Renasant Corporation Announces Earnings For The Third Quarter Of 2019 And New $50 Million Stock Repurchase Program

TUPELO, Miss., Oct. 21, 2019 /PRNewswire/ -- Renasant Corporation (NASDAQ: RNST) (the "Company") today announced earnings results for the third quarter of 2019. Net income for the third quarter of 2019 was $37.4 million, as compared to $32.0 million for the third quarter of 2018. Basic and diluted earnings per share ("EPS") were $0.65 and $0.64, respectively, for the third quarter of 2019, as compared to basic and diluted EPS of $0.61 for the third quarter of 2018.

Net income for the nine months ending September 30, 2019, was $129.2 million, as compared to $102.5 million for the same period in 2018. Basic and diluted EPS were $2.21 for the first nine months of 2019, as compared to basic and diluted EPS of $2.03 for the same period in 2018.

"We closed the quarter with solid results and maintained strong performance ratios despite feeling the impact from Durbin for the first time," said Renasant Chairman, E. Robinson McGraw. "We completed our previously announced $50 million share repurchase program in early October and our Board approved another $50 million share repurchase program. Additionally during the third quarter, we redeemed the subordinated notes we assumed as part of the Brand acquisition. The repurchase programs support our strategy of returning capital to our shareholders while also maintaining a strong capital position."

The Company continues to capitalize on market disruption across its footprint by hiring new production team members. The Company's net income for the third quarter and first nine months of 2019 includes approximately $2.6 million and $3.7 million, respectively, in after-tax expense related to team members that have joined the Company in the first nine months of 2019.  The expense related to these strategic hires decreased diluted EPS by $0.05 and $0.07, respectively, for the quarter and the nine months ended September 30, 2019.

"The third quarter results were highlighted by strong loan growth and a continued focus on growing non-interest bearing deposits," commented C. Mitchell Waycaster, Renasant President and Chief Executive Officer. "Our team did a tremendous job of executing our growth strategy during the quarter, even as accelerated payoffs remain at record levels for the Company. The legacy production team had a very strong quarter, and we are on track with the plan previously laid out for our new production team members."

Impact of Certain Expenses and Charges

From time to time, the Company incurs expenses and charges in connection with certain transactions 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 table presents the impact of these expenses and charges on reported earnings per share for the dates presented (in thousands, except per share data):

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. 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 table presents the Company's profitability metrics, including and excluding the impact of after-tax merger and conversion expenses, debt prepayment penalties and mortgage servicing rights (MSR) valuation adjustment, as applicable, for the dates presented:

Financial Condition

Total assets were $13.04 billion at September 30, 2019, as compared to $12.93 billion at December 31, 2018. The Company's financial condition, as well as its results of operations as of and for the three and nine months ended September 30, 2019, include the impact of the Company's acquisition of Brand Group Holdings, Inc., which was completed on September 1, 2018.

Total loans held for investment were $9.31 billion at September 30, 2019 as compared to $9.08 billion at December 31, 2018. Loans not purchased increased $642.1 million to $7.03 billion at September 30, 2019 as compared to $6.39 billion at December 31, 2018. During the third quarter, the Company reclassified a group of non-mortgage consumer loans from the held for sale category to  the held for investment category; $123.9 million of these loans are included in the September 30, 2019 held for investment balance. Excluding the reclassification, the Company had linked-quarter annualized total of 5.93% and  linked-quarter annualized non-purchased loan growth of 17.43%.

Total deposits increased to $10.29 billion at September 30, 2019, from $10.13 billion at December 31, 2018. The Company continued its focus on growing non-interest bearing deposits during the third quarter, resulting in an increase in non-interest bearing deposits of $198.1 million on a linked quarter basis. Since the beginning since 2019, the Company's non-interest baring deposits have grown $288.4 million. Non-interest bearing deposits were $2.61 billion, or 25.35% of total deposits, at September 30, 2019 as compared to $2.32 billion, or 22.89% of total deposits, at December 31, 2018.

Results of Operations

Net interest income was $108.8 million for the third quarter of 2019, as compared to $112.8 million for the second quarter of 2019 and $99.4 million for the third quarter of 2018. The following table presents reported taxable equivalent net interest margin and yield on loans, including loans held for sale, for the periods presented (in thousands).

The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans, including loans held for sale, loan yield and net interest margin is shown in the following table for the periods presented (in thousands).

Net interest income was $334.8 million for the first nine months of 2019, as compared to $281.1 million for the same period in 2018. The following table presents reported taxable equivalent net interest margin and yield on loans, including loans held for sale, for the periods presented (in thousands).

The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans, including loans held for sale, loan yield and net interest margin is shown in the following table for the periods presented (in thousands).

For the third quarter of 2019, the cost of total deposits was 84 basis points, as compared to 83 basis points for the second quarter of 2019 and 60 basis points in the third quarter of 2018. The cost of total deposits was 82 basis points for the first nine months of 2019, as compared to 51 basis points for the same period in 2018. The table below presents, by type, our funding sources and the total cost of each funding source for the periods presented:

Noninterest income for the third quarter of 2019 was $38.0 million, as compared to $42.0 million for the second quarter of 2019 and $38.1 million for the third quarter of 2018. Effective July 1, 2019, the Company became subject to the limitations on interchange fees imposed by the Durbin Amendment under the Dodd-Frank Act, which resulted in a $3.0 million reduction in fees and commissions on loans and deposits in the third quarter of 2019. Mortgage banking income for the third quarter of 2019 was $15.7 million, compared to $16.6 million for the second quarter of 2019 and $14.4 million for the third quarter of 2018. Mortgage banking income during the third quarter of 2019 was negatively impacted by a MSR valuation adjustment of $3.1 million.

