RNST Renasant Corporation

TUPELO, Miss., July 22, 2019 /PRNewswire/ -- Renasant Corporation (NASDAQ: RNST) (the "Company") today announced earnings results for the second quarter of 2019. Net income for the second quarter of 2019 was $46.6 million, as compared to $36.7 million for the second quarter of 2018. Basic and diluted earnings per share ("EPS") were $0.80 for the second quarter of 2019, as compared to basic and diluted EPS of $0.74 for the second quarter of 2018.

Net income for the six months ending June 30, 2019, was $91.7 million, as compared to $70.5 million for the same time period in 2018. Basic and diluted EPS were $1.57 and $1.56, respectively, for the first six months of 2019, as compared to basic and diluted EPS of $1.43 and $1.42, respectively, for the first six months of 2018.

As discussed in more detail below, the Company's net income for the second quarter and first half of 2019 includes approximately $1.1 million and $1.2 million, respectively, in after-tax expense related to production team members that have joined the Company in the first half of 2019.  The expense related to these strategic hires decreased diluted EPS by $0.02 for both the quarter and the six months ended June 30, 2019.

"We closed the quarter with solid results, while navigating through the uncertainty around the direction of interest rates and other macro-economic factors that have clouded much of 2019," said Renasant Chairman, E. Robinson McGraw.   "Our continued effort to effectively manage our core business in light of the economic pressures we face has consistently driven greater shareholder value. Our profitability metrics continue to remain strong, and we will continue to evaluate opportunities to return value to our shareholders."

New Hiring Bolsters Growth Outlook

The Company previously announced that Curtis Perry has joined Renasant Bank as its Chief Corporate Banking Officer.  Mr. Perry brings more than 34 years of experience in corporate banking, and we expect that his knowledge and connections will broaden our corporate banking operations as well as generate additional hiring opportunities for Renasant. Since joining Renasant and through the date of this release, Mr. Perry has successfully recruited 13 corporate bankers and other revenue producers throughout our footprint.

In addition to the corporate hires by Mr. Perry, the Company hired 18 revenue producers, including new market presidents, commercial relationship managers and retail bankers, across the footprint during the second quarter of 2019. Recruiting efforts remain ongoing to support the Company's long term growth strategy.

"In addition to the tremendous talent that already makes up our team, we made significant investments in production talent during the quarter which has amplified our long-term growth goals," commented C. Mitchell Waycaster, Renasant President and Chief Executive Officer. "Although this hiring had an immediate impact on our expenses, we expect our new teammates to generate loan portfolios over the next 9 to 12 months and provide additional loan growth into 2020 and beyond significantly enhancing our revenue growth and profitability."

While focusing on growth, the Company remains disciplined in its pricing decisions and prudent in in its underwriting standards.  The Company has added three senior credit officers and other credit support staff to complement its already strong credit team and to support the new production team members.

With the current disruption throughout its footprint caused by recent merger activity and other factors, the Company expects to continue to be successful in its recruiting efforts in future quarters.  Although the Company is capitalizing on this market disruption to accelerate the pace of building out its corporate and commercial banking teams, the Company believes that it is positioned for growth and expansion from all lines of businesses and markets.

Profitability Metrics

The following table presents the Company's profitability metrics, including and excluding the impact of after-tax merger and conversion expenses, for the dates presented:

A reconciliation of all non-GAAP financial measures disclosed in this release from GAAP to non-GAAP is included in the tables at the end of this release. The information below under the heading "Non-GAAP Financial Measures" explains why the Company believes the non-GAAP financial measures in this release provide useful information and describes the other purposes for which the Company uses non-GAAP financial measures.

Financial Condition

Total assets were $12.89 billion at June 30, 2019, as compared to $12.93 billion at December 31, 2018. The Company's financial condition as well as its results of operations as of and for the three and six months ended June 30, 2019, include the impact of the Company's acquisition of Brand Group Holdings, Inc., which was completed on September 1, 2018.

Total loans held for investment were $9.05 billion at June 30, 2019 as compared to $9.08 billion at December 31, 2018. Loans not purchased increased $314.6 million to $6.70 billion at June 30, 2019 as compared to $6.39 billion at December 31, 2018.

Total deposits increased to $10.2 billion at June 30, 2019, from $10.1 billion at December 31, 2018. Even as interest rates on deposits increased in the first half of 2019, the Company has experienced success in growing its non-interest bearing deposits. Non-interest bearing deposits averaged $2.4 billion, or 23.4% of average deposits, for the first six months of 2019, compared to $1.8 billion, or 22.3% of average deposits, for the same period in 2018.

