Renasant Corporation Aktie

Good day, and welcome to the Renasant Corporation's 2026 Third Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Kelly Hutcheson. 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, realization of the projected financial metrics from our recently announced merger with Commercial Holding Company and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release and the press release announcing the proposed merger, both of which have been posted to our corporate site, www.renasant.com at the Press Releases link under the News and Market Data tab.

We undertake no obligation, and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures in our earnings release to the most comparable GAAP measures can be found in such release.

And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman.

Thank you, Kelly, and good morning. Third quarter results continue to show momentum in achieving our financial goals, adding talent and gaining market share. Adjusted earnings per share in the third quarter were $0.86, up 12% from 1 year ago. Adjusted return on average assets was 1.16% in the quarter compared to 1.09% in the same period last year. Similarly, adjusted return on average tangible common equity was 14.5% versus 14.2% in the third quarter of '25. The efficiency ratio also improved to 57.7% this quarter.

Our core business continues to perform well. Highlights this quarter include strong loan and core deposit growth, a record level of loan production, a stable core net interest margin, a reduction in problem credits, a reduction in expenses and continued buybacks. While EPS declined linked quarter, this was primarily due to a higher provision driven by the ramp in loan growth.

In addition, we are pleased this morning to announce the merger with Commercial Bank & Trust, which will strengthen our presence in Memphis and provide solid, long-tenured deposit and wealth management relationships throughout Western Tennessee. We are looking forward to welcoming Mott Ford and the commercial team to Renasant. And importantly, we do not believe this deal will distract us from the market share opportunities we continue to see across our footprint. Altogether, Renasant is in a great position to continue to improve financial performance and capitalize on growth opportunities and the commercial acquisition will be additive to that momentum.

I will now turn the call over to Jim to provide more details on the financial results.

Thank you, Kevin, and good morning. Looking at the balance sheet, loans were up $555.9 million on a linked-quarter basis or 11.5% annualized. Deposits were down $73.2 million from the second quarter or 1.3% annualized, primarily due to outflows of public fund deposits and a couple of larger noncore higher cost relationships, offset by about 8% annualized growth in consumer and commercial deposits. Reported net interest margin decreased 6 basis points to 3.77%, while adjusted margin was down 2 (sic) [ 3 ] basis points at 3.58%. Excluding the accelerated bond discount accretion last quarter, core net interest margin was up 2 basis points linked quarter.

Our total cost of deposits increased by only 1 basis point to 1.97%, while our adjusted loan yields increased 5 basis points to 6.08%. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $13.3 million comprised of $10.1 million for funded loans and $3.2 million for unfunded commitments. Net charge-offs were $10 million and the ACL as a percentage of total loans declined 4 basis points quarter-over-quarter to 1.50%.

Turning to the income statement. Our pre-provision net revenue was $112.6 million. Net interest income was $228.6 million, an increase of $0.9 million quarter-over-quarter. Excluding fair value accretion and the accelerated bond discount accretion last quarter, core net interest income increased $5.8 million linked quarter or 11% annualized.

Noninterest income was $49.3 million in the third quarter, a linked quarter decrease of $1.9 million, which was primarily driven by a decrease in mortgage banking income. Noninterest expense was $160.3 million for the third quarter, a linked quarter decrease of $1.2 million, mostly driven by a decline in deferred compensation accruals. As to the Commercial Bank & Trust transaction, we have provided a supplementary slide deck with details on this transaction. A few highlights. The deal value is approximately $140 million and is comprised of roughly 75% stock and 25% cash.

Slide 4 provides an overview of Commercial's high-quality, low-cost core deposit base. We anticipate the deal to be approximately 4% accretive to EPS and 1.5% dilutive to tangible book value per share with an estimated earn-back of just under 2 years. We expect to see modest diminution to the capital ratios with CET1 being approximately 11% at close. We anticipate the deal to close sometime in the first quarter of 2027.

I will now turn the call back over to Kevin.

Thank you, Jim. We believe that Renasant is in a great position to continue high levels of performance while also taking advantage of opportunities created by industry consolidation. 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.

[Operator Instructions] Our first question comes from Stephen Scouten with Piper Sandler.

I guess maybe if I could start on deposits and just kind of thinking about with the strong loan growth you saw, how you think about the ability to fund that growth with deposit growth. I know you talked a lot about new customers coming on board recently. So just how that's developing and what you think can manifest moving forward?

Yes. So yes, look, as we look at deposit growth, and look, if you look at total deposits, there's some noise in there, and we tried to lay out what that noise is, particularly with some of our public funds. But if you look underneath that, core deposits continue to grow at an appreciable rate. I think in Q3, that number was close to a little bit over $300 million. And so the seasonality we see with public funds, you'll start to see that reverse as we get into the end of this year or early next year. So that will stop being a headwind and become a tailwind. But that hasn't distracted us or taken us away from the opportunity of growing core deposits.

And also just on that public funds and maybe a little bit of insight is what the market is providing us with an opportunity is as we look at our cost of deposits relative to our peers, it's a tick or 2 higher than where we want it to be. Our cost of deposit is a little bit higher. And we can attribute that largely to some of the makeup and a little bit of a concentration in public funds. And so over time, we want to reduce that reliance. There's typically a higher costing, particularly in today's time where funding is more prevalent, everybody is looking for funding. The cost of those public funds have gone up.

And the market opportunity has given us the ability to remix that funding. And really, it's driven on an effort to bring our cost of deposits down back in line with our peer and isolating that one difference. But as we look out, we feel that having a balance sheet that -- or a strategy with growing our balance sheet in the mid-single digits that over time, that allows us to properly fund it. And so I know this quarter, deposits didn't keep up with the loan growth. But over time, we expect that to be more in balance and more in line.

Okay. Great. And then maybe thinking about the deal alongside of that, it looks like a really nice deposit base, 150-year-old bank with a low loan-to-deposit ratio. Is that one of the primary strategic motivators on this deal? Or can you talk a little bit about what you liked and what drove that decision?

Yes. No, thank you. And it is. We -- just a continued focus of growing a stable core deposit base. That's been our focus organically. And then the opportunity with M&A to augment to complement that is something that I think we've talked about that we would look at that. And I think if you look at commercial and what it represents a very strong core funded deposit base with complementary wealth management that fits exactly the type of opportunity that would complement what we're doing. Said another way, I'm not sure right now we have a limit to our appetite on core deposits.

We continue to feel and see that deposits and funding are tightening up. That is our #1 focus is continuing to grow our core deposit base. This just gives us a complementary opportunity to bolster and enhance what we're already working on at Renasant and frankly, what we already have at Renasant, but it just complements. And look, future opportunities that may fit a similar profile, we would absolutely look at. But I would say right now, our focus is commercial and ensuring that we have a successful conversion and integration of their employees, our new teammates as well as our new customers.

Got it. And just maybe last for me. With the strong loan growth and a pending deal, does that inhibit you from the repurchase utilization in the near-term at all?

Jim, do you want to take that?

Stephen, it's Jim. So clearly, as you point out, we've got some cash in the deal mix. And that probably at the margin, temper a little bit what we do in terms of buybacks, but buybacks are very much on the table. The Board reauthorized our program yesterday at $175 million. So we do intend to be active. It just may not be quite as active over the next 12 months as it was over the prior, but we'll see sort of what emerges in the environment and what goes on with our share price and other things, but intend to be active, just maybe not quite as active as we have been.

Yes. Makes sense when you can deploy it into acquiring low-cost deposits.

Our next question comes from Michael Rose with Raymond James.

Jim, I appreciate the color around the core NIM and some of the accelerated accretion this quarter. I think you said it was up 2 basis points [ for some ] of that. Just how should we think about the next quarter or so, just given the response to some of Stephen's questions around deposits and the like? Just trying to get a better sense for how that core NIM should move forward from here.

So yes, I think probably like I think a lot of banks in the quarter, we feel good about the behavior of core NIM going forward. And so I would say that our outlook, assuming, I guess, as I think about the next few quarters, I think we're sort of modeling a December and 2 other hikes in '27. And with that outlook, generally, we think there's some modest upside potential in that NIM. So -- and as you point out, we had good behavior in the NIM from Q2 to Q3, particularly when you make allowance for the fact that we -- Q2's NIM was a little higher than usual because of that extraordinary item.

So we feel really good about behavior. Our core deposit cost was up, I think, 1 basis point. Loan yields were up nicely in the quarter. And if we look at sort of data from the end of Q3 and September data, all those things point to modest improvement to the NIM over the next quarter or 2.

Very helpful, Jim. I appreciate it. And then, Kevin, obviously, very strong loan growth this quarter. Obviously, very strong loan production, a record moderating payoffs. How much of that acceleration really is from some of the investments you've made in talent over the past year or so versus maybe market disruption? Just trying to kind of level set what the drivers were. It seems like everything clicked this quarter. And I think you had talked about kind of a mid-single-digit loan growth kind of outlook. Is that the way we should think about 2027? Or could it be potentially stronger just given some of those dynamics that I just laid out?

Yes. So thank you, Michael. Just the last part of your question first. So we still feel confident that mid-single-digit balance sheet growth is the appropriate level of growth. And I mean, look, as we see the environment and our outlook, we are still optimistic about being able to grow the balance sheet. We still have good commentary and dialogue with our customers. But I think that there's any hesitation to try to move that number up from the mid-single digits. It's just more concerned about from a macro backdrop. And so as we get clarity about what the macroeconomic looks like, then we might have a little bit more confidence to kind of push that number up. But right now, I think we're still very set on mid-single-digit growth, and that's the appropriate level.

As it relates to where that growth is coming from, I'd say it's coming from all across the company. If we look at it from a geographic or from a region standpoint, everybody is contributing. We look at some of our specialty lines, our secured lending, everybody is contributing. When we look at credit channels, whether it's consumer or commercial or small business or larger corporate, again, everybody is contributing to this. It's not coming from a single all for one source. And honestly, that's exciting to see because it means everybody is plugged in and capturing opportunity throughout the market.

And also, I think it's indicative of the investments that we made, not so much this year in the talent that we've hired, but really bringing The First and their team on board and allowing them to continue to achieve success, expand opportunity, capabilities. I think that's what we're seeing this year, which means the built-up demand, the opportunity from the hiring that we've done this year. And by the way, we -- this past quarter, we added another 11 revenue producers to the team. There will be the opportunity to continue to take market share that isn't quite reflected in the balance sheet yet.

And I would just add to that, Michael, on the right-hand side of the balance sheet, Kevin spoke earlier that underlying core deposit growth was around 8% annualized for the quarter. And of that 8%, a little over half, almost 60% of that 8% were from deposit customers who were new to Renasant, who previously had no account with Renasant. So I think that speaks. And we had that in Q2 as well. So I think the momentum certainly on the right-hand side of the balance sheet is there, and we expect that to carry over on the left-hand side of the balance sheet in terms of market share gains and net new customers to Renasant.

Yes. And sorry, just to continue to belabor a point, but I mentioned just some of the uncertainty about the macro outlook. And again, I just want to level set the mid-single digits because we don't want to try to force balance sheet growth. And we already see very tight competition from a yield standpoint. So if we set higher levels of expectations or just try to push to get higher levels of growth, we may have to give on something to be able to get that.

And we're not going to sacrifice credit. We're not going to sacrifice yield. We're going to be relevant. We're going to be competitive, but don't want to try to force something and make a bad decision just because we're trying to set an expectation of higher levels of balance sheet growth. We need it to come at the proper level of margin and have the proper level of underwriting and credit risk as well. So that's just to level set. And I think we've talked about this in the past, that mid-single digit, we feel that gives us the ability to have a stable to expanding margin and grow the balance sheet at our historical credit risk.

The next question comes from Matt Olney at Stephens.

I'll ask about just expenses, saw some really good trends in the third quarter. And you mentioned, Kevin, hiring a number of new producers in 3Q on top of the adds that we saw in the first half of the year. So it looks like expense trends are kind of well contained. Would love to appreciate any additional outlook here on the expense outlook.

Matt, this is Jim. So yes, we were pleased with the behavior of the expense line in the quarter and to see that number continue to trend down. I think as we look to Q4, our outlook is for a slight increase in expenses, which could almost be 100% tied to what Kevin referred to earlier, and that's hires. We've had really good success on taking advantage of the dislocation and making some key hires, and we expect that to continue in Q4. So I would say that core behavior away from dislocation opportunities remains very solid and steadfast. But again, I think you'll see the number inch up a little bit because of the hires we've made. The other thing I'd mention, which, of course, you would appreciate, there'll probably be a little bit of noise in Q4 because we've got -- we'll have likely some merger expenses related to commercial.

Okay. Great. I appreciate the color there. And then I guess going back to the margin commentary that you provided earlier, any more color you can provide on just competitive pressures on both loans and deposits? Any notable changes from what you're hearing more recently compared to a few months ago?

Not really a change. I would just say this past year, it's been competitive, just particularly from a rate standpoint. What has become more pronounced maybe over the last quarter and we saw this in Q2 is the competition on the deposit side. That continues. Everybody is searching for funding. And I think if you look at our cost of deposits with what we've been able to grow and keeping our cost of deposits relatively flat, maybe it was up a basis point or 2, it shows where our focus is around where we have the opportunity to grow core deposits.

