Renasant Corporation

Good day, and welcome to Renasant Corporation's 2026 Second Quarter Earnings Conference Call and Webcast. All participants will be in a listen-only mode for the duration of the call, and should you need any assistance today, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. and if you'd like to withdraw a question, please press star then two. Also, please be aware that today's call is being recorded. I would now like to turn the call over to Kelly Hutcheson, Executive Vice President and Chief Accounting Officer. Please go ahead.

Good morning and thank you for joining us for Renasant Corporation's quarterly webcast and conference call. Participating in the 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.renaissance.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 President and Chief Executive Officer, Kevin Chapman.

Thank you, Kelly, and good morning. Our performance in the second quarter continued at the pace we set in the first quarter. Operating results across the company were strong, as we continue to focus on organic growth as well as disruption in many of our markets. Adjusted earnings per share in the second quarter were 94 cents, up 36 percent from a year ago. Adjusted return on average assets was 1.3 percent compared to 1.01 percent in the same period last year. Similarly, adjusted return on average tangible common equity was 16.25 percent versus 13.5% in the second quarter of 2025. The efficiency ratio also improved from 67.6% a year ago to 57.9% this quarter. By focusing on increasing core banking relationships and adding talent throughout the company, Renasant is in a great position to capitalize on growth opportunities throughout the back half of the year. I will now turn the call over to Jim to provide more details on our financial results.

Thank you, Kevin, and good morning. Looking at the balance sheet, loans are up $220.9 million on a linked quarter basis, or 4.7% annualized. Deposits were down $398.4 million from the first quarter, or 7.2% annualized. primarily due to seasonal outflows of public fund deposits. Reported net interest margin decreased four basis points to 3.83%, while adjusted margin remained flat at 3.61%. Our adjusted total cost of deposits increased by two basis points to 1.96%, while our adjusted loan yields decreased one basis point to 6.03%. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We record a credit loss provision on loans of $3.8 million, comprised of $1.2 million for funded loans and $2.6 million for unfunded commitments. Net charge-offs were $2.8 million. and the ACL as a percentage of total loans declined two basis points quarter over quarter to 1.54%. Turning to the income statement, our pre-provision net revenue was $112.4 million. Net interest income was $227.7 million, a decrease of $0.8 million quarter over quarter. Non-interest income was $51.2 million in the second quarter, A linked quarter increase of $0.9 million. Non-interest expense was $161.5 million for the second quarter. A linked quarter increase of $6.2 million, mostly driven by deferred compensation accruals tied to market valuations, higher health insurance claims, and annual merit increases. We look forward to the second half of 2026. I will now turn the call back over to Kevin.

Thank you, Jim. We believe that Renasant is in a great position to continue to improve on its high levels of performance. We appreciate your interest in Renasant and look forward to discussing our results with you. I will now turn the call over to the operator for questions.

We will now begin the question and answer session. Again, to ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw a question, you may press star, then two. At this time, we will pause just momentarily to assemble our roster. And our first question here will come from Michael Rose with Raymond James. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions. wanted to start on loan growth obviously really good production this quarter can you just talk about you know the expectations as we think about the back half of the year because it looks like if I either include or exclude Republic you guys were a little short of my expectations and consensus and just want to get a sense for production levels from here schedule payoffs and what you would expect out of Republic business as we move forward thanks

Yeah, hey, Michael, good morning. It's Kevin. So if you broke down several of the components of the growth, we were pleased with the uptick in production that we had in Q3. As you noted, that was offset by some headwinds and payoffs and still think payoffs are going to continue to be something we have to overcome. But as we look at our pipeline, as we look at our efforts, we look at our conversations with customers, production is ramping and it's ramping it's it's ramping in the fact that our pipeline if we look at our pipeline today it's up about six six to ten percent from where it was at the beginning of Q2 so what we're seeing what we're seeing where where we've guided to that mid single digit growth number we're seeing that fully in scope and fully in range as we get into Q3 and into the back half of the year.

