RNST - Renasant Corporation Announces Earnings for the Fourth Quarter of 2020

TUPELO, Miss., Jan. 26, 2021 (GLOBE NEWSWIRE) -- Renasant Corporation (NASDAQ: RNST) (the “Company”) today announced earnings results for the fourth quarter of 2020. Net income for the fourth quarter of 2020 was $31.5 million, as compared to $38.4 million for the fourth quarter of 2019. Basic and diluted earnings per share (“EPS”) were $0.56 for the fourth quarter of 2020, as compared to basic and diluted EPS of $0.67 for the fourth quarter of 2019.

Net income for the year ended December 31, 2020, was $83.7 million, as compared to net income of $167.6 million for the same period in 2019. Basic and diluted EPS were $1.49 and $1.48, respectively, for 2020, as compared to basic and diluted EPS of $2.89 and $2.88, respectively, for 2019.

“Our fourth quarter results highlight a strong finish to a year that presented many challenges,” commented C. Mitchell Waycaster, Renasant President and Chief Executive Officer. “Renasant’s strategy is to be ‘One Team going to market as One Bank,’ and our team, while facing trying circumstances, flawlessly executed on that strategy in 2020 by providing customers across our footprint with the excellent service to which they are accustomed. We believe that we are in a great position moving into 2021 with an excellent team and diverse product line. Looking forward, we intend to continue to emphasize the importance of core funding, asset quality and strong capital, while building core earnings.”

Impact of Certain Expenses and Charges
From time to time, the Company incurs expenses and charges with respect to which management is unable to accurately predict when these expenses or charges will be incurred or, when incurred, the amount of such expenses or charges. The following tables present the impact of these expenses and charges on reported EPS for the fourth quarter of 2020 and the same period in 2019 and for the year ended December 31, 2020 and the same period in 2019. The “COVID-19 related expenses” line item in the table below primarily consists of (a) employee overtime and employee benefit accruals directly related to the Company’s response to both the COVID-19 pandemic itself and federal legislation enacted to address the pandemic, such as the CARES Act, and (b) expenses associated with supplying branches with protective equipment and sanitation supplies (such as floor markings and cautionary signage for branches, face coverings and hand sanitizer) and more frequent and rigorous branch cleaning. The “restructuring charges” and “swap termination charges” line items in the table below are discussed in more detail later in this release.

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.

Profitability Metrics
The following tables present the Company’s profitability metrics, including after adjusting for the impact of the mortgage servicing rights (MSR) valuation adjustment, debt prepayment penalties, merger and conversion expenses, restructuring charges, swap termination charges and COVID-19 related expenses, as applicable, for the dates presented:

Financial Condition
Total assets were $14.93 billion at December 31, 2020, as compared to $13.40 billion at December 31, 2019. Total loans held for investment were $10.93 billion at December 31, 2020, as compared to $9.69 billion at December 31, 2019. Loans held for investment at December 31, 2020 included $1.13 billion in Paycheck Protection Program (“PPP”) loans.

Total deposits increased to $12.06 billion at December 31, 2020, from $10.21 billion at December 31, 2019. Non-interest bearing deposits increased $1.13 billion to $3.69 billion, or 30.56% of total deposits, at December 31, 2020, as compared to $2.55 billion, or 24.99% of total deposits, at December 31, 2019. The growth in non-interest bearing deposits during the year was primarily driven by PPP lending, other government stimulus and client sentiment to maintain liquidity.

Continued Focus on Prudent Capital Management
The Company continues to prioritize maintaining a strong capital position. The Company has a $50.0 million stock repurchase plan that will remain in effect through October 2021.

At December 31, 2020, Tier 1 leverage capital was 9.37%, Common Equity Tier 1 ratio was 10.93%, Tier 1 risk-based capital ratio was 11.91% and total risk-based capital ratio was 15.07%. All regulatory ratios exceed the minimums required to be “well-capitalized.”

