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RENASANT CORP (RNST)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid core performance: net interest income rose to $135.5M with NIM stable at 3.36%, while diluted EPS was $0.70 and adjusted diluted EPS $0.73 as the quarter lapped Q3’s insurance-agency gain .
  • Funding costs improved materially: total deposit cost fell 16 bps QoQ to 2.35%, supporting NII despite modestly lower loan yields; management now expects modest NIM expansion in 2025 versus prior guidance for modest compression .
  • Balance sheet momentum: loans grew $257.4M (8.1% annualized) QoQ; deposits increased $62.9M QoQ with brokered deposits fully eliminated by year-end; credit metrics improved QoQ (NPL/loans 0.88%, coverage 178%) .
  • Noninterest income fell $55.1M QoQ due to the absence of Q3’s $53.3M gain on the insurance sale and seasonal mortgage softness; core expense control was evident as merger/conversion costs declined to $2.1M from $11.3M QoQ .
  • Potential stock catalysts: NIM outlook turning positive, continued loan growth, and first-half 2025 merger completion with The First Bancshares (FBMS) could reset earnings trajectory and multiple if cost synergies/earn-back are confirmed .

What Went Well and What Went Wrong

What Went Well

  • Deposit cost relief and stable NIM: total deposit cost fell to 2.35% (−16 bps QoQ), with NIM holding at 3.36%—management cited better-than-expected deposit pricing beta as a key driver and now guides to modest NIM expansion in 2025 .
  • Strong loan growth and balanced production: loans +$257.4M QoQ; production was granular across geographies and products, with new/renewed loan yields ~7.35% in Q4 and ~7.05% in December .
  • Credit metrics improved QoQ: criticized loans/total loans fell to 2.89% (−13 bps QoQ), NPL/loans declined to 0.88%, and coverage (ACL/NPL) increased to 178% .

Quote (CEO): “Our team maintained its focus on generating organic growth, disciplined pricing on both sides of the balance sheet and steady credit performance” .
Quote (CFO): “Our outlook…as opposed to modest compression…is for some modest expansion in the margin” .

What Went Wrong

  • Noninterest income normalized sharply QoQ: down $55.1M as Q3 included a $53.3M pretax insurance-agency sale gain; excluding the gain, core noninterest income fell $1.7M QoQ, with mortgage income down $1.6M QoQ and lock volume slipping to $482.3M .
  • Core operating expenses (ex-merger) edged higher: while reported noninterest expense decreased $7.2M QoQ, core expense excluding merger/conversion rose ~$1.9M QoQ; management flagged elevated Reg E/fraud losses and higher health/life claims .
  • Year-over-year credit mix still tighter: NPL/loans is 0.88% vs 0.56% in Q4 2023; ACL/loans dipped to 1.57% vs 1.61% in Q4 2023, though quarterly trends improved QoQ .

Financial Results

Core P&L and Margin Trends

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Diluted EPS (GAAP) ($)0.50 0.69 1.18 0.70
Adjusted Diluted EPS (non-GAAP) ($)0.76 0.69 0.70 0.73
Net Interest Income (FTE) ($M)128.6 127.6 133.6 135.5
Noninterest Income ($M)20.4 38.8 89.3 34.2
Net Interest Margin (%)3.33 3.31 3.36 3.36
Cost of Total Deposits (%)2.17 2.47 2.51 2.35
PPNR (non-GAAP) ($M)34.4 51.8 98.3 52.4
Adjusted PPNR (non-GAAP) ($M)52.6 51.8 56.2 54.2

Balance Sheet and Capital

MetricQ4 2023Q3 2024Q4 2024
Loans HFI ($M)12,351.2 12,627.6 12,885.0
Deposits ($M)14,076.8 14,509.8 14,572.6
Brokered Deposits ($M)632.7 151.0 0.0
Book Value/Share ($)40.92 41.82 42.13
Tangible BV/Share ($) (non-GAAP)22.92 26.02 26.36
CET1 Ratio (%)10.52 12.88 12.72

Credit KPIs

MetricQ4 2023Q3 2024Q4 2024
NPL/Total Loans (%)0.56 0.94 0.88
ACL/Loans (%)1.61 1.59 1.57
ACL/NPL Coverage (%)286.26 168.07 178.11
Criticized Loans/Loans (%)2.16 3.02 2.89
Net Charge-offs ($M)1.713 0.703 1.722
NCOs / Avg Loans (annualized, %)0.06 0.02 0.05

Segment Breakdown – Noninterest Income Mix

Category ($M)Q4 2023Q3 2024Q4 2024
Service charges10.60 10.44 10.55
Fees & commissions4.13 4.12 4.18
Wealth management5.67 5.84 6.37
Mortgage banking6.59 8.45 6.86
BOLI income2.59 2.86 3.32
Other6.92 4.26 2.94
Gain on sale of insurance agency—53.35 —
Total noninterest income20.36 89.30 34.22