I think Jim mentioned just some of that core deposit growth that we had in Q3, that came on at a rate, call it, in the mid-2s. And that's 1 percentage point to 1.5 percentage point less than the wholesale rates or even some of the product offerings that we're seeing in the market. So everything -- from a pricing standpoint, everything just continues to remain competitive. I think the dynamic in Q3 is that you saw the yield curve shift up. Rates were up, particularly in the 5 and the 10-year point of the curve. And we work to move our yields up, but spreads didn't necessarily expand during that same time. And so that's what we talk about with those competitive pressures is that the spreads just continue to be very tight, which means competition just is very competitive for that good balance sheet growth that everybody is looking for.

The next question comes from Will Jones with KBW.

So I know just a couple of questions, one with the deal, a couple with the quarter. I know we never model revenue synergies with these transactions, but you call out kind of a nice little wealth business that got there. Maybe, Kevin, just talk about what you see opportunity-wise there. If I heard you right, if another Commercial Bank & Trust were to come along, Renasant is still very much open for M&A if that kind of size and deal parameter were to come along?

Yes. So let me just clarify. So I would say that the opportunity with commercial fits the profile of what we're looking for, not necessarily looking to stack up a bunch of things, but this is the profile of what we're looking for. Just on the revenue synergies, we haven't really modeled any revenue synergies. We do believe there will be opportunity for that. With their wealth management, as we noted, they've got over $1 billion in assets under management in the wealth division, largely concentrated in trust.

We have a trust department. And so we're excited about the opportunity to expand and enhance our trust capabilities in wealth management. And also, their growth in wealth management has -- particularly in trust has been at a notch or 2 higher than ours. So there could be the opportunity for revenue synergies, but it may be more on the Renasant side and what we can learn from them about strategies to pick up trust business throughout our footprint and as much as the opportunity with them.

Got it. Okay. I appreciate all that helpful commentary. Jim, maybe one for you. Just on the balance sheet, I know borrowings were a little bit higher in the quarter, just as we had some of the seasonal public fund runoff. Is the expectation as you guys feel better about the deposit pipeline next quarter that we would start to see those balances decline as you're replaced with some of this expected deposit growth?

Will, it's a good question. And we -- obviously, our loan-to-deposit ratio has inched up a little bit. I think we're 90%, 91%. And I think for us, we wouldn't want to get much above that. And so we'll be looking at that funding mix, and we saw some really encouraging things in Q3 about that core deposit growth, which was sort of masked by trying to exit some higher costing deposits. So our hope and our goal remains to match loan growth as close as we can with deposit growth. And clearly, that's a tougher thing now than it has been historically, but we feel really good about the things we're seeing in terms of our -- sort of our deposit engine working well.

So the goal is to try to match that. And look, we don't want to be reliant on wholesale funding. And whether that's advances or broker deposits, that's not really part of our plan. And so I think whether it's next quarter or in subsequent quarters, our goal would be to -- we like operating with 0 balances, both at the FHLB and with broker deposits, and that's a goal.

Okay. That's fair enough. Maybe last for me. We don't really spend a ton of time talking about credit, especially with Renasant. If I look at NPA trends, criticized trends, everything continues to show modest improvement every quarter. We still find ourselves with a pretty high level of reserves just on a percentage basis. Is there a point in time where that starts to bleed down or we can reliably feel comfortable taking reserve levels down just as we remain relatively benign credit-wise?

Will, this is Dave Meredith. And I think what you'll see over the past couple of quarters as you've seen just what you've stated, as we've continued to have improved asset quality, our criticized and classified has come down for 4 quarters in a row, which you pointed out, our NPAs have been down for the past 2 quarters. And commensurate with that, you can see we brought down our reserve levels just as our model dictates based on the improvement of our asset quality as we continue to resolve problem loans criticized, classified, NPLs, so forth, past dues come down.

Our reserve requirements commensurate with that have come down. So we've seen that number come down from, I want to say, 1.56%, 1.57% a couple of quarters ago to 1.54% last quarter to 1.50%. And so we would foresee as we continue to improve asset quality, the expectation would be our model would dictate that, that reserve level would continue to come down. So we follow the model based on need for loan growth, what our asset quality is telling us. And so the past couple of quarters, based on that improvement, we've seen just that point of the reserve levels need has come down.

The next question comes from David Bishop with Hovde Group.

I was wondering if I could circle back to Matt's question. Just curious, Kevin or Jim, if you knew or had offhand, what the new rates on loan production were this quarter relative to last quarter, what you're seeing on that front?

Dave, so I can give you a couple of data points that are hopefully helpful as you think about modeling our results. So if you look at core loan yield in Q3, it was about 6.11%. And if you look at new and renewed in the quarter, it was roughly 6.19%. And I'll give you -- again, it's always a little -- giving spot numbers is a little treacherous because 1 month can be a little deceiving. But in the month of September, you look at new and renewed loan yields, it was 6.35%.

35%, okay. Got it. And then I may have missed this at the beginning, and apologies if so, obviously, a very strong production quarter. Just curious how the pipeline sort of compares exiting the quarter. Was that sort of dampened out? And are you seeing sort of any impact from some higher rates impacting maybe the commercial real estate pipeline?

Yes, we've seen a little bit of pullback in the pipeline. But honestly, it still remains a healthy pipeline. So it's a little bit of a pullback from what we saw compared to the beginning of Q3. But we still see -- we're still having dialogue and conversations with customers. The pipeline hasn't gone to 0. And we continue to expect to have a good quarter as we look at Q4. With the holidays towards the end of the year, things may slow down a little bit. But just looking at our pipeline, our pipeline continues to remain healthy.

Got it. And then, Kevin, obviously, the opportunity sort of jumps off the page with the commercial acquisition on the deposit front. Any prospects to grow the loan book? Anything -- any niches there or markets they operate in that excites you from a loan growth perspective?

Yes. So I think in a couple of areas. I mean, one, they just -- they have a very similar, very granular loan portfolio. So very similar to us. So there'll absolutely be opportunities that we can have or we can help enhance what they already do, particularly from a consumer or a commercial side. We'll be able to manage larger relationships that maybe today, they can't manage the full relationship. So we think that there is -- I'd say manage it from a balance sheet capacity standpoint, not so much from a talent standpoint, but a balance sheet capacity standpoint.

So I think there's real opportunity to be able to complement one another, no different than how we've done in prior mergers. But just on a combined basis, be able to enhance, provide more opportunity from what Renasant would bring to the table as well as complement what their team has there in Memphis. And the exciting thing about this is that we do overlap in Memphis with Commercial. But there's still plenty of opportunity in that market where we won't be stepping on each other's toes. So expecting a good integration of both teams there in that one overlapping market in Memphis.

And Dave, I'll add to just like Kevin said, just expanding on a little bit, we did with The First, the complementary lines of business we have that they don't offer, be that asset-based lending, SBA factoring, we saw it with The First, the ability to leverage their C&I customer book into some of those specialty lines business has paid huge dividends for us and the expectation to come with the acquisition of commercial, we would expect the same results.

Got it. I guess one final question, circling back to credit. I think the narrative noted one credit driving the increase in charge-offs provisions. Any color around that single credit?

Sure. Dave, we have recognized that as a problem loan back in Q1 of this year. So we've been carrying a material level of impairment on that asset for a couple of quarters while we sought to fully value the assets. We received that -- the value of those assets back in Q3. And so we went ahead and charged it down to what we believe to be the realizable value. It's a single credit in the C&I space. We view it to be a one-off transaction. And based on that valuation, we've written it down to our realizable value.

The next question comes from Janet Lee with TD Cowen.

Apologies if I missed, but in your expectations around core NIM improving a little bit, what is the cycle to date or through the cycle interest-bearing deposit beta being assumed in that assumption?

Janet, this is Jim. So in terms of interest-bearing deposit beta, I think near-term, it's probably upper 40s, low 50s, and it sort of graduates from there to mid-50s is what we've got in our model.

Okay. Got it. And maybe for Kevin, you've been adding a lot of revenue producers, 11 this quarter, and there continues to be a fair amount of disruption across your markets. You've talked about this a little bit, but can you just give us more details around where you think you are in this investment cycle today? And as you balance continued opportunities to add talent with getting productivity from the investments you've already made, how should we think about the trajectory for ROTCE over the next 12 months?

Yes. So thank you. I still think that when it comes to some of the talent displacement, we're still in the middle innings of this. We still see the opportunity to pick up good talent that complements what we're already doing. Janet, in some cases, it's replacing existing talent. It's not just necessarily a net add to staff. It's replacing maybe some holes that we have, and we're trying to upgrade talent in certain markets. So we have put a premium on wealth management talent, on treasury management/cash management talent as well as solid, well-known bankers throughout our market, not lenders, but bankers. And I still feel like we're a little bit in the middle innings of this.

And as we look at how that should change our growth projections, right now, what we really see is it more just solidifying our outlook on that mid-single digit. And that's just not only loan growth, that's deposit growth as well and gives us greater confidence that the opportunity to grow at a faster pace is there if we can get it at the proper spreads and under the proper credit underwriting terms. But again, just to kind of summarize the question, I still feel like we're in the middle innings, but where we are focusing has really been on revenue producers that really drive the sticky type of revenue, and that's around wealth management, treasury management and then solid core bankers.

Got it. And if I could add just one more. Commercial deal makes a lot of sense, small, strong core deposits, wealth angle. On M&A, when your ROTCE was below peers, it was easier to see how M&A and cost saves could help close that gap. And now that you're more in line with peers at that 15% to 16%, how is your thinking around M&A changed? What do you need to get out of the deal for it to create incremental value from here?

Yes. So one, I think all M&A is at a higher bar, just looking at what the market opportunities are. And so as we looked at the opportunity to partner with commercial, that was one of our decisions to -- one of the go/no-go decisions was, would this create a distraction? Would it take us away from our organic growth? And just given its size, given that it's really isolated in one area of our footprint, it will be -- we will have -- we'll go through a conversion, we'll go through an integration. We are not dismissing that. But we didn't feel like it would be a broad-based distraction throughout the company.

And so the rest of our teams will continue to focus on just continuing to grow organically, capturing opportunity, capturing market share. But it does require a higher hurdle, M&A does, just given the -- one, our baseline of where ROTCE is today compared to in the past, but then also just the risk associated with the distraction. It just requires a higher hurdle. Jim, any specifics you want to give as it relates to the impact on ROA, ROTCE or efficiency just from the deal itself?

Yes, I'd be happy to. So Janet, on ROTCE, this is -- these are fully phased-in numbers. So we've got, I think, roughly half of our expense saves occurring in '27 and 100% in '28. But that sort of fully phased impact is about 70 basis points accretive to ROTCE, roughly 5 basis points accretive to NIM and 5 basis points to ROA.

[Operator Instructions] Our next question is a follow-up from Matt Olney.

Just a few follow-ups here. The accretion levels took a little step down this quarter. Jim, any color or guidance you can provide on expectations for the accretion from here?

Sure. And Matt, I want to correct one thing I said to you earlier about core loan yields. So in the quarter, we were at 6.08%. And for the month of September, it was 6.11%. I think I misspoke on that. But yes, on accretable yield, I would say this, it's really difficult and challenging to predict the accelerated part of that. And with this -- the backdrop of higher rates, payoffs have probably been pushed out some. So that's definitely affected that accelerated piece of accretable yield.

And I think the way we're looking at Q4 is to maybe give you some numbers that might be helpful. I think total accretable yield will be around $10 million. That's our current sort of estimate and about $1.5 million of that would be accelerated. And clearly, the rate environment will have a lot to do with this, but that accelerated piece will start to move itself down and both pieces will, but the accelerated piece will probably move itself down during the course of '27.

Okay. That's helpful. And I appreciate that's, as you said, not easy to predict there. And then just on the fee side, anything to call out on the fees? It looks like mortgage is a little bit softer this quarter, not a big surprise given what we've seen from some of your peers with higher rates. Any other thing to call out on the fee side? Any outlook there you can share?

Sure. I would say the fee outlook for Q4 is for probably a little more softness. So I think there's -- and that's -- much of that's driven by mortgage. It's just a very challenging environment. There are a lot of good things going on within mortgage. We've made some really good hires in legacy Renasant markets, but also some of the new markets, but it's just -- it's a difficult backdrop with rates where they are. So I think we're expecting mortgage to again be soft in Q4, and it's a seasonally tough quarter as well.

So in terms of other income, I would think that what we'd see is largely, probably a modest decline there driven mainly by mortgage. We've not seen -- capital markets has been soft for us during the year. I think that's -- I think we -- hopefully, we'll see some encouraging signs in the quarters ahead there that we'll see that line item grow. Wealth has been very stable, and we've had some low single-digit increases in wealth, and we expect that to continue.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Kevin Chapman for any closing remarks.

Thank you, George, and thank you to those that listened to our call this morning. We appreciate your interest in the company and look forward to meeting with you throughout the quarter. Thank you.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.

Good day, and welcome to Renasant Corporation's 2026 Second Quarter Earnings Conference Call and Webcast. [Operator Instructions] 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 fluctuations, regulatory changes, portfolio performance and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com at the Press Releases link under the News and Market Data tab.

We undertake no obligation, and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.

And now I will turn the call over to our 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 $0.94, up 36% from a year ago. Adjusted return on average assets was 1.3% compared to 1.01% in the same period last year.

