Renasant (NYSE:RNST) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Renasant Corporation reported a 12% year-over-year increase in adjusted earnings per share to $0.86, along with improvements in adjusted return on average assets and tangible common equity.
The company announced a merger with Commercial Bank and Trust to enhance its presence in Memphis. The deal is expected to be 4% accretive to EPS and is expected to close in the first quarter of 2027.
Renasant experienced strong loan growth, up $555.9 million or 11.5% annualized, although deposits decreased slightly due to outflows of public fund deposits. Core net interest margin remained stable, while core deposit costs were well-contained, increasing only by 1 basis point.
The company continues to add talent and gain market share, with a focus on growing core deposits and maintaining a strong balance sheet. Management expressed confidence in mid-single-digit balance sheet growth, driven by investments in talent and strategic initiatives.
Renasant’s credit quality improved, with reduced problem credits and a stable reserve level, though a single credit issue increased charge-offs. The company’s operational focus includes enhancing wealth management capabilities and strategic hiring amid market dislocation.
Full Transcript
OPERATOR
Good day and welcome to the Renasant Corporation 2026 Third Quarter Earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After this presentation there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone. To withdraw your question, please press star then two.
Please note this event is being recorded. I would now like to turn the conference over to Kelly Hutchison. Please go ahead.
Kelly Hutchison (Investor Relations)
Good morning and thank you for joining us for Renasant Corporation’s quarterly webcast and conference call. Participating in the call today are members of Renasant’s Executive Management Team. Before we begin, please note that many of our comments during this call will be forward-looking statements which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.
Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance, realization of the projected financial metrics from our recently announced merger with Commercial Holding Company, and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release and the press release announcing the proposed merger, both of which have been posted to our corporate site, www.renasant.com, at the Press Releases link under the News and Market Data tab.
We undertake no obligation, and we specifically disclaim any obligation, to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures in our earnings release to the most comparable GAAP measures can be found in such release. And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman.
Kevin Chapman (President and Chief Executive Officer)
Thank you, Kelly, and good morning. Third quarter results continue to show momentum in achieving our financial goals, adding talent, and gaining market share. Adjusted earnings per share in the third quarter were $0.86, up 12% from one year ago. Adjusted return on average assets was 1.16% in the quarter compared to 1.09% in the same period last year. Similarly, adjusted return on average tangible common equity was 14.5% versus 14.2% in 3Q25. The efficiency ratio also improved to 57.7% this quarter.
Our core business continues to perform well. Highlights this quarter include strong loan and core deposit growth, a record level of loan production, a stable core net interest margin, a reduction in problem credits, a reduction in expenses, and continued buybacks. While EPS declined linked quarter, this was primarily due to a higher provision driven by the ramp in loan growth. In addition, we are pleased this morning to announce the merger with Commercial Bank and Trust, which will strengthen our presence in Memphis and provide solid, long-tenured deposit and wealth management relationships throughout Western Tennessee. We are looking forward to welcoming Mott Ford and the Commercial team to Renasant, and, importantly, we do not believe this deal will distract us from the market share opportunities we continue to see across our footprint.
Altogether, Renasant is in a great position to continue to improve financial performance and capitalize on growth opportunities, and the Commercial acquisition will be additive to that momentum. I will now turn the call over to Jim to provide more details on the financial results.
Jim Mabry (Chief Financial Officer)
Thank you, Kevin, and good morning. Looking at the balance sheet, loans were up $555.9 million on a linked-quarter basis, or 11.5% annualized. Deposits were down $73.2 million from the second quarter, or 1.3% annualized, primarily due to outflows of public fund deposits and a couple larger non-core, higher-cost relationships, offset by about 8% annualized growth in consumer and commercial deposits. Reported net interest margin decreased 6 basis points to 3.77%, while adjusted margin was down 2 basis points at 3.58%.
Excluding the accelerated bond discount accretion last quarter, core net interest margin was up 2 basis points linked quarter. Our total cost of deposits increased by only 1 basis point to 1.97%, while our adjusted loan yields increased 5 basis points to 6.08%. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $13.3 million, comprised of $10.1 million for funded loans and $3.2 million for unfunded commitments. Net charge-offs were $10 million, and the ACL as a percentage of total loans declined 4 basis points quarter over quarter to 1.50%.
Turning to the income statement, our pre-provision net revenue was $112.6 million. Net interest income was $228.6 million, an increase of $0.9 million quarter over quarter. Excluding fair value accretion and the accelerated bond discount accretion last quarter, core net interest income increased $5.8 million linked quarter, or 11% annualized. Noninterest income was $49.3 million in the third quarter, a linked-quarter decrease of $1.9 million, which was primarily driven by a decrease in mortgage banking income.