Very helpful, Kevin. And then maybe one for Jim on expenses. Expenses were maybe a little bit higher than I think what I was looking for, but Any change to the trajectory that you guys had kind of previously talked about? And, you know, maybe if you can just balance some of the investments that you guys are making in both people and technology along with other cost saving opportunities that you guys may have. Thanks.

Sure. Good morning, Michael. So, yes, we had a couple of questions. you know one-time or non-recurring items in the expense bucket and when we look at our sort of core expense run right we feel really good with where it is and and again of course we can't I mean these are obviously the results of the results but we the underlying trends and expenses we feel is good and I I I would say our outlook from here is that what we saw in Q1 in terms of expenses probably will moderate downward a little bit in Q3 and sort of be steady for the balance of the year. and that does reflect, as you talked about, investments we're making in people and we continue to make those investments in people and the guidance that I'm sharing in terms of that trajectory allows for some of that. If we're more successful than we think in terms of some of those hires, then that might change a little bit. But I think the core NIE rate will, again, come down a little bit and then remain steady for the balance of the year.

Very helpful. I'll step back. Thanks for taking my questions, guys.

Hey, Michael, I may just add, but before you hop off, I may just add to that. Jim talked about the new hires and We've talked about our activity in new hires that we've had going back to Q3 of last year. So just to remind you, in Q1, we had 18 new revenue producing new hires. In Q2, that number was five. We added five. And so far in Q3, we've added seven. And so we've talked about the opportunities that we've had in the markets to hire talent. We continue to execute on that. And we'll continue to look for opportunities to add and augment to our team. And those hires as well as the activity that we're having in our markets from our existing team is showing up in results. Mark, you talked about the loan growth. We talked about the headwinds from the payoffs. The production of the activity is offsetting the headwinds. I'll just give you a data point of what we're seeing so far in Q3. We've seen elevated payoffs in Q3, but production is outpacing that, and right now we're up net loans about $40 million, and that's on elevated payoffs. So our teams are continuing to focus on taking market share, serving customers, and that continues to show up in the numbers even as we get into Q3.

I appreciate all that color, Kevin. Thanks again. I'll step back.

And our next question will come from Catherine Miller with KBW. Please go ahead.

Thanks. Good morning. Good morning, Catherine. Moving to the other side of the balance sheet, I know some of the outflows and deposits were seasonal this quarter with public funds. Can you give us any update on what you're seeing on your core underlying deposit trends and expectations for deposit growth in the second half of the year?

Katherine, this is Jim. Maybe I'll start. Go ahead, Kevin.

Jim, you go ahead.

So a couple of things, and I know Kevin can add some really good color, Catherine, as it relates to some recent trends. But yes, as you noted, seasonal outflows in public funds were really the driver in terms of the change from Q1 to Q2. And as you probably recall from prior quarters with us, we'll start to see those flows reverse here in the second half. as opposed to being a headwind, those inflows will be a tailwind. And then I guess most importantly and really probably to the main point of your question, the underlying performance in core deposits we're very encouraged about. And so not only do we expect to see the public fund trend shift, but I think the underlying trends in core deposits are really strong. And Kevin, you may want to pick up on that.

So Catherine, I think if you go back to this call in Q2, back in April, we shared some of the numbers we'd seen at that time about new account openings. And we're interested and excited to see how that would play out through the remainder of the quarter. So just kind of refresh you on what we achieved as far as core deposit growth, kind of looking through that public fund noise. just core deposit growth and new account openings that we had in Q2. New account openings, new customers to the bank did not have an existing account with us, did not have existing dollars with us. We opened up over 10,000 new accounts in Q2, and that equates to roughly $380 million in new deposits. If you break that down, about half of it was CDs, which means the other half was checking accounts. and we believe those checking accounts are sticky core deposits that we didn't go and get because of rate. We've got to do the relationship. And that's also commercial accounts as well as consumer accounts. As we look at that activity into Q3, that activity hasn't slowed down just through July. We've opened up over 2,000 net new accounts, and that represents 86 million in new fundings. And some of these accounts we don't think all the money has moved into yet. We think those accounts are still being funded. Activity and reassigning deposits or bill pay, all of that activity is still going on, and we expect to continue to see deposits build into some of these accounts. as we get into Q3 and Q4.