Similarly, adjusted return on average tangible common equity was 16.25% 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 were 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 4 basis points to 3.83%, while adjusted margin remained flat at 3.61%. Our adjusted total cost of deposits increased by 2 basis points to 1.96%, while our adjusted loan yields decreased 1 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 recorded 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 2 basis points quarter-over-quarter to 1.54%.

Turning to the income statement. Our preprovision net revenue was $112.4 million. Net interest income was $227.7 million, a decrease of $0.8 million quarter-over-quarter. Noninterest income was $51.2 million in the second quarter, a linked quarter increase of $0.9 million. Noninterest 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.

[Operator Instructions] And our first question here will come from Michael Rose with Raymond James.

I wanted to start on loan growth. Obviously, really good production this quarter. Can you just talk about 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, scheduled payoffs and what you would expect out of Republic business as we move forward.

Michael, 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 in 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 -- in fact if we look at our pipeline today, it's up about 6% to 10% from where it was at the beginning of Q2. So we're seeing 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 previously talked about? And 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.

Sure, Michael. So yes, we had a couple of onetime or nonrecurring items in the expense bucket. And when we look at our core expense run rate, we feel really good with where it is. And again, of course, we can't -- these are obviously the results are results, but the underlying trends in expenses, we feel is good. And 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 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 then -- 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.

Michael, I may just add -- 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 5. We added 5. And so, far in Q3, we've added 7. 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 will 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. Mike, you talked about the loan growth. We talked about the headwinds from the payoffs, the production 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.

And our next question will come from Catherine Mealor with KBW.

Moving to the other side of the balance sheet. I know some of the outflows in 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?

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

No, 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. And so 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 refresh you on what we achieved as far as core deposit growth, 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 accounts -- those checking accounts are sticky core deposits that we didn't go and get because of rate. We got it due to 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 that 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 I guess we saw a couple of 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 mess that up if we're looking at an exit run rate. But curious what you're thinking about deposit cost increases in the next couple of quarters.

Yeah...

Yes. So our deposits...

Go ahead, Kevin.

Yes. Our deposits are coming in at market rates. We're not -- 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 2s and low 3s.

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

I 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?

Jim, do you want to talk about new and renewed?

Sure. So as you recall, you were talking about April, the pressures that were present then are still there. It is very competitive on both sides. And on the loan side, I think in terms of new and renewed, we're generally looking in the low 6s, Matt. And so, 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 costs inched up a bit on deposits, and we do have some tailwinds that will help us in terms of NIM. But yes, those pressures remain as they were back in April.

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

I would say that as it relates to the profitability side of that and margin, we don't -- in our outlook, we're not budgeting or planning on any cut or increase as we sit here today. And generally, I would say that a few -- 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 -- a more meaningful change in rates, I don't see it having a major impact on the balance sheet or the income statement.

And our next question will come from Dave Bishop with Hovde Group.

Since Matt opened the door in terms of the NIM discussion, just curious, is the bias for stability still here? Or maybe I think you mentioned maybe some tailwinds on the deposit side, you see a little bit of bias up. Just curious how you're thinking about the margin.

Sure. As we discussed in the answer to Matt's question, our outlook is that generally, it's going to be fairly stable for the second half. We've got certainly the deposit pricing pressures. But on the -- I'd say on the asset side, we've got a couple of things working for us. As you probably noted, 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 will be a nice tailwind going into Q3.

The other thing is we've got roughly $1.25 billion in loans that mature over the next 12 months and the rate on that is about 4.95%. So that will be another tailwind that will benefit and help offset deposit pricing pressures.

And then lastly, not as significant, but still meaningful, we've got $50 million to $60 million a month rolling off the securities book, and that's coming off at the low 3s, Dave, and coming back on the upper 4s or close to 5%. So we feel good about the outlook of a stable margin, a core stable margin here in the back half.

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

Kevin?

Yes. So Dave, just what we're seeing in scheduled paydowns 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 early payoffs in our C&I book, and it's really the sale 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 bottomed out in Q1 that we thought we'd 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 runoff 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.

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

So it's a handful of things, but market disruption is one of those main underliers. 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 allowed -- market disruption just allowed us to lean into that focus. And 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 it is -- 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 reorging 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.

And our next question will come from Janet Lee with TD Cowen.

Not to be too nitpicky on the public fund seasonal outflows. When we look at [Technical Difficulty] 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 '26.

Janet, this is Jim. I think our sense is that if you look at deposit growth in the second half, it's going to be -- on both sides, we target whether it's loans or deposits that mid-single-digit growth rate number 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 1.96%?

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

Okay. Can you share with us the spot cost of deposits at the end of June?

Yes, total cost of deposits at the end of June was 1.96%.

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 to your CET1? And is CET1 range or target beyond 2026?

So our expectation is it will reduce risk-weighted 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 capital position going forward with that, I don't -- it doesn't change how we look at underlying capital goals. And as you know, we've been -- we'd 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.

So what implications that's got for 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.

Our next question here will come from Stephen Scouten with Piper Sandler.

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 noninterest earning expense driving some of that? And what was embedded within that increase quarter-over-quarter there in that line item?

So there were 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 will 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.

So that's why our outlook for the second half is for moderately lower expenses and still baking in, as Kevin has talked about, opportunistic hiring.

And then on the opportunistic hiring front, I think last quarter, Kevin, you had said, look, there are 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 in your markets and even around your markets, would you look at moving towards Texas at all for LPOs or otherwise to take advantage of that disruption there?

Yes, Stephen, 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 and specifically in the 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.

And then maybe just lastly for me. Curious if you could touch on just 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 ]?

Stephen, this is [ David ]. So we're seeing those pressures come across a variety of elements. We've talked about and 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 the competition. It could be anything from level of guarantor support on a transaction, proceeds that we have loan, covenants. So it comes in various forms from a competitive sector, which is not -- 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 it's with its customers that we know, markets that we know well, we have good institutional knowledge, both on the front line with the lenders 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.

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.

Stephen, it's Kevin, I'll just add one last thing too. 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 of 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 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.

And our next question is a follow-up from Matt Olney with Stephens.

A few follow-ups here. On the fee side, haven't heard you guys talk much about the fees this morning. Looks a little bit softer than expectations. I think we typically have 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. So 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 they were really strong numbers. They'll probably moderate some in the second half, so that will be a headwind. Capital markets has been soft in the first half. And I think we've talked about it in our Q1 call. They were on clip for a record quarter in Q1 and then things dropped off the cliff with the hostilities in the Middle East, but we feel really good about capital markets in the second half and are hopeful that will 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 markets. 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.

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? Asking just because it's a pretty big range from we saw in the first quarter versus what we saw in the second quarter?

Sure. It is. And I would say this, Matt. I don't know -- I do feel good about the -- I think it was $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 health and life is just a really difficult thing to project. But that was over $1 million in Q2, $1 million 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 million 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.

Several moving parts there. So definitely get the view there.

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.

Good morning, and welcome to the Renasant Corporation 2026 First Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kelly Hutcheson, Executive Vice President and Chief Accounting Officer with Renasant Corporation. 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.renasant.com at the Press Releases link under the News and Market Data tab.

We undertake no obligation, and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman.

Thank you, Kelly, and good morning. Two years ago, we challenged ourselves by setting aspirational goals to improve our financial performance. At that time, we targeted the first quarter of 2026 as a key measuring stick that would show the financial benefits of our work. Frankly, the strong results for the first quarter exceed our goals. Adjusted earnings per share were $0.93 in the first quarter representing a 41% increase year-over-year. For the quarter, adjusted return on assets grew from 95 basis points in 2025 to 133 basis points in 2026.

Our adjusted return on tangible equity grew from 10.3% to 16.3%. And last of all, the efficiency ratio improved from 65.5% to 55.7%. I am extremely proud of our team's accomplishments to remain customer-centric while we went through our largest merger, conversion and integration. As we move forward, the Renasant team is engaged and focused on the priorities for our company to continue to grow customer relationships and hiring talented bankers. I will now turn the call over to Jim to give more details on the financial results.

Thank you, Kevin, and good morning. Looking at the balance sheet, loans were down $71.8 million on a linked quarter basis or 1.5% annualized. Deposits were up $626.4 million from the fourth quarter or 11.8% annualized. Reported net interest margin decreased 2 basis points to 3.87%, while adjusted margin decreased 1 basis point to 3.61% on a linked quarter basis. Our adjusted total cost of deposits decreased 3 basis points to 1.94%, while our adjusted loan yields decreased 7 basis points to 6.04%.

From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $8.1 million, comprised of $4.2 million for funded loans and $3.9 million for unfunded commitments. Net charge-offs were $2.3 million and the ACL as a percentage of total loans increased 2 basis points quarter-over-quarter to 1.56%. Turning to the income statement. Our adjusted pre-provision net revenue was $118.3 million. Net interest income decreased $3.8 million quarter-over-quarter. Noninterest income was $50.3 million in the first quarter, a linked quarter decrease of $0.9 million. The decline in noninterest income is primarily related to the recognition in the fourth quarter of a one-time gain of $2 million resulting from the exit of low-income housing tax credit partnerships.

The absence of this gain in the first quarter was partially offset by strong performance on SBA loan sales. Noninterest expense was $155.3 million for the first quarter. Excluding merger and conversion expenses of $10.6 million in the fourth quarter, this is a linked quarter decrease of $4.9 million. I will now turn the call back over to Kevin.

Thank you, Jim. We believe that Renasant is uniquely positioned to capitalize on organic growth opportunities. We appreciate your interest in Renasant and look forward to further discussing our results with you this morning. I will now turn the call over to the operator for questions.

[Operator Instructions] The first question comes from Michael Rose with Raymond James.

Just wanted to start on expenses. Obviously, a lot of hard work has been done on the first cost savings. The step down was maybe a little bit better than I think you guys had talked about last quarter. Maybe, Kevin, if you can just give us kind of an update on where the merger cost savings stand. I would assume that you've got most of them at this point, but wanted to see if there's anything left. Maybe you can also talk about kind of the reduction in employee headcount that you've had. And if we can kind of assume that there'd be a little bit of growth off of this 155 rate that we saw in the first quarter. Just trying to get kind of a near-term outlook.

Michael, it's Jim. I'll start, and I'm sure Kevin will add some color. But we're really pleased with what's happened in that line item. I mean we -- it's been a focus, as you know, for the company for a number of years. And we started to see the real progress beginning, call it, 18 months ago, even before we started to see the benefits from the merger with the first, we could see it start to bend down. So that's been a focus and remains a focus. In terms of where we go from here, I mean, as you point out, we hit our goals with respect to expense saves from the first.

So very pleased with that. I don't see a lot of savings associated with the merger from this point on, I think we realized most of those expense saves. That's not to say that we can't be more just as a company as a whole, but I think expenses that are -- expense saves that are truly related to the merger are pretty much in this run rate. Looking forward there, I guess, a couple of things. We will have merit increases, obviously, in the second quarter, and there's a day count factor as we look to Q2 and beyond.

But I think -- so I think we do have those things, which will cause expenses to drift up moderately. The other variable, and this is probably something Kevin should speak to, but is we have seen and are seeing opportunities to hire. As you know, there's a lot of dislocation going on in the marketplace. And so we've seen that already and expect to see more of it. I would say that's the part of the picture in NIE that will be a little hard to predict. And Kevin, please add to that.

Yes, thank you, Jim. And Michael, I'll just add, you mentioned about the headcount. So if you go back to June of '24, which we announced the merger with the first in July. But if you look at just our combined FTEs, we were just shy of 3,400 employees. If you just take us plus them, that's what our FTEs were. At 3/31, that number will be about 2,950. So we've carved out 420 employees over that time period. Not all of them were due to the cost saves of the merger.

Prior to that, Renasant was highly focused on accountability and ensuring that we had the right team for what we want the goals to be. So I agree with Jim that our cost save number we've achieved, but the accountability measures and the requirements to be higher performing at Renasant haven't changed. And so we'll continue to focus on that, find incremental ways to improve costs to reallocate expenses to higher-performing endeavors. That effort will not change, but that didn't occur because of the first. That was happening long before that.

Jim also mentioned the new hires. I think one thing that is hidden in the focus on expenses that we've had over the past couple of quarters is the hiring we've been doing. The cost saves and the expenses where they land today, that includes new hires that we've been making along -- all along the past several quarters. In Q1, we hired 18 revenue producers. In Q4, we hired 6. And in Q3 of last year, we hired 9. So if you look at the real cost saves associated with the merger, associated with accountability measures, it's much deeper than optically what we're showing in the numbers.

But we're extremely excited about the hiring opportunities we have, the market dislocation that is giving us the opportunity to have conversations with extremely talented bankers all throughout the Southeast. And I think we've said it in the past, we kind of grade out -- you grade out your employees, A, B, C, D and F. I think we've said this that we will always hire A-rated talent when they're available. And maybe I'll say it a little bit more pointedly, we won't flinch at the opportunity to hire A-rated talent. And we're seeing that opportunity all around us right now.

That's great color. So I'm not trying to pin you down, but just as a starting point, it sounds like with the puts and takes, maybe a couple of million bucks higher in the second quarter is what we could expect? Or is that fair? Just trying to better appreciate kind of a starting run rate with the seasonality aspects.

I would say this, that from Q1, probably a low single-digit percent increase, and that factors in some of the hiring Kevin is talking about, but that's the variable that's hard to predict because as Kevin points out, we see opportunities to be opportunistic, and we intend to pursue those. So that's the piece that Michael is a little tough to forecast. But at its base, I would give you that, that day count and merit is probably, call it, I don't know, low single digits, and then we'll see what comes from the hiring, which will add to that.

