RNST Renasant Corporation

TUPELO, Miss., July 18, 2017 /PRNewswire/ -- Renasant Corporation (NASDAQ: RNST) (the "Company") today announced earnings results for the second quarter of 2017. Net income for the second quarter of 2017 was approximately $25.3 million, up 10.41%, as compared to $22.9 million for the second quarter of 2016. Basic and diluted earnings per share ("EPS") were $0.57 for the second quarter of 2017, as compared to basic and diluted EPS of $0.54 for the second quarter of 2016.  

Net income for the six months ending June 30, 2017, was $49.3 million, an increase of 11.65%, as compared to $44.1 million for the same time period in 2016. Basic and diluted EPS were $1.11 through the first six months of 2017, as compared to basic and diluted EPS of $1.07 and $1.06, respectively, for the same time period in 2016.

The Company incurred expenses and charges in connection with certain transactions that are considered to be infrequent or non-recurring in nature. The following table presents the impact of these charges on reported EPS for the dates presented (in thousands):

On July 1, 2017, the Company completed its previously-announced acquisition of Metropolitan BancGroup, Inc. ("Metropolitan") in an all-stock merger. As of the acquisition date, Metropolitan operated eight offices in Nashville and Memphis, Tennessee and the Jackson, Mississippi MSA and had approximately $1.2 billion in assets, which included approximately $990 million in total loans and approximately $940 million in total deposits. The acquired operations of Metropolitan are not included in the financial information in this release.

"We are excited to report record earnings for the second quarter of 2017. Our earnings were driven by expanding net interest margin, strong fee income, improving credit quality metrics and continued focus on overall expenses. As our earnings grew, our profitability metrics continued to improve as our returns on average tangible assets and average tangible equity, excluding nonrecurring items, were 1.38% and 14.84%, respectively," said Renasant Chairman and Chief Executive Officer, E. Robinson McGraw. "With the closing of the Metropolitan merger on July 1, 2017, we welcome our new associates and clients as we look forward to a smooth integration during the third quarter of 2017."

The following table presents the Company's profitability metrics for the three and six months ending June 30, 2017, including and excluding the impact of after-tax merger and conversion expenses and, for the six-month period, debt prepayment penalties:

Highlights from the second quarter of 2017 include the following:

Profitability Metrics

• Total assets were $8.9 billion at June 30, 2017, as compared to $8.7 billion at December 31, 2016.
• Loans not purchased increased to $5.1 billion at June 30, 2017, from $4.7 billion at December 31, 2016. For the second quarter of 2017, the yield on total loans was 5.03% compared to 4.82% for the first quarter of 2017 and 5.09% for the second quarter of 2016. For the six months ended June 30, 2017, the yield on total loans was 4.93% compared to 5.02% for the same time period in 2016. The following tables reconcile the reported loan yield to the adjusted loan yield excluding the impact from interest income collected on problem loans and purchase accounting adjustments on purchased loans for the periods presented (in thousands):

• Total deposits increased to $7.2 billion at June 30, 2017, from $7.1 billion at December 31, 2016. Noninterest-bearing deposits averaged $1.6 billion, or 22.17% of average deposits, for the first six months of 2017, compared to $1.4 billion, or 21.50% of average deposits, for the same period in 2016. For the second quarter of 2017, the cost of total deposits was 30 basis points, as compared to 29 basis points for the first quarter of 2017 and 26 basis points for the second quarter of 2016. The cost of total deposits was 30 basis points for the six months ending June 30, 2017, as compared to 26 basis points over the same time period in 2016.
• Net interest income was $79.6 million for the second quarter of 2017, as compared to $74.0 million for the first quarter of 2017 and $77.2 million for the second quarter of 2016. Net interest margin was 4.27% for the second quarter of 2017, as compared to 4.01% for the first quarter of 2017 and 4.29% for the second quarter of 2016. The following table reconciles reported net interest margin to adjusted net interest margin excluding the impact from interest income collected on problem loans and purchase accounting adjustments on purchased loans for the periods presented (in thousands):

• Net interest income was $153.6 million for the first six months of 2017, as compared to $147.2 million for the same period in 2016. Net interest margin was 4.14% for the first six months of 2017, as compared to 4.25% for the same period in 2016. The following table reconciles reported net interest margin to adjusted net interest margin excluding the impact from interest income collected on problem loans and purchase accounting adjustments on purchased loans for the periods presented (in thousands):

