Is Renasant (RNST) a Buy After a Disappointing Earnings Miss Despite Strong Revenue Growth?

The recent earnings report from Renasant Corporation (RNST) has sparked a familiar debate in the regional banking sector: should investors focus on short-term volatility or long-term strategic gains? For RNST, the second-quarter 2025 results—marked by a sharp drop in net income and a $66.6 million Day 1 acquisition provision—have created a headwind. Yet, beneath these headline numbers lies a compelling story of operational expansion, revenue resilience, and improving net interest income trends that warrant a closer look.

The Earnings Miss: Merger Costs vs. Strategic Gains

Renasant's Q2 net income of $1.0 million was a stark contrast to the $41.5 million reported in Q1 2025. However, this decline was largely a function of one-time merger-related expenses and a Day 1 acquisition provision for credit losses tied to its April 2025 acquisition of The First Bancshares. These non-recurring costs totaled $87.1 million (net of tax) and skewed the earnings picture. Adjusted diluted EPS, which strips out these costs, remained stable at $0.69—a metric that reflects the company's core operational strength.

The merger, which added 116 locations across five states, is a textbook example of a bank prioritizing scale over short-term profitability. By expanding its asset base to $26.6 billion and boosting net interest income by $85.3 million (to $222.7 million), Renasant has laid the groundwork for sustainable growth. The net interest margin (NIM) also improved to 3.85%, a 40-basis-point increase from Q1, driven by the merger's accretive deposits and loan portfolios.

Net Interest Income: A Key Driver of Resilience

The rise in net interest income is critical. With the Federal Reserve's rate hikes beginning to ripple through the banking system, regional banks like RNST are in a better position to capitalize on higher spreads. Renasant's NIM of 3.85% now ranks among the top quartile for its peers, and the cost of total deposits has fallen to 2.12%, down 10 bps from Q1. This combination of higher yields and lower funding costs creates a tailwind for future profitability.

Moreover, the company's organic growth metrics—6.9% annualized loan growth and 6.8% deposit growth—underscore its ability to generate internal momentum. The $361.3 million in net deposit growth, particularly in noninterest-bearing accounts, is a structural advantage that reduces reliance on rate-sensitive funding.

Credit Quality and Risk Management

A common concern with mergers is the potential for hidden credit risks. Renasant's Q2 results, however, suggest disciplined risk management. Nonperforming loans remain steady at 0.76% of total loans, and the allowance for credit losses (1.57% of total loans) provides a buffer. The Day 1 provision for credit losses, while large, appears to be a prudent charge to account for the acquired portfolio's risk profile.

Investors should also note the company's adjusted efficiency ratio of 57.07%, a significant improvement from 64.43% in Q1. This drop reflects the economies of scale from the merger and bodes well for future profitability.

Shareholder Returns and Strategic Patience

Renasant's $100 million stock repurchase program, set to expire in October 2025, adds another layer of appeal. While no buybacks occurred in Q2, the program signals management's confidence in the stock's value. For long-term investors, the combination of a robust balance sheet, improving NIM, and disciplined capital returns creates a compelling case.

However, patience is key. The integration of The First Bancshares is still in its early stages, and expenses will remain elevated until the synergies materialize. The company's adjusted EPS of $0.69 in Q2 suggests that the core business remains intact, but investors should brace for a few quarters of earnings volatility.

Final Verdict: A Buy for the Long-Term

Renasant's Q2 earnings miss was a function of strategic reinvestment, not operational failure. The company's ability to boost net interest income, grow deposits, and maintain credit quality in a post-merger environment demonstrates its competitive positioning. For investors with a three- to five-year horizon, RNST offers a compelling mix of scale expansion, margin improvement, and shareholder-friendly policies.

That said, the stock is not without risks. The regional bank sector remains sensitive to interest rate cuts and economic slowdowns, and Renasant's elevated expenses could pressure near-term results. For now, the fundamentals suggest that the earnings miss is a temporary setback rather than a red flag.

In conclusion, Renasant (RNST) is a buy for investors who can look beyond short-term noise and recognize the long-term value being created. The company is in the early innings of a transformative merger, and the rewards for patient capital are likely to materialize in the coming years.