RENASANT CORP (RNST)·Q2 2025 Earnings Summary

Executive Summary

• GAAP diluted EPS was $0.01, driven by $66.6M Day 1 acquisition provision and $20.5M merger/conversion expenses; adjusted diluted EPS was $0.69, modestly below consensus $0.73* .
• S&P-defined “Revenue” (net interest income after provision + noninterest income) was $185.9M versus Street at $264.0M*, reflecting the large Day 1 provision flowing through provision expense and reducing net revenue* .
• Core fundamentals improved: net interest margin expanded to 3.85% GAAP (3.58% adjusted), and deposit costs fell to 2.12%; organic loan and deposit growth were 6.9% and 6.8% annualized, respectively .
• Management reiterated synergy timing (systems conversion in early August; bulk of merger costs in Q3; clean run-rate by Q1 next year) and indicated modest core NIM expansion ahead; buybacks remain optional but not prioritized near term .

What Went Well and What Went Wrong

• What Went Well

  • Core margin expansion: GAAP NIM 3.85% and adjusted NIM 3.58% (up 40bps and 16bps q/q); CEO: “meaningful expansion in the core net interest margin from 3.42%-3.58%” .
  • Funding mix and costs improved: total deposit cost fell to 2.12% (down 10bps q/q), adjusted cost of deposits to 2.04%; CFO highlighted lower sensitivity post-merger .
  • Organic growth and mortgage rebound: net organic loan growth $311.6M and deposit growth $361.3M; mortgage banking income rose $3.1M with gain-on-sale margin at 1.87% .

• What Went Wrong

  • Headline GAAP EPS hit by one-offs: $66.6M Day 1 acquisition provision and $20.5M merger expenses reduced GAAP EPS to $0.01; adjusted EPS of $0.69 was below Street $0.73* .
  • Street revenue miss using S&P definition: Q2 “Revenue” $185.9M vs $264.0M consensus*, largely due to the provision for credit losses embedded in net revenue* .
  • Credit noise: net charge-offs were $12.1M (two C&I credits), criticized loans rose to 2.66% with layering from The First; management sees charges as non-systemic .

Financial Results

Estimates comparison (Street vs actual; S&P Global consensus):

Values with asterisks retrieved from S&P Global.

Segment breakdown – Loan portfolio composition ($USD Millions):

KPIs and credit metrics:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We also saw meaningful expansion in the core net interest margin from 3.42%-3.58%. Reported margin… rose from 3.45%-3.85% for the quarter” .
• CFO on accretion: “Normal part… about $13 million… a pretty good indicator of what you’re likely to see in the next quarter or two; accelerated… a little less than maybe $5 million, tougher to project” .
• CFO on expense trajectory: “You’ll see some efficiencies show up in Q3… more in Q4… goal is to have a clean income statement… by Q1 [next year]” .
• CEO on growth: “We’re still guiding towards mid single digit loan and deposit growth… pipelines are good” .
• CCO on charge-offs: “Both… C&I… not necessarily systemic… expect run-rate around 10–15bps” .

Q&A Highlights

• Margin and purchase accounting: Analysts focused on core NIM trajectory and purchase accretion; mgmt guided modest core margin expansion with normal accretion ~$13M/quarter and cautioned on accelerated accretion variability .
• Expenses and synergies: Path to efficiencies post-August conversion; ~$25M merger expenses in H2, largely Q3; clean run-rate targeted by Q1 next year .
• Credit clarity: Two idiosyncratic C&I charge-offs drove elevated net charge-offs; criticized loans up mainly from portfolio layering; non-systemic outlook, with normalized charge-off run-rate ~10–15bps .
• Capital allocation: Buybacks remain optional; priority on organic growth, small bolt-ons, talent; maintain capital for future M&A; parent-level liquidity provides flexibility .
• Rate sensitivity: Post-merger balance sheet less rate sensitive; anticipated Fed cuts have de minimis impact on margin guidance .

Estimates Context

• EPS: Adjusted diluted EPS of $0.69 versus consensus $0.73* (Q2 miss); Q1 beat ($0.66 vs $0.61*); Q4 beat ($0.73 vs $0.61*) .
• Revenue (S&P-defined net revenue): Q2 actual $185.9M versus consensus $264.0M*, a large miss driven by the Day 1 acquisition provision flowing through provision for credit losses and reducing net revenue* .
• Street likely to recalibrate near-term estimates for GAAP metrics to reflect remaining merger conversion costs ($25M, mostly Q3) and the cadence of purchase accretion ($13M normal per quarter), while maintaining improving core margin and synergy trajectory .

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

• Near-term headline GAAP results are noisy due to Day 1 provisioning and merger costs; focus on improving core NIM (3.58% adjusted) and falling deposit costs (2.12%), which support earnings normalization post-Q3 .
• Core earnings power is strengthening: adj. PPNR rose to $103.0M, and NIM expansion should continue modestly; expect efficiencies to begin in Q3 and be more visible in Q4 .
• Loan and deposit growth remain healthy (mid single-digit guided), with mortgage income and treasury/capital markets offering incremental fee upside .
• Credit normalization underway: Q2 charge-offs were concentrated in two C&I names; criticized loan uptick largely from portfolio layering; coverage ratio remains robust (~205%) .
• Capital optionality intact, but buybacks are secondary to organic growth and integration; parent cash and reduced rate sensitivity provide flexibility if opportunities arise .
• Trading lens: Expect volatility around Q3 merger expense recognition, but catalysts include visible synergy capture post-conversion and continued margin improvement; watch monthly/quarterly spot NIM and deposit pricing for confirmation .
• Estimate risk skew: Street may lift core NIM and efficiency assumptions while trimming GAAP EPS near term for conversion costs; adjust models for ~$13M/quarter normal accretion and potential fee tailwinds .