• Noninterest income for the second quarter of 2017 was $34.3 million, as compared to $35.6 million for the second quarter of 2016. Noninterest income for the first six months of 2017 was $66.3 million, as compared $68.9 million for the same time frame in 2016. The Company experienced increases in service charges on deposit accounts, fees and commissions on loans and deposits, and wealth management revenue in the first half of 2017 as compared to the same period in 2016. Mortgage banking income for the second quarter of 2017 was $12.4 million, compared to $13.4 million for the same period in 2016 as mortgage loans originations were down for the same period due to a reduction in the refinancing of mortgage loans. Lastly, during the second quarter of 2016 the Company recognized $1.3 million in gains on sale of securities, while there was no gain or loss recognized in the first half of 2017.
• Noninterest expense was $74.8 million for the second quarter of 2017, as compared to $77.3 million for the second quarter of 2016. Noninterest expense for the first six months of 2017 was $144.2 million, as compared $147.1 million for the same time frame in 2016. Excluding nonrecurring charges for merger and conversion expenses and debt prepayment penalties, noninterest expense decreased when compared to the second quarter of 2016. This decrease is primarily attributable to a decrease in salary and employee benefits, data processing costs which were realized through contract renegotiations, and expenses on other real estate owned.

Asset Quality Metrics
Total nonperforming assets were $46.5 million at June 30, 2017, a decrease of $12.3 million from December 31, 2016, and consisted of $26.8 million in nonperforming loans (loans 90 days or more past due and nonaccrual loans) and $19.7 million in OREO. 

The Company's nonperforming loans and OREO that were purchased in previous acquisitions (collectively referred to as "purchased nonperforming assets") were $14.1 million and $15.4 million, respectively, at June 30, 2017, as compared to $22.2 million and $17.4 million, respectively, at December 31, 2016.  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 decreased to $12.7 million, or 0.25% of total non-purchased loans, at June 30, 2017, from $13.4 million, or 0.28% of total non-purchased loans, at December 31, 2016. These loans were $12.0 million, or 0.28% of total non-purchased loans, at June 30, 2016. Early stage delinquencies, or loans 30-to-89 days past due, as a percentage of total loans were 0.18% at June 30, 2017, as compared to 0.23% at December 31, 2016, and at 0.22% June 30, 2016.
• Non-purchased OREO was $4.3 million at June 30, 2017, as compared to $5.9 million at December 31, 2016, and $9.6 million at June 30, 2016. Non-purchased OREO sales totaled $1.8 million in the first half of 2017 and $3.3 million over the second half of 2016.
• The allowance for loan losses was 0.69% of total loans at both June 30, 2017, and December 31, 2016, and 0.74% at June 30, 2016. The allowance for loan losses was 0.87% of non-purchased loans at June 30, 2017, as compared to 0.91% at December 31, 2016, and 1.03% at June 30, 2016.
• • Net loan charge-offs were $524 thousand, or 0.03% of average total loans, for the second quarter of 2017, as compared to $191 thousand, or 0.01% of average total loans, for the second quarter of 2016.
  • The provision for loan losses was $1.8 million for the second quarter of 2017, as compared to $1.4 million for the second quarter of 2016. The provision was $3.3 million for the first six months of 2017, as compared to $3.2 million for the same time period in 2016.

Capital Metrics

• At June 30, 2017, Tier 1 leverage capital ratio was 10.68%, Common Equity Tier 1 ratio was 11.65%, Tier 1 risk-based capital ratio was 12.86%, and total risk-based capital ratio was 15.00%. All regulatory ratios exceed the minimums required to be considered "well-capitalized."
• Tangible common equity ratio was 9.31% at June 30, 2017, as compared to 9.00% at December 31, 2016.

CONFERENCE CALL INFORMATION:

A live audio webcast of a conference call with analysts will be available beginning at 10:00 AM Eastern Time on Wednesday, July 19, 2017.

The webcast can be accessed through Renasant's investor relations website at www.renasant.com or http://services.choruscall.com/links/rnst170719.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 10110411 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until August 2, 2017.

ABOUT RENASANT CORPORATION:

Renasant Corporation is the parent of Renasant Bank, a 113-year-old financial services institution. Renasant has assets of approximately $10.0 billion and operates more than 175 banking, mortgage, financial services and insurance offices in Mississippi, Tennessee, Alabama, Florida and Georgia.

NOTE TO INVESTORS:

This news release may contain, or incorporate by reference, statements which may 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" 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, and that 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 undertakes no 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 certain non-GAAP financial measures. Certain non-GAAP financial measures that the Company uses exclude purchase accounting adjustments and interest income collected (foregone) on problem loans from loan interest income and net interest income when calculating the Company's taxable equivalent loan yields and net interest margin, respectively. The Company's management uses these non-GAAP financial measures to evaluate ongoing operating results and to assess ongoing profitability.

Certain other 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") and the efficiency ratio) adjust GAAP financial measures to exclude intangible assets and certain charges that the Company considers to be non-recurring in nature.  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 indications 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 non-recurring charges 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."

With respect to all of the non-GAAP financial information that the Company has included in this release, such information is not 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 other 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.