Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Renasant Corp (RNST, Financial) reported strong financial performance for the third quarter with earnings of $72.5 million or $1.18 per diluted share.
- The company successfully completed the sale of its insurance agency, resulting in an after-tax gain of $39 million.
- Net interest income increased by $6 million on a linked-quarter basis, driven by higher loan yields and effective deposit cost management.
- Renasant Corp (RNST) experienced significant growth in traditional deposits, increasing by over $285 million from the second quarter.
- The merger with The First is progressing well, with regulatory applications filed and shareholder approvals obtained, expected to close in the first half of 2025.
Negative Points
- Adjusted noninterest income decreased by $2.8 million quarter-over-quarter, primarily due to the loss of insurance commissions following the sale of the insurance agency.
- Income from the mortgage division decreased by $1.3 million on a linked-quarter basis due to a higher fallout percentage and a decrease in gain on sale margin.
- Total noninterest expense was $122 million for the third quarter, with merger and conversion expenses contributing to the increase.
- Criticized loans and total nonperforming assets increased due to the downgrade of a few larger loans, particularly in the senior housing and non-medical office sectors.
- The company anticipates modest negative impacts on net interest margin due to potential future rate cuts.
Q & A Highlights
Q: Can you discuss the impact of potential rate cuts on Renasant's margin and how it might differ when considering the merger with The First?
A: James Mabry, CFO, explained that near-term rate cuts are expected to have a modestly negative impact on the margin. The First is less asset-sensitive, which could help moderate the negative impact of rate cuts in 2025. However, the exact impact will depend on the size and pace of these cuts.
Q: How have deposit costs been affected by recent rate cuts, and what trends are you observing?
A: James Mabry noted that deposit behavior has been better than expected, with noninterest-bearing deposits remaining flat. The bank has been able to reduce rates on specials, indicating a positive trend in deposit costs.
Q: What is the outlook for loan growth given the current economic uncertainties?
A: CEO Mitch Waycaster highlighted a strong pipeline and production, with a focus on diversified loan types and geographies. Despite an increase in payoffs, the bank remains optimistic about achieving low to mid-single-digit net loan growth, contingent on future payoff levels.
Q: How is the mortgage division performing amid current market conditions?
A: Kevin Chapman, President and COO, acknowledged the challenging environment due to flat or rising longer-term rates. While the pipeline remains active, a significant uptick in mortgage activity is expected if rates decrease further.
Q: Can you provide more details on the recent downgrades in loan quality?
A: David Meredith, Chief Credit Officer, identified senior housing and non-medical office loans as areas of stress. Despite these downgrades, the bank believes the issues are isolated and continues to monitor and address them proactively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
