KBRA Affirms Ratings for Renasant Corporation
21 Jul 2025 | New York
KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Tupelo, Mississippi-based Renasant Corporation (NYSE: RNST) (“the company”). KBRA also affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for the subsidiary, Renasant Bank. The Outlook for all long-term ratings is Stable.
Key Credit Considerations
The ratings and Outlook are supported by historically stable returns, with ROA averaging ~1.0% over the past six years, which has been well defended with a diverse revenue stream of noninterest income relative to total revenue of 20%-35% over the same period. Additionally, RNST expects core ROA to grow to approximately 1.3% following a successful integration of Mississippi-based The First Bancshares, Inc. (NASDAQ: FBMS), which we view as achievable given FBMS’ solid earnings capacity, projected accretion, and proposed cost-savings. The transaction, which closed on April 1, 2025, creates a pro-forma institution with ~$26 billion of assets, ~$21 billion of deposits, ~$18 billion of loans, and 270+ branches across the Southeast.
The ratings also reflect the company’s history of sound credit performance through various economic cycles, which is demonstrated in the company’s NCO ratio staying below 2% during the global financial crisis. Moreover, in recent years, NCOs have not exceeded 0.10% of average total loans on an annual basis. In our view, this reflects the institution’s experienced management team and effective underwriting practices. The merger with FBMS is expected to sustain a similar credit profile in the loan book and maintain the loan loss reserves to total loans ratio well above the peer average, which we view as ample considering both institutions' favorable credit metrics.
KBRA also acknowledges RNST’s tenured and granular deposit base, with annualized total core deposit growth of 7% since YE23. The merger will strengthen Renasant’s deposit franchise along the current footprint and improve the funding profile supported by lowering both deposit costs and the loan-to-deposit ratio (~87% at close compared to 90% at 1Q25).
RNST’s capitalization remains appropriate for the rating category. Core capital metrics increased by over 200 bps in 3Q24 primarily due to the $230 million common equity raise as part of the FBMS acquisition plan. The proforma capital profile post-closing is expected to be consistent with historical capital levels with TCE and CET1 ratios of ~8.7% and ~11.0%, respectively. Sustained improvement in core capital ratios, more closely aligned with higher rated peers, would be viewed favorably by KBRA.
Rating Sensitivities
The ratings reflect our continued favorable opinion of the company's earnings and credit quality. While a rating upgrade is not currently expected, higher levels of profitability and capitalization could result in positive momentum if sustained over time. A rating downgrade in the near term is not expected. However, negative earnings trends, or a material deterioration in asset quality or capital metrics could pressure the ratings.
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