At June 30, 2019, Tier 1 leverage capital ratio was 10.65%, Common Equity Tier 1 ratio was 11.64%, Tier 1 risk-based capital ratio was 12.69%, and total risk-based capital ratio was 14.62%. All regulatory ratios exceed the minimums required to be considered "well-capitalized."

Our ratio of shareholders' equity to assets was 16.44% at June 30, 2019, as compared to 15.80% at December 31, 2018. Our tangible capital ratio (non-GAAP) was 9.62% at June 30, 2019, as compared to 8.92% at December 31, 2018.

The Company announced a $50.0 million stock repurchase program in October 2018.  During the second quarter of 2019, the Company repurchased $12.9 million of common stock at a weighted average price of $35.57. Since the date the program was authorized, a total of $20.0 million of common stock has been repurchased. The plan will remain in effect until the earlier of October 2019 or the repurchase of the entire amount of common stock authorized to be repurchased by the Board of Directors.

Results of Operations

Net interest income was $112.8 million for the second quarter of 2019, as compared to $113.1 million for the first quarter of 2019 and $92.4 million for the second quarter of 2018. The following table presents reported taxable equivalent net interest margin and yield on loans, including loans held for sale, for the periods presented (in thousands).

The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans, including loans held for sale, loan yield and net interest margin is shown in the following table for the periods presented (in thousands).

Net interest income was $225.9 million for the first half of 2019, as compared to $181.6 million for the first half of 2018. The following table presents reported taxable equivalent net interest margin and yield on loans, including loans held for sale, for the periods presented (in thousands).

The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans, including loans held for sale, loan yield and net interest margin is shown in the following table for the periods presented (in thousands).

For the second quarter of 2019, the cost of total deposits was 83 basis points, as compared to 79 basis points for the first quarter of 2019 and 52 basis points in the second quarter of 2018. The cost of total deposits was 81 basis points for the first six months of 2019, as compared to 46 basis points for the same period in 2018. The table below presents, by type, our funding sources and the total cost of each funding source for the periods presented:

Noninterest income for the second quarter of 2019 was $42.0 million, as compared to $35.9 million for the first quarter of 2019 and $35.6 million for the second quarter of 2018. Mortgage banking income for the second quarter of 2019 was $16.6 million, compared to $10.4 million for the first quarter of 2019 and $12.8 million for the second quarter of 2018. The previously announced acquisition of FirstBank's wholesale mortgage operations was completed on June 7, 2019.  On account of the closing date of this transaction, the impact of the acquired operations was immaterial to the Company's mortgage banking income for the second quarter of 2019.

Noninterest expense was $93.3 million for the second quarter of 2019, as compared to $88.8 million for the first quarter of 2019 and $79.0 million for the second quarter of 2018. Excluding charges for merger and conversion expenses, amortization of intangible assets and gains and losses on the sale of securities, the Company's efficiency ratio (non-GAAP) was 58.30%  for the second quarter of 2019 and 57.97% for the first six months of 2019, representing the fifth consecutive quarter that the Company has maintained an efficiency ratio below 60%, a long-term goal of the Company.

Asset Quality Metrics

Total nonperforming assets were $42.1 million at June 30, 2019, an increase of $5.1 million from  December 31, 2018, and consisted of $33.4 million in nonperforming loans (loans 90 days or more past due and nonaccrual loans) and $8.7 million in other real estate owned ("OREO").

The Company's nonperforming loans and OREO that were purchased in previous acquisitions (collectively referred to as "purchased nonperforming assets") were $14.9 million and $5.3 million, respectively, at June 30, 2019, as compared to $13.1 million and $6.2 million, respectively, at December 31, 2018. The purchased nonperforming assets were recorded at fair value at the time of acquisition, which significantly mitigates the Company's actual loss. As such, the remaining information in this release on nonperforming loans, OREO and the related asset quality ratios focuses on non-purchased nonperforming assets.