Perfect. I appreciate that, Jim. Maybe just as a follow-up, I think the one thing you can point to this quarter is just the loan contraction. I think you guys did a good job kind of laying that out. It does look like the production was down maybe a little bit more than I think maybe some of us would have expected and down year-over-year as well despite the addition of the first. Maybe you can just maybe update loan growth expectations from here. I think last quarter, you kind of talked about mid-single digits for the year. That could be a little tough just given the starting point, but just any puts and takes and then maybe what paydowns would look like?

Yes. So look, we recognize loan growth was slightly down, but it has not changed our outlook for our growth profile. We think we are squarely a mid-single-digit grower. Michael, when I listen to conversations, I get feedback from our team, they're active and engaged. If you break down Q1, let's just break it down into the 3 months of Q1. January and February, we had good growth. In March, that growth evaporated on us a little bit. And I think 2 things caused that. One was some macro events. We saw some of our pipeline and some opportunities get pushed into Q3.

Right now, the -- at the beginning of the quarter, our pipeline is up 30% from where it was at the beginning of the year. So I think some of it is our pipeline got pushed just with some macro events. The other thing is that we saw some very aggressive pricing and terms on some incumbent banks that were being aggressive to retain customers. And so that's the 2 things that really kind of led to the slight decrease in our loan growth in Q1. But we think one of those corrects with that pipeline being pushed into Q2. And then also, we'll just continue to operate in a very competitive environment and make decisions that's best for Renasant. And in some cases, we may try to match terms. In other cases, we may not. But we -- just in talking with our team, we still have confidence that over the course of a longer period of time, not just 1 quarter, but over several quarters, we are a mid-single-digit grower.

So it sounds like you're reaffirming the outlook for the year.

The next question comes from Catherine Mealor with KBW.

Great to see you reaffirmed the mid-single-digit growth outlook. The deposit growth was really strong this quarter. Can you talk about if any of that was seasonal or should pull back and kind of how you're thinking about deposit growth relative to loan growth for the year? And maybe within deposits, what you're seeing on incremental deposit costs as well?

Sure. Catherine, this is Jim. So yes, the first quarter was a good quarter -- the first quarter was a good quarter in terms of deposit growth. And there was some seasonality to it, and much of that would be on the public fund side. We -- as you know, we felt some of those tailwinds in the latter half of last year in terms of public fund outflows. That reversed itself in Q1. So a meaningful, call it, 50% or 60% of the growth that we saw in Q1 came from public funds. And the balance was just core deposit growth.

And as we look forward, I would say we'll have some seasonality here in April, tax season, plus we'll start to see some of that -- some of those public inflows moderate as we go throughout the year, and they'll trend downward. So -- our outlook overall, though, for the year is that we've got mid-single-digit growth in deposits. That's the goal, and that's what we're focused on in terms of growing core deposits in that mid-single-digit range. We want to try to have that growth be roughly parallel with the loan growth, and that's still our outlook for the year.

Catherine, I may just add to that, that we recognize that public funds have created some noise. But if you kind of look through that and just tying this back to the market disruption, we've seen an uptick in the month of April in new account openings on deposits. And it's a marked improvement. I'll just give you one data point that I learned this morning. Over the last 4 days, we've opened up 340 deposit accounts. Normal trend line in 2025 is that we're probably opening a couple of hundred accounts per month.

And over the last 4 days, we've opened up over 300. So I think that's just an interesting point of data. It will ultimately show up in the numbers. But again, I think it also speaks to how our team is responding throughout our markets and meeting needs of customers who may be uncertain at this moment, providing certainty to them. But I think that's an interesting data point that as we get into Q2 and Q3, we'll see how it plays out with balance sheet growth.

That's great. And then maybe just thinking about average earning asset growth. It looks like the bond book increased this quarter, and maybe that was to replace some of the slowness of the loan growth this quarter and that's temporary. But do you expect to continue to grow securities as we move through the year? Or do you think the back half of the year is really more geared towards loan growth and the bond book will be a little bit more flat?

I mean that's the outlook we would hope for because as you point out, we didn't have quite the loan growth that we anticipated, and that was some of the reason you saw the growth in the bond book. So I think as we go through the course of the year, we've got -- I think our securities portfolio is roughly $4 billion, plus or minus, and that's comfortably $1 billion above where we would -- we feel comfortable.

So there's plenty of capacity there to fund loan growth, and we would expect and hope that probably that securities portfolio starts to trend downward as we have that loan growth. And of course, some of that will depend on what we see on the deposit side. But you're correct to point out that was a function of a couple of things, just the strong deposit growth we had and the lower-than-average loan growth in Q1.

The next question comes from Matt Olney with Stephens.

I wanted to follow up on the net interest margin discussion. I think last time we talked on the call, we talked about the margin being relatively flattish for the year with the expectation of a few rate cuts. So I would love to hear just updated thoughts on the net interest margin, absent any rate cuts and any kind of sensitivity you have if the Fed does cut from here?

Our guidance was really unchanged on the margin. We -- our current forecast does not have any rate cuts in it. And even though I think as you point out, I think we had 2 cuts in our prior call or in the model when we had the fourth quarter call, it really doesn't change that much the outlook for NIM. So I think we're -- I think the outlook from here is stable in that core NIM. If we get a couple of cuts, I don't know that, that really influences it very much. So I think it's sort of steady as she goes on core NIM for the balance of '26.

Okay. Appreciate that, Jim. And then I guess just following up on that. Deposit costs were great this quarter, moved that down a little bit more. Any more opportunities on the, I guess, the overall funding side for improvement from what we saw in the first quarter?

I would say not much, Matt. I mean I think we've exhausted much of what we're going to see in terms of repricing opportunities on the deposit side. We still do have on the left-hand side, we've got loans maturing. I think we've got $1.2 billion or $1.3 billion over the next 12 months or like at 5% or 5.1%. So that represents some repricing benefit, but not so much -- we don't see so much on the deposit side.

The next question comes from Dave Bishop with Hovde Group.

Kevin, I'm curious, you talked about the hiring opportunities within the market. Are there any specific niches or segments that maybe you're not in that are enticing you here? Are these sort of the tried and true commercial C&I bankers that you're going to be targeting?

Yes. So really, not so much niches per se, but what we are seeing is the opportunity to build out some -- outside of your -- what you mentioned, kind of your traditional commercial bankers or bankers in a specific market. What we are seeing is the ability to kind of more develop or fully develop and mature some business lines that we already have, whether it's some of our secured lending conversations that we're having there or in the case of a line of business like wealth management. We're seeing opportunity there, which just gives us -- we already have some of these throughout our footprint.

This has just given us the ability to get more depth and reach in some of those business lines, but not necessarily looking to add a new vertical in the lending unit. It's really just being able to more mature and put more bench strength within already lines of businesses or some of our established secured lending lines. And again, that's just outside of your traditional C&I or your market-specific banking team.

And so I'd just say that opportunity is all throughout -- that opportunity for conversations and hiring is all throughout. There's also just with the disruption and how we overlay with the disruption, I think we've shared this in past conversations, but we created an internal map just overlays our footprint with the markets that are going through disruption, and we overlay nicely with that.

But to quantify the opportunity, there's over $90 billion in deposits that are currently going through a transformational merger. And again, not that we're going to pick up and I'm not saying we're going to pick up $90 billion, but it just shows you the level of disruption that's happening. We also firmly believe there's going to continue to be M&A in the Southeast, and that disruption just gets more loud. And to be in a position where Renasant is today to be converted, to be merged, to be integrated and to be focused on customers and employees, that's a very good place to be right now in a world of disruption.

Stability is a great place to be in a world of disruption. And so I think that's what gives us an opportunity and a little bit of an edge at the moment. But specifically to your question, we're having conversations with people that bring sticky business and sticky revenue, and that will enhance and complement what we do.

Great. And one follow-up on the buyback, the aggressiveness there. Just curious, holistically, is there sort of any targeted TCE regulatory capital ratios that sort of govern how aggressive you're going to be?

Thanks, Dave. This is Jim. Yes, I think our outlook there is similar to what we talked about in the Q4 call. We -- if we pick CET1 as a ratio to point to, we started the year at roughly 11.25%, plus or minus percent. And I think our desired outcome would be to roughly finish somewhere in that range at year-end. And so balance sheet growth will play a role in that. But our expectation is obviously take care of whatever balance sheet growth comes our way and make sure we capitalize that, but then continue to lean into buybacks.

So as you saw, we were active in Q1, and we continued that activity in early Q2. And so our goal is to continue to avail ourselves of buybacks. We're very optimistic about our performance outlook as a company. And so we like the opportunity to invest in our stock. And bear in mind those sort of capital guardrails, our goal is to continue to take advantage of opportunities to buy back our stock.

The next question comes from Stephen Scouten with Piper Sandler.

Maybe a little bit following up on that line of questioning. But just wondering how aggressive you would see yourselves being in this macro environment, kind of the level of cautiousness versus what you described as kind of the opportunity set before you and a mindset of always wanting to hire good talent, a talent when it's out there, just kind of how you balance that as you look ahead to the rest of this year.

Yes. So one, great question because -- and I'm going to talk very holistic with you because I think it speaks to our capital plan, right? So this is a long-term plan. And if you look at what we've been doing over the last couple of quarters, we've been fully enacting this capital plan. And that plan starts with a strong balance sheet, strong capital ratios, strong allowance for loan loss. And we try to think in terms of optionality and being best positioned in a variety of scenarios.

And so we believe we are well positioned to be opportunistic to deploy capital for future hiring and have capital allocated for future growth. If things get bad from a macro level, I think if we start looking at the stability of the balance sheet or the strength of a holding company, the cash on hand at a holding company or in a stress scenario with allowance, we're going to screen out very well in that draconian scenario as well. So we can be -- we are well positioned to be opportunistic in a good environment or defensive in a bad environment.

And that's -- that's a great place to be in a world of uncertainty where the whole world can change in a matter of minutes with a tweet. That's really where we feel like we need to be right now. And -- but if you look at where we are from a return on tangible common equity or return on Tier 1 capital, being at 16% gives us a lot of optionality. It gives us the ability to pay roughly a 30% dividend payout ratio. It gives us the ability to stockpile capital for future growth. And then it gives us the ability to have some extra capital to either stockpile for future M&A, stockpile for future hires and their growth or look at the option of buying back in the form of a stock buyback.

So I'm giving you a very roundabout answer to say, we -- with where we've gotten the profitability of the company, particularly from a return on Tier 1 capital, return on tangible common equity, that gives us a lot of optionality to choose which way we want to lean based on how we see hiring or performance of the stock or M&A or just simply be defensive. We feel like we are well positioned to have that option in our control as opposed to being behind as the environment change, and it could change rapidly.

Yes. That's great color, Kevin. I appreciate the idea of the optionality there. I guess one follow-up for me, and I think you somewhat answered it when you talked about your internal mapping of the dislocation. But as you think about the concentration of new hires, would you say it's been more about where those opportunities just exist currently based on dislocation? Or has there been any incremental effort to kind of deepen the newer markets that you entered into from the first? Just kind of wondering where those hires are concentrated, if at all.

Yes. So they're really -- they're really concentrated in markets -- in new markets we've entered or markets where we don't necessarily have the market share that we want to have. So I'll just take, for example, North Mississippi. We've done some selective hiring. But what we've mainly done there is our teams have been focused on customer acquisition as opposed to talent acquisition just because of the overlap. In other areas -- in other markets, it's given us the opportunity to build bench strength. And also, there are certain parts of our company, we can't have enough employees.

It always feels like we're a player or 2 behind in those areas. And this has given us the opportunity to get a player or 2 ahead in those areas and just build bench strength and take pressure off of our current employees. They do a great job, but just give them some additional support. Stephen, the other thing we're doing is taking the opportunity to pick up back office talent. Right now, our back office, we have tremendous talent in our back office.

This gives us the ability to build bench strength and also increase our time horizon, extend our runway and have the potential to grow to higher levels than maybe we currently are contemplating by adding that staff today, it will give us that runway and optionality to become a bigger bank without immediately meeting a growing pain as we do that. So just -- we're being very selective, but I would say that most of it has been targeted in either new markets where we want to build out additional footprint and market share or very selective places where we're just adding talent to provide more bench strength.

[Operator Instructions] The next question comes from Janet Lee with TD Cowen.

You've already touched on it, and I understand that payoff and paydowns you can never really predict precisely. But is it realistic to assume that your CRE loans are going to just continue decline from here on and a lot of your growth will be coming from C&I? Or do you have a line of sight into we're at the low point on CRE and things are likely to improve in the second half of 2026?

Janet, this is David Meredith. So I guess we'll look at it a few different ways. One, I would say CRE is not an area we intend to shrink. We continue to have a great deal of focus on our commercial real estate business. We've got some great lines of business that continue to pursue just commercial real estate. So it's a dedicated effort we have. I think there's -- obviously, there's a lot of noise in commercial real estate. We've had the expectation for an increased level of payoffs for some time based on interest rates and the aging of some properties.

