Renasant Corporation — 2023 Form 10-K
Business context and period: Renasant Corporation is a Southeast-focused bank holding company with community banking, insurance and wealth management operations, plus nationwide factoring and asset-based lending. This annual report covers the year ended December 31, 2023; comparisons are primarily with 2022. Financial amounts below are rounded to millions unless stated otherwise.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Net interest income | $519.3 million | $481.3 million |
| Net interest margin, fully taxable equivalent | 3.45% | 3.30% |
| Noninterest income | $113.1 million | $149.3 million |
| Noninterest expense | $439.6 million | $395.4 million |
| Net income | $144.7 million | $166.1 million |
| Diluted EPS | $2.56 | $2.95 |
| Efficiency ratio | 68.33% | 61.88% |
| Cash from operating activities | $148.6 million | $574.0 million |
- Revenue and earnings: Net interest income increased 7.9%, as higher loan yields and loan growth more than offset substantially higher deposit and borrowing costs. Net income declined about 12.9%; diluted EPS declined about 13.2%. Net interest income represented 82.4% of net revenue.
- Credit costs and asset quality: Provision for credit losses was $15.6 million, down from $23.9 million. Net charge-offs rose to $12.3 million, or 0.10% of average loans, from $7.3 million, or 0.07%. Nonperforming loans were $69.4 million (0.56% of loans), versus $56.9 million (0.49%); other real estate owned rose to $9.6 million from $1.8 million. The allowance for loan losses was $198.6 million, or 1.61% of loans.
- Balance sheet and liquidity: Total assets were $17.36 billion, up from $16.99 billion. Loans, net of unearned income, increased 6.7% to $12.35 billion; deposits increased 4.4% to $14.08 billion. Cash and cash equivalents were $801.4 million, compared with $576.0 million. The filing reports $2.92 billion available on unused FHLB lines and $180 million in correspondent-bank lines, with none drawn on the latter.
- Funding and debt: Noninterest-bearing deposits fell to $3.58 billion from $4.56 billion; they represented 25.46% of deposits, down from 33.80%. Brokered deposits increased to $461.4 million from $233.1 million. Short-term borrowings were $307.6 million, down from $712.2 million; long-term debt was $429.4 million. Average cost of total deposits and borrowings increased to 1.88% from 0.42%.
- Capital: At year-end, the Company’s CET1 ratio was 10.52%, total risk-based capital ratio 14.93%, and leverage ratio 9.62%. The Bank’s corresponding ratios were 12.25%, 13.49%, and 10.45%. Shareholders’ equity was $2.30 billion; tangible equity to tangible assets, a non-GAAP measure, was 7.87%.
Material changes and unusual items
- Higher rates supported loan yields and the net interest margin, but sharply raised deposit costs: interest expense increased to $278.0 million from $60.5 million. Management also increased on-balance-sheet liquidity following banking-sector stress in March 2023, contributing to funding costs.
- Noninterest income declined 24.2%, mainly due to securities repositioning: $22.4 million in realized securities losses and a $19.4 million impairment on securities identified for sale. The filing states the identified securities were sold in January 2024. Combined, these items reduced 2023 diluted EPS by about $0.60 after tax.
- Noninterest expense rose 11.2%, reflecting compensation, lower deferred loan-origination costs, the Republic Business Credit acquisition and a $2.7 million FDIC special assessment accrued in the fourth quarter. The efficiency ratio was adversely affected by 496 basis points from securities losses and impairments.
- Cash from operating activities decreased to $148.6 million; investing activities used $55.4 million, while financing activities provided $132.2 million. The filing does not present a conventional free-cash-flow measure.
- Common dividends were $0.88 per share, unchanged from 2022. A new $100 million repurchase authorization was approved in October 2023; no shares were repurchased under the plan during the fourth quarter.
Outlook, commentary and risks
The filing provides no quantified earnings, revenue, margin or loan-growth guidance. Management describes priorities that include organic loan growth, increased noninterest income, improved operating efficiency and technology investment. It emphasizes disciplined deposit pricing and continued focus on stable core deposits, while retaining access to brokered deposits and wholesale funding.
- Management characterized credit metrics as relatively stable, but reported higher nonperforming loans and other real estate owned. Commercial real estate, construction and C&I lending, along with real-estate collateral values, are key exposures. CRE loans including construction totaled about $6.82 billion, or 55.22% of loans; the Bank’s ADC loans equaled 83% of Bank-level capital and total CRE loans equaled 281%.
- Interest-rate, deposit-retention and liquidity risks remain material amid elevated rates and deposit competition. Year-end sensitivity analysis showed an asset-sensitive position: a parallel +200-basis-point shock was modeled to increase net interest income 3.32% over 1–12 months and 6.00% over 13–24 months; actual outcomes may differ from model assumptions.
- Other stated risks include economic weakness, inflation, securities valuation and potential forced sales, acquisition integration, regulatory costs, cybersecurity and reliance on vendors. The Company disclosed vendor-related data incidents in 2022 and 2023, including exposure of some customer personal information; it said these incidents had not materially affected the Company to date.
- The filing reports no material pending legal proceedings. Management and the independent auditor concluded internal control over financial reporting was effective; the financial statement audit opinion was unqualified. The allowance for credit losses was identified as a critical audit matter.
Important facts for investors to verify
- Whether deposit costs stabilize and the noninterest-bearing deposit share recovers; also monitor brokered and uninsured deposits and funding needs.
- Trends in CRE and residential mortgage delinquencies, nonperforming assets, charge-offs, OREO and allowance adequacy—particularly against the substantial real-estate concentration.
- The realized results of the January 2024 securities sale and any further effects of securities repositioning on earnings, accumulated other comprehensive income and liquidity.
- Future net interest margin and earnings sensitivity as rates change; modeled results depend on assumptions about deposit repricing, loan prepayments and balance-sheet composition.
- Execution against the stated efficiency and revenue-diversification priorities, and any use of the $100 million share repurchase authorization.