Yahoo Finance Renasant Corporation (NASDAQ:RNST) Q1 2024 Earnings Call Transcript
Renasant Corporation (NASDAQ:RNST) Q1 2024 Earnings Call Transcript April 24, 2024
Renasant Corporation isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and welcome to the Renasant Corporation 2024 First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Kelly Hutcheson with Renasant Corporation. Please go ahead.
Kelly Hutcheson: Good morning and thank you for joining us for Renasant Corporation's 2024 quarterly webcast and conference call. Participating in this call today are members of Renasant’s Executive Management Team. Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance, and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com at the press releases link under the News and Market Data tab.
We undertake no obligation, and we specifically disclaim 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. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. And now, I will turn the call over to our Executive Vice Chairman and Chief Executive Officer, Mitch Waycaster.
Mitchell Waycaster: Thank you, Kelly. Good morning. We appreciate you joining the call and your interest in Renasant. This quarter's results reflect loan and deposit growth plus continued expense management. We continue to build the strength of the balance sheet and believe this will be beneficial as we progress through 2024. Our southeastern markets remain economically vibrant and lead us to see continued growth in the near term. The combination of deposit-rich markets and the higher growth areas is one of the keys to our financial success. Yesterday, our Board of Directors implemented the next step of our company's management succession plan by designating Kevin Chapman to become our CEO in May 2025. I look forward to working closely with Kevin in this leadership transition as I will continue as Executive Vice Chairman when he assumes his new role as CEO.
Having worked with Kevin for nearly 20 years, I know Renasant is in great hands with Kevin guiding our company and look forward to a bright future under his leadership. I will now turn the call over to Kevin.
Kevin Chapman: Thank you, Mitch. I appreciate the trust and confidence our Board, shareholders, and company has in me and look forward to your wisdom and guidance as I prepare to take on this new role. Looking at our first quarter results, our earnings were $39.4 million or $0.70 per diluted share. In the first quarter, we sold a portion of our mortgage servicing rights portfolio for a $3.5 million gain. The carrying value at the time of the sale was $19.5 million and represented $2 billion in unpaid principal amount. Excluding this gain and one smaller item, our adjusted EPS was $0.65 for the quarter. We experienced another quarter of solid loan growth, which -- when coupled with an increase in loan yields of 12 basis points, resulted in an increase of $3.9 million in loan interest income on a linked quarter basis.
On the deposit side, we remained focused on growing our core funding base and continued to see good momentum during the quarter with core deposit growth of $280 million on a linked quarter basis. With this continued growth, we were able to allow $119 million of broker deposits to mature. Pricing for deposits remains competitive throughout our footprint and although deposit interest expense has continued to increase, the pace of increase continues to slow as reflected during the quarter. Included in non-interest income for the first quarter are two one-time items, the gain on the sale of the mortgage servicing rights of $3.5 million and a gain of $56,000 on extinguishment of debt. Excluding these one-time items, adjusted non-interest income decreased $688,000 quarter-over-quarter.
Income from our mortgage division, excluding the MSR gain, increased $1.3 million from the fourth quarter. Interest rate lock volume increased $102 million quarter-over-quarter and our gain on sale margin increased 64 basis points. Non-interest expense increased $1 million from the fourth quarter. In the first quarter of 2024, we recorded expense of $700,000 related to the FDIC special assessment after the $2.7 million assessment in the fourth quarter of 2023. We also made contributions totaling $1.1 million to certain charitable organizations, which qualify as tax credits and will provide a one-to-one offset in tax income expense. I will now turn the call over to Jim.
James Mabry: Thank you, Kevin. As we walk through the quarter's results, I will reference slides from the earnings deck. While the size of our balance sheet is essentially unchanged, we continue to see excess liquidity deployed into loans and deposit growth has generally kept pace with loan growth. Loan growth in the first quarter was $149 million and represents an annualized growth rate of 5%. We experienced another quarter of strong core deposit growth, which allowed us to continue to shift our reliance away from non-core funding sources. As you can see on Slides 6 and 7, the company's core deposit base and overall liquidity position remain strong. The deposit base is diverse and granular. The average deposit account is $31,000 and there are no material concentrations.
Referencing Slide 8, all regulatory capital ratios are in excess of required minimums to be considered well capitalized and each of these ratios improved from the prior quarter. Earnings for the quarter contributed to an increase in the tangible common equity ratio, which now exceeds 8% in tangible book value per share. Turning to asset quality, we recorded a credit loss provision of $2.4 million. Net charge-offs were $164,000, which represents an annualized rate of 1 basis point and the ACL as a percentage of total loans was flat at 1.61%. Asset quality metrics are presented on Page 9. Our criticized loans increased quarter-over-quarter. The loans added in the quarter are current on payments and we currently do not anticipate any loss on these loans.
All other metrics were relatively stable, underscoring our emphasis on prudent underwriting. We continue to remain vigilant in monitoring credit, including early identification of potential problem loans in order to mitigate loss. Our profitability metrics are presented on Slides 10 and 11. Excluding one-time items, adjusted pre-provisioned net revenue declined $4.4 million on a linked quarter basis. Pressure on our net interest income is the primary driver of the decrease. Turning to Slide 12, adjusted net interest margin, which excludes purchase accounting accretion and interest recoveries was 3.28%, down one basis point from Q4. Adjusted loan yields increased 12 basis points, while the cost of total deposits increased 18 basis points. Deposit pricing pressures remain and will likely cause deposit costs to continue to increase in the near term.
Kevin commented on the highlights within non-interest income and expense. While uncertainty in the rate environment continues to be a challenge, the focus remains on improving operating leverage. I will now turn the call back over to Mitch.
Mitchell Waycaster: Thank you, Jim. We believe Renasant is well positioned to prosper and look forward to providing you updates on the progress. I will now turn the call over to the operator for questions.
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