The Company’s ratio of shareholders’ equity to assets was 14.28% at December 31, 2020, as compared to 15.86% at December 31, 2019. The Company’s tangible capital ratio (non-GAAP) was 8.33% at December 31, 2020, as compared to 9.25% at December 31, 2019.

The PPP loans held on the Company’s balance sheet at December 31, 2020, negatively impacted the Company’s tangible capital ratio by 73 basis points and its leverage ratio by 92 basis points.

Results of Operations
Net interest income was $108.1 million for the fourth quarter of 2020, as compared to $106.3 million for the third quarter of 2020 and $108.9 million for the fourth quarter of 2019. Net interest income was $426.8 million for 2020, as compared to $443.7 million for 2019.

Net interest margin was 3.35% for the fourth quarter of 2020, as compared to 3.29% for the third quarter of 2020 and 3.90% for the fourth quarter of 2019. Net interest margin was 3.44% for all of 2020, as compared to 4.08% for 2019. While pressures on loans yields continued in the quarter, the impact was somewhat offset by lower deposit costs. The following tables present the percentage of total average earning assets, by type and yield, for the periods presented:

The following tables present reported taxable equivalent net interest margin and yield on loans, including loans held for sale, for the periods presented (in thousands).

PPP loans reduced net interest margin and loan yield by 1 basis point and 10 basis points, respectively, in the fourth quarter of 2020 and 5 basis points and 13 basis points, respectively, for all of 2020.

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 tables for the periods presented (in thousands).

(1) Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $1,872, $2,286 and $4,041 for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively. This additional interest income increased total loan yield by 7 basis points, 8 basis points and 16 basis points for the same periods, respectively, while increasing net interest margin by 6 basis points, 7 basis points and 14 basis points for the same periods, respectively.

(1) Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $8,077 and $14,635 for the twelve months ended December 31, 2020 and 2019, respectively. This additional interest income increased total loan yield by 7 basis points and 15 basis points for the same periods, respectively, while increasing net interest margin by 6 basis points and 13 basis points for the same periods, respectively.

For the fourth quarter of 2020, the cost of total deposits was 33 basis points, as compared to 40 basis points for the third quarter of 2020 and 76 basis points for the fourth quarter of 2019. The cost of total deposits was 47 basis points for the year ended December 31, 2020, as compared to 81 basis points for same period in 2019. The tables below present, by type, the Company’s funding sources and the total cost of each funding source for the periods presented:

Noninterest income for the fourth quarter of 2020 was $62.9 million, as compared to $70.9 million for the third quarter of 2020 and $37.5 million for the fourth quarter of 2019. Noninterest income for 2020 was $235.5 million, as compared to $153.3 million for 2019. Despite the decrease in mortgage banking income on a linked quarter basis, it continued to be a strong source of noninterest income for the Company with mortgage production of approximately $1.43 billion for the fourth quarter of 2020 and approximately $6.75 billion for the year. The following tables present the components of mortgage banking income for the periods presented (in thousands):

Noninterest expense was $122.2 million for the fourth quarter of 2020, as compared to $116.5 million for the third quarter of 2020 and $95.6 million for the fourth quarter of 2019. Noninterest expense was $472.0 million for 2020, as compared to $374.2 million for 2019. As part of the continued focus on efficiency, in the fourth quarter the Company initiated a system-wide branch evaluation effort and offered an early retirement incentive to a select group of employees, participation in which was voluntary. The Company incurred $7.4 million in restructuring charges during the quarter, primarily attributable to the voluntary early retirement program, and these efforts are expected to allow for a more efficient use of the Company’s workforce and branch network moving into 2021. The Company also incurred $2.0 million in swap termination charges that will reduce interest expense over the remaining terms of two swaps, which were originally scheduled to mature in June 2022 and 2023. The Company recorded a $500 thousand provision for unfunded commitments in other noninterest expense in the fourth quarter of 2020, as compared to a $2.7 million provision for unfunded commitments in the third quarter of 2020, bringing the total provision for unfunded commitments to $9.2 million for 2020.

