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Renasant Corporation Announces Earnings For The Third Quarter Of 2017

TUPELO, Miss., Oct. 17, 2017 /PRNewswire/ -- Renasant Corporation (RNST) (the "Company") today announced earnings results for the third quarter of 2017. Net income for the third quarter of 2017 was approximately $26.4 million, up 13.99%, as compared to $23.2 million for the third quarter of 2016. Basic and diluted earnings per share ("EPS") were $0.54 and $0.53, respectively, for the third quarter of 2017, as compared to basic and diluted EPS of $0.55 for the third quarter of 2016.

Net income for the nine months ending September 30, 2017, was $75.7 million, an increase of 12.46%, as compared to $67.3 million for the same period in 2016. Basic and diluted EPS were $1.64 for the first nine months of 2017, as compared to basic and diluted EPS of $1.62 and $1.61, respectively, for the same 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):


Three months ended 
September 30, 2017


Three months ended 
September 30, 2016


Pre-tax

After-tax

Impact to
Diluted
EPS


Pre-tax

After-tax

Impact to
Diluted
EPS

Merger and conversion expenses

$

6,266


$

4,075


$

0.09



$

268


$

178


$


Debt prepayment penalty





2,210


1,468


0.03


 


Nine months ended 
September 30, 2017


Nine months ended 
September 30, 2016


Pre-tax

After-tax

Impact to
Diluted
EPS


Pre-tax

After-tax

Impact to
Diluted
EPS

Merger and conversion expenses

$

9,655


$

6,459


$

0.14



$

4,023


$

2,689


$

0.07


Debt prepayment penalty

205


137




2,539


1,697


0.05


The Company's balance sheet and results of operations as of and for the three months ended September 30, 2017, include the impact of the Company's acquisition of Metropolitan BancGroup, Inc. ("Metropolitan"), which was completed on July 1, 2017. As of the acquisition date, Metropolitan operated eight offices in Nashville and Memphis, Tennessee and the Jackson, Mississippi MSA and had approximately $1.4 billion in assets, which included approximately $970 million in total loans and approximately $940 million in total deposits. The assets acquired and liabilities assumed have been recorded at estimated fair value and are subject to change pending finalization of all valuations.

"We are pleased to announce our results for a strong third quarter of 2017.  Contributing to our record net income for the quarter was annualized linked quarter non-acquired loan growth of 18.4% coupled with the contribution to our operations resulting from our completed acquisition of Metropolitan. A continued focus on expense containment resulted in the achievement of an efficiency ratio below 60 percent, which has been a key long-term objective for Renasant.  With the successful conversion of Metropolitan core systems and a smooth integration of our team members, we believe we are well positioned for a strong finish to 2017," said Renasant Chairman and Chief Executive Officer, E. Robinson McGraw.

Profitability Metrics

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


Three Months Ended


Nine Months Ended


September 30, 2017


September 30, 2017


As Reported

Excluding Merger

and Conversion
Expenses


As Reported

Excluding Merger
and Conversion
Expenses and Debt
Prepayment
Penalties

Return on average assets

1.02%

1.18%


1.09%

1.19%

Return on average tangible assets

1.13%

1.30%


1.21%

1.31%

Return on average equity

7.01%

8.09%


7.58%

8.24%

Return on average tangible equity

12.74%

14.62%


13.30%

14.41%

The above profitability metrics, excluding return on average assets and return on average equity as reported, are non-GAAP financial measures. A reconciliation of these financial measures from GAAP to non-GAAP is included in the table at the end of this release.

Highlights from the third quarter of 2017 and the nine months ended September 30, 2017 include the following:

  • Total assets were $10.3 billion at September 30, 2017, as compared to $8.7 billion at December 31, 2016.
  • Loans not purchased increased to $5.3 billion at September 30, 2017, from $4.7 billion at December 31, 2016. For the third quarter of 2017, the yield on total loans was 4.88% compared to 5.03% for the second quarter of 2017 and 4.94% for the third quarter of 2016. For the nine months ended September 30, 2017, the yield on total loans was 4.91% compared to 4.99% 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):

 


Three Months Ended


September 30,

June 30,

September 30,


2017

2017

2016

Taxable equivalent interest income on loans (as reported)

$

90,693


$

78,857


$

75,128


Interest income collected (foregone) on problem loans

963


2,734


1,019


Accretable yield recognized on purchased loans(1)

6,259


5,410


6,866


Interest income on loans (adjusted)

$

83,471


$

70,713


$

67,243






Average loans

$

7,375,410


$

6,293,497


$

6,048,017






Loan yield, as reported

4.88

%

5.03

%

4.94

%

Loan yield, adjusted

4.49

%

4.51

%

4.42

%



(1)

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $2,770, $2,674 and $3,317 for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively, which increased loan yield by 15 basis points, 17 basis points and 12 basis points for the same periods, respectively.

