Renasant Announces Record $23.2 Million in 2016 Third Quarter Earnings

TUPELO, Miss., Oct. 18, 2016 /PRNewswire/ -- Renasant Corporation (NASDAQ: RNST) (the "Company") today announced its financial results for the third quarter of 2016.  Net income for the third quarter of 2016 was $23.18 million, or basic and diluted earnings per share ("EPS") of $0.55, an increase of 42.90% from $16.22 million, or basic and diluted EPS of $0.40, for the third quarter of 2015.  

The Company incurred pre-tax merger and conversion expenses of $268 thousand, equal to $178 thousand on an after-tax basis, during the third quarter of 2016 which had an immaterial impact on reported diluted EPS, as compared to pre-tax merger and conversion expenses incurred during the third quarter of 2015 of $7.75 million, equal to $5.24 million on an after-tax basis, which reduced diluted EPS by $0.13 for such quarter.  In connection with the prepayment of approximately $38.89 million in long term advances from the Federal Home Loan Bank ("FHLB") in the third quarter of 2016, the Company incurred prepayment penalty charges of $2.21 million, equal to $1.47 million on an after-tax basis, which reduced diluted EPS by $0.04.  The Company did not incur any FHLB prepayment penalties in the third quarter of 2015.  Excluding the impact of after-tax merger and conversion expenses and debt prepayment penalties incurred during each quarter, diluted EPS was $0.59 for the third quarter of 2016, as compared to $0.53 for the third quarter of 2015.

The Company's balance sheet and results of operations as of and for the three months ending September 30, 2016, include the impact of the Company's acquisition of KeyWorth Bank ("KeyWorth"), a Georgia state bank headquartered in Atlanta, Georgia, which was completed on April 1, 2016. As of the acquisition date, KeyWorth operated six offices in the Atlanta metropolitan area and had approximately $399 million in assets, approximately $284 million in total loans, and approximately $347 million in total deposits.  The assets acquired and liabilities assumed were recorded at estimated fair value as of the acquisition date and are subject to change pending finalization of all valuations.

On August 22, 2016, the Company completed the public offering and sale of $60 million of its 5.00% fixed-to-floating rate subordinated notes due September 1, 2026, and $40 million of its 5.50% fixed-to-floating rate subordinated notes due September 1, 2031 (collectively, the "Notes"). The Notes were sold at par, resulting in net proceeds, after deducting underwriting discounts and expenses, of approximately $98.17 million.  The Company intends to use the net proceeds from the Notes offerings for general corporate purposes, which may include providing capital to support the Company's growth organically or through strategic acquisitions, repaying indebtedness and financing investments and capital expenditures, and for investments in the Bank as regulatory capital.

For the third quarter of 2016, the Company's return on average assets and return on average equity were 1.08% and 8.12%, respectively, as compared to 0.81% and 6.33%, respectively, for the third quarter of 2015.  The Company's 2016 third quarter return on average tangible assets and return on average tangible shareholders' equity were 1.20% and 15.15%, respectively, as compared to 0.93% and 12.20%, respectively, for the third quarter of 2015.

The following table presents the Company's profitability metrics for the third quarter of 2016, including and excluding the impact of after-tax merger and conversion expenses and debt prepayment penalties:

"We are pleased with our third quarter financial results highlighted by 21.64% annualized linked quarter growth in our non-acquired loan portfolio and a strong performance from our mortgage division.  These metrics, among others, contributed to a return on average tangible assets of 1.28%, when excluding merger and conversion expenses and debt prepayment penalties," said Renasant Chairman and Chief Executive Officer, E. Robinson McGraw. "Furthermore, the successful issuance of our subordinated notes at preferable interest rates provides us the ability to continue to capitalize on opportunities either through organic balance sheet growth or accretive acquisition opportunities."

Total assets as of September 30, 2016, were approximately $8.54 billion, as compared to $7.93 billion as of December 31, 2015.

Total loans, including loans acquired in the KeyWorth, Heritage Financial Group, Inc. ("Heritage"), and First M&F Corporation ("First M&F") acquisitions or in FDIC-assisted transactions (collectively referred to as "acquired loans"), were approximately $6.11 billion at September 30, 2016, as compared to $5.41 billion at December 31, 2015.  Excluding acquired loans, loans grew 18.16% to $4.53 billion at September 30, 2016, as compared to $3.83 billion at December 31, 2015.  Non-acquired loans were $3.61 billion at September 30, 2015.

Total deposits were $6.82 billion at September 30, 2016, as compared to $6.22 billion at December 31, 2015.  Noninterest-bearing deposits averaged approximately $1.51 billion, which represents 22.32% of the Company's average deposits, for the third quarter of 2016, as compared to $1.27 billion, or 20.38% of average deposits, for the third quarter of 2015.  The Company's cost of funds was 40 basis points for the third quarter of 2016, as compared to 33 basis points for the same quarter in 2015.

