Renasant (RNST)

Regional banking company Renasant (NYSE:RNST) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 22.4% year on year to $269.5 million. Its non-GAAP profit of $0.77 per share was 1.6% below analysts’ consensus estimates.

Company Overview

Founded in 1904 during a time when the South was rebuilding its economy, Renasant (NYSE:RNST) is a regional bank holding company that offers banking, wealth management, insurance, and specialized lending services throughout the Southeast.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Renasant competes with other regional banks operating in the Southeast such as Regions Financial (NYSE:RF), Truist Financial (NYSE:TFC), First Horizon (NYSE:FHN), and Synovus Financial (NYSE:SNV), as well as national banks with significant presence in the region like Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Renasant grew its revenue at a decent 6.2% compounded annual growth rate. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Renasant’s annualized revenue growth of 15.1% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Renasant’s year-on-year revenue growth of 22.4% was excellent, and its $269.5 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 74.6% of the company’s total revenue during the last five years, meaning lending operations are Renasant’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Renasant’s efficiency ratio has increased by 2.6 percentage points, going from 65.7% to 66.7%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Renasant’s efficiency ratio came in at 67.1% this quarter, falling short of analysts’ expectations by 829.5 basis points (100 basis points = 1 percentage point). This result was 12.3 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects Renasant to rein in some of its expenses as it anticipates an efficiency ratio of 57.6%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Renasant’s EPS grew at a remarkable 8.3% compounded annual growth rate over the last five years, higher than its 6.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Renasant, its two-year annual EPS declines of 6.9% mark a reversal from its (seemingly) healthy five-year trend. These shorter-term results weren’t ideal, but given it was successful in other measures of financial health, we’re hopeful Renasant can return to earnings growth in the future.

In Q3, Renasant reported adjusted EPS of $0.77, up from $0.70 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Renasant’s full-year EPS of $2.85 to grow 16.7%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Renasant’s TBVPS grew at a tepid 3.4% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 4.5% annually over the last two years from $21.76 to $23.77 per share.

Over the next 12 months, Consensus estimates call for Renasant’s TBVPS to grow by 10.7% to $26.32, solid growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Renasant has averaged a Tier 1 capital ratio of 11.5%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Renasant has averaged an ROE of 7%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We struggled to find many positives in these results. Although its net interest margin beat, it missed Wall Street’s net interest income, efficiency ratio, and EPS estimates. Overall, this was a softer quarter. The stock traded up 2% to $35.73 immediately after reporting.

Updated: December 3, 2025 at 11:46 PM EST

Before deciding whether to buy Renasant or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Renasant’s business quality ultimately falls short of our standards. To begin with, its revenue growth was uninspiring over the last five years. And while its estimated net interest income growth for the next 12 months is great, the downside is its relatively low ROE suggests management has struggled to find compelling investment opportunities. On top of that, its TBVPS growth was uninspiring over the last five years.

Renasant’s P/B ratio based on the next 12 months is 0.9x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $42.43 on the company (compared to the current share price of $35.90).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.