 


Nine Months Ended


September 30,


September 30,


2017


2016

Taxable equivalent interest income on loans (as reported)

$

243,260



$

217,066


Interest income collected (foregone) on problem loans

4,264



2,610


Accretable yield recognized on purchased loans(1)

17,273



21,135


Interest income on loans (adjusted)

$

221,723



$

193,321






Average loans

$

6,626,848



$

5,811,350






Loan yield, as reported

4.91

%


4.99

%

Loan yield, adjusted

4.47

%


4.44

%



(1)

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $8,185 and $9,616 for the nine months ended September 30, 2017, and September 30, 2016, respectively, which increased loan yield by 17 basis points and 22 basis points for the same periods, respectively.

 

  • Total deposits increased to $8.1 billion at September 30, 2017, from $7.1 billion at December 31, 2016. Noninterest-bearing deposits averaged $1.7 billion, or 22.40% of average deposits, for the first nine months of 2017, compared to $1.4 billion, or 21.79% of average deposits, for the same period in 2016. For the third quarter of 2017, the cost of total deposits was 33 basis points, as compared to 30 basis points for the second quarter of 2017 and 27 basis points for the third quarter of 2016. The cost of total deposits was 31 basis points for the nine months ending September 30, 2017, as compared to 26 basis points over the same time period in 2016.
  • Net interest income was $90.0 million for the third quarter of 2017, as compared to $79.6 million for the second quarter of 2017 and $75.7 million for the third quarter of 2016. Net interest margin was 4.08% for the third quarter of 2017, as compared to 4.27% for the second quarter of 2017 and 4.15% for the third 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):

 


Three Months Ended


September 30,

June 30,

September 30,


2017

2017

2016

Taxable equivalent net interest income (as reported)

$

91,935


$

81,453


$

77,483


Interest income collected (foregone) on problem loans

963


2,734


1,019


Accretable yield recognized on purchased loans (1)

6,259


5,410


6,866


Net interest income (adjusted)

$

84,713


$

73,309


$

69,598






Average earning assets

$

8,944,067


$

7,657,849


$

7,433,461






Net interest margin, as reported

4.08

%

4.27

%

4.15

%

Net interest margin, adjusted

3.76

%

3.84

%

3.72

%



(1)

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $2,770, $2,674 and $3,317 for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively, which increased net interest margin by 12 basis points, 14 basis points and 18 basis points for the same periods, respectively.

 

  • Net interest income was $243.6 million for the first nine months of 2017, as compared to $222.9 million for the same period in 2016. Net interest margin was 4.12% for the first nine months of 2017, as compared to 4.21% 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):

 


Nine Months Ended


September 30,


September 30,


2017


2016

Taxable equivalent net interest income (as reported)

$

249,295



$

228,228


Interest income collected (foregone) on problem loans

4,264



2,610


Accretable yield recognized on purchased loans (1)

17,273



21,135


Net interest income (adjusted)

$

227,758



$

204,483






Average earning assets

$

8,094,838



$

7,233,302






Net interest margin, as reported

4.12

%


4.21

%

Net interest margin, adjusted

3.76

%


3.78

%



(1)

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $8,185 and $9,616 for the nine months ended September 30, 2017, and September 30, 2016, respectively, which increased net interest margin by 14 basis points and 18 basis points for the same periods, respectively.

 

  • Noninterest income for the third quarter of 2017 was $33.4 million, as compared to $38.3 million for the third quarter of 2016. Noninterest income for the first nine months of 2017 was $99.7 million, as compared $107.2 million for the same period in 2016. Mortgage banking income for the third quarter of 2017 was $10.6 million, compared to $15.8 million for the third quarter of 2016. Mortgage banking income for the first nine months of 2017 was $33.5 million, compared to $41.2 million for the same period in 2016. The decrease is driven by lower mortgage loan originations in the current year when compared to the prior year due to a reduction in the refinancing of mortgage loans as interest rates have risen. This impact is compounded by margin compression as a result of increased competition due to a reduction in housing supply in a number of our markets. The decrease in mortgage banking income was slightly offset by the increase in service charges on deposit accounts and fees and commission on loans and deposits. The addition of Metropolitan coupled with growth in fee income on legacy Renasant loan and deposit products contributed to the growth in service charges on deposits and fees and commissions on loans and deposits for the first nine months of 2017 compared to the same period in 2016.
  • Noninterest expense was $80.7 million for the third quarter of 2017, as compared to $76.5 million for the third quarter of 2016. Noninterest expense for the first nine months of 2017 was $224.8 million, as compared $223.5 million for the same period in 2016. Excluding nonrecurring charges for merger and conversion expenses and debt prepayment penalties, noninterest expense remained relatively flat when compared to the third quarter of 2016. This is primarily attributable to a decrease in data processing costs, which were realized through contract renegotiations, and expenses on other real estate owned.

