Renasant Corporation (RNST) Bundle
Understanding Renasant Corporation (RNST) Revenue Streams
Understanding Renasant Corporation’s Revenue Streams
Renasant Corporation generates revenue primarily through two streams: net interest income and noninterest income.
Breakdown of Primary Revenue Sources
- Net Interest Income: For the third quarter of 2024, net interest income was $133.6 million, reflecting a 4.7% increase from the previous quarter.
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Noninterest Income: Total noninterest income for the third quarter of 2024 was $89.3 million, which includes:
- Gain on sale of insurance agency: $53.3 million
- Service charges on deposit accounts: $10.4 million
- Wealth management revenue: $5.8 million
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for 2024 is highlighted by the following:
| Period | Net Interest Income (in millions) | Noninterest Income (in millions) | Total Revenue (in millions) | Year-over-Year Growth Rate (%) |
|---|---|---|---|---|
| Q3 2023 | $127.4 | $38.2 | $165.6 | - |
| Q3 2024 | $133.6 | $89.3 | $222.9 | 34.6% |
Contribution of Different Business Segments to Overall Revenue
As of Q3 2024, the contributions from various segments to overall revenue are as follows:
| Segment | Contribution (in millions) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $133.6 | 60% |
| Noninterest Income | $89.3 | 40% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams for Q3 2024 include:
- The increase in noninterest income primarily due to a significant gain from the sale of the insurance agency.
- Net interest income showed a consistent increase, supported by growth in loans held for investment, which reached $12.6 billion as of September 30, 2024.
Overall, Renasant Corporation has demonstrated strong revenue performance, with significant contributions from both interest and noninterest income streams, reflecting a robust financial position heading into 2024.
A Deep Dive into Renasant Corporation (RNST) Profitability
Profitability Metrics
Understanding the profitability metrics of a company is crucial for investors. This section provides a detailed analysis of profitability for Renasant Corporation as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, Renasant Corporation reported the following:
- Net Income: $72.5 million
- Basic EPS: $1.18
- Diluted EPS: $1.18
- Adjusted Diluted EPS: $0.70
Trends in Profitability Over Time
Comparing quarterly results, the net income figures have shown a significant increase:
| Quarter Ended | Net Income (in millions) | Diluted EPS |
|---|---|---|
| Sep 30, 2024 | $72.5 | $1.18 |
| Jun 30, 2024 | $38.8 | $0.69 |
| Sep 30, 2023 | $41.8 | $0.74 |
Comparison of Profitability Ratios with Industry Averages
Key profitability ratios for Renasant Corporation are as follows:
| Metric | Renasant (2024) | Industry Average |
|---|---|---|
| Return on Average Assets (ROA) | 1.63% | 1.10% |
| Return on Average Equity (ROE) | 11.29% | 10.00% |
| Net Interest Margin | 3.36% | 3.00% |
Analysis of Operational Efficiency
Operational efficiency is key to understanding profitability. The following data highlights cost management and gross margin trends:
- Efficiency Ratio (GAAP): 54.73%
- Adjusted Efficiency Ratio (non-GAAP): 64.62%
- Noninterest Expense: $121.98 million for Q3 2024
Summary of Key Profitability Metrics
The following table summarizes the key profitability metrics:
| Metric | Value |
|---|---|
| Net Income (Q3 2024) | $72.5 million |
| Return on Average Assets | 1.63% |
| Return on Average Equity | 11.29% |
| Net Interest Margin | 3.36% |
| Efficiency Ratio | 54.73% |
Debt vs. Equity: How Renasant Corporation (RNST) Finances Its Growth
Debt vs. Equity: How Renasant Corporation Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Renasant Corporation reported total debt of $433.2 million in long-term debt. The company also has short-term borrowings amounting to $569.5 million, bringing total interest-bearing liabilities to $11.4 billion.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Renasant Corporation stands at 0.16 as of the latest reporting period, which is significantly lower than the industry average of approximately 0.60. This ratio indicates a conservative approach to leveraging in comparison to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In July 2024, Renasant completed a public offering of 7,187,500 shares at a price of $32.00 per share, generating net proceeds of approximately $217 million. Additionally, the company has not reported any recent downgrades in its credit ratings, maintaining a strong credit profile.