Noninterest expense was $160.3 million for the third quarter, a linked-quarter decrease of $1.2 million, mostly driven by a decline in deferred compensation accruals. As to the Commercial Bank and Trust transaction, we have provided a supplementary slide deck with details on this transaction. A few highlights: The deal value is approximately $140 million and is comprised of roughly 75% stock and 25% cash. Slide 4 provides an overview of Commercial’s high-quality, low-cost core deposit base. We anticipate the deal to be approximately 4% accretive to EPS and 1.5% dilutive to tangible book value per share, with an estimated earn-back of just under two years.
We expect to see modest diminution to the capital ratios, with CET1 being approximately 11% at close. We anticipate the deal to close sometime in the first quarter of 2027. I will now turn the call back over to Kevin.
Kevin Chapman (President and Chief Executive Officer)
Thank you, Jim. We believe that Renasant is in a great position to continue high levels of performance while also taking advantage of opportunities created by industry consolidation. We appreciate your interest in Renasant and look forward to discussing our results with you. I will now turn the call over to the operator for questions.
OPERATOR
Thank you very much. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Stephen Skelton with Piper Sandler.
Please go ahead.
Stephen Skelton (Analyst at Piper Sandler)
Hey, good morning. I guess maybe if I could start on deposits and just kind of thinking about, with the strong loan growth you saw, how you think about the ability to fund that growth with deposit growth, and you talked a lot about new customers coming on board recently. So just how that’s developing and what you think can manifest moving forward.
Kevin Chapman (President and Chief Executive Officer)
Yeah. Hey. Hey, Steven. Good morning. So, yeah, look, as we look at deposit growth—and look, if you look at total deposits, there’s some noise in there. And we tried to lay out where that noise is, particularly with some of our public funds. But if you look underneath that, core deposits continue to grow at an appreciable rate. I think in Q3 that number was close to a little bit over $300 million. And so the seasonality we see with public funds, you’ll start to see that reverse as we get into the end of this year or early next year.
So that’ll stop being a headwind and become a tailwind. But that hasn’t distracted us or taken us away from the opportunity about growing core deposits. And also, just on that public funds—and maybe a little bit of insight—is what the market is providing us with an opportunity is, as we look at our cost of deposits relative to our peers, it’s a tick or two higher than where we want it to be. Our cost of deposits are a little bit higher, and we can attribute that largely to some of the makeup and a little bit of a concentration in public funds. And so, over time, we want to reduce that reliance.
Those typically are higher-costing, particularly in today’s time where funding is more prevalent—everybody’s looking for funding. The cost of those public funds have gone up, and the market opportunity has given us the ability to remix that funding. And really it’s driven on an effort to bring our cost of deposits down back in line with our peer and isolating that one difference. But as we look out, we feel that having a balance sheet—or a strategy—with growing our balance sheet in the mid-single digits, that over time that allows us to properly fund it. So I know this quarter deposits didn’t keep up with the loan growth, but over time we expect that to be more in balance and more in line.
Stephen Skelton (Analyst at Piper Sandler)
Okay, great. And then maybe thinking about the deal alongside of that, looks like a really nice deposit base—150-year-old bank with a low loan-to-deposit ratio. Was that one of the primary strategic motivators on this deal, or can you talk a little bit about what you liked and what drove that decision?
Kevin Chapman (President and Chief Executive Officer)
Yeah, no, thank you. And it is—we—just a continued focus of growing a stable core deposit base. That’s been our focus organically, and then the opportunity with M&A to augment, to complement that is something that I think we’ve talked about, that we would look at that. And I think if you look at Commercial and what it represents, a very strong, core-funded deposit base with complementary wealth management that fits exactly the type of opportunity that would complement what we’re doing.
Said another way, I’m not sure right now we have a limit to our appetite on core deposits. We continue to feel and see that deposits and funding are tightening up. That is our number one focus, is continuing to grow our core deposit base. This just gives us a complementary opportunity to bolster and enhance what we’re already working on at Renasant and, frankly, what we already have at Renasant. But it just complements—and, look, future opportunities that may fit a similar profile, we would absolutely look at.
But would say right now our focus is Commercial and ensuring that we have a successful conversion and integration of their employees—our new teammates—as well as our new customers.
Stephen Skelton (Analyst at Piper Sandler)
Got it. And just maybe last for me, with the strong loan growth and a pending deal, does that inhibit you from the repurchase utilization in your terminal?
Kevin Chapman (President and Chief Executive Officer)
Jim, you want to take that?
Jim Mabry (Chief Financial Officer)
Good morning, Stephen. It’s Jim. So, you know, clearly as you point out, we’ve got some cash in the deal mix, and that will probably, at the margin, temper a little bit what we do in terms of buybacks, but buybacks are very much on the table. You know, the board reauthorized our program yesterday at $175 million. So we do intend to be active. It just may not be quite as active over the next 12 months as it was over the prior. But we’ll see, you know, sort of what emerges in the environment and what goes on with our share price and other things.