Great. And then how about the rate on new deposit growth? I assume because we saw a couple basis points increase in deposit costs this quarter, these are especially maybe the CD piece is coming on with a little bit of a higher rate. Curious maybe where that ended the quarter and maybe the public funds might kind of mess that up before looking at an exit run rate. But curious what you're thinking about deposit cost increases in the next couple quarters.

Yeah, so our deposits are coming in at market rates. We don't have a special out there. We're not paying above average to get them. I think the weighted average rate of those new accounts are going to be in the high twos and low threes.

That's great. Great. Great. Thank you.

And our next question will come from Matt Olney with Stevens.

Please go ahead. Thanks. Good morning. Appreciate you taking my question. Want to go back to the loan growth discussion and the loan production sounds great. Any more color on loan pricing competition? I think when we talked in April, you highlighted just increasing pressure back then. So curious any update since that April timeframe. Thanks.

Jim, you want to talk about new and renewed?

Sure. As you recall, you were talking about April. The pressures that were present then are still there. It is very competitive on both sides. On the loan side, I think in terms of new and renewed, we're generally looking in the low sixes, Matt. there's certainly a lot of competitive pressures there and it varies by region and we're seeing it in certain markets and maybe not so much in others and the same thing on the deposit side you saw our cost inched up a bit on deposits and we do have some tailwinds that will help us in terms of them but yes those pressures remain as they were back in April Okay

Appreciate that, Jim. And then I guess as a follow-up, just thinking more about industry rate sensitivity, if the Fed funds were to move up this week or in September, would love to know kind of what your thoughts are as far as the balance sheet and overall impact to higher Fed funds. Thanks.

I would say that as it relates to the profitability side of that and We're not budgeting or planning on any cut or increase as we sit here today and generally I would say that you know a few base you know 25 basis points here that's not going to make a big difference in our outlook in terms of the profitability impact and I would say that's generally be true on the balance sheet in terms of dollars so absent a meaningful change you know a more meaningful change in rates I don't see it having a major impact on the balance sheet or the income statement.

Okay thanks guys.

Thank you, Matt. And our next question will come from Dave Bishop with Hubby Group. Please go ahead. Hey, good morning, gentlemen.

Good morning, Dave. Since Matt sort of opened the door in terms of the discussion, I'm just curious, you know, is the bias for stability still here? Or, you know, maybe I think you mentioned maybe some tailwinds on the deposit side. Do you see a little bit of bias? I'm just curious how you're thinking about the margins.

Sure, as we sort of discussed in answering Matt's question, our outlook is that generally it's going to be fairly stable for the second half. We've got, you know, certainly the deposit pricing pressures, but I'd say on the asset side, we've got a couple things, you know, working for us. As you probably noted, I mean, most of our loan growth in the quarter came at the very end of the quarter. So there's a significant difference between average balances and period end balances for us. And that'll be a nice tailwind going into Q3. The other thing is we've got roughly a billion and a quarter dollars in loans that mature over the next 12 months. And the rate on that's about 495. So that'll be a another tailwind that will benefit and help offset deposit pricing pressures. And then lastly, not as significant but still meaningful, we've got $50 to $60 million a month rolling off the securities book. And that's coming off at the low threes, Dave, and coming back on the upper fours are close to 5%. So we feel good about the outlook of a stable margin, a core stable margin here in the back half.

Great, appreciate that color. And then maybe Kevin or Jim, you know, you talked about the payoffs, the paydowns and the payoff headwinds continuing. Just curious if you could sort of ring fence maybe what, you know, vintages those are coming from and, you know, sort of, you know, from a snake through the tunnel perspective, do you think you're in the seventh, eighth, ninth inning or still sort of midway through? Just curious how you sort of view the paydown pipeline.

Kevin?