Balancing Between Debt Financing and Equity Funding
Renasant Corporation actively balances its financing strategy between debt and equity. The company utilizes debt for growth opportunities while leveraging equity financing to maintain a lower debt-to-equity ratio. As of September 30, 2024, total shareholders' equity was reported at $2.66 billion, reflecting a robust equity base to support its operations and growth.
| Metric | Amount |
|---|---|
| Long-term Debt | $433.2 million |
| Short-term Borrowings | $569.5 million |
| Total Interest-Bearing Liabilities | $11.4 billion |
| Debt-to-Equity Ratio | 0.16 |
| Industry Average Debt-to-Equity Ratio | 0.60 |
| Equity Raised from Share Offering | $217 million |
| Total Shareholders' Equity | $2.66 billion |
Assessing Renasant Corporation (RNST) Liquidity
Assessing Renasant Corporation's Liquidity
Current and Quick Ratios
The current ratio for Renasant Corporation as of September 30, 2024, stands at 1.12. The quick ratio, which excludes inventory from current assets, is reported at 0.99. These ratios suggest a stable liquidity position, indicating that the company can cover its short-term liabilities with its short-term assets.
Analysis of Working Capital Trends
As of September 30, 2024, Renasant Corporation’s working capital is approximately $500 million, reflecting a positive trend from previous quarters. This is an increase from $450 million in June 2024. The growth in working capital is attributed to an increase in cash and cash equivalents, which rose to $1.28 billion from $851.9 million in the prior quarter.
Cash Flow Statements Overview
The cash flow statement reveals the following trends for the third quarter of 2024:
- Operating Cash Flow: Cash provided by operating activities was $85 million.
- Investing Cash Flow: Cash used in investing activities totaled $35 million, primarily for loan originations.
- Financing Cash Flow: Cash used in financing activities was $60 million, which includes dividend payments and repurchase of shares.
Liquidity Strengths and Concerns
Renasant Corporation has shown notable liquidity strengths with a significant increase in cash reserves and a strong current ratio. However, there are potential concerns regarding the quick ratio being below 1. This indicates that while the company can meet its current obligations, it may face challenges if immediate cash is required without converting other assets.
| Financial Metric | Q3 2024 | Q2 2024 | Q1 2024 |
|---|---|---|---|
| Current Ratio | 1.12 | 1.10 | 1.08 |
| Quick Ratio | 0.99 | 0.97 | 0.95 |
| Working Capital | $500 million | $450 million | $400 million |
| Operating Cash Flow | $85 million | $80 million | $75 million |
| Investing Cash Flow | -$35 million | -$30 million | -$25 million |
| Financing Cash Flow | -$60 million | -$55 million | -$50 million |
Overall, while there are strengths in cash flow and working capital, the liquidity ratios suggest that monitoring will be essential moving forward.
Is Renasant Corporation (RNST) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the company’s market value per share was $32.50.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share (EPS) for the third quarter of 2024 was $1.18. The P/E ratio can be calculated as follows:
P/E Ratio = Market Value per Share / Diluted EPS = $32.50 / $1.18 = 27.73.
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was $41.82.
P/B Ratio = Market Value per Share / Book Value per Share = $32.50 / $41.82 = 0.78.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the calculation of EV/EBITDA, we first need the EBITDA. According to the latest report, net interest income was $133.6 million and noninterest income was $89.3 million. The total revenue can be approximated as:
Total Revenue = Net Interest Income + Noninterest Income = $133.6 million + $89.3 million = $222.9 million.
Assuming a rough EBITDA margin of 60%, estimated EBITDA = $222.9 million 0.60 = $133.74 million.
Enterprise Value (EV) can be approximated as market capitalization plus total debt minus cash. With cash at $1.27 billion and total debt at $569.5 million, the calculation is:
EV = Market Cap + Total Debt - Cash = (63,564,028 shares $32.50) + $569.5 million - $1.275 billion = $2.066 billion + $569.5 million - $1.275 billion = $1.36 billion.
EV/EBITDA = EV / EBITDA = $1.36 billion / $133.74 million = 10.18.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- 12 months ago: $26.19
- 6 months ago: $31.32
- 3 months ago: $30.54
- Current price: $32.50
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.22 per share in the last quarter. The dividend yield can be calculated as follows:
Dividend Yield = Annual Dividend / Market Price = ($0.22 4) / $32.50 = 2.72%.
The dividend payout ratio is 18.64%.
Analyst Consensus on Stock Valuation
According to recent analyst ratings, the consensus is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| Market Value per Share | $32.50 |
| P/E Ratio | 27.73 |
| P/B Ratio | 0.78 |
| EV/EBITDA Ratio | 10.18 |
| 12-Month Price Change | 24.36% |
| Dividend Yield | 2.72% |
| Dividend Payout Ratio | 18.64% |
Key Risks Facing Renasant Corporation (RNST)
Key Risks Facing Renasant Corporation
The financial health of Renasant Corporation is influenced by various internal and external risk factors. These risks can significantly impact its operational efficiency and overall market position.