Asset Quality Metrics

Total nonperforming assets were $43.3 million at September 30, 2017, a decrease of $15.5 million from December 31, 2016, and consisted of $25.5 million in nonperforming loans (loans 90 days or more past due and nonaccrual loans) and $17.8 million in other real estate owned ("OREO").

The Company's nonperforming loans and OREO that were purchased in previous acquisitions, including the Metropolitan acquisition (collectively referred to as "purchased nonperforming assets"), were $12.2 million and $13.3 million, respectively, at September 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.

  • Excluding purchased loans, nonperforming loans decreased to $13.3 million, or 0.25% of total loans, at September 30, 2017, from $13.4 million, or 0.28% of total loans, at December 31, 2016. These loans were $14.8 million, or 0.33% of total loans, at September 30, 2016. Early stage delinquencies, or loans 30-to-89 days past due, as a percentage of total loans were 0.23% at September 30, 2017 and December 31, 2016, as compared to 0.22% at September 30, 2016.
  • Excluding purchased OREO, OREO was $4.5 million at September 30, 2017, as compared to $5.9 million at December 31, 2016, and $8.4 million at September 30, 2016. OREO sales totaled $2.3 million in the first nine months of 2017 and $4.2 million in the first nine months of 2016.
  • The allowance for loan losses was 0.60% of total loans at September 30, 2017, as compared to 0.69% at December 31, 2016 and 0.75% at September 30, 2016. The allowance for loan losses was 0.84% of non-purchased loans at September 30, 2017, as compared to 0.91% at December 31, 2016, and 1.01% at September 30, 2016.

Capital Metrics

  • At September 30, 2017, Tier 1 leverage capital ratio was 10.05%, Common Equity Tier 1 ratio was 11.21%, Tier 1 risk-based capital ratio was 12.25%, and total risk-based capital ratio was 14.29%. All regulatory ratios exceed the minimums required to be considered "well-capitalized."
  • Tangible common equity ratio was 9.03% at September 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, October 18, 2017.

The webcast can be accessed through Renasant's investor relations website at www.renasant.com or http://services.choruscall.com/links/rnst171018.html. To access the conference via telephone, dial 1-877-513-1143 in the United States and request the Renasant Corporation Third 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 10113195 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until November 1, 2017.

ABOUT RENASANT CORPORATION:
Renasant Corporation is the parent of Renasant Bank, a 113-year-old financial services institution. Renasant has assets of approximately $10.3 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 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 most directly comparable GAAP financial measure is presented with these non-GAAP measures. 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."

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.

 

null

RENASANT CORPORATION






















(Unaudited)






















(Dollars in thousands, except per share data)








































Q3 2017 -


For The Nine Months Ending





2017


2016


Q3 2016


September 30,





Third


Second


First


Fourth


Third


Second


First


Percent






Percent


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Variance


2017


2016


Variance

Statement of earnings






















Interest income - taxable equivalent basis

$

102,613



$

89,429



$

83,781



$

87,564



$

84,784



$

85,783



$

78,009



21.03



$

275,823



$

248,585



10.96


Interest income

$

100,695



$

87,579



$

81,889



$

85,840



$

83,032



$

84,008



$

76,259



21.27



$

270,163



$

243,299



11.04


Interest expense

10,678



7,976



7,874



7,791



7,301



6,851



6,205



46.25



26,528



20,357



30.31



Net interest income

90,017



79,603



74,015



78,049



75,731



77,157



70,054



18.86



243,635



222,942



9.28


Provision for loan losses

2,150



1,750



1,500



1,650



2,650



1,430



1,800



(18.87)



5,400



5,880



(8.16)



Net interest income after provision

87,867



77,853



72,515



76,399



73,081



75,727



68,254



20.23



238,235



217,062



9.75


Service charges on deposit accounts

8,676



7,958



7,931



8,163



8,200



7,521



7,991



5.80



24,565



23,712



3.60


Fees and commissions on loans and deposits

5,618



5,470



5,199



4,772



4,921



4,877



4,244



14.16



16,287



14,042



15.99


Insurance commissions and fees

2,365



2,181



1,860



1,951



2,420



2,175



1,962



(2.27)



6,406



6,557



(2.30)


Wealth management revenue

2,963



3,037



2,884



2,849



3,040



2,872



2,891



(2.53)



8,884



8,803



0.92


Securities gains (losses)

57











1,257



(71)



100.00



57



1,186



(95.19)


Mortgage banking income

10,616



12,424



10,504



8,262



15,846



13,420



11,915



(33.01)



