Renasant Corporation Announces 2016 Fourth Quarter And Year-End Results

TUPELO, Miss., Jan. 17, 2017 /PRNewswire/ -- Renasant Corporation (NASDAQ: RNST) (the "Company") today announced earnings results for the fourth quarter and year ended December 31, 2016. Net income for the fourth quarter of 2016 was approximately $23.6 million, up 11.70%, as compared to $21.2 million for the fourth quarter of 2015. Basic and diluted earnings per share ("EPS") were $0.56 and $0.55, respectively, for the fourth quarter of 2016, as compared to basic and diluted EPS of $0.53 and $0.52, respectively, for the fourth quarter of 2015.  

Net income for 2016 was $90.9 million, an increase of 33.69%, as compared to $68.0 million for 2015. Basic and diluted EPS were $2.18 and $2.17, respectively, for 2016, as compared to basic and diluted EPS of $1.89 and $1.88, respectively, for 2015.  

The Company incurred expenses and charges in connection with certain transactions that are considered to be infrequent or non-recurring in nature. The following table presents the impact of these charges on reported EPS for the dates presented:

The Company's balance sheet and results of operations as of and for the year ending December 31, 2016, include the impact of the Company's acquisition of KeyWorth Bank ("KeyWorth"), a Georgia state bank headquartered in Atlanta, Georgia, which was completed on April 1, 2016. As of the acquisition date, KeyWorth operated six offices in the Atlanta metropolitan area and had approximately $399 million in assets, approximately $284 million in total loans, and approximately $347 million in total deposits. The assets acquired and liabilities assumed were recorded at estimated fair value as of the acquisition date and are subject to change pending finalization of all valuations.

On December 8, 2016, the Company's wholly owned subsidiary, Renasant Bank (the "Bank"), entered into an agreement with the Federal Deposit Insurance Corporation (the "FDIC") that terminated all of the Bank's loss share agreements with the FDIC, which includes Single-Family Shared Loss and Commercial Shared Loss agreements. All rights and obligations of the Bank and the FDIC under the FDIC loss share agreements were eliminated under the termination agreement.  The Company incurred a one-time pre-tax charge of $2.1 million, or $1.4 million on an after-tax basis, in connection with the termination agreement. At December 31, 2016, the Company had $28.1 million in loans, $2.6 million of which were nonperforming, and $487 thousand in other real estate owned ("OREO") which had been previously covered under these loss share agreements. 

"We made significant achievements in 2016, and the financial results for the year are a testament to a well executed plan. Our diluted EPS of $2.17 per share represents our highest reported yearly earnings which was driven by the strong performance of our overall company coupled with the successful conversion and integration of KeyWorth's operations," commented Renasant Chairman and Chief Executive Officer, E. Robinson McGraw. "The results include our successful completion of the KeyWorth acquisition and a 22.97% annual growth in our legacy loan portfolio. As we look to 2017, we believe we are well positioned to continue to improve on profitability and earnings growth, which in turn will generate shareholder value."

Highlights from the fourth quarter and annual results of 2016 include the following:

Enhanced Profitability

• Total assets increased $773.4 million to $8.7 billion at December 31, 2016, as compared to $7.9 billion at December 31, 2015. Earning assets contributed $778.3 million of the increase year over year.
                                                    
• Loans not acquired increased $880.0 million, or 22.97%, to $4.7 billion from December 31, 2015. For the fourth quarter of 2016, the yield on loans was 5.02% compared to 5.03% for the same period in 2015. The yield on loans excluding the impact from purchase accounting adjustments during the fourth quarter of 2016 was 4.51% compared to 4.48% for the same period in 2015. The yield on loans was 4.95% for the full year of 2016 compared to 4.91% for 2015. The yield on loans excluding the impact from purchase accounting adjustments on loans was 4.47% and 4.50% for 2016 and 2015, respectively.