And so there's going to be a certain level of rotation or volatility in that commercial real estate space as some of them pay off. But we continue to look at new opportunities and continue to be aggressive in that space. When we look at increase in commitments over the last couple of quarters, we have an increased level of commitment in our construction book. Obviously, with the level of equity going into construction projects, it may be 6 to 9 months before we start to see fundings, but we are growing our commitment levels in those areas, and we've done those for the past couple of quarters as well.

But what we will continue to see is based on the interest rate environment, we'll continue to see some -- just some rotation of loans as they've matured and just the normal course of business for commercial real estate opportunities, they're going to go to -- they're going to either sell the asset, they're going to go to the private debt market, look for private placement long-term rates, things that aren't traditionally a bank-type financing vehicle.

So we'll continue to see some volatility in that space, but it's definitely an area we're still continuing to pursuing at a high level of our growth strategy, along with -- as we've seen increased levels of C&I. As you pointed out, we invested in those lines of business, the factoring the asset-based lending, the corporate C&I effort. So we continue to focus there. But it's a broad-based commercial real estate, C&I. We're not being specific in any one area.

Got it. And it looks like the second quarter, fee income, there was some strong performance on the SBA loan sales. Where do you see the most upside in terms of fee income opportunities? It looks like there are some different puts and takes within the specific line items within fee. But overall, it's been growing pretty nicely. But how should we think about the pace of your fee income growth from here?

This is Jim Mabry. I would say, as you mentioned SBA, there are a couple of areas that have done really well. And our outlook for the balance of the year would be, I think there are some puts and takes, but generally, the first quarter is a pretty good jumping off point. I would think there's a chance for some modest improvement there. But I think it's a good run rate to think about. Mortgage had a good quarter in Q1. It was up a bit from fourth quarter. SBA was good. We didn't see -- and this relates to some of the commentary about loan production.

We didn't have the capital markets performance that we typically do in Q1. So I think as we start to see that production fall through and become loan growth, we would expect that capital markets would exhibit higher levels of fee income. So -- and I guess lastly, I would say wealth is an area that's been very steady. I do think that, that holds promise as we look forward for solid single-digit, mid-single-digit growth and potentially better down the road. We're putting a lot of effort and energy into that area. And I think with the things that we're doing just internally with legacy Renasant and then some of the things that are going on around us in terms of dislocation, I see that as an area that will do well in coming years.

Jim, I may just add to that. Just some of the hiring we've done, we've enhanced wealth management. You'll start to see that revenue lift. As we get -- as we start to exit Q2 and get into Q3 and Q4, I do want to take the opportunity to talk about mortgage. Mortgage was an interesting quarter, particularly if you go back to February, February prior to kind of the macro Middle East conflict events, and the subsequent rates rising, the 30-year rate had gotten down to a 5 handle on a conventional mortgage and our pipeline popped. We saw immediate -- and it really just kind of spoke to how we've built mortgage with the retooling of the production we've added.

And as rates cooperate, that pipeline, the revenue, it immediately shows up. And so again, I know we're not in a position where rates are cooperating with mortgage. They'll continue to slug it out, continue to be profitable. But when rates cooperate, mortgage will -- you will see almost an immediate impact from mortgage. And you kind of see that a little bit in Q1 because of what happened with rates in February. So again, we wait for the day that we don't have to apologize for mortgage and for being in the mortgage industry, but we continue to be well positioned and invest in that arm of our company and feel like we're really well positioned if rates ever cooperate with us.

And we have a follow-up from Dave Bishop with Hovde Group.

Yes. Just a quick follow-up on credit. Trends look fairly well behaved. It looks like there's a little bit of inflow on the nonaccrual side. Just maybe some color there. And then, Kevin, maybe holistically, speaking in the past, I know you guys have always taken pride in the reserves to loans, sort of like building a rainy day fund there. Do you think that the ACL to loan sort of sits in the mid-150s range as you go through the year? Do you think there's a little bit of a bleed if things improve from a macroeconomic perspective?

David Meredith. On the NPL question, we did see a little bit of an inflow in Q2, and that number has increased somewhat over the last couple of quarters. And that increase has kind of been broad-based. There's nothing in particular. If we look at Q2, we had about a $24 million increase. I will say that was about $69 million of new NPLs on a $45 million outflow. So we continue to resolve our NPL loans. But the inflow was centered in really a few larger dollar transactions, about $7 million in CRE, $19 million in C&I and then a little bit in construction and development. And really, it was centered in just a handful of loans that we believe we're in a position to work out.

Our composition of our NPL book continues to be somewhat consistent quarter-over-quarter. There's not any one area that I would say is concentrated in from an asset type or a geography. Our average NPL size is small. I will say we've -- when we look at our kind of our general asset quality, we see some positives. Our 30- to 89-day numbers continue to be low. So we like within the breadth of our portfolio, we don't see a broader level of losses. I also will say our charge-offs in Q4, as you saw, were only 5 basis points. And consistently, it was in our deck, we -- over the last 12 months, we resolved a high level of NPLs with minimal charge-offs.

And so we feel comfortable that our underwriting that we're structuring loans properly as we continue to resolve those problems. So it's something we'll continue to work through. We continue to have processes in place to identify loans early so we can resolve them quickly and mitigate any loss that's out there. So a lot of positives, 30-day, 89-day charge-offs, criticized classifieds came down. So -- and we'll just continue to work through our NPLs.

And Dave, I'll just add on the allowance. Look, I think as we look around credit quality is stable. And -- but one thing that really probably just concerns us, and this goes back to when we built the allowance back to 2020 was just all the volatility and uncertainty that's out there that's putting strain on either consumers or commercial businesses cash flows. And so I don't think that the macro concerns have alleviated yet. Just take what happened in March with energy costs. All you have to do is go fill up your car, and you saw a 30% to 40% increase in 30 days of what it costs just to fill up your car.

And we think that ultimately, that's got to catch up with people in some way in their cash flows. And so just continue to keep what we think is an appropriate level of allowance just given the uncertainty and as we have clear pictures from a macro level, at that point in time, we'll reevaluate the sufficiency of the allowance. But right now, I just think there's enough macro uncertainty, even though it may not be showing up quantitatively in our credit quality numbers, there is enough uncertainty out there to keep the level of reserve where it is.

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin Chapman, President and CEO, for any closing remarks.

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

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

Good day, and welcome to the Renasant Corporation 2025 Fourth Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kelly Hutcheson. 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 Renaissance executive management team. Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com at the Press Releases link under the News and Market Data tab.

We undertake no obligation and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.

And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman.

Thank you, Kelly, and good morning. 2025 was a transformative year for Renasant marked by considerable improvement in our profitability and strong balance sheet growth on the heels of the completion of the largest merger in the company's history.

As we discussed during our October call, systems conversion took place in the third quarter of this year, and we continue to build on the successful integration progress that has already occurred. Throughout the year, we have been intentional about maintaining and frankly, accelerating the momentum in the company and believe our financial results reflect that focus. Our goal is to create a high-performing company that leverages the opportunities presented by our presence in many of the country's best economies. We strive to deliver excellent customer service led by an exceptionally talented team. This was evidenced by the organic loan and deposit growth we achieved in 2025.

Renasant's core profitability showed significant improvement this year, fueled by the benefits of the merger with the first along with ongoing efforts to improve efficiency at legacy Renasant. Adjusted earnings per share for the year were $3.06, representing an 11% increase year-over-year. For the year, adjusted ROA grew 94 basis points in 2024 to 110 basis points in 2025. Likewise, the adjusted efficiency ratio saw an approximate 900 basis point improvement year-over-year to 57.46%, and the adjusted return on tangible equity grew from 11.5% in 2024 to 13.79% in 2025. I'm extremely proud of what our team has accomplished this year and excited about how we are positioned to grow on this success in 2026.

I will now turn the call over to Jim.

Thank you, Kevin, and good morning. I will now highlight financial results for the quarter. The company's net income was $78.9 million or $0.83 per diluted share. Adjusted earnings, excluding merger charges, were $86.9 million or $0.91 per diluted share. Our adjusted return on average assets of 1.29% for the quarter grew 20 basis points from the third quarter, and our adjusted return on tangible common equity of 16.8% for the quarter is an improvement of 196 basis points. .

Loans were up $21.5 million on a linked quarter basis or 0.4% annualized. During the fourth quarter, the company sold approximately $117 million of loans acquired from the first which were not considered to be core to Renasant's business. Deposits were up $48.5 million from the third quarter or 0.9% annualized. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $10.9 million comprised of $5.5 million for funded loans and $5.4 million for unfunded commitments.

Net charge-offs were $9.1 million which includes $2.5 million recognized in connection with the aforementioned sale of the acquired $117 million loan portfolio. The ACL as a percentage of total loans declined 2 basis points quarter-over-quarter to 1.54%. Turning to the income statement. Our adjusted pre-provision net revenue was $118.3 million. Net interest income increased $3.9 million quarter-over-quarter. Reported net interest margin increased 4 basis points to 3.89% and while adjusted margin was flat at 3.62% on a linked quarter basis. Our adjusted total cost of deposits decreased by 11 basis points to 1.97%, while our adjusted loan yields decreased 12 basis points to 6.1%. And noninterest income was $51.1 million in the fourth quarter, a linked-quarter increase of $5.1 million.

This increase includes $2 million in income associated with the exit of certain low-income housing tax credit partnerships during the fourth quarter. Noninterest expense was $170.8 million for the fourth quarter. Excluding merger and conversion expenses of $10.6 million, noninterest expense was $160.2 million for the quarter, a linked quarter decrease of $6.2 million. This decrease includes an offset of $2.1 million in the games connected with branch consolidations during the fourth quarter. We are encouraged by the results of the fourth quarter and the positive momentum going into 2026.

I will now turn the call back over to Kevin.

Thank you, Jim. As you have heard, Renasant is well positioned for 2026. We have a talented and motivated team a strong balance sheet and an enhanced profitability profile. The banking industry continues to undergo significant change, and we are optimistic about our ability to take advantage of the opportunities. We appreciate your interest in Renasant and look forward to sharing our results. I will now turn the call over to the operator. .

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question today will come from Michael Rose with Raymond James.

Just wanted to start on expenses. Really nice step down, Kevin here the systems conversion. I know this is kind of a long process extending back to the previous administration to not only get the finish line, but also get the conversion done maybe a little bit later than I think you and we all would have hoped. But this was a nice, obviously, a quarter of progress. Can you just walk us through kind of the puts and takes of how we should think about expenses through the year? Clearly, there's been a lot of M&A in and around your markets and other deal announced in Texas today.

Can you just talk about what's still left to go in terms of cost savings from the first? And then from an opportunistic standpoint, how do you see the hiring playing out? And then I guess maybe for Jim to wrap up, how should we think about kind of the level of expenses over the next quarter or 2?

Michael, this is Jim. And actually, I'll do that in a reverse direction from the way you asked it, but I appreciate the question. And I will say, too, apologies upfront, if we're not as smooth and feeling the questions as maybe we usually are because we're each in a different location this morning to the storm and so we'll do our best. And actually speaking of that, we're definitely thinking of folks that have been impacting our marketplace. We're still feeling the impacts of the storm. We've still got lots of people without power. And like other companies, we've had a lot of people at the company working to make sure we get branches open and get people to where they need to be to help serve our customers. So it's been a grind, but hopefully, we're nearing the end of that.

With that said, Michael, I'll start and then I'll let Kevin sort of clean it up. But I think in Q3, we talked about roughly $2 million to $3 million we hope to see in Q4 and then in Q1 in terms of sort of core expense reduction, if you will. And I use that word core because I think it ties into, I think, what you're probably alluding to as we go forward in expenses and how we might think about that. So we still feel good about looking at Q1 and having that core number come down again in that $2 million to $3 million range salaries as we've seen that's the line item that probably shows the most significant impact, and that was down a couple of million dollars in Q4, and we expect a similar result. So I think our overall guidance in terms of core NIE, if you will, from what we said on the Q3 call remains unchanged. And -- but I do think it's important to talk about how '26 mainfold and Kevin I would ask you to do that.

Yes. Thank you, Jim. And Michael, you're right. I mean it feels like this quarter has been a long time coming. We announced the merger with the first back in July and really tried to put eyes on Q4 because we felt it'd be a good look as to how the company's performance was -- would look as we entered '26 and you'd start to see some of the benefits in the rationale of what we launched 18 months ago. And a lot of that is just cost saves from the merger but also using it as an opportunity to unlock some of the potential of Renasant -- legacy Renasant. And I think you saw this in Q3 that as we went through a conversion, the largest conversion that both companies ever contemplated we still grew.

We grew in Q4, and we're doing it with less resources. We're doing it less people. And I think Jim summed up for our expense trajectory as well. I'll just add to that, maybe a little bit of esoteric information about where our focus has been. If you go back and you look at our FTEs, us and the first back in June of '24, Q2 '24, a -- that was a little over 3,400 employees. I think at the end of this year, we're going to be a little bit above 3,000 employees. So we've eliminated 400 positions. That all hasn't been the first, by the way, and it all hasn't been by by way of the merger. But as we stand right now, that number is sub 3,000. And so we are still working towards goals and efficiencies of improving our profitability and again, doing more with less. But also just to emphasize what Jim alluded to and what you mentioned, Michael, is we're seeing real opportunity and disruption and we're not going to shy away from that. But we're going to continue to make investments in talent that will meaningfully improve our position, our live, our customer service, our customer reach and ultimately improve our profitability. And so there'll be a little bit of a mixed message. We're still going to continue to focus on improving profitability in our expenses at Renasant.