Asset Quality Metrics
At December 31, 2020, the Company’s credit quality metrics remained strong. The Company has maintained contact with its borrowers and continues to focus on those industries more highly impacted by the pandemic, primarily the hospitality and healthcare industries. To provide necessary relief to the Company’s borrowers – both consumer and commercial clients – the Company established loan deferral programs at the onset of the pandemic, which allowed qualified clients to defer principal and interest payments. The Company continues to monitor loans remaining on deferral, and as of December 31, 2020, approximately 1.5% of the Company’s loan portfolio (excluding PPP loans) was in deferral, down from approximately 5.1% as of September 30, 2020.

The Company’s credit quality in future quarters may be impacted by both external and internal factors related to the pandemic in addition to those factors that traditionally affect credit quality. External factors outside the Company’s control include items such as the pace at which the COVID-19 vaccine is administered to residents in the Company’s markets and the United States generally, federal, state and local government measures, the re-imposition of “shelter-in-place” orders, and the economic impact of government programs, including additional fiscal stimulus and the re-opening of the Paycheck Protection Program. Internal factors that will potentially impact credit quality include items such as the Company’s loan deferral programs, involvement in government offered programs and the related financial impact of these programs. The impact of each of these items are unknown at this time and could materially and adversely impact future credit quality.

The table below shows nonperforming assets, which includes nonperforming loans (loans 90 days or more past due and nonaccrual loans) and other real estate owned, as well as early stage delinquencies (loans 30-89 days past due) for the periods presented (in thousands).

The implementation of CECL on January 1, 2020, which required purchased credit deteriorated loans to be classified as nonaccrual based on performance, contributed approximately $3.3 million as of December 31, 2020 to the increase in purchased nonaccrual loans.

The table below shows the increase in the allowance for credit losses and the reserve for unfunded commitments since the day one transition to CECL on January 1, 2020 to the ending allowance at December 31, 2020 (in thousands).

The Company recorded a provision for credit losses of $10.5 million ($1.5 million of which was allocated to deferred interest) and a reserve for unfunded commitments, which is recorded in other noninterest expense (and discussed above), of $500 thousand for the fourth quarter of 2020. Net loan charge-offs were $954 thousand, or 0.03% of average loans held for investment on an annualized basis. Although there was a meaningful decrease in credit costs during the quarter, the allowance for credit losses on loans remains elevated due to qualitative factors related to the uncertainty concerning the COVID-19 pandemic, with limited GDP growth (in relation to pre-pandemic levels) and elevated unemployment rates projected into 2021 and 2022. Even though economic projections continue to trend in a positive direction, there remains considerable uncertainty.

The provision for credit losses recorded during the fourth quarter of 2019 was $3.0 million with net charge-offs of $1.6 million, or 0.07% of average loans held for sale on an annualized basis. The Company’s coverage ratio, or the allowance for credit losses to nonperforming loans, was 317.55% as of December 31, 2020, as compared to 367.05% as of September 30, 2020 and 143.61% as of December 31, 2019.

CONFERENCE CALL INFORMATION:
A live audio webcast of a conference call with analysts will be available beginning at 10:00 AM Eastern Time (9:00 AM Central Time) on Wednesday, January 27, 2021.

The webcast can be accessed through Renasant’s investor relations website at investors.renasant.com or https://services.choruscall.com/links/rnst210127.html. To access the conference via telephone, dial 1-877-513-1143 in the United States and request the Renasant Corporation 2020 Fourth Quarter Earnings Conference Call and Webcast. International participants should dial 1-412-902-4145 to access the conference call.

The webcast will be archived on investors.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 10151152 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until February 10, 2021.

