RNST - Renasant Corporation Announces Earnings for the Third Quarter of 2021

TUPELO, Miss., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Renasant Corporation (NASDAQ: RNST) (the “Company”) today announced earnings results for the third quarter of 2021. Net income for the third quarter of 2021 was $40.1 million, as compared to $30.0 million for the third quarter of 2020. Basic and diluted earnings per share (“EPS”) were $0.71 for the third quarter of 2021, as compared to basic and diluted EPS of $0.53 for the third quarter of 2020.

Net income for the nine months ending September 30, 2021, was $138.8 million, as compared to net income of $52.1 million for the same period in 2020. Basic and diluted EPS were $2.47 and $2.46, respectively, for the first nine months of 2021, as compared to basic and diluted EPS of $0.93 and $0.92, respectively, for the first nine months of 2020.

“Our team produced solid results during the third quarter, and we continue to see all areas of the Bank perform at a high level. Our financial condition remains strong and is highlighted by our core funding, robust capital structure and stable credit metrics,” commented C. Mitchell Waycaster, Renasant President and Chief Executive Officer. “We believe the markets in which we operate provide significant opportunities, and we remain optimistic about future loan growth, despite the headwinds of elevated payoffs. Our team remains committed to improving profitability through our ongoing revenue and expense initiatives.”

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 periods listed. The “COVID-19 related expenses” line item 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.

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, except that reconciliations for asset quality measures that exclude Paycheck Protection Program loans from the relevant measure are included in the Company’s presentation materials filed with the Securities and Exchange Commission together with 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, restructuring charges, swap termination charges and COVID-19 related expenses, as applicable, for the dates presented:

Financial Condition
Total assets were $16.16 billion at September 30, 2021, as compared to $14.93 billion at December 31, 2020. Total loans held for investment were $10.02 billion at September 30, 2021, as compared to $10.93 billion at December 31, 2020. Loans held for investment at September 30, 2021 and December 31, 2020 included $67.5 million and $1.13 billion, respectively, in Paycheck Protection Program (“PPP”) loans. Excluding PPP loans, the loan portfolio grew 1.87% on an annualized basis in the third quarter of 2021.

Total deposits increased to $13.25 billion at September 30, 2021, from $12.06 billion at December 31, 2020. Non-interest bearing deposits increased $807.6 million to $4.49 billion, or 33.89% of total deposits, at September 30, 2021, as compared to $3.69 billion, or 30.56% of total deposits, at December 31, 2020.

Capital Management; Adoption of New Stock Repurchase Program
The Company’s capital position, as measured by regulatory capital ratios, remains strong. This capital strength gives the Company flexibility to accommodate future loan growth, M&A activity or share repurchases. In the third quarter of 2021, the Company repurchased $21.3 million of its common stock at a weighted average price of $34.82.

On October 26, 2021, the Company’s Board of Directors approved a new stock repurchase program (the previous program having just expired), authorizing the Company to repurchase up to $50.0 million of its outstanding common stock, either in open market purchases or privately-negotiated transactions. The new repurchase program will remain in effect for one year or, if earlier, the repurchase of the entire amount of common stock authorized to be repurchased. Notwithstanding the Board’s action, the Company currently has no plans to resume stock repurchases.

At September 30, 2021, Tier 1 leverage capital was 9.18%, Common Equity Tier 1 ratio was 11.02%, Tier 1 risk-based capital ratio was 11.94% and total risk-based capital ratio was 14.66%. All of the Company’s regulatory ratios exceed the minimums required to be “well-capitalized.”

The Company’s ratio of shareholders’ equity to assets was 13.64% at September 30, 2021, as compared to 14.29% at December 31, 2020. The Company’s tangible capital ratio (non-GAAP) was 8.15% at September 30, 2021, as compared to 8.33% at December 31, 2020.

Results of Operations
Net interest income was $103.3 million for the third quarter of 2021, as compared to $109.6 million for the second quarter of 2021 and $106.3 million for the third quarter of 2020. The decrease quarter over quarter was primarily driven by the decrease in PPP income as the PPP portfolio continued to decline during the quarter due to loan forgiveness. Net interest income was $322.5 million for the first nine months of 2021, as compared to $318.7 million for the first nine months of 2020.

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 for the periods presented (in thousands):

PPP loans benefited net interest margin and loan yield by 7 basis points and 9 basis points, respectively, in the third quarter of 2021, and 11 basis points and 8 basis points, respectively, in the first nine months of 2021. Increased liquidity has continued to add pressure to net interest margin in recent quarters. The Company has aggressively lowered interest rates on interest bearing deposits and increased its purchases of investment securities, and it continues to evaluate options to mitigate the pressure on net interest margin.

The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans held for investment, 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 $1,649, $1,224 and $2,286 for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively. This additional interest income increased loan yield by 7 basis points, 5 basis points, and 8 basis points for each of the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, while increasing net interest margin by 5 basis points, 4 basis points, and 7 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 $4,145 and $6,205 for the nine months ended September 30, 2021 and September 30, 2020, respectively. This additional interest income increased loan yield by 5 basis points and 8 basis points for the same periods, respectively, while increasing net interest margin by 4 basis points and 7 basis points for the same periods, respectively.

For the third quarter of 2021, the cost of total deposits was 21 basis points, as compared to 24 basis points for the second quarter of 2021 and 40 basis points for the third quarter of 2020. The cost of total deposits was 24 basis points for the first nine months of 2021, down from 53 basis points for the same period in 2020. 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 third quarter of 2021 was $50.8 million, as compared to $47.6 million for the second quarter of 2021 and $70.9 million for the third quarter of 2020. The quarter-over-quarter decline is due to changes in mortgage banking income, as detailed below. Noninterest income for the first nine months of 2021 was $179.4 million, as compared to $172.7 million for the same period in 2020.