Kevin? Yeah, so Dave, just what we're seeing in scheduled pay downs or what's been communicated to us, it's largely coming in some commercial real estate, some asset classes. There's been an above average payoff in some multifamily and some office space. It's also largely coming from the sale of the assets, or in some cases the sale of the business. As we get into Q3, we've seen some some early payoffs in our CNI book, and it's really sell of the underlying business. So it's not as if we're losing any of these loans to competition. We're just, our borrowers are making decisions to sell collateral, to liquidate collateral. And as they look at redeploying that liquidity, we expect to get first shot at any future opportunity. But largely this is coming in the commercial, the payoffs are coming in commercial real estate and we somewhat anticipated this as rates kind of bottomed out in Q1 that we thought would see some elevated payoffs. As the 10-year has increased, we think some of those pressures on the payoffs of commercial real estate subside a little bit in the short run or long run depending on where the 10-year goes. So we are expecting some easing on the payoffs. but again, it can be very lumpy at the same time as our customers make decisions about the underlying collateral. As far as the, throughout the book, we're not seeing, outside of it being commercial real estate, we're not seeing it being concentrated in a certain market or it's run off from, it's not run off from the first book, it's really just broad based and we're seeing it more mainly in the asset class of commercial real estate.

One final question. Kevin, you noted the strong deposit account openings. Just curious if any of that you can sort of point to coming from some of the merger disruption that's been undergoing within your footprint.

Thanks. So it's a handful of things, but market disruption is one of those main underliers. I mean, Dave, we've had a focus on deposits going back to 2023 that we wanted to continue to maintain a moderate loan-to-deposit ratio in that mid-80% range. So we've had a heightened focus on deposits. And then market opportunity, market disruption just allowed us to lean into that focus. And I mean, look, our teams, just look at the numbers. Our teams responded. to the opportunity in the market. And we don't think that opportunity is abating at the moment. We still think there's a lot of disruption and a lot of opportunity. And again, we may have mentioned this in the past, but we think the fact that we're stable, we're not doing a major merger, we're not going through a transformational integration, we're not reordering the company, all of those play well to where we can just be stable and focus on client needs. and our teams know who their credit partner is. They know who to go to. They know they've got good support in the back office and that they will show well in front of a customer that has uncertainty or may be unhappy where they currently are. Perfect.

Appreciate the call.

Thank you, Dave.

And our next question will come from Janet Lee with TD Cohen. Please go ahead.

Morning. Not to be too nitpicky on the public fund seasonal outflows, when we look at in the third quarter, so should we expect any of those to come back to the bank in the third quarter or the fourth quarter? I get that you're getting a good traction on the core deposit growth side, but just wanted to see how your forecast pans out in the second half of 26th.

Janet, this is Jim. Good morning. I think our sense is that if you look at deposit growth in the second half, it's going to be – I mean, on both sides, we sort of target, whether it's loans or deposits, that mid-single-digit growth rate number, you know, through the cycle, through the periods. And that outlook really hasn't changed. And so – Our expectation is that you're going to see good deposit growth in the second half and public funds will be relatively stable if not some inflows there.

Those public fund deposits, can you give us what the cost there is relative to your average cost of deposits at 196?

It would be somewhat higher, probably roughly 100 basis points higher, Janet.

Oh, okay. Can you share with us the spot cost of deposits at the end of June?

The total cost of deposits at the end of June was 196.

Oh, so the same as the average for the quarter?

That's correct.

Okay. And lastly, how should we think about, could you give us a refresh on the Basel III proposal impact here, CT1? And is CT1 a range or target beyond 2026?

So our expectation is it'll reduce risk-weight assets somewhere around $1 billion to $1.3 billion, and that's call it 55 to 65 basis points positive impact to CET1. And I think we're, one, we haven't at this point budgeted that in or projected that in, even though that seems like that's where things are going. But as to how we think about our sort of and so forth. So I think that's the capital position going forward with that. It doesn't change how we look at sort of underlying capital goals. And as you know, we like CET1 to be in the low 11s, and I don't think that will change. I don't think our outlook on that will change because of this change in the regs. Capital Deployment. We'll see, but I don't think it's going to change the way we think about our capital base and where we want it to be relative to the balance sheet.