33,544



41,181



(18.54)


Other

3,118



3,195



3,643



4,258



3,845



3,464



4,370



(18.91)



9,956



11,679



(14.75)



Total noninterest income

33,413



34,265



32,021



30,255



38,272



35,586



33,302



(12.70)



99,699



107,160



(6.96)


Salaries and employee benefits

48,530



45,014



42,209



39,966



44,702



45,387



42,393



8.56



135,753



132,482



2.47


Data processing

4,179



3,835



4,234



4,503



4,560



4,502



4,158



(8.36)



12,248



13,220



(7.35)


Occupancy and equipment

9,470



8,814



9,319



8,809



8,830



8,531



8,224



7.25



27,603



25,585



7.89


Other real estate

603



781



532



1,585



1,540



1,614



957



(60.84)



1,916



4,111



(53.39)


Amortization of intangibles

1,766



1,493



1,563



1,624



1,684



1,742



1,697



4.87



4,822



5,123



(5.88)


Merger and conversion related expenses

6,266



3,044



345





268



2,807



948



2,238.06



9,655



4,023



140.00


Debt extinguishment penalty





205





2,210



329





(100.00)



205



2,539



(91.93)


Loss share termination







2,053















-


Other

9,846



11,860



10,902



13,018



12,674



12,347



11,437



(22.31)



32,608



36,458



(10.56)



Total noninterest expense

80,660



74,841



69,309



71,558



76,468



77,259



69,814



5.48



224,810



223,541



0.57


Income before income taxes

40,620



37,277



35,227



35,096



34,885



34,054



31,742



16.44



113,124



100,681



12.36


Income taxes

14,199



11,993



11,255



11,461



11,706



11,154



10,526



21.30



37,447



33,386



12.16



Net income

$

26,421



$

25,284



$

23,972



$

23,635



$

23,179



$

22,900



$

21,216



13.99



$

75,677



$

67,295



12.46


Basic earnings per share

$

0.54



$

0.57



$

0.54



$

0.56



$

0.55



$

0.54



$

0.53



(1.82)



$

1.64



$

1.62



1.23


Diluted earnings per share

0.53



0.57



0.54



0.55



0.55



0.54



0.52



(3.64)



1.64



1.61



1.86


Average basic shares outstanding

49,316,572



44,415,423



44,364,337



42,441,588



42,091,164



42,066,168



40,324,475



17.17



46,050,250



41,500,407



10.96


Average diluted shares outstanding

49,434,850



44,523,541



44,480,499



42,636,325



42,310,358



42,303,626



40,559,145



16.84



46,167,764



41,729,908



10.63


Common shares outstanding

49,320,225



44,430,335



44,394,707



44,332,273



42,102,224



42,085,690



40,373,753



17.14



49,320,225



42,102,224



17.14


Cash dividend per common share

$

0.18



$

0.18



$

0.18



$

0.18



$

0.18



$

0.18



$

0.17





$

0.54



$

0.53



1.89


Performance ratios






















Return on avg shareholders' equity

7.01

%


8.06

%


7.80

%


8.14

%


8.12

%


8.21

%


8.12

%




7.58

%


8.15

%



Return on avg tangible s/h's equity (1)

12.74

%


13.76

%


13.48

%


14.90

%


15.15

%


15.57

%


15.58

%




13.30

%


15.42

%



Return on avg assets

1.02

%


1.16

%


1.11

%


1.09

%


1.08

%


1.08

%


1.07

%




1.09

%


1.08

%



Return on avg tangible assets (2)

1.13

%


1.28

%


1.23

%


1.22

%


1.20

%


1.20

%


1.20

%




1.21

%


1.20

%



Net interest margin (FTE)

4.08

%


4.27

%


4.01

%


4.24

%


4.15

%


4.29

%


4.21

%




4.12

%


4.21

%



Yield on earning assets (FTE)

4.55

%


4.68

%


4.43

%


4.66

%


4.54

%


4.66

%


4.57

%




4.56

%


4.59

%



Cost of funding

0.49

%


0.43

%


0.43

%


0.42

%


0.40

%


0.38

%


0.37

%




0.45

%


0.38

%



Average earning assets to average assets

87.03

%


87.81

%


87.55

%


87.10

%


86.82

%


86.59

%


86.21

%




87.44

%


86.55

%



Average loans to average deposits

90.96

%


88.03

%


86.81

%


88.89

%


89.40

%


87.73

%


87.39

%




88.72

%


88.20

%



Noninterest income (less securities gains/























losses) to average assets

1.29

%


1.58

%


1.48

%


1.40

%


1.78

%


1.62

%


1.69

%




1.44

%


1.69

%



Noninterest expense (less debt prepayment penalties/























merger-related expenses) to average assets