretion last quarter, core net interest income increased $5.8 million linked quarter, or 11% annualized. Non-interest income was $49.3 million in the third quarter, a linked quarter decrease of $1.9 million, which was primarily driven by a decrease in mortgage banking income. Non-interest expense was $160.3 million for the third quarter, a linked quarter decrease of $1.2 million, mostly driven by a decline in deferred compensation accruals.

As to the Commercial Bank & Trust transaction, we have provided a supplementary slide deck with details on this transaction. A few highlights. The deal value is approximately $140 million and is comprised of roughly 75% stock and 25% cash. Slide 4 provides an overview of Commercial's high quality, low cost core deposit base. We anticipate the deal to be approximately 4% accretive to EPS and 1.5% dilutive to tangible book value per share, with an estimated earn back of just under two years. We expect to see modest diminution to the capital ratios, with CET1 being approximately 11% at close. We anticipate the deal to close sometime in the first quarter of 2027. I will now turn the call back over to Kevin.

Thank you, Jim. We believe that Renasant is in a great position to continue high levels of performance while also taking advantage of opportunities created by industry consolidation. We appreciate your interest in Renasant and look forward to discussing our results with you. I will now turn the call over to the operator for questions.

Yeah. Hey, Stephen. Good morning. Look, as we look at deposit growth, and look, if you look at total deposits, there's some noise in there, and we tried to lay out where that noise is, particularly with some of our public funds. But if you look underneath that, core deposits continue to grow at an appreciable rate. I think in Q3, that number was close to a little bit over $300 million. So the seasonality we see with public funds, you'll start to see that reverse as we get into the end of this year or early next year. So that'll stop being a headwind and become a tailwind. But that hasn't distracted us or taken us away from the opportunity around growing core deposits.