Noninterest expense was $96.5 million for the third quarter of 2019, as compared to $93.3 million for the second quarter of 2019 and $94.7 million for the third quarter of 2018. The Company experienced an increase in salaries and employee benefits during the quarter. This was primarily driven by the impact from new hires made throughout the footprint and the impact from the wholesale mortgage acquisition in the second quarter of 2019. The Company's efficiency ratio (GAAP) was 65.10% for the third quarter of 2019 and 61.25% for the first nine months of 2019, while its adjusted efficiency ratio (non-GAAP) was 62.53% and 59.47% for the same respective periods. The adjusted efficiency ratio excludes charges for merger and conversion expenses, debt extinguishment penalties, amortization of intangible assets, gains and losses on the sale of securities and the MSR valuation adjustment.

Completion of Previously Announced Stock Repurchase Program and Announcement of New $50 Million Stock Repurchase Program

The Company completed its previously announced $50.0 million stock repurchase program during the first week of October 2019.  In the third quarter of 2019, the Company repurchased $28.7 million of common stock at a weighted average price of $33.72, with the remaining $1.3 million repurchased during the first week of October. The weighted average price of all shares of common stock repurchased over the entire repurchase program was $34.45.

On October 15, 2019, the Company's Board of Directors approved a new stock repurchase program, 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 stock 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 by the Board of Directors.

Additionally, the Company redeemed its $30.0 million principal amount 8.50% subordinated notes during the third quarter of 2019.  These subordinated notes were assumed as part of the Brand acquisition.

At September 30, 2019, Tier 1 leverage capital ratio was 10.56%, Common Equity Tier 1 ratio was 11.36%, Tier 1 risk-based capital ratio was 12.40%, and total risk-based capital ratio was 14.07%. All regulatory ratios exceed the minimums required to be considered "well-capitalized."

Our ratio of shareholders' equity to assets was 16.26% at September 30, 2019, as compared to 15.80% at December 31, 2018. Our tangible capital ratio (non-GAAP) was 9.46% at September 30, 2019, as compared to 8.92% at December 31, 2018.

Asset Quality Metrics

Total nonperforming assets were $44.4 million at September 30, 2019, an increase of $7.4 million from December 31, 2018, and consisted of $36.2 million in nonperforming loans (loans 90 days or more past due and nonaccrual loans) and $8.2 million in other real estate owned ("OREO").

The Company's nonperforming loans and OREO that were purchased in previous acquisitions (collectively referred to as "purchased nonperforming assets") were $13.2 million and $6.2 million, respectively, at September 30, 2019, as compared to $13.1 million and $6.2 million, respectively, at December 31, 2018. 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 were $23.1 million, or 0.33% of total non-purchased loans, at September 30, 2019, as compared to $12.9 million, or 0.20% of total non-purchased loans, at December 31, 2018. Early stage delinquencies, or loans 30-to-89 days past due, as a percentage of total non-purchased loans were 0.18% at September 30, 2019, as compared to 0.27% at December 31, 2018.
• Non-purchased OREO was $2.0 million at September 30, 2019, as compared to $4.9 million at December 31, 2018. Non-purchased OREO sales totaled $3.8 million in the first nine months of 2019.
• The allowance for loan losses was 0.55% of total loans held for investment at September 30, 2019, as compared to 0.54% at December 31, 2018. The allowance for loan losses was 0.72% of total non-purchased loans at September 30, 2019, as compared to 0.77% at December 31, 2018.
• Net loan charge-offs were $945 thousand, or 0.04% of average loans held for investment on an annualized basis, for the third quarter of 2019, as compared to $995 thousand, or 0.05% of average loans on an annualized basis, for the third quarter of 2018. Net loan charge-offs were $2.3 million, or 0.03% of average loans on an annualized basis, for the first nine months of 2019, as compared to $3.4 million, or 0.06% of average loans on an annualized basis, for the same period in 2018.
• The provision for loan losses was $1.7 million for the third quarter of 2019, as compared to $2.3 million for the third quarter of 2018. The provision was $4.1 million for the first nine months of 2019, as compared to $5.8 million for the same time period in 2018.

CONFERENCE CALL INFORMATION:

A live audio webcast of a conference call with analysts will be available beginning at 10:00 AM Eastern Time on Tuesday, October 22, 2019.

The webcast can be accessed through Renasant's investor relations website at www.renasant.com or https://services.choruscall.com/links/rnst191022.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.combeginning 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 10135897 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until November 5, 2019.

ABOUT RENASANT CORPORATION:
Renasant Corporation is the parent of Renasant Bank, a 115-year-old financial services institution. Renasant has assets of approximately $13.0 billion and operates more than 190 banking, mortgage, wealth management and insurance offices in Mississippi, Tennessee, Alabama, Florida and Georgia.

NOTE TO INVESTORS:
This press release may contain, or incorporate by reference, statements which 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," "approximately," "should" and variations of such words 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. 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 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 expressly disclaims 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.

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, 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 and the adjusted efficiency ratio. These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets and/or certain charges (such as, when applicable, merger and conversion expenses, debt prepayment penalties 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. 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 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 and charges such as merger and conversion expenses 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.