Got it. That's it. Thank you.

And again, if you have a question or a follow-up, you may press star then 1 to join the queue. Our next question here will come from Steven Scatton with Piper Sandler. Please go ahead.

Yeah, thanks. Good morning. Maybe one follow-up first on just the expense trajectory. I think, Jim, you said it could potentially go down a little bit into the third quarter. Is that some of the slight jump there in other non-externing expense driving some of that, and what was embedded within that increased quarter-by-quarter there in that line item?

Good morning, Stephen. So there are a couple of things. So merit, which certainly we contemplated, was part of that increase. There was an increase associated with deferred comp expense. And we don't expect that to be part of the second half. So that'll be a benefit. And then health and life. We're self-insured. And sometimes those claims will be higher than normal. And they were a little higher in Q2 than we anticipated. That's why our outlook for the second half is for moderately lower expenses and still baking in, as Kevin's talked about, opportunistic hiring.

Okay, great. And then, yeah, on that opportunistic hiring front, I think last quarter, Kevin, you had said, you know, look, there's some markets maybe where we don't feel like we could even have enough people. Any updates on geographically where you would look to add people and given all the dislocation kind of in your markets and even around your markets, would you look at, you know, moving towards Texas at all for LPOs or otherwise to take advantage of that disruption there?

Yeah, Steven, yeah. Our primary focus is mainly building out in our existing footprint. And as it relates to a new market, that's all going to be facts and circumstances. There are a couple of markets where we have a presence. We may have a single location and it's a large market, and we need to build the infrastructure or continue our path or accelerate our path. towards more relevance in some of those markets. And I think that's going to be our focus primarily before we go open up a new market, maybe specifically in a case like Texas. There's a lot that we would need to learn about Texas. Great market, great state, economically is outperforming any metric that you can throw at it. But also I think looking at what it would take to be relevant in some of the markets in Texas, we would have to have significant scale to be relevant in a place like a Dallas or a Houston or San Antonio. And so I think that as it relates to Texas being a primary focus, I would say that's not the case at the moment. We're going to focus more on our existing market and building out more scale, more infrastructure in our existing markets. and I'll also say not apologizing for our markets as well. The southeast and the markets that we operate in, those are very high performing, high inbound migration, high median household income, high economic growth potential. So we feel like we've got ample opportunity in our existing footprint before we go launch and try to go to another market. And again, I think in some of those cases, we'd have to go there in a substantial way to be able to be relevant in some of those markets.

Yeah, that makes sense. Appreciate that, Keller. And then maybe just lastly for me, curious if you could touch on just kind of lending competition from the standpoint of what you're seeing in terms of aggressiveness from competitors around either rate structure or both. If there's a bigger tension point on one or the other and if any of the If any of what you're seeing competitors do gives you maybe trepidation about the ability to hit the growth targets if things just get further down the risk curve than you'd want to be.

Kevin, you or David? Hey, Steven, this is David. We're seeing those pressures come across a variety of elements. We've talked about, Jim talked about this morning, the pricing pressures and those continue Quarter over quarter, we're seeing other elements of pressure within our structure from competition. It could be anything from level of guarantor support on a transaction, proceeds that we loan, covenants. So it comes in various forms from a competitive sector, which is normal as we progress through a competitive environment. It's going to go rate, then it's going to go terms. And so we're starting to see that on terms. To your point about is that going to impact loan growth, we're going to continue to be disciplined just like we always have on our opportunities. And if it's customers that we know, markets that we know well, we have good institutional knowledge both on the front line with the lender as well as the credit side, the management side. We're going to lean into opportunities with well-known customers to protect those relationships, particularly where we've got deposits at risk and so forth. We're going to protect those relationships. You know, if it's a new customer, something that we may not be as comfortable with, we may pull back and say we're going to continue to remain disciplined in our terms. It all comes back to that disciplined underwriting that's going to continue to drive our positive credit metrics. So it's a balance. So we're seeing the competition, and we're just going to choose when we lean in and when we don't lean in.

Got it. Very helpful. Thank you so much for all the color today. Yes.