We're also going to continue to be very focused in making investments for future growth and future profitability. But like where we are, like our position, like the momentum in the company like the focus from all of our teammates to improve the metrics that we think are important, but also be willing to be opportunistic and invest in future talent.

Very helpful. Jim, if I can ask a clarifying question. So the $2 million to $3 million, I think, reduction you said in the first quarter I think that's what you said. So correct me if I'm wrong. But what base is that off of? Is that off of the core ex the merger charges? Or does it also incorporate the add back from the the gain that you guys booked the $2.1 million gain. So I'm just trying to get a sense for what the base is. .

Yes. It does incorporate that gain, Michael. So as you said, sort of take the -- I guess, it was roughly $170 million of back out, call it, I think it was $10 million approximately in merger expenses, and then we had that offset of $2 million and change, I don't remember the exact number, but right around $2 million. And that's the number I'm sort of jumping off for Q1.

Okay. So the $162.3 million roughly versus just ex the margin charge to be 160.2 right? .

Correct. .

Okay. Perfect. Maybe just switching to loan growth. If I back out the loan -- if I add back the loan sale gains, this quarter. It looks like the growth was about 3% annualized. Can you just walk us through some of the puts and takes and maybe dovetailing with my prior question just on opportunities. not only for hires but also for market share gains, just given some of the dislocation. What should we think -- is there any change to what you guys laid out last quarter, which I think is kind of a mid-single-digit growth outlook? Or could it potentially be better just given some of that dislocation and some of the hires that you guys have and plan to make?

Kevin? .

Yes. Thank you, Jim. Thank you, Michael. Yes, -- as we look at loan growth, really no change to our guidance. We're still targeting for the year, mid-single digits. And look, I think '26 can be similar to $25 million where there might be some lumpiness in the quarters. I can't project with precision what it will be in Q1, but would you say over a longer time horizon, we're definitely positioned for that mid-single-digit and there is the opportunity for upside as market disruption occurs. But if you break down kind of what led to that 3% annualized in the production was good. The production was there, and our pipeline is still holding as we look at that.

All of '25, we predicted payoffs, and we were wrong for 11 months or 10 months but they finally materialized in late Q4. And so payoffs were elevated and that's going to be a wildcard, Michael, as much as market share gain or taking being opportunistic with disruption. The payoff is still going to be a little bit of a wildcard as to that net loan growth, maybe on a quarter-by-quarter basis, I don't think it changes our guidance for mid-single digits year-to-date. But when we look at again, when we look at how we're operating fully integrated with the first production coming from all markets through all channels continues to remain good. And so the production is there. The wildcard is just going to be the payoffs. But I think we're well positioned in what we're currently doing. And again, there is upside as market dislocation that may present some additional opportunities throughout the year.

The next question will come from Stephen Scouten with Piper Sandler. .

Kevin, you kind of spoke to maybe the push/pull between investing in growth and trying to manage expenses and profitability. I mean I guess, how can we think about that? I mean could there be like an overarching efficiency initiative, coupled with a hiring plan? Is it you're adding production people but trying to normalize maybe back office? Or just kind of -- how can we think about that push-pull dynamic around those 2 concepts?

Yes. So it's really -- it's all of the above. So let me just give you an example. If we just take production hires and terminations throughout the quarter, we eliminated 12 producers, not tied to the merger, not tied to, there's more accountability measures is what drove that, but we added 6 and so it's that type of push pool that we've been doing now for the last couple of years, where accountability and an expectation of higher performance only of producers, but as a company as a whole. That is going to be our focus.

With some of the talent that may be out there, Stephen, we may make an investment in back office that gives us scalability to a larger asset size than where we currently are today. And it's hard to say that we're going to hire these many people and when we're going to hire them just giving the opportunity for the disruption. What I'd tell you is, and I think this is consistent with what you've heard from us, our goal is to be high performing, not high performing, excluding all the bad stuff, but high performing. And so as we work to achieve that, a lot of the hiring we're doing, whether it's the investment or whether it is the additions to staff in the back office, that has to be paid for through higher levels of performance.

And again, it's hard -- it's really hard to quantify and lay out where that will occur. I would just ask that you look over the last year, maybe the last 18 months, what we've been doing and it's what's showing up in the numbers is that ROA, that ROE is going up to the right. The efficiency is down into the right. And that will continue to be our plan and our focus as we find ourselves in a really unique position with all the disruption, but also knowing Renasant has to continue to improve its profitability line.

Yes. No, that's great context. I appreciate that. And then maybe thinking about kind of capital usage from here. You've obviously got a fairly sizable repurchase plan. Kind of wondering how you're thinking about that, given the stock still appears to be undervalued relative to peers? And kind of how you stack rank that relative to obviously using for organic growth? And if M&A would even be on the table. I would think it would be low down the priority list for you guys today, but just kind of curious how you think about that capital deployment. .

Stephen, this is Jim. I'll start and then ask Kevin to add on. But -- so as you know, Q2 was the first sort of combined quarter and we felt after the merger, we felt good about where everything sort of shook out. And we -- I think we still want the added comfort of seeing be on time and on schedule. And with that, we felt more confident in sort of flexing our muscle, if you will, a little bit as it relates to capital uses other than organic growth. So organic growth is still #1, and we're hopeful we'll have a strong year in terms of growth. But I would say in terms of those capital levers, at least near term, the most attractive 1 to us would be buybacks. And of course, we had some activity in Q4 and would anticipate that activity continues into '26.

Great. Appreciate color .

Kevin, do you want to comment on M&A? .

Yes. I'll add to that. And look, as we look at our capital plan and capital deployment, Jim laid out many of what's on the table. I'll also add, and I think we did this in the Q4 also redemption of debt. So we've got our full capital plan playbook open right now. And Stephen, that does include M&A. And it's something that we'll continue to look at. It's just got to meet our metrics. It's got to be that right partner. And again, it's a little bit backdropped against all the other opportunities we have, but M&A is still part of our plan. And again, it's something that that we're fully ready to deploy if we find that opportunity or when we find that right opportunity. .

The next question will come from David Bishop with Hovde Group.

Jim, I was wondering maybe some thoughts here. How should we think about the the NIM outlook here? It looks like the Fed could be on the sidelines near term. Just curious maybe expectations for the margin here into the first half of the year and throughout .

Sure. So we -- coming into -- actually, I'll take a step back. The first, as you know, really helped our asset sensitivity position and lessened our asset sensitivity, and that played out and it's probably the last couple of quarters, but certainly in Q4 because we were -- I think, in talking with on the Q3 call and with investors post that, we were guiding to some slight degradation in the margin in Q4. We didn't see that, as you saw, and it behaved really well. Our outlook for on margin. And I think we've got 2 cuts in sort of our outlook of, I think, March and September roughly of 25 bps each. .

Even with that, we expect the margin to behave relatively stable. We don't see much movement as we sit here today, plus or minus. And so with growth in balance sheet, net interest income should follow that. In other words, should grow as we've got balance sheet growth with a stable margin outlook, we should see some modest growth in those dollars. We're starting our year a little below where we thought we would in terms of loan balance, given the loan sale and the payoff activity we had in Q4, but margin outlook, I would say, is stable and we should have improving NII dollars as we get through the year.

Got it. And then maybe as a follow-up. Any commentary in terms of the specifics of the loan pipeline, how that broke down at the end of the year relative to the end of last quarter.

Kevin?

Yes. So yes, best what -- so it's in line. It's consistent with what we've seen over the past couple of quarters kind of fully baked in with the first. And really, contributions again from all are no different than where we're seeing the production where all areas are providing. Likewise, we see that in the pipeline again, just good activity, good production potential and again, that's across all segments, whether it's geographic, again, in the states we operate, Tennessee, Alabama, Georgia, the coastal area or even Mississippi or whether we look at it through our channels, the size of the loans, whether some of our small business, our middle market or even our larger corporate and our specialty lines. So it's just a good pipeline that really covers all the areas of the company. We continue to see that. And that's -- again, that's what we've seen for the last couple of quarters, and that's where we want to position the company. just not any 1 group driving all the growth, but a good contribution from everybody. And Dave, what I may add is that on the consumer side, we've seen a little bit of a pullback on the consumer side. If there is an area that's pulled back a little bit more on the consumer side. But I would say that's probably more about choice than it is consumer behavior. .

The next question will come from Jordan Ghent with Stephens.

I just wanted to ask about the loan sale. And then maybe if you could give any additional color on the types of loans. And then going forward, if we should expect to see any more loan sales? .

Jordan, this is Jim. So the loan sale involved a portfolio of loans secured by cash surrender value of life insurance policies. And it was a good performing portfolio, high-quality portfolio. And the first had picked it up to an acquisition, the previous deal that they had done. And I think they had sort of looked at that and said, it's not really core to our business long term because there was no ancillary business with these these loans, and they were not -- they were in and out of the footprint. So they had flagged this and we flagged it during diligence. And once we got systems conversion behind us and so forth, we started down that process and sold that book. There aren't any other portfolios or loans or categories at the first that we would see selling or divesting or slowing down. We felt like it was a good match.

And David Meredith can add to this, but I think our initial read was we really like what they did. They had good client selection, and we like their book. So we don't really see anything else in the portfolio. But David, you may want to add to that?

Thank you. The only thing I would reiterate exactly what you said, it was a solid performing book of business for the first when we went through due diligence, they viewed it as noncore we viewed it as noncore. And it was with the ability to obtain properly full relationships out of those things. We chose to put better focus our capital and our attention on those were better in market opportunities for growth, be it other loan opportunities on the deposit opportunities. .

Okay. And then maybe just 1 follow-up. I wanted to ask what you're kind of seeing on the loan and deposit competition side, if you're seeing loan yields kind of come down significantly as well as any irrational behavior?

I would say, Jordan, generally what we're seeing on both sides of the balance sheet in terms of competition, this is out, but it's really unchanged. I mean from what we've said the last couple of quarters. It's very competitive on both sides. I would say probably a little more competitive incrementally on the deposit side. And so in our outlook for '26, we hope there's some relief on that front, but not counting on it in our numbers. And so I think if if somebody would say, okay, what's the vulnerability and our margin outlook, it would be maybe in the funding side, but I think we've accounted for in terms of the way we're thinking about 26% in our margin. But it's definitely on the deposit side more than the loan side. We -- our 5-month special, the rate on that hasn't changed in probably 18 months. And it's sort of stuck at that 4% number. We'd love to lower it. And hopefully, we'll get some relief on that in but generally unchanged in terms of the competitive landscape on loans and deposits on the pricing front.

The next question will come from Catherine Mealor with KBW.

I wanted to follow up on your commentary on buybacks, Jim. You said that you expect the activity to continue into 2016. Is it fair to assume that we should see a higher level that we saw in the fourth quarter. You had a big authorization, but the activity we saw this quarter was pretty light relative to the authorization.

Just trying to kind of frame kind of the level of buybacks that's safe to assume in our modeling for

Sure. So with all the standard caveats in terms of how much organic growth we see in market conditions. I would frame it this way, Catherine, that I think we're roughly at 11 25% or thereabout on CET1 at year-end. And I think we want to -- we would not want to -- I think we'd want to end up at year-end something close to that or be willing to end up something close to that, I guess, I would say. And so again, we'll see what the environment holds in terms of other possible levers and so forth. But I would sort of frame it that way. We like where CET1 is. It's going to, I think, -- we're going to grow roughly 60 basis points, 50 to 60 basis points in that ratio. And so we'd like to end the year at roughly where we started the year.

That's fair. That's great. And then maybe 1 follow-up just on the margin. You added a great new slide, Slide 19 to your deck, which just shows some of the detail around loan repricing and maturity. As I look at that slide, and I see fixed rate loans today are at around kind of 5.5% and then variable rate loans are about 6.3%. Where -- are those 2 buckets, as you see those loans reprice new originations replace it. Where are you seeing new loan originations come on kind of relative to those rates? .

So new and renewed, I'd say, is if we looked at -- I don't remember the December quarter, but probably, call it, right around 6%, upper 5s, low 6s, somewhere in that range. And I think we've got roughly $1.3 billion if you look at the math on that table that you're referring to, roughly $1.3 billion in fixed rate loans that will reprice and those loans are at, call it, 5.25%.

So maybe that helps frame the opportunity there in terms of repricing.

[Operator Instructions] And the next question will come from Janet Lee with TD Cowen.

Good morning. So if I look at the fourth quarter profitability metrics, whether I look at ROA or ROTCE more efficiency ratio. You guys kind of achieved the levels that you wanted to achieve from the first acquisition, the slide deck that you filed a while ago, which was impacted in '25 given the changes in purchase accounting, et cetera. But so we're there. So is there any updated thoughts on where you want your profitability metrics to go from here? Or are we at the level that you guys wanted to achieve, and it's more about scaling from here?

Janet, this is Jim. So maybe I'll start with that, but Kevin should add on. So again, I think you summed it up well. We feel -- we're pleased with the fact that we except for a couple of assumptions, we're pretty much on pace to achieve what we set out 18 months ago with respect to the merger and the economic benefits of it. So feel really good about that. And we sort of pointed all along to Q1, '26 is being -- is hopefully being a clean quarter and and showing distinctly the benefits that came out of that merger. And the other thing I should have mentioned this in expenses, we don't anticipate any M&A expenses in Q1.

