RNST Q2 Deep Dive: Merger Integration Drives Revenue Growth, Profitability Lags Expectations

Regional banking company Renasant (NYSE:RNST) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 63.1% year on year to $267.2 million. Its non-GAAP profit of $0.69 per share was 5.7% below analysts’ consensus estimates.

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StockStory’s Take

Renasant’s second quarter results reflected the company’s first full period since closing its merger with The First Bancshares, a major development that drove strong top-line growth but left profitability below Wall Street’s expectations. Management attributed the significant revenue increase to the combined operations and emphasized progress in integrating teams and customer bases. However, elevated merger-related expenses, integration costs, and some one-time credit charges weighed on margins, which contributed to a negative market reaction. CEO Kevin Chapman noted, “Our earnings trajectory and balance sheet strength are evident in the second quarter results,” but the company acknowledged that much of the merger’s anticipated cost savings have yet to be realized.

Looking ahead, Renasant’s outlook is tied to the successful systems conversion in early August and realizing the expected cost synergies from the merger. Management remains focused on integrating treasury management offerings, expanding mortgage lending in growth markets, and supporting organic loan and deposit growth. CFO James Mabry described upcoming quarters as a transition period, stating, “You’ll see some efficiencies show up in the expense line [in Q3], and then a little bit more in Q4.” The company believes it is on track to achieve its targeted efficiency and profitability metrics, but further integration progress and disciplined cost control will be crucial for meeting long-term goals.

Key Insights from Management’s Remarks

Management attributed the quarter’s revenue momentum to the completed merger with The First Bancshares, while profitability was pressured by integration costs and one-time charges.

• Merger-driven revenue growth: The full-quarter impact of The First Bancshares merger was the main driver of higher revenues, with both loan and deposit balances growing 7% since the transaction closed. Management highlighted the combined company’s expanded footprint in attractive Southeastern markets as a foundation for future growth.
• Integration expenses weighed on margins: Noninterest expenses were elevated due to $20.5 million in merger and systems conversion costs, which management said will persist into the next quarter. These costs offset much of the underlying operating leverage from the business combination.
• Loan credit quality stable: While Renasant reported some uptick in classified loans, management attributed this to adding The First’s portfolio and described recent charge-offs as isolated, non-systemic events within the commercial loan book. The company’s allowance for loan losses was maintained near prior levels.
• Net interest margin improved: The core net interest margin expanded from 3.42% to 3.58%, partly due to purchase accounting adjustments and a more favorable loan mix post-merger. CFO James Mabry indicated that modest further expansion is possible in the near term.
• Noninterest income opportunities emerging: Growth in mortgage banking income and progress in rolling out treasury management solutions to The First’s customer base were cited as early signs of cross-selling potential. Management is optimistic that these areas, along with capital markets initiatives, will contribute more meaningfully after full integration.

Drivers of Future Performance

Renasant’s near-term outlook centers on capturing merger synergies, controlling costs, and leveraging new fee income streams while managing integration risks.

• Cost synergies and efficiency gains: The company expects merger-related cost savings to begin materializing in the third quarter, with the full benefit reflected by early next year. Management reiterated its targets for improved efficiency and profitability, emphasizing that most cost reductions are still ahead.
• Organic growth in key markets: Renasant is targeting mid-single-digit annual growth in loans and deposits, supported by strong pipelines and its expanded presence in the Southeast. Management believes continued migration into these markets will support demand for mortgage and commercial lending.
• Fee income expansion: The rollout of treasury management, mortgage, and capital markets products to The First’s customer base is expected to drive incremental noninterest income, though management cautioned that these benefits may accumulate gradually as integration is completed.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will be monitoring (1) the pace and effectiveness of cost savings from merger integration, (2) progress in expanding fee-based income streams such as treasury management and mortgage, and (3) the stability of loan credit quality as the combined loan book matures. Execution on systems conversion and realizing targeted efficiency ratios will be important indicators of management’s success.

Renasant currently trades at $36.40, down from $38.10 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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