Renasant Corporation Q2 FY2025 earnings call

• Merger Integration: Closed on April 1, second quarter reflects full quarter of combined operations. Cultural integration of employees and customers is going well, with systems conversion in early August. - Financial Results: Reported and adjusted earnings were positive, with balance sheet growth in loans and deposits. Core net interest margin improved. - Merger Details: Fair value of assets and liabilities, core deposit intangibles, and preliminary goodwill from the merger were discussed. - Asset Quality: Past due loans improved, nonperforming loans were flat, but classified loans were affected by portfolio layering. Credit loss provision and net charge-offs were noted. - Income Statement: Adjusted pre-provision net revenue, noninterest income growth (driven by The First and mortgage division), and noninterest expense with merger/conversion expenses were highlighted.

Reported earnings were $1 million or $0.01 per diluted share, with adjusted earnings approximately $66 million or $0.69 per diluted share. Loans were up $312 million or 7% from March 31 of the combined companies, and deposits were up $361 million or 7%. Core net interest margin increased from 3.42% to 3.58%, while reported margin (including purchase accounting) rose from 3.45% to 3.85%. Adjusted total cost of deposits decreased 18 basis points to 2.04%, and adjusted loan yields decreased 1 basis point to 6.18%. The merger saw fair value of assets acquired total $7.9 billion (including $5.2 billion in loans) and liabilities assumed total $6.9 billion (including $6.4 billion in deposits), with core deposit intangibles at $159.6 million and preliminary goodwill at $428.7 million. Asset quality showed improvement in past due loans, nonperforming loans were flat, but classified loans increased due to portfolio layering. Credit loss provision on loans was $14.7 million, net charge-offs were $12.1 million, and ACL as a percentage of total loans was 1.57%. Adjusted pre-provision net revenue was $103 million, noninterest income was $48.3 million (linked quarter increase $11.9 million), and noninterest expense was $183.2 million (excluding merger/conversion expenses of $20.5 million, noninterest expense was $162.7 million).

• Loan and Deposit Growth: Guiding for mid-single digit loan and deposit growth, with potential impact from payoffs. - Margin Outlook: Anticipates modest expansion in core margin, with spot margin in June at 3.60%. Purchase accounting accretion: interest accretion ~$10M, normal part proxy for Q3/Q4, accelerated part hard to project. - Expense Outlook: Q2 had ~$20M merger expenses, expect ~$25M in second half with most in Q3. Efficiencies to start showing in Q3, more in Q4, full effect in Q1 next year. - Strategic Goals: Tracking in line with pre-merger goals: efficiency ratio below 60%, balance sheet growth driving revenue, ROA and efficiency on track.

• Forward-Looking Statements: Factors like changes in funding sources, interest rate fluctuations, regulatory changes, portfolio performance could affect results. - Merger Execution: Systems conversion in August, but cultural integration going well. Potential for unanticipated events affecting merger benefits. - Credit Risk: Classified loans uptick due to portfolio layering, but past due and nonperforming loans improved. Provision and charge-off levels influenced by model-driven factors.

Q: Walk through margin, accretion, loan growth A: Core margin expected to expand, accretion from purchase accounting hard to project, loan growth pipeline good with mid-single digit guidance.

Q: Expense levels, cost savings A: Q2 had merger expenses, efficiencies to show in Q3/Q4, full effect in Q1 next year.

Q: Strategic goals, ROA, efficiency A: Tracking in line with pre-merger goals, efficiency ratio below 60%, balance sheet growth driving revenue.

Q: Margin duration, charge-offs, buybacks A: Time deposit amortization ~5 months, charge-offs not systemic, capital for organic growth, buybacks considered but focus on integration.

Q: Bank M&A, securities portfolio A: Focus on The First integration, securities sold ~50%, future repositioning on legacy Renasant side.

Q: Interest rate risk, fee income opportunities A: The First improved interest rate sensitivity, fee income opportunities in mortgage, treasury management, capital markets.