The latest earnings call from Renasant Corporation hummed with the familiar melody of cautious optimism. Loan growth was solid, asset quality remained steady, expenses were under control, and capital strength continued to build. On the surface, it was a reassuring performance for a regional bank navigating the choppy waters of an uncertain rate environment. But beneath the placid surface, a subtle shift in tone suggests a potential evolution in Renasant's traditionally conservative approach. Could this regional powerhouse be quietly setting the stage for a more aggressive growth strategy in 2024?

Let's rewind to January 24th, 2024. Renasant's Q4 2023 earnings call. The bank announced a strategic decision to sell a portion of its securities portfolio. While initially framed as a means to mitigate unrealized losses and bolster capital, the move also liberated a significant chunk of capital: $177 million, to be exact. This influx of cash, coupled with the consistent organic growth Renasant has been experiencing, fuels a tantalizing hypothesis: is the bank gearing up to deploy this capital more aggressively in pursuit of higher loan growth?

The numbers whisper an affirmative. Loan growth in Q4 2023 clocked in at a respectable 6% annualized rate. However, Renasant's CEO, Mitch Waycaster, dropped an intriguing hint during the Q1 2024 call, suggesting loan growth in 2024 could be "in line with our past quarters and more in that mid-single-digit-type net." The word "more" hangs in the air, a tantalizing suggestion of a potential push beyond historical norms.

Further supporting this hypothesis are the bank's optimistic projections for loan yields. Jim Mabry, Renasant's CFO, pointed to a comfortable position in the "low eights" for incremental loan yields, excluding the contribution from Republic Business Credit (RBC). Adding RBC, which has historically commanded higher yields, pushes this figure even higher, reaching around 8.50% to 8.60% in March 2024.

These robust loan yields create a compelling opportunity for Renasant to widen its spreads on new production, particularly if the bank can manage its deposit costs effectively. Mabry acknowledged the "stubborn" nature of deposit pricing pressure, but expressed hope that deposit cost increases will slow in the coming quarters. If this hope materializes, Renasant could find itself in a sweet spot, enjoying strong loan yields while the pace of deposit cost increases moderates, ultimately fueling stronger bottom-line growth.

Loan Growth Trends

The following chart illustrates Renasant's loan growth over recent quarters, highlighting the potential for acceleration in 2024.

But where will this hypothetical growth come from? Renasant has traditionally focused on organic growth within its existing footprint, a strategy that has served it well. However, the significant capital freed up by the securities sale opens new avenues. Could acquisitions be on the horizon? While Renasant has historically been prudent in its M&A activities, the current environment may present attractive opportunities to expand its reach into new markets or bolster its presence in existing ones.

Consider, for instance, Renasant's recent investment in Republic Business Credit, a specialized asset-based lender. This strategic move diversified Renasant's loan portfolio and opened up a new channel for higher-yielding loans. Could this acquisition signal a broader shift towards exploring new, specialized lending niches?

The allure of accelerated growth is undeniable, particularly for a regional bank looking to stand out in a crowded landscape. But will Renasant fully embrace a more aggressive approach? The next few quarters will be telling. As the bank navigates the uncertainties of 2024, keep a watchful eye on loan growth, deposit costs, and any hints of M&A activity. Renasant's whisper of change could soon become a full-throated roar.

"Fun Fact: Did you know that Renasant Corporation's name is a blend of the words "Renaissance" and "ascendant"? It reflects the bank's commitment to revitalizing communities and its aspirations for continued growth. Perhaps 2024 will mark a new chapter in Renasant's story, a chapter defined by bolder strokes and a more dynamic pursuit of its ascendant trajectory."