• Non-purchased nonperforming loans were $18.4 million, or 0.28% of total non-purchased loans, at June 30, 2019, as compared to $12.9 million, or 0.20% of total non-purchased loans, at December 31, 2018. Early stage delinquencies, or loans 30-to-89 days past due, as a percentage of total non-purchased loans were 0.22% at June 30, 2019, as compared to 0.27% at December 31, 2018.
• Non-purchased OREO was $3.5 million at June 30, 2019, as compared to $4.9 million at December 31, 2018. Non-purchased OREO sales totaled $1.9 million in the first half of 2019.
• The allowance for loan losses was 0.55% of total loans held for investment at June 30, 2019 , as compared to 0.54% at December 31, 2018. The allowance for loan losses was 0.75% of total non-purchased loans at June 30, 2019, as compared to 0.77% at December 31, 2018.
• • Net loan charge-offs were $676 thousand, or 0.03% of average loans held for investment on an annualized basis, for the second quarter of 2019, as compared to $856 thousand, or 0.04% of average loans on an annualized basis, for the second quarter of 2018. Net loan charge-offs were $1.4 million, or 0.03% of average loans on an annualized basis, for the first half of 2019, as compared to $2.4 million, or 0.06% of average loans on an annualized basis, for the same period in 2018.
  • The provision for loan losses was $900 thousand for the second quarter of 2019, as compared to $1.8 million for the second quarter of 2018. The provision was $2.4 million for the first six months of 2019, as compared to $3.6 million for the same time period in 2018.

CONFERENCE CALL INFORMATION:

A live audio webcast of a conference call with analysts will be available beginning at 10:00 AM Eastern Time on Tuesday, July 23, 2019.

The webcast can be accessed through Renasant's investor relations website at www.renasant.com or https://services.choruscall.com/links/rnst190723.html. To access the conference via telephone, dial 1-877-513-1143 in the United States and request the Renasant Corporation Second Quarter Earnings Webcast and Conference Call. International participants should dial 1-412-902-4145 to access the conference call.

The webcast will be archived on www.renasant.com beginning one hour after the call and will remain accessible for one year. Replays can also be accessed via telephone by dialing 1-877-344-7529 in the United States and entering conference number 10133435 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until August 6, 2019.

ABOUT RENASANT CORPORATION:

Renasant Corporation is the parent of Renasant Bank, a 115-year-old financial services institution. Renasant has assets of approximately $12.9 billion and operates more than 190 banking, mortgage, wealth management and insurance offices in Mississippi, Tennessee, Alabama, Florida and Georgia.

NOTE TO INVESTORS:

This press release may contain, or incorporate by reference, statements which constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward looking statements usually include words such as "expects," "projects," "anticipates," "believes," "intends," "estimates," "strategy," "plan," "potential," "possible," "approximately," "should" and variations of such words and other similar expressions.

Prospective investors are cautioned that any such forward-looking statements are not guarantees for future performance and involve risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include significant fluctuations in interest rates, inflation, economic recession, significant changes in the federal and state legal and regulatory environment, significant underperformance in the Company's portfolio of outstanding loans, and competition in the Company's markets. Management believes that the assumptions underlying the Company's forward-looking statements are reasonable, but any of the assumptions could prove to be inaccurate. Investors are urged to carefully consider the risks described in the Company's filings with the Securities and Exchange Commission (the "SEC") from time to time, including its most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, which are available at www.renasant.com and the SEC's website at www.sec.gov.  The Company expressly disclaims 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.

NON-GAAP FINANCIAL MEASURES:

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains non-GAAP financial measures, namely, return on average tangible shareholders' equity, return on average tangible assets, the ratio of tangible equity to tangible assets (commonly referred to as the "tangible capital ratio"), tangible book value per share and the efficiency ratio. These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets and/or certain charges (such as, when applicable, merger and conversion expenses and debt prepayment penalties) with respect to which the Company is unable to accurately predict when these charges will be incurred or, when incurred, the amount thereof. Management uses these non-GAAP financial measures when evaluating capital utilization and adequacy. In addition, the Company believes that these non-GAAP financial measures facilitate the making of period-to-period comparisons and are meaningful indicators of its operating performance, particularly because these measures are widely used by industry analysts for companies with merger and acquisition activities. Also, because intangible assets such as goodwill and the core deposit intangible and charges such as merger and conversion expenses can vary extensively from company to company and, as to intangible assets, are excluded from the calculation of a financial institution's regulatory capital, the Company believes that the presentation of this non-GAAP financial information allows readers to more easily compare the Company's results to information provided in other regulatory reports and the results of other companies. Reconciliations of these other non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this release under the caption "Reconciliation of GAAP to Non-GAAP."

None of the non-GAAP financial information that the Company has included in this release is intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Investors should note that, because there are no standardized definitions for the calculations as well as the results, the Company's calculations may not be comparable to similarly titled measures presented by other companies. Also, there may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.