• Total deposits increased $840.5 million, or 13.52%, to $7.1 billion from December 31, 2015, with noninterest bearing deposits growing 22.14% during the same time. Noninterest-bearing deposits averaged $1.47 billion, or 22.00% of average deposits, for 2016, compared to $1.13 billion, or 20.29% of average deposits, for 2015. For the fourth quarter of 2016, the cost of total deposits was 28 basis points, as compared to 22 basis points for the same period in 2015. The cost of total deposits was 27 basis points for the full year of 2016, as compared to 25 basis points in 2015.
                                                            
• Net interest income was $78.0 million for the fourth quarter of 2016, as compared to $72.4 million for the fourth quarter of 2015. Net interest margin was 4.24% for the fourth quarter of 2016, as compared to 4.33% for the fourth quarter of 2015. The following table reconciles reported net interest margin to net interest margin excluding the impact from purchase accounting adjustments on loans for the periods presented:

• Net interest income was $301.0 million for the year ended December 31, 2016, as compared to $241.4 million for the year ended December 31, 2015. Net interest margin was 4.22% for 2016, as compared to 4.16% for the prior year. The following table reconciles reported net interest margin to net interest margin excluding the impact from purchase accounting adjustments on loans for the periods presented:

• Noninterest income for the fourth quarter of 2016 was $30.1 million, as compared to $31.4 million in the same period of 2015. The decrease is driven by a decline in mortgage banking income resulting from rising interest rates during the fourth quarter of 2016. Noninterest income increased to $137.2 million for the full year of 2016, as compared to $108.3 million for 2015. The growth is primarily attributable to an increase in mortgage banking income, income from the Company's wealth management division and the KeyWorth acquisition.
                                                               
• Noninterest expense was $71.4 million for the fourth quarter of 2016, as compared to $70.7 million for the fourth quarter of 2015 and $294.9 million for the full year of 2016, as compared to $245.1 million for 2015. Excluding nonrecurring charges for merger and conversion expenses, debt prepayment penalties and loss share termination, the increase from 2015 is primarily attributable to the addition of KeyWorth operations and strategic additions of personnel.

The following table presents the Company's profitability metrics for the quarter and year ending December 31, 2016, including and excluding the impact of after-tax merger and conversion expenses, debt prepayment penalties and loss share termination:

Aggressively Managed Problem Credits 
Total nonperforming assets were $58.8 million at December 31, 2016, a decrease of $22.0 million from December 31, 2015, and consisted of $35.5 million in nonperforming loans (loans 90 days or more past due and nonaccrual loans) and $23.3 million in OREO. 

The Company's nonperforming loans and OREO that were purchased in previous acquisitions (collectively referred to as "acquired nonperforming assets") were $22.2 million and $17.4 million, respectively, at December 31, 2016, as compared to $30.5 million and $22.4 million, respectively, at December 31, 2015.  The acquired nonperforming assets were recorded at fair value at the time of acquisition, which significantly mitigates the Company's actual loss. As such, the remaining information in this release on nonperforming loans, OREO and the related asset quality ratios primarily focuses on non-acquired nonperforming assets.

• Non-acquired nonperforming loans decreased to $13.4 million, or 0.28% of total non-acquired loans, at December 31, 2016, from $15.0 million, or 0.39% of total non-acquired loans, at December 31, 2015. Early stage delinquencies, or loans 30-to-89 days past due, as a percentage of total loans were 0.23% at December 31, 2016, as compared to 0.19% at December 31, 2015.
                                                      
• Non-acquired OREO decreased 54.35% to $5.9 million at December 31, 2016, from $13.0 million at December 31, 2015. Non-acquired OREO sales totaled $10.0 million in 2016 with $4.2 million occurring during the fourth quarter of 2016.
                                                      
• The allowance for loan losses represents 0.69% of total loans at December 31, 2016, as compared to 0.78% at December 31, 2015. The allowance for loan losses represents 0.91% of nonaquired loans at December 31, 2016, as compared to 1.11% at December 31, 2015.
                                                      
  • Net loan charge-offs were $4.8 million, or 0.31% of average total loans, for the fourth quarter of 2016, as compared to $1.4 million, or 0.10% of average total loans, for the same period in 2015. Net loan charge-offs were $7.2 million, or 0.12% of average total loans, for 2016, as compared to $4.6 million, or 0.10% of average total loans, for 2015. The increase year over year and quarter over quarter is attributable to bringing several problem credits to final resolution. The charges were fully reserved for in the Company's allowance for loan losses and resulted in no additional provision for loan loss expense.
                                                        
  • Provision for loan losses was $1.7 million for the fourth quarter of 2016, as compared to $1.8 million for the fourth quarter of 2016 and $7.5 million for the full year 2016, as compared to $4.8 million for 2015. The increase in the Company's provision year over year is primarily attributable to the aforementioned nonacquired loan growth.