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (NIM)FY 2025Modest compression expected (prior outlook) Modest expansion expected Raised
Expense growth (core)FY 2025Not previously quantified2–3% YoY run-rate guide (management effort to keep lower) New
Time/CD repricingH1 2025N/A~$2B of CDs to mature; blended rate low-4% to reprice at ~3.75–4.00% Informational
Merger timing (FBMS)H1 2025First half 2025 First half 2025 reaffirmed; regulatory process progressing Maintained
DividendOngoing$0.22/share (historical) $0.22/share declared for Mar 31, 2025 payment Maintained
Share repurchaseThrough Oct 2025$100M program authorized No Q4 buybacks Maintained (no activity)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
NIM trajectoryQ2: NIM 3.31%, deposit cost rising; Q3: NIM 3.36%, prior outlook for modest compression NIM stable at 3.36%; management now guides modest expansion on improved deposit beta and yield curve slope Improving
Deposit costs & mixQ2 cost 2.47%; Q3 cost 2.51%; brokered deposits reduced to $126.8M Cost down to 2.35%; brokered deposits eliminated; noninterest-bearing deposits 23.4% of total Improving
Loan growth & pipelineQ2 loans +$104M; Q3 loans +$23M Q4 loans +$257M; pipeline $174M entering Q1; new/renewed yields ~7.35% Q4, ~7.05% spot Dec Strengthening
Credit qualityQ2 NPL/loans 0.78%; Q3 0.94%; criticized loans rose QoQ Q4 NPL/loans 0.88% (down QoQ); criticized loans/loans 2.89% (down QoQ); coverage 178% Stabilizing
Merger with FBMSQ3: shareholder approvals; first-half 2025 target First-half 2025 reaffirmed; marks largely de minimis to earn-back; regulatory engagement is constructive On track
Technology/customer experienceN/A (Q2/Q3)Expanded NCR Atleos collaboration to enhance ITM/ATM platform and self-service features (Feb 24, 2025 PR) Investing

Management Commentary

  • CEO (prepared): “We announced a transformative merger…our team maintained its focus on generating organic growth, disciplined pricing…steady credit performance” .
  • CFO (Q&A on NIM): “Our outlook…for ‘25…is for some modest expansion in the margin” (better deposit pricing behavior; improved curve slope) .
  • CFO (balance sheet): “Total assets grew $76.1M…loan growth of $257.4M…continued to shift away from noncore funding sources” .
  • CCO (credit): Movement of ~$27M from special mention to classified reflects ongoing portfolio management rather than new deterioration .
  • COO (expenses): Elevated Reg E/fraud losses and health/life claims inflated Q4 expenses; 2025 run-rate guide 2–3% .

Q&A Highlights

  • NIM Outlook: Prior guide for modest compression flipped to modest expansion on better deposit betas and a less inverted curve; management cautioned against over-optimism but sees directional improvement .
  • Loan Growth & Yields: New/renewed yields ~7.35% in Q4 and ~7.05% in December; production granular across markets and products with pipeline $174M entering Q1 .
  • Merger Timeline & Marks: First-half 2025 close reaffirmed; monthly mark updates show de minimis change to earn-back as impacts offset; regulatory process progressing well .
  • Expenses Run-rate: Despite Q4 outliers (fraud, health/life), 2025 outlook is +2–3% YoY; working to minimize volatility; Q1 seasonality noted .
  • CD Repricing: ~$2B of CDs maturing in H1 with blended low-4% rates expected to reprice ~3.75–4.00% .

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q4 2024 were unavailable due to a data access limit, so we cannot provide an EPS or revenue comparison to consensus at this time (S&P Global request limit exceeded).
  • Given the positive NIM outlook and strong QoQ loan growth, sell-side models may need to recalibrate near-term NII/NIM trajectories and merger-related expense cadence once regulatory clarity is achieved .

Key Takeaways for Investors

  • Deposit cost tailwind and stable NIM underpin near-term earnings; management’s pivot to modest NIM expansion in 2025 is a constructive inflection against prior compression narrative .
  • Strong, granular loan growth and an intact pipeline suggest continued balance sheet momentum, even if payoffs fluctuate; new/renewed yields remain attractive relative to funding trajectory .
  • Credit metrics improved QoQ (lower NPLs and criticized loans; higher coverage), though y/y NPLs are still higher than Q4 2023—monitoring remains warranted as classifications migrate .
  • Expense discipline continues, but operational/fraud and health claims can add noise; 2–3% FY25 core expense guide anchors expectations .
  • Merger with FBMS remains the medium-term catalyst; marks appear manageable, and timeline is reaffirmed—post-close synergy and earn-back updates will be key to multiple re-rating .
  • Elimination of brokered deposits and strong core deposit engine enhance flexibility for securities purchases and balance sheet optimization in Q1 .
  • Continued tech investments (e.g., NCR Atleos collaboration) should improve self-service capabilities and customer experience, supporting franchise competitiveness as the footprint expands .