Renasant Corporation Q4 FY2025 earnings call

• 2025 was a transformative year for Renasant with improved profitability and strong balance sheet growth post-largest merger in company history.
• Systems conversion completed in Q3, ongoing integration. Core profitability improved with adjusted earnings per share up 11% YoY, adjusted ROA grew 94 bps, adjusted efficiency ratio improved ~900 bps, and adjusted return on tangible equity grew from 11.5% to 13.79%.
• Fourth quarter: adjusted pre-provision net revenue $118.3 million; net interest income up $3.9 million QoQ; noninterest income up $5.1 million; noninterest expense excluding mergers down $6.2 million.

The company's net income was $78.9 million or $0.83 per diluted share. Adjusted earnings excluding merger charges were $86.9 million or $0.91 per diluted share. Loans were up $21.5 million on a linked-quarter basis or 0.4% annualized. Deposits were up $48.5 million from the third quarter or 0.9% annualized. Net interest income increased $3.9 million quarter-over-quarter. Reported net interest margin increased 4 basis points to 3.89%, while adjusted margin was flat at 3.62% on a linked-quarter basis. Noninterest income was $51.1 million in the fourth quarter, a linked quarter increase of $5.1 million. Noninterest expense was $170.8 million for the fourth quarter. Excluding merger and conversion expenses of $10.6 million, noninterest expense was $160.2 million for the quarter, a linked quarter decrease of $6.2 million.

• Loan growth guidance remains mid-single digits for 2026.
• Core expense reduction expected in Q1 around $2 million to $3 million, similar to Q4.
• Margin outlook stable, expecting modest growth in net interest income as balance sheet grows.
• Capital plan includes buybacks, aiming to maintain CET1 ratio around current levels.

• Changes in funding sources, interest rate fluctuations, regulatory changes, and portfolio performance.
• Loan sales and potential impact on loan growth; competitive landscape affecting deposit and loan pricing.

Q: Just wanted to start on expenses. Really nice step down, Kevin here on the systems conversion...

A: Michael, this is Jim. And actually, I'll do that in reverse direction from the way you asked it, but I appreciate the question. And I will say, too, apologies upfront if we're not as smooth and filling the questions as maybe we usually are because we're each in a different location this morning due to the storm. And so we'll do our best. And actually speaking of that, we're definitely thinking of folks that have been impacting our marketplace. We're still feeling the impacts of the storm. We've still got lots of people without power. And like other companies, we've had a lot of people at the company working to make sure we get branches open and get people to where they need to be to help serve our customers. So it's been a grind, but hopefully, we're nearing the end of that. With that said, Michael, I'll start and then let Kevin sort of clean it up. But I think in Q3, we talked about roughly $2 million to $3 million we hope to see in Q4 and then in Q1 in terms of sort of core expense reduction, if you will. And I use that word core because I think it ties into, I think, what you're probably alluding to as we go forward in expenses and how we might think about that. So we still feel good about looking at Q1 and having that core number come down again in that $2 million to $3 million range. Salaries as we've seen -- that's the line item that probably shows the most significant impact, and that was down a couple of million dollars in Q4, and we expect a similar result in Q1. So I think our overall guidance in terms of core NIE, if you will, from what we said on the Q3 call remains unchanged. And -- but I do think it's important to talk about how '26 may unfold, and Kevin I would ask you to do that.

Q: Just wanted to ask about the loan sale and then maybe if you could give any additional color on the types of loans. And then going forward, if we should expect to see any more loan sales?

A: Jordan, this is Jim. So the loan sale involved a portfolio of loans secured by cash surrender value of life insurance policies. And it was a good performing portfolio, high-quality portfolio. And the first had picked it up through an acquisition, a previous deal that they had done. And I think they had sort of looked at that and said it's not really core to our business long term because there was no ancillary business with these loans, and they were not -- they were in and out of the footprint. So they had flagged this and we'd flagged it during diligence. And once we got systems conversion behind us and so forth, we started down that process and sold that book. There aren't any other portfolios or loans or categories at the first that we would see selling or divesting or slowing down. We felt like it was a good match. And David Meredith can add to this, but I think our initial read was we really like what they did. They had good client selection, and we like their book. So we don't really see anything else in the portfolio. But David, you may want to add to that?