Built Our Capital Ratios

• At December 31, 2016, Tier 1 leverage capital ratio was 10.59%, Common Equity Tier 1 ratio was 11.48%, Tier 1 risk-based bapital ratio was 12.86%, and total risk-based capital ratio was 15.03%. All regulatory ratios exceed the minimums required to be considered "well-capitalized."
                                                
• Tangible common equity ratio was 9.00% at December 31, 2016, as compared to 7.54% at December 31, 2015.
                                                
• In December 2016, the Company completed the underwritten public offering of 2,135,000 shares of the Company's common stock at a public offering price of $41.50 per share resulting in net proceeds to the Company of $84.1 million.
                                                
• In August 2016, the Company completed the public offering and sale of $60 million of the Company's 5.00% fixed-to-floating rate subordinated notes due September 1, 2026, and $40 million of its 5.50% fixed-to-floating rate subordinated notes due September 1, 2031 (collectively, the "Notes"). The Notes resulted in net proceeds to the Company of $98.2 million and qualify as Tier 2 capital.

CONFERENCE CALL INFORMATION: 
A live audio webcast of a conference call with analysts will be available beginning at 10:00 AM Eastern Time on Wednesday, January 18, 2017.

The webcast can be accessed through Renasant's investor relations website at www.renasant.com or http://services.choruscall.com/links/rnst170118.html. To access the conference via telephone, dial 1-877-513-1143 in the United States and request the Renasant Corporation Fourth Quarter Earnings Webcast and Conference Call. International participants should dial 1-412-902-4145 to access the conference call.

The webcast will be archived on www.renasant.com beginning one hour after the call and will remain accessible for one year.  Replays can also be accessed via telephone by dialing 1-877-344-7529 in the United States and entering conference number 10098912 or by dialing 1-412-317-0088 internationally and entering the same conference number. Telephone replay access is available until February 2, 2017.

ABOUT RENASANT CORPORATION:  
Renasant Corporation is the parent of Renasant Bank, a 113-year-old financial services institution. Renasant has assets of approximately $8.7 billion and operates more than 175 banking, mortgage, financial services and insurance offices in Mississippi, Tennessee, Alabama, Florida and Georgia.

NOTE TO INVESTORS:  
This news release may contain, or incorporate by reference, statements which may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such forward looking statements usually include words such as "expects," "projects," "anticipates," "believes," "intends," "estimates," "strategy," "plan," "potential," "possible" and other similar expressions. 

Prospective investors are cautioned that any such forward-looking statements are not guarantees for future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.  Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include significant fluctuations in interest rates, inflation, economic recession, significant changes in the federal and state legal and regulatory environment, significant underperformance in the Company's portfolio of outstanding loans, and competition in the Company's markets. Management undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

NON-GAAP FINANCIAL MEASURES:  
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures.  These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets and certain charges that the Company considers to be non-recurring in nature.  The Company's management uses these non-GAAP financial measures when evaluating capital utilization and adequacy.  In addition, the Company believes that these non-GAAP financial measures facilitate the making of period-to-period comparisons and are meaningful indications of its operating performance particularly because these measures are widely used by industry analysts for companies with merger and acquisition activities.  Also, because intangible assets, such as goodwill and the core deposit intangible, and non-recurring charges can vary extensively from company to company and, as to intangible assets, are excluded from the calculation of a financial institution's regulatory capital, the Company believes that the presentation of this non-GAAP financial information allows readers to more easily compare the Company's results to information provided in other regulatory reports and the results of other companies.

The specific non-GAAP financial measures used are return on average tangible shareholders' equity, return on average tangible assets, the ratio of tangible equity to tangible assets (commonly referred to as the "tangible capital ratio") and the efficiency ratio.  The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP.  Investors should note that, because there are no standardized definitions for the calculations as well as the results, the Company's calculations may not be comparable to other similarly titled measures presented by other companies. Also there may be limits in the usefulness of these measures to investors.  As a result, the Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this release under the caption "Reconciliation of GAAP to Non-GAAP."