Hey, Steve and Kevin, I'll just add, I'll ask one last thing. To your point about the competition, do we think it causes us to relook at our guidance? Short answer is no. And in fact, our guidance is based off the competition. And we firmly believe that we are and should be a mid-single-digit grower. And that factors in what it takes to be competitive in our markets. And there is... There is competition all around us for good loan growth, and we can be competitive in that. At some point, though, when it comes to rate, there has to be a question, are we getting the proper returns off of the use of that capital? It may look good on the balance sheet that we're showing growth, but long term, it may take us off track from our profitability goals. But as we look at the mid-single digit, we think that allows us to get the proper returns at the proper rate with the proper underwriting. It doesn't put pressure on our funding costs, allows us to keep margins stable. All of that is baked into the math and the calculus behind being a single digit grower long term. If we press on that, then it can cause, we may have to change our outlook, maybe not on balance sheet growth, but on margin compression or on profitability. which at this time we don't feel any need to do that. We think we can grow single digit and hit all of our goals as it relates to increasing and improving profitability, maintaining a stable margin, not outgrowing our funding. All of that is why we come with the basis of the mid single digit growth.

Great. Thanks for that, Ken.

Appreciate it.

And our next question is a follow up from Matt Olney with Stevens. Please go ahead.

Hey, thanks, guys. A few follow-ups here. On the fee side, I haven't heard you guys talk much about the fees this morning. It looks a little bit softer than expectations. I think we typically have kind of a nice seasonal pull-through in 2Q. Anything to call out there in 2Q or the outlook in the near term?

Matt, this is Jim. I think a couple of things. If you break down the fee income We had really good SBA numbers in the first half. I do think, I mean, they were really strong numbers. They'll probably moderate some of the second half, so that'll be a head win. Capital markets has been soft in the first half, and I think we talked about it in our Q1 call. I mean, they were on clip for a record quarter in Q1, and then things sort of dropped off the cliff with the hostilities in the Middle East, but we feel really good about capital markets in the second half, and and are hopeful that'll sort of rebound to historic levels. Mortgage continues to be weak. We don't see anything improving there and it could be a little bit weaker than what we saw in Q2. Wealth is very steady and growing and it's an area too that I would cite as a beneficiary of some of the dislocation that we're experiencing in our market. So all in all, I would say that Q2 run rate is probably pretty close to what we'll do in the second half, plus or minus a little bit, but that's probably a good jumping off point for what we see in the second half. Okay.

All right. Appreciate that, Jim. And then I guess going back to the expense discussion, I hear your point around the 2Q levels being a little bit elevated due to some of those items that you called out were unusual, a little heavy than what we typically see. I just want to make sure I understand the expectations for the third quarter. I think I heard you say it was going to be lower than what we saw in 2Q. Is there any more you can give us beyond that? Is there a range? I'm asking just because it's a pretty big range from what we saw in the first quarter versus what we saw in the second quarter. Thanks.

Sure, it is. And I would say this, Matt. I mean, I don't know I do feel good about the 161.5 coming down in Q3. I think the reason I would hedge a little bit on how far it comes down somewhat depends upon the success we have in this opportunistic hiring. We've got some of that baked in. and then some of the, a couple of the items in Q2, I mean health and life is just a really difficult thing to project but I mean that was over a million dollars in Q2. A million dollars more than what it was in Q1. So it's a little tough to project, but we're hopeful and optimistic that it will come down and then stabilize for what we see in Q3 will be a good indicator of what we should see for Q4. I know it's not probably giving you the specificity you want, but I think we were angling towards roughly a 160 number. internally for Q2 when we ended Q1. And I think absent some of these items we've called out, we'd have been right on the mark there.

Okay. Understood. Well, several moving parts there, so definitely get the view there. Thank you, guys. Thank you, Matt.

And this concludes our question and answer session. I'd like to turn the conference back over to Kevin Chapman for any closing remarks.

Thank you, Joe, and thank you to all of those that have joined us this morning. We appreciate your interest in Renasant and look forward to meeting with you throughout the quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect your lines.