In mortgage banking, the Company’s interest rate lock volume was $1.44 billion in the third quarter of 2021 and $4.71 billion for the first nine months of 2021. Although gain on sale margins continued to compress during the third quarter, mortgage banking income increased on a linked quarter basis. This increase was primarily driven by an improvement in the fair value adjustment to the loan pipeline from the second quarter to the third quarter. The following tables present the components of mortgage banking income for the periods presented (in thousands):

In the third quarter of 2021, the Company experienced increases in other fee income categories, including wealth management and insurance, as compared to the second quarter of 2021 and the third quarter of 2020. The Company also recognized in the third quarter of 2021 $764 thousand in gains on securities sold.

The Company entered into a referral relationship with a third party to utilize its technology platform for PPP loans originated under the latest round of the program. The Company earned approximately $2.3 million and $1.4 million, respectively, in referral fees from this round of PPP during the first and second quarter of 2021, which are recorded in other noninterest income. No such fees were earned during the third quarter of 2021.

Noninterest expense was $104.0 million for the third quarter of 2021, as compared to $108.8 million for the second quarter of 2021 and $116.5 million for the third quarter of 2020. Noninterest expense for the first nine months of 2021 was $328.7 million, as compared to $349.8 million for the same period in 2020. The decrease on both a linked quarter and quarter-over-quarter basis in 2021 is partially related to a decrease in salaries and employee benefits, which was driven by lower mortgage incentive compensation expense recognized during the third quarter of 2021 and cost savings realized from the voluntary early retirement program offered during the fourth quarter of 2020. Other noninterest expense in the third quarter of 2021 was down from the second quarter of 2021 primarily due to the full amortization of a $3.1 million tax credit investment recognized during the second quarter of 2021. A corresponding credit of $3.4 million reduced income taxes for the second quarter. Additionally, the Company released a portion of the reserve for unfunded commitments and recorded a negative $200 thousand provision for unfunded commitments in other noninterest expense during the third quarter of 2021.

Asset Quality Metrics
At September 30, 2021, the Company’s credit quality metrics remained strong. Loans on deferred payment, as offered through the Company’s loan deferral program, established in response to the COVID-19 pandemic, continue to decline, and as of September 30, 2021, approximately 0.04% of the Company’s loan portfolio (excluding PPP loans) was on deferral, down from approximately 1.5% as of December 31, 2020.

The table below shows nonperforming assets, which include 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), and related financial ratios, as of the dates presented (in thousands):

The table below shows the total allowance for credit losses and related ratios at September 30, 2021, as compared to December 31, 2020 (in thousands):

The Company recorded a negative provision for credit losses of $1.2 million during the third quarter and first nine months of 2021, as compared to a $23.1 million provision for credit losses in the third quarter of 2020 and a $76.4 million provision in the first nine months of 2020. Net loan charge-offs for the third quarter of 2021 were $1.1 million, or 0.04% of average loans held for investment on an annualized basis. The Company’s coverage ratio, or the allowance for credit losses to nonperforming loans, was 299.68% as of September 30, 2021, as compared to 317.55% as of December 31, 2020.

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 Friday, October 29, 2021.

The webcast can be accessed through Renasant’s investor relations website at www.renasant.com or https://services.choruscall.com/mediaframe/webcast.html?webcastid=feyQW5Vg . To access the conference via telephone, dial 1-877-513-1143 in the United States and request the Renasant Corporation 2021 Third 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 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 10161149 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until November 12, 2021.

ABOUT RENASANT CORPORATION:
Renasant Corporation is the parent of Renasant Bank, a 117-year-old financial services institution. Renasant has assets of approximately $16.2 billion and operates 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.

Important factors currently known to management that could cause our actual results to differ materially from those in forward-looking statements include the following: (i) the continued impact of the COVID-19 pandemic (and variants thereof) and related governmental response measures on the U.S. economy and the economies of the markets in which we operate; (ii) 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; (iii) the effect of economic conditions and interest rates on a national, regional or international basis; (iv) timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (v) competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, mortgage lending and auto lending industries; (vi) the financial resources of, and products available from, competitors; (vii) changes in laws and regulations as well as changes in accounting standards; (viii) changes in policy by regulatory agencies; (ix) changes in the securities and foreign exchange markets; (x) the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (xi) 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; (xii) an insufficient allowance for credit losses as a result of inaccurate assumptions; (xiii) general economic, market or business conditions, including the impact of inflation; (xiv) changes in demand for loan products and financial services; (xv) concentration of credit exposure; (xvi) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (xvii) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (xviii) civil unrest, natural disasters, epidemics and other catastrophic events in the Company’s geographic area; (xix) the impact, extent and timing of technological changes; and (xx) other circumstances, many of which are beyond management’s control.

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 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, the adjusted efficiency ratio and certain asset quality ratios (nonperforming loans to total loans, nonperforming assets to total assets, loans 30-89 past due to total loans, and the allowance for credit losses to total loans) in each case excluding PPP loans. These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets and/or certain charges (such as, among others, COVID-19 related expenses, restructuring 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 or, with respect to asset quality measures, to exclude the Company’s PPP loans. 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; with respect to its asset quality measures, management excludes PPP loans, which are both forgivable and guaranteed by the Small Business Administration, to more clearly measure potential loss, and the coverage therefor, in the Company’s loan portfolio. 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, charges such as restructuring charges and COVID-19 related expenses, and the amount of PPP loans 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 tables at the end of this release under the caption “Reconciliation of GAAP to Non-GAAP,” except that reconciliations of the non-GAAP asset quality measures to GAAP are included in the presentation materials that the Company filed with the SEC together with this earnings release.

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.