Industry Competition
In the banking sector, competition is intensifying. Renasant faces pressure from both traditional banks and emerging fintech companies. This rivalry can affect market share and pricing strategies, potentially leading to reduced profit margins.
Regulatory Changes
Changes in regulatory frameworks can pose substantial risks. For instance, compliance with evolving federal and state regulations can increase operational costs. In 2024, the company reported an increase in compliance-related expenses, which can impact profitability.
Market Conditions
The economic environment directly influences the company’s performance. Interest rate fluctuations can affect net interest income, which was reported at $133.6 million for Q3 2024, up from the previous quarter. However, a rising interest rate environment can also lead to higher borrowing costs for customers, impacting loan demand.
Operational Risks
Operational risks include potential disruptions in business processes, such as technology failures or cybersecurity threats. The company has emphasized enhancing its cybersecurity measures to mitigate these risks.
Financial Risks
Credit quality is a crucial financial risk. As of September 30, 2024, the ratio of nonperforming loans to total loans increased to 0.94%, up from 0.78% in June 2024. Additionally, criticized loans rose to 3.02%.
Strategic Risks
The ongoing merger with The First Bancshares, Inc. introduces strategic risks. While mergers can lead to operational synergies, they also come with integration challenges and potential cultural clashes.
Mitigation Strategies
Renasant Corporation has implemented several strategies to mitigate these risks:
- Strengthening compliance frameworks to adapt to regulatory changes.
- Enhancing technology infrastructure to improve operational efficiency and cybersecurity.
- Monitoring credit quality closely to manage and mitigate potential loan defaults.
| Risk Factor | Description | Current Metrics |
|---|---|---|
| Industry Competition | Pressure from traditional banks and fintechs | Net interest income: $133.6 million |
| Regulatory Changes | Compliance costs increasing | Compliance-related expenses: Increasing |
| Market Conditions | Interest rate fluctuations | Interest rate margin: 3.36% |
| Operational Risks | Disruptions in business processes | Cybersecurity measures: Enhanced |
| Financial Risks | Credit quality deterioration | Nonperforming loans: 0.94% |
| Strategic Risks | Challenges from merger integration | Merger with The First: Pending |
Future Growth Prospects for Renasant Corporation (RNST)
Future Growth Prospects for Renasant Corporation
Analysis of Key Growth Drivers
Renasant Corporation is poised for growth through several strategic initiatives. The merger with The First Bancshares, Inc., announced on July 29, 2024, aims to expand its market presence and increase its customer base. Shareholders have approved this merger, which is expected to be completed in the first half of 2025.
In addition, the company completed a public offering of 7,187,500 shares at a price of $32.00 per share, raising approximately $217.0 million in net proceeds. This capital infusion will support future growth initiatives, including potential acquisitions and investments in technology.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of 2024, Renasant reported net income of $72.5 million, with diluted earnings per share at $1.18. The adjusted diluted earnings per share (non-GAAP) was $0.70, reflecting consistent operational performance despite market challenges. Analysts project that with the completion of the merger and ongoing strategic initiatives, the company could see a revenue growth rate of approximately 10-12% annually over the next three years.
Strategic Initiatives or Partnerships That May Drive Future Growth
The merger with The First Bancshares is a significant strategic initiative expected to enhance Renasant’s competitive positioning. This merger will not only expand its geographical footprint but also diversify its product offerings. Furthermore, the recent sale of its insurance agency for $56.4 million provides liquidity that can be reinvested into core banking operations.
Competitive Advantages That Position the Company for Growth
Renasant’s competitive advantages include a strong balance sheet, with total assets of $17.68 billion as of September 30, 2024. The company maintains a robust capital structure, with a tangible common equity ratio of 9.76%. Additionally, the net interest margin improved to 3.36%, indicating effective asset management.
Key Financial Metrics
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income | $72.5 million | $38.8 million | $41.8 million |
| Diluted EPS | $1.18 | $0.69 | $0.74 |
| Adjusted Diluted EPS (Non-GAAP) | $0.70 | $0.69 | $0.74 |
| Total Assets | $17.68 billion | $17.37 billion | $17.24 billion |
| Tangible Common Equity Ratio | 9.76% | 8.16% | 7.55% |
| Net Interest Margin | 3.36% | 3.31% | 3.36% |
In summary, Renasant Corporation's strategic initiatives, strong financial performance, and market expansion efforts position the company well for future growth. The completion of the merger and the effective use of raised capital will likely enhance profitability and shareholder value moving forward.
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Article updated on 8 Nov 2024
Resources:
- Renasant Corporation (RNST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Renasant Corporation (RNST)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Renasant Corporation (RNST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.