ABOUT RENASANT CORPORATION:

Renasant Corporation is the parent of Renasant Bank, a 116-year-old financial services institution. Renasant has assets of approximately $14.9 billion and operates more than 200 banking, lending, mortgage, wealth management and insurance offices in Mississippi, Tennessee, Alabama, Florida, Georgia, North Carolina and South Carolina.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:

This press release may contain, or incorporate by reference, statements about Renasant Corporation that 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. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “projects,” “anticipates,” “intends,” “estimates,” “plans,” “potential,” “possible,” “may increase,” “may fluctuate,” “will likely result,” and similar expressions, or future or conditional verbs such as “will,” “should,” “would” and “could,” are generally forward-looking in nature and not historical facts. Forward-looking statements include information about the Company’s future financial performance, business strategy, projected plans and objectives and are based on the current beliefs and expectations of management. The Company’s management believes these forward-looking statements are reasonable, but they are all inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ from those indicated or implied in the forward-looking statements, and such differences may be material. Prospective investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties and, accordingly, investors should not place undue reliance on these forward-looking statements, which speak only as of the date they are made.

Currently, the most important factor that could cause the Company’s actual results to differ materially from those in forward-looking statements is the continued impact of the COVID-19 pandemic and related governmental measures to respond to the pandemic on the United States economy and the economies of the markets in which the Company operates and its participation in government programs related to the pandemic. In this press release, the Company has addressed the historical impact of the pandemic on the operations of the Company and set forth certain expectations regarding the COVID-19 pandemic’s future impact on the Company’s business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects. The Company believes that its statements regarding future events and conditions in light of the COVID-19 pandemic are reasonable, but these statements are based on assumptions regarding, among other things, how long the pandemic will continue, the pace at which the COVID-19 vaccine can be distributed and administered to residents of the markets the Company serves and the United States generally, the duration, extent and effectiveness of the governmental measures implemented to contain the pandemic and ameliorate its impact on businesses and individuals throughout the United States, and the impact of the pandemic and the government’s virus containment measures on national and local economies, all of which are out of the Company’s control. If the Company’s assumptions underlying its statements about future events prove to be incorrect, the Company’s business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects may be materially different from what is presented in the Company’s forward-looking statements.

Important factors other than the COVID-19 pandemic currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: (i) the Company’s ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses, grow the acquired operations and realize the cost savings expected from an acquisition to the extent and in the timeframe anticipated by management; (ii) the effect of economic conditions and interest rates on a national, regional or international basis; (iii) timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (iv) competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, mortgage lending and auto lending industries; (v) the financial resources of, and products available from, competitors; (vi) changes in laws and regulations as well as changes in accounting standards, such as the adoption of the CECL model as of January 1, 2020; (vii) changes in policy by regulatory agencies; (viii) changes in the securities and foreign exchange markets; (ix) the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (x) changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers; (xi) an insufficient allowance for credit losses as a result of inaccurate assumptions; (xii) general economic, market or business conditions, including the impact of inflation; (xiii) changes in demand for loan products and financial services; (xiv) concentration of credit exposure; (xv) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (xvi) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (xvii) civil unrest, natural disasters, epidemics and other catastrophic events in the Company’s geographic area; (xviii) the impact, extent and timing of technological changes; and (xix) other circumstances, many of which are beyond management’s control. The COVID-19 pandemic has exacerbated, and is likely to continue to exacerbate, the impact of any of these factors on the Company.

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 investors.renasant.com and the SEC’s website at www.sec.gov.

The Company undertakes no obligation, and specifically disclaims any obligation, to update or revise forward-looking statements, whether as a result of new information or to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by federal securities laws.

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, earnings, with exclusions, 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 adjusted efficiency ratio. These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets and/or certain charges (such as, when applicable, COVID-19 related expenses, restructuring charges, merger and conversion expenses, debt prepayment penalties, swap termination charges and asset valuation adjustments) with respect to which the Company is unable to accurately predict when these charges will be incurred or, when incurred, the amount thereof. With respect to COVID-19 related expenses in particular, management added these expenses as a charge to exclude when calculating non-GAAP financial measures because the expenses included within this line item (as discussed earlier in this release) are readily quantifiable and possess the same characteristics with respect to management’s inability to accurately predict the timing or amount thereof as the other charges excluded when calculating non-GAAP financial measures. 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, restructuring charges and COVID-19 related 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 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.