Renasant (RNST) Q3 2025: Loan Growth Accelerates to 9.9% Annualized as Integration Synergies Build

2025-10-29 | By EarningsIQ Research

Renasant’s third quarter showcased broad-based loan growth and early synergy capture from its merger with The First, as integration milestones and disciplined expense management set the stage for further profitability gains. Management’s focus on operational leverage and scale is translating into both cost efficiencies and improved revenue productivity, though competitive deposit markets and credit vigilance remain key watchpoints. With merger integration largely complete and momentum in both lending and capital, Renasant is positioned to capitalize on Southeast banking disruption heading into 2026.

Summary

• Integration Synergy: Merger with The First is yielding both loan growth and operational efficiencies ahead of plan.
• Expense Discipline: Cost saves and productivity gains are being realized, with further reductions expected into 2026.
• Capital Flexibility: Strengthened balance sheet and capital ratios open the door for buybacks and talent acquisition as industry disruption persists.

Performance Analysis

Renasant delivered a strong quarter of nearly 10% annualized loan growth, driven by broad-based production across geographies, asset classes, and lending channels. The integration with The First, announced in July 2024, has begun to unlock the scale and lending capacity that management targeted, with immediate traction in legacy and new markets—particularly along the Gulf Coast. Despite a modest seasonal decline in deposits, core deposit growth remains a top priority, and management expects seasonal public fund outflows to partially reverse in Q4.

Profitability improved on multiple fronts: adjusted ROA and return on tangible common equity both saw notable year-over-year gains, and the net interest margin remained stable with slight expansion on an adjusted basis. Efficiency ratio improvement and expense management were clear standouts, with management guiding to further core non-interest expense reductions in the next two quarters. Credit quality remained stable, with increases in criticized loans described as broad-based and proactively managed, and no material loss exposure identified.

• Loan Growth Momentum: Lending expansion was distributed across small business, commercial, and corporate channels, with tangible benefits from the merger’s enhanced scale.
• Margin and Profitability Gains: Adjusted margin and improved asset returns reflect both lending mix and early synergy realization.
• Expense Trajectory: Core non-interest expense is expected to decline further as integration-related costs roll off and operational leverage increases.

With merger charges largely behind and operational integration complete, Renasant’s results signal a foundation for continued profitability improvement and capital deployment flexibility into 2026.

Executive Commentary

Strategic Positioning

1. Merger Execution and Synergy Realization

Integration of The First has moved from planning to execution, with system conversions completed and operational teams unified. Management highlighted that synergy capture is ahead of schedule, with both revenue and cost benefits flowing through the P&L. The expanded balance sheet is enabling larger and more specialized lending, which is immediately benefiting growth in legacy and new markets.

2. Expense Management and Operating Leverage

Cost discipline is a central theme, with management reiterating a two- to three-million-dollar reduction in core non-interest expense over each of the next two quarters. The company is leveraging scale to drive down expenses per unit, and productivity expectations have been raised at both the individual and market level, supporting higher returns on existing infrastructure.

3. Capital Allocation and Growth Flexibility

With regulatory capital ratios well above required minimums and organic capital generation accelerating, Renasant is actively considering share buybacks and talent acquisition from competitors. The recent increase in buyback authorization reflects both a larger capital base post-merger and a readiness to deploy capital for shareholder return and strategic hires as industry disruption continues in the Southeast.

4. Credit Quality and Proactive Risk Management

Credit vigilance remains high, with management proactively identifying and downgrading criticized loans across asset classes. While the increase this quarter was broad-based, management expressed confidence that there is no material loss exposure, emphasizing early detection and active portfolio management as key risk mitigation levers.

5. Deposit Strategy and Funding Costs

Core deposit growth is a renewed focus, especially as the loan-to-deposit ratio approaches 90%. Management acknowledges increasing competition and pressure on deposit betas, but remains confident in their ability to grow deposits in line with loan growth over the cycle, leveraging both incentive structures and market presence.

Key Considerations

This quarter marks a transition from integration to execution, with Renasant demonstrating both the capacity to grow and the discipline to deliver on merger-related profitability targets. The combination of broad-based loan growth, expense reductions, and capital strength positions the bank to capitalize on continued Southeast banking disruption.

Key Considerations:

• Merger Synergy Capture: Early evidence that integration is delivering both revenue and cost benefits, with more to come as modeled synergies are realized.
• Expense Run Rate Trajectory: Guidance for further core expense reductions supports a structurally lower efficiency ratio and improved operating leverage.
• Deposit Growth Imperative: Loan growth outpaced deposits this quarter, making core deposit generation a critical focus as the loan-to-deposit ratio rises.
• Capital Deployment Options: Buybacks and strategic hiring are increasingly viable, given strong capital ratios and organic capital build.
• Credit Watchfulness: Proactive portfolio risk management is mitigating the impact of criticized loan increases, but ongoing vigilance is warranted as macro conditions evolve.

Risks

Competitive funding markets and rising deposit costs present ongoing margin pressure, especially as the industry contends with aggressive pricing for core deposits. Credit quality remains a watchpoint, with increases in criticized loans—albeit proactively managed—highlighting the need for continued vigilance. Merger integration risks have largely abated, but future expense saves and revenue synergies must be realized to meet elevated profitability targets. Macroeconomic uncertainty and rate volatility could also impact prepayment speeds and balance sheet dynamics.

Forward Outlook

For Q4 2025, Renasant guided to:

• Further $2-3 million reduction in core non-interest expense
• Modest contraction in net interest margin, with expansion expected in 2026 assuming four rate cuts

For full-year 2026, management suggested:

• Expense base at or slightly better than consensus levels

Management emphasized that modeled merger synergies and continued loan growth will drive profitability improvement:

• Expense saves and operating leverage remain central to achieving efficiency and return targets
• Deposit growth and talent acquisition are priorities as the bank leverages its scale and capital strength

Takeaways

Renasant’s Q3 results mark a successful transition from integration to execution, with clear momentum in both growth and efficiency. The bank is well positioned to capture share and deploy capital as Southeast banking disruption persists.

• Scale and Synergy Realization: Merger with The First is already yielding above-peer loan growth and cost efficiencies, supporting improved profitability metrics.
• Expense and Capital Discipline: Ongoing expense reductions and strong capital ratios provide flexibility for both buybacks and opportunistic hiring as the competitive landscape shifts.
• Future Focus: Investors should monitor deposit growth relative to loans, the pace of further synergy capture, and credit trends as the bank executes on its elevated internal targets.

Conclusion

Renasant’s third quarter confirms that merger integration is delivering tangible benefits, with broad-based loan growth, disciplined expense management, and capital strength setting the foundation for further gains. The bank is poised to capitalize on industry disruption and deliver on its profitability ambitions into 2026.

Industry Read-Through

Renasant’s results underscore the value of scale and operational discipline in regional banking, especially as competitive funding markets and industry consolidation reshape the Southeast landscape. The ability to rapidly integrate acquisitions, deliver cost saves, and redeploy capital for growth or buybacks will differentiate winners as margin and deposit pressures persist. Other regionals facing similar integration or disruption should note the importance of proactive credit management and productivity accountability, as well as the opportunity to attract talent and clients amid ongoing M&A turbulence.

RNST Financials Regional Banks Integration Loan Growth Deposit Costs Expense Management Capital Allocation