As of September 30, 2016, the Company's Tier 1 leverage capital ratio was 9.38%, its Common Equity Tier 1 risk-based capital ratio was 10.16%, its Tier 1 risk-based capital ratio was 11.57%, and its total risk-based capital ratio was 13.84%. The Company's regulatory capital ratios continue to be in excess of the regulatory minimums required to be classified as "well-capitalized."  At September 30, 2016, our tangible common equity ratio was 8.03%.

Net interest income was $75.73 million for the third quarter of 2016, as compared to $68.61 million for the third quarter of 2015. Net interest margin was 4.15% for the third quarter of 2016, as compared to 4.09% for the third quarter of 2015.  Additional interest income recognized in connection with the acceleration of pay downs and payoffs from acquired loans increased net interest margin by $3.40 million, or 18 basis points, in the third quarter of 2016 and $726 thousand, or 4 basis points, in the third quarter of 2015.

The Company's noninterest income is derived from diverse lines of business which primarily consist of originations and sales of mortgage loans, wealth management and insurance revenue sources along with income from deposit and loan products.  Total noninterest income was $38.27 million for the third quarter of 2016, as compared to $32.08 million for the third quarter of 2015. The Company's overall increase in noninterest income for the third quarter, as compared to the same period in the prior year, is primarily attributable to an increase in mortgage banking income and the KeyWorth acquisition.

Noninterest expense was $76.47 million for the third quarter of 2016, as compared to $75.98 million for the third quarter of 2015.  The Company recorded merger and conversion expenses of approximately $268 thousand and $7.75 million during the third quarter of 2016 and 2015, respectively.  During the current quarter, the Company recognized a penalty charge of $2.21 million in connection with the prepayment of approximately $38.89 million in borrowings from the FHLB.  No such charge was incurred during the third quarter of 2015.  After considering these expenses, which are typically nonrecurring, the Company's overall growth in noninterest expense for the third quarter, as compared to the same period in the prior year, is primarily attributable to the addition of KeyWorth operations. 

Annualized net charge-offs as a percentage of average loans were 0.05% for the third quarter of 2016, as compared to 0.04% for the third quarter of 2015. The Company recorded a provision for loan losses of $2.65 million for the third quarter of 2016, as compared to $750 thousand for the third quarter of 2015.  The increase in provision is primarily attributed to the Company's loan growth over such period.

Nonperforming assets consists of loans 90 days or more past due, nonaccrual loans and other real estate owned ("OREO").  The following table provides details of the Company's nonperforming assets as of the dates presented (in thousands):

Since the nonperforming assets acquired in previous acquisitions or in connection with FDIC-assisted transactions (collectively referred to as "acquired nonperforming assets") were recorded at fair value at the time of acquisition or are subject to loss-share agreements with the FDIC, which significantly mitigates the Company's actual loss, the remaining information in this release on nonperforming loans, OREO and the related asset quality ratios excludes these acquired nonperforming assets. 

The Company's nonperforming loans (loans 90 days or more past due and nonaccrual loans) were $14.77 million as of September 30, 2016, as compared to $14.97 million as of December 31, 2015. Nonperforming loans as a percentage of total loans were 0.33% as of September 30, 2016, as compared to 0.39% as of December 31, 2015.

The allowance for loan losses totaled $45.92 million at September 30, 2016, as compared to $42.05 million as of September 30, 2015, and $42.44 million as of December 31, 2015.  The allowance for loan losses as a percentage of loans was 1.01% as of September 30, 2016, as compared to 1.17% as of September 30, 2015, and 1.11% as of December 31, 2015.

The Company's coverage ratio, or its allowance for loan losses as a percentage of nonperforming loans, was 310.95% as of September 30, 2016, as compared to 277.22% as of September 30, 2015, and 283.46% as of December 31, 2015. Loans 30-to-89 days past due as a percentage of total loans were 0.22% at September 30, 2016, as compared to 0.23% at September 30, 2015, and 0.19% at December 31, 2015. 

OREO was $8.43 million as of September 30, 2016, as compared to $12.99 million at December 31, 2015.  The Company continues to proactively market the properties held in OREO as it sold approximately $4.18 million of OREO during the nine months ended September 30, 2016.

CONFERENCE CALL INFORMATION:

The Company will hold executive management's quarterly webcast and conference call with analysts on Wednesday, October 19, 2016 at 10:00 AM Eastern Time (9:00 AM Central Time).    The webcast can be accessed through Renasant's investor relations website at www.renasant.com or http://services.choruscall.com/links/rnst161019.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 10094427 or by dialing 1-412-317-0088 internationally and entering the conference number. Telephone replay access is available until November 2, 2016.

ABOUT RENASANT CORPORATION:

Renasant Corporation is the parent of Renasant Bank, a 112-year-old financial services institution. Renasant has assets of approximately $8.5 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 our portfolio of outstanding loans, and competition in our markets. We undertake 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.  These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets, which the Company's management uses 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 can vary extensively from company to company and 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.

The specific non-GAAP financial measures used are return on average tangible shareholders' equity, return on average tangible assets and the ratio of tangible equity to tangible assets (commonly referred to as the "tangible capital ratio").  The presentation of this non-GAAP financial 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.

Reconciliations of these 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."