We think mean there could be something that dribbles in, but I think we've incurred the last of those in Q4. So I think you framed it well. We feel like we're very much on pace in 26 to attain largely what we outlined 18 months ago. And I think to sort of go from that to all right, where do we -- how do we think about future profitability and incorporate all the things going on in the industry and around us, I'll turn it over to Kevin.

Yes. Great question, Janet. It just got me reflecting -- because I think -- to your point, we're right on top of what we projected 18 months ago. But 18 months ago, that would have put us in the top quartile of our peer group, right? But based on what we knew at that time. Well, today, we're not in that top quartile. The peer has moved. I think we find ourselves what right in the middle, which isn't where we want to be.

Our goal is to be a top-performing company in all areas, including our financial metrics. So no, we're not there yet. One, because we didn't plan to land here 18 months ago and then be satisfied with that. We plan to continue to improve but what's exciting about what's happened with our peer groups, with the peers moving is it's forced us to continue to set our sights on higher goals. And what I see in the company, what I feel in the company is real momentum and real buy into that. and in some cases, opting out of it. But that's okay because that opt out is what will help us achieve our higher performing status. But what I see by and large is as most people embracing that and actually relishing in it. And so our goal is to continue to improve from here and chase a moving target with the ultimate goal of being high performing. And I just -- I was somewhat reflecting on just this past year and this morning.

And if you look at our results for the year, particularly as we leave Q4, we but really don't know what we projected as far as pretax pre-provision revenue back in '18. I can't remember what that was, but I suspect it's probably appreciably higher today than what we projected. And what I mean by that is that 1 thing that we did this year is we maintained our allowance. Just as we saw some migration in credit, we're not seeing any massive breakout. We don't have any significant concern but we've also maintained allowance, and that has weighed on ROA a little bit, all things being equal. We're probably a little bit ahead of where we thought provision would be for $25 million actual results compared to where we thought it would be in '24.

And if you normalize for that, maybe we are a little bit closer to that top performing peer group. But again, just out of a mindfulness of caution, we've maintained some reserves -- but I think if you look at -- if you look through that, look at the operating results, we're probably doing a little bit better than what we projected, but still aren't ready to drop a mission accomplished banner yet. The peer has moved. And frankly, that's what's exciting about this. is we're relevant. We're in the game. We're in the middle of the pack rather than the bottom of the pack as it relates to our performance and the difference between top performing and where we are is a few basis points. And so our execution, the strategies we have, our execution is what will make the difference against the peer group. And that -- to me, that's what's exciting and fun about this. It's not discouraging. You could easily say, well, we did all this work, and we ended up in the middle, not the top -- that's not really what I feel in the company. What I feel is an excitement that our plan and our team and our execution, I feel confident that we'll continue to move up the rankings as we just perform and we just need a little bit more time to perform and that will continue to allow us to improve financial performance and ultimately achieve our goal of getting to that top performing or high-performing status.

That's great to hear. And just my last follow-up on loan growth. In terms of you reiterated that mid-single-digit guide for 2026, you cited strong pipelines. I understand you really don't have a lot of line of sight into payoffs. But what's -- what's giving you that confidence that are you seeing signs that payoffs are -- have moderated versus the fourth quarter level? And what gives you confidence? .

Yes. So I would just say the confidence probably is a little bit more of a longer period of time, so let's extend this out 12 months. It gives me confidence that over the course of the year, things will normalize. It may be abnormal quarter-to-quarter, but over the course of a longer period of time, I think we're well positioned to grow at that mid-single run rate. And that's not only loans, but also funding that appropriately on the liability side with deposits. payoffs just early on, I mean, we're early on into the quarter. So it's really hard to gauge what payoffs will be for we're just kind of projecting that it's going to be a similar level of payoffs that we had in Q4, which were elevated compared to previous quarters. But that really isn't necessarily based on what we've seen in the first something days of the quarter. It's really just a concern that these are lumpy. They show up sometimes unexpected or the first 20-something days really aren't in a good indication of what will happen and play out over the course of 90 days. But -- just when I look at our production, when I hear -- when I talk to our teams and hear the opportunities that they see or they're having the conversations they're having, that's what give me -- that gives me confidence that we're over the course of the year, mid-single digits is the appropriate run rate for us. .

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin Chapman for any closing remarks. .

Thank you, Nick, and thank you to everybody that listened this morning and we appreciate your interest in Renasant. We also look forward to meeting with investors throughout the quarter. Thank you. .

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

Good day, and welcome to the Renasant Corporation 2025 Third Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded.

I'd now like to the conference over to Kelly Hutcheson. 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 executive management team.

Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Such factors include, but are not limited to, changes in the mix and cost of our funding sources interest rate fluctuation, regulatory changes, portfolio performance and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com at the Press Releases link under the News and Market Data tab.

We undertake no obligation and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release.

And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman.

Thank you, Kelly, and good morning. We appreciate you joining the call and look forward to sharing results for the quarter. Renasant's financial performance in the third quarter reflects good loan growth and profit improvement that keeps us on the path to meet the financial goals of the merger. The integration with the First continues to go well. Systems conversion took place in early August, and I believe we have made great strides in operating as 1 team. As you know, in July 2024, Renasant and the First announced a partnership that would maximize our strengths and create a high-performing Southeast bank. At that time, we established profitability goals related to return on assets, return on tangible common equity and our efficiency ratio.

We knew that the third quarter of 2025 would be an important measuring stick our progress against these expectations. Q3 results position us to achieve our goals. Additionally, it is very gratifying to see our team despite going through the largest conversion either company has gone through produced loan growth of almost 10% during the quarter. I want to thank all of our employees for their tremendous effort this quarter in completing systems conversion while continuing to understand and meet the needs of our customers.

I will now highlight financial results for the quarter. The company's net income was $59.8 million or $0.63 per diluted share. Adjusted earnings, excluding merger charges, were $72.9 million or $0.77 per diluted share. Loans were up $462 million on a linked quarter basis or 9.9% annualized. Deposits were down $158 million from the second quarter, which was driven by a seasonal decrease in public funds of $169 million on a linked quarter basis. Reported net interest margin was flat at 3.85%, while adjusted margin was up 4 basis points to 3.62% on a linked-quarter basis. Our adjusted total cost of deposits increased by 4 basis points to 2.08%, while our adjusted loan yields increased 5 basis points to 6.23%. We look forward to seeing additional profitability improvements in upcoming quarters as efficiency savings are realized.

I will now turn the call over to Jim.

Thank you, Kevin, and good morning. As Kevin mentioned, we are encouraged by the integration efforts of our employees and the positive impact on results this quarter. Our adjusted return on average assets of 1.09% for the quarter is an improvement of 12 basis points from a year ago, and our adjusted return on tangible common equity of 14.22% for the quarter is an improvement of 296 basis points. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $10.5 million, comprised of $9.7 million for funded loans and $800,000 for unfunded commitments.

Net charge-offs were $4.3 million, and the ACL as a percentage of total loans declined 1 basis point quarter-over-quarter to 1.56%.

Turning to the income statement. Our adjusted pre-provision net revenue was $103.2 million. Net interest income growth was driven by the improvement in the net interest margin and loan growth. Noninterest income was $46 million in the third quarter, a linked quarter decrease of $841,000, excluding the gain on sale of MSR assets in Q2. Noninterest expense was $183.8 million for the third quarter, excluding merger and conversion expenses of $17.5 million noninterest expense was $166.3 million for the quarter, a linked quarter increase of $3.6 million. With systems conversion now complete, we expect modeled synergies to be more evident in our results going forward.

Regarding conversion-related expenses, we believe the majority have been recorded through the third quarter with a modest amount expected to come in the fourth quarter. There was a decline in our adjusted efficiency ratio of about 0.4 percentage points, and we expect to see additional improvements in the coming quarters. We are encouraged by the results of the third quarter and the positive momentum going into the fourth quarter.

I will now turn the call back over to Kevin.

Thank you, Jim. We look forward to closing out a successful year for Renasant. We have come a long way on our goal of improving profitability. The combination of a strong balance sheet plus added profitability puts us in a position to capitalize on opportunities in our vibrant banking footprint.

I will now turn the call over to the operator for questions.

[Operator Instructions] And the first question comes from Stephen Scouten with Piper Sandler.

Everyone. Really nice quarter here. Loan growth was particularly encouraging. Can you give any color around what you're seeing from a pipeline perspective? And maybe also around specifically the legacy SPMS markets, maybe in and around the Gulf Coast potential strength you're seeing there that's helping fuel the strong growth?

See,it's Kevin. So yes, we -- looking at loan growth for the quarter. I know we've been guiding more towards, call it, the mid-single digits. We've been expecting payoffs to increase. Our production has been all year long. I think for Q1, Q2, we've been more in the 7% range if you look at the net loan growth. Again, this looming potential of payoffs -- can you -- it feels like it continues to be out there. But getting to the current quarter, what I'd tell you what we're excited about is the growth happened all throughout our footprint whether you look at as a breakdown from a geography, whether you look at it from, say, our credit channels, whether it's our small business lending units or our business banking lending units or even some of our larger units like corporate or commercial lending units. All categories, we saw good distributed growth in all of them.

And even if you break it down by asset classes, we saw good growth. So going to where we were back in July of '24 when we contemplated merging with the first, what we thought we could do is unlock some potential in both companies. I think...

Specific to the first in the Gulf Coast. What we've seen is we've seen good growth there as well. And the opportunities that Renasant can provide to the first lenders with being able to expand relationships now that they have a little bit bigger balance sheet, we have a bigger balance sheet. We have more lending capabilities or the ability to do specialized lending with some of our secured lending lines. That team has immediately gravitated to it, has made referrals, and we've seen immediate successes as a result of, again, the combination. So again, as we look we're excited about what Q3 indicates, how we're positioned. And again, I think we've got the opportunity to continue growth in Q4 and beyond.

Great. Appreciate that color, Kevin. Maybe just curious about pace of expense saves from here kind of how much maybe you've been able to extract so far and kind of what we can think about in terms of further expense states from the deal and kind of the path as we maybe look at a good 1Q 26 run rate, that sort of thing?

Stephen, this is Jim. So just to touch on Q3 for a second. So you saw in core NIE, we were up about $3 million ex the merger expenses. And our -- and I would say actually, let me comment on the increase in what we saw in -- there was -- there were 3 buckets where we saw the increase, and they were about equally weighted. You had an increase in health and life increase and occupancy and you saw an increase in health and life occupancy in the FAS 91. So 2 of those are sort of uncontrollable, so we'll see how those play out in future quarters. But as it relates more particularly to your question, our sense is that in Q4, we'll see about a $2 million or $3 million decrease in core NIE for Q4 and then another $2 million or $3 million decrease in core NIE in q1.

Okay. Fantastic. That's really helpful, Jim. And then just lastly for me, I really appreciate how you guys broke out kind of accretion in your slide deck. What's kind of a good baseline assumption of the normal accretion expected? Is it around that, I guess, it was $12.4 million. Is that right? Or maybe the interest rate component of that was about $9.8 million, if I'm doing the math right. Is that a good way to think about forward accretion?

Well, it obviously is going to vary the accelerated part is going to vary given loan prepayments. So it's a hard thing to predict. But I think that scheduled accretion is going to track pretty closely to what you saw in Q3.

And the next question comes from Matt Olney with Stephens.

I want to ask more about that core margin in the third quarter, saw some good expansion with that? Any more color on the drivers of that expansion? And then I guess if we look forward, I think you mentioned on a previous call that you thought it could -- core margin would maybe flatten out as we got towards the fourth quarter. Is that still the view of the fourth quarter core margin.

Matt, this is Jim. So yes, we were pleased to see a little expansion in Q3. Looking forward, I would say, in Q4, probably some modest contraction in the margin in Q4. And then for '26, I would say, modest expansion. So not a lot of change, but that would be a general outlook and that assumes 4 rate cuts. between now and year-end of 26.

Just to clarify, you said that assumes 4 rate cuts between -- clearly today, I assume, between now and the end of next year. Is that right?

That's correct.

Okay. That's helpful. And then I guess switching over to credit quality. We did see criticized loans jump up in the third quarter. Any color on the driver of that jump up of criticized loans?

This is David. So it was a broad-based increase for the quarter. There was a little bit of commercial real estate, a little bit of C&I we get into the weeds a little bit, we had a single multifamily transaction that does make up about 1/4 of it. that we feel very strong. This is a good asset. I just was underperforming relative to our original budget. We expect that loan to pay off the ordinary course probably early '26. We had 2 C&I transactions that made up roughly 1/3 of that number one of them is the truck or credit that we've talked about that made up a large percentage of that asset type. A little bit of migration in our self-store portfolio and then a little bit of migration in 1 asset or senior housing.

So it was broad-based within our downgrades to criticized. We don't feel that we have any loss exposure in that increase. But it's broad-based. And Matt, I know you know we do a fairly aggressive job of looking at our loan portfolio from the health portfolio, risk-rating loans proactively to make sure we're identifying risk so we can find those loans and migrate them out of the bank as quick as possible. So I think that's just a testament to our early identification of problem loans so we can manage them proactively.

And the next question comes from Michael Rose with Raymond James.

Just on the new buyback that you guys announced, -- good to see you guys are going to be building capital, but you haven't bought back really any stock since 2021. And just wanted to see where that currently plays in your thought process, particularly given the fact that you've just here recently completed a deal, there's probably other deals out there. It seems like the environment good. Just wanted to kind of run down the thought process on capital as we move forward.

Michael, it's Jim. So the third quarter was an important quarter for us because we obviously got the deal closed, and that was reflected in Q2. And then to go through systems conversion and just see Q3 come out like it did. And of course, Kevin's comments, I thought were spot on. I mean it's just really nice to see all that momentum that we've got and the fact that our teams remain focused. I say that because I think it's important to have that backdrop as we think about capital because we -- I think we feel like we've got pretty good visibility into Q4 and into '26 in terms of the prospects for us to continue to grow that capital.

Our sense is that we could grow those capital ratios anywhere between 60 and 70 basis points between now and year-end. And so the capital levers, including buyback, are much more in focus for us. And we are putting a lot of thought into that. And I think are mindful of the fact that we're going to have a growing capital base. We've taken a couple of steps here recently. One, notably, where after the quarter, we redeemed $60 million of sub debt. You saw the dividend announcement, the common dividend announcement. So -- and we wanted to think about that authorization. And one of the things -- 1 of the reasons we increased it is just proportionate. I mean, we're 50% larger in terms of market cap and capital. But also, it's a lever that we're increasingly inclined to think about. So I think whether it's the buyback supporting organic growth, which, of course, has been strong, remains the #1 goal. But we're going to bear down on uses of capital. And I think buyback is certainly high on that list in terms of levers we might pull in the coming quarters.

Very helpful. And then maybe if I can just ask a question on deposits. You guys loan to deposit ratio is now kind of approaching 90%. It's the highest it's been since basically the beginning of COVID. Can you just talk about some of the deposit growth strategy? I know there's always some seasonality with muni deposits, too, but the general trend has been upward over the past few years. And just wanted to get a better sense of your plans for deposit growth juxtaposed with the rate environment?

I think we've been spoiled because I think out of the last 10 quarters, we've had deposit growth that's equal or better loan growth. And so to not have that in a quarter is certainly something that caught our attention. But as you point out, a lot of it was seasonal. It had to do with public funds. And our goal is to grow deposits, core deposits in line with loan growth. And that remains a focus of ours and the way we incentivize our teams, what we motivate our teams and so as we go forward in '26, we want that core deposit growth to equal whatever loan growth we produce.

As we look to Q4 some of the public outflows that we saw in Q3, there might be just given the seasonality of the way some of the municipalities behave, we could see some of that come back in the latter part of Q4, so we'll see how that plays out. But I would tell the funding loan growth remains a top priority here. And we know we can generate deposits. We've got a great record of doing that, and it's a focus of the company, whether it's this quarter or next quarter or for the next decade. That is a paramount focus that Renasant to grow the deposit base regardless of what loan growth is.

Really appreciate the color. Maybe if I could just sneak 1 last 1 in. I appreciate the near-term color on expenses. I know it's something we all struggle with in modeling as we go through a deal, especially at the size. But just as we think about kind of the combined franchise now that systems conversion has happened, are there other areas and levers that you guys can pull to kind of generate the positive operating leverage as we kind of move forward? I'm just trying to better appreciate some of the opportunities, maybe at legacy Renasant now that you have the cost saves from the deal and the accretion from the deal?

Yes. Michael, Kevin. And so the short answer is yes. right? If we go back 16, 18 months ago, Renasant on a stand-alone basis, the first on a stand-alone basis. Both of us were looking at either adding expenses for the assets where we were at or we needed scale for the expenses and infrastructure we have built. So combining both companies unlock potential. And I think we laid out some goals when we launched this of an ROA in the 120s, mid-teens ROE and a mid-50s efficiency ratio. And I think, again, you saw it in Q2, you see we are right on top on path to meet those goals. But as we've talked about or as we've tried to communicate, that's not where we're stopping. There's real momentum in the company, not only around expenses, but driving higher levels of profitability on our expenses.

So that operating leverage that's there is going to continue to come in 2 places. It will come from discipline and management on the expense side, but it's also going to be getting the right return on the expenses we have. So we've had probably above average loan growth now for a couple of quarters. We want to have above-average loan growth. It doesn't have to be 20% loan growth. It just needs to be a couple of multiples above the average so that we can get the scale. So we can get the revenue that's generated off those expenses. And that's been an effort that's been ongoing and on the Renasant -- and now I think you're seeing it on the combined company. But there's still going to be a continued effort to look at our expenses, create efficiencies. Accountability is prevalent all throughout the company and we hold each other accountable, but the expectations for the company internally have been raised, I would say, further than where expectations are for external estimates.

And so we really -- the momentum we have around our financial performance and our focus and that leads with profitability that has been embraced by the company, and I think it's unleashed some pent-up excitement, pent-up demand within the company as we start -- as we're achieving the success that we felt we could achieve.

So the operating leverages will be not only on the expense side, but it's also going to come on the revenue side. Our provision was elevated this quarter, not because of credit but because we had twice the loan growth we thought we were going to have. So that revenue that's going to come from that above average loan growth is going to be there in the future quarters. And that's what excites us about the past couple of quarters and some of the balance sheet growth that we've had is it's in line with our plan and really kind of reemphasizes what we thought could happen combining both Renasant and the First is unlocking some of that potential that was there. Unlocking it on a -- when we combined as opposed to us not being able to unlock it or struggle a little bit if we remained independent.

And the next question comes from Dave Bishop of the Hub Group.

Kevin, quick question in the preamble. It sounded like maybe you were surprised in terms of the lack of payoffs this quarter? And maybe last, just curious if you have like line of sight into potential payoffs into the next quarter? And if they didn't occur, maybe what's delaying or are there borrowers sort of waiting for lower rates? Just curious if there's any way to ring-fence maybe potential headwinds into the coming quarter or next, if that's possible?

Yes. No, it is. To be honest with you, we are -- I am and I think we are a little bit surprised that payoffs have been a little bit muted -- but we've also been -- we've set an indicator that we've been looking at as the 10-year. The 10-year as it approached 4% or dropped below 4% and -- we think the risk of prepayments, payoffs for us increase. Q3, the -- I don't know the exact number on the 10-year, but it was probably in the 14s or the $420 million and didn't really approach the 4% range until we got into October. So as we look at, say, fourth quarter, we are more focused on and ensuring that we have good line of sight into customers, our lenders getting updates as to where potential payoffs, prepayments could occur only because we had set towards the end of last year, beginning of this year, that 4% 10-year is an important benchmark for us that as we approached it or we got below it, that could elevate payoffs in our commercial real estate book.

Got it. And then obviously, you're cognizant of the significant amount of M&A activity in your backyard or backyard, so to speak, Just curious how aggressive you think you're going to be in terms of recruiting some of that talent and commercial clients that could dislodge from those acquisitions. And is the opportunity set big enough to -- I know the First merger is closed, but is the opportunity there to sort of replace whole bank M&A with lift out of talent?

Yes. So David, I'm not sure it replaces it, but it provides an interesting and unique opportunity for us. And in some cases, there may be opportunity to hire with some of the overlap we may have the opportunity to pick up customers without any additional hires. So I think we find ourselves in a very unique position and we like where we sit with all the disruption. And again, I don't necessarily think this is going to be the last disruption. That's what we've seen, there's going to be further disruption in the Southeast. And I think we sit in a very unique position to potentially benefit from that. And again, it may come in the form of hiring in -- just for example, in Q3, I think we hired 10 new either market presidents or prominent lenders throughout the footprint.

We've also been actively hiring in Q4. But again, in some cases, we have the opportunity to pick up potential business and we won't have to hire -- we don't feel like we'll have to hire to do that. So it's going to be -- again, we're excited that we're not in the middle of a conversion. We're not middle of approvals. We're not in the middle of anything that we're on the other side of our conversion, other side of our integration and really focus to what we want to do, which is get business and gain market share. And so we're excited about where we stand right now as it relates to that.

And the next question comes from Catherine Mealor with KBW.

I want just to circle back on expenses, just to kind of be on maybe looking at the expense trajectory into '26. So if I lower expenses per what you're talking about, Jim, kind of somewhere around $2 million to $3 million each of the next 2 quarters. I'm kind of starting next year at a 161 base. And if I just annualize that number, basically where consensus is for '26 in expenses, which is 645. And so as I'm thinking about that, I mean, do you feel like we're in a position where you're where you're lowering expenses in the next 2 quarters and then were flat? Or should we actually grow a little bit off of that base in the first quarter of '26, just kind of given better revenue growth and opportunities in your markets?

Catherine, I would say -- I would guide you towards that consensus number or a touch better for '26. I think that's a reasonable outlook for us. And we sort of got the crosswinds of the efficiencies from the deal. And then the things that Kevin mentioned, we set in a really good spot right now geographically and just as a company, having gotten the conversion behind us. The integration still, there's work to do, but it's gone really well. And so -- but I think what you laid out, I mean, we'll end up with a Q1 run rate, and I think it will be a pretty clean quarter overall in terms of expenses. There may be some a little noise in there, but I think it will be pretty clean. And then we'll have a merit that will impact our numbers a little bit towards the middle of the year. But I think that consensus number is probably a pretty good number, maybe a touch better.

Okay. That's awesome. Very helpful. And then on the deposit side, it was interesting to see deposits up a little bit this quarter. And I know that's the mix change, and now we'll have the benefit of 2 cuts -- but we're hearing from a lot of other banks this quarter, the deposit costs are getting more and more competitive. And so just curious on how you're kind of thinking about deposit costs and betas over the next few cuts relative to what we've seen over the past 100 basis points of cuts?

Well, certainly, on the deposit pricing side where we've seen the most pressures, I mean the loan side is always competitive, but I feel like -- it's the -- any sort of improvement in the deposit side has been grudgingly so. I mean it just -- it feels really tough there. So I think our betas interest-bearing deposits and loans are probably roughly the same in the mid-30s for '26, between now and year-end '26. And the key variable there is just -- is what we see in the deposit side and people's thirst for that funding. So as you said, we had a little bit of increase in the cost in Q4. I don't think our CD special or 5-month special. I don't think that's changed in pricing in, I don't know, 4 or 5 quarters. And then there's -- and we hope to see that change. But right now, I wouldn't say there's the prospect of that near-term. So we'll just see -- we'll see what the market and the competition gives us, but it's been tough to eke out games on the funding cost side.

And the next question comes from Janet Lee with TD. Cowen.

Clearly, driving improved returns and increasing profitability, it looks like that is 1 of the key goals for you, Kevin. In terms of like expectations being raised further on your internally, I guess, for Renasant and leading with that increased profitability. Aside from the expense side on the revenue side, can you just give us like what you mean by that? And like what kind of examples are there that? Is it employees like the bankers bringing in more like low-cost deposits or bringing in more like fee income products? What does that mean?

Yes. So thank you. So great question. Let's break that down. So 1 thing that's weighed on our profitability maybe is really a little bit of a lack of scale. So we made investments -- but we didn't quite get the scale that we needed, whether it's our average loan to lender, loan to relationship manager, our average deposit to branch. And so we've been focusing on looking at performance at the individual or the market level to improve that. And so when we see our growth happening all throughout our footprint, that's encouraging to us because we're actually doing it with less headcount right now. But if we look at what the full-time employees were of Renasant in the first before we announced the acquisition and where we are at 9/30, we're down over 300 employees. So we're doing it with less. We're having above-average growth, and we're dealing with less employees.

Now some of that's part of call saves, but some of it is not part of cost saves. It's been the ongoing accountability measures we've had. So when we talk about the need for improvement, and improve profitability. It's absolutely on the expense side, but it's also on the revenue side and getting more scale where we should have it. And so whether that's at an individual market level, whether that's a Nashville or the coastal region and Atlanta, where those are good markets where there's opportunity to grow. Or whether it's at an individual lender level, we're holding everybody accountable for a higher level of expectations to support their cost. And we really focus on the return of the individual, the return of the market to determine our success. And we've increased our expectations and our teams are responding to that. So I don't know if that provides enough color, but that gives a little bit of a glimpse as to what we're talking about as it relates to improving the accountability and improving the revenue growth, the performance that comes along with the efforts to reduce expenses.

Got it. And in terms of your on the loan and deposit growth. So you mentioned mid-single-digit sort of growth for you guys on a normalized basis. I get that the payoffs were a little elevated. I mean not elevated the other way around, were smaller than expected. So do you still think that mid-single digits is sort of a good run rate for you? Or could we expect little bit higher in terms of both deposit and loan growth.

Yes. So I think right now, just given -- I'd like to get through Q4 before we set any new expectations just given where the tenure is and where we think that some payoff elevation could happen in Q4. But before we change that. So we're still looking at the mid-single digit which bakes in an uptick of payoffs, prepayments happening in Q4 just due to a lower rate environment, particularly on the 5- and the 10-year spot on the curve. So we're still targeting mid-single digit. But I can tell you, our focus is continue to find every good opportunity we can and find a banking relationship with that opportunity, whether it's on the loan or deposit side.

But I think Q4 is going to be interesting, at least for us to see how prepayment speeds react to where we find ourselves in the current curvature of the interest rate curve, the current slope of the interest rate curve.

And this does conclude the question-and-answer session. I would like to turn the floor to Kevin Chapman for any closing comments.

Thank you. We appreciate your interest in Renasant this morning, and we look forward to continuing our conversations with you throughout the quarter. Thank you.

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