But intend to be active, just maybe not quite as active as we have been.
Stephen Skelton (Analyst at Piper Sandler)
Makes sense when you can deploy it into acquiring low-cost deposits. So thanks for all that, all the color.
OPERATOR
Thanks, Eric. Thanks, David. Our next question comes from Michael Rose with Raymond James. Please go ahead.
Michael Rose (Analyst at Raymond James)
Hey, good morning, guys. Thanks for taking my questions, Jim. I appreciate the color around the core NIM and some of the accelerated accretion this quarter. I think you said it was up 2 basis points of that. Just how should we think about the next quarter or so just given the response to some of Steven’s questions around deposits and the like. Just trying to get a better sense for how that core NIM should move forward from here. Thanks.
Jim Mabry (Chief Financial Officer)
Good morning, Michael. So yeah, I think probably like I think a lot of banks in the quarter we feel good about the behavior of core NIM going forward. And so I would say that our outlook, assuming I guess as I think about the next few quarters, I think we’re sort of modeling a December and two other hikes in ’27. And with that outlook generally we think there’s some modest upside potential on that NIM, though. And as you point out, we had good behavior in the NIM from Q2 to Q3, particularly when you make allowance for the fact that Q2’s NIM was a little higher than usual because of that extraordinary item.
So we feel really good about behavior. Our core deposit cost was up, I think, one basis point. Loan yields were up nicely in the quarter. And if we look at sort of data from the end of Q3 and September data, all those things point to, you know, modest improvement to the NIM over the next quarter or two.
Michael Rose (Analyst at Raymond James)
Very helpful, Jim. I appreciate it. And then Kevin, obviously very strong loan growth this quarter, obviously very strong loan production, a record moderating payoff. You know, how much of that acceleration really is from some of the investments you’ve made in talent, you know, over the past year or so, versus maybe market disruption. Just trying to kind of level set, you know, what the drivers were. It seems like everything clicked this quarter.
And I think you had talked about kind of a mid-single-digit loan growth, you know, kind of outlook. Is that the way we should think about 2027 or could it be potentially stronger just given some of those dynamics that I just laid out?
Kevin Chapman (President and Chief Executive Officer)
Yeah, so thank you, Michael. Just the last part, last part of your question first. So we still feel, still feel confident that mid-single-digit balance sheet growth is the appropriate, appropriate level of growth. And I mean, look, as we see the environment and our outlook, we are still optimistic about being able to grow the balance sheet. We still have good commentary and dialogue with our customers. But I think if there’s any hesitation to try to move that number up from the mid-single digits, it’s just more concern from a macro backdrop.
And so as we get clarity about what the macroeconomic looks like, then we might have a little bit more confidence to kind of push that number up. But right now I think we’re still very set on mid-single-digit growth. And that’s the appropriate level. As it relates to where that growth is coming from, I’d say it’s coming from all across the company. If we look at it from a geographic or from a region standpoint, everybody’s contributing. We look at some of our specialty lines, our secured lending, everybody’s contributing. When we look at credit channels, whether it’s consumer or commercial or small business or larger corporate, again, everybody is contributing to this. It’s not coming from a single all-for-one source.
And honestly that’s exciting to see because it means everybody’s plugged in and capturing opportunity throughout their market. And also I think it’s indicative of the investments that we made. Not so much this year in the talent that we’ve hired, but really bringing the First and their team on board and allowing them to continue to achieve success, expand opportunity, capabilities. I think that’s what we’re seeing this year. Which means the built-up demand, the opportunity from the hiring we’ve done this year, and by the way, this past quarter we added another 11 revenue producers to the team.
There will be the opportunity to continue to take market share that isn’t quite reflected in the balance sheet yet.
Jim Mabry (Chief Financial Officer)
And I would just add to that, Mike. On the right-hand side of the balance sheet, Kevin spoke earlier that underlying core deposit growth was around 8% annualized for the quarter and of that 8% a little over half, almost 60% of that 8%, were from deposit customers who were new to Renasant who previously had no account with Renasant. So I think that, and we had that in Q2 as well. So I think the momentum certainly on the right-hand side of the balance sheet is there and we expect that to carry over on the left-hand side of the balance sheet in terms of market share gains and net new customers to Renasant.
Kevin Chapman (President and Chief Executive Officer)
Yeah, and sorry just to continue to belabor a point, but I mentioned just some of the uncertainty about the macro outlook and again just want to level set the mid-single digits because we don’t want to try to force balance sheet growth. We already see very tight competition from a yield standpoint. So if we set higher levels of expectations or try to push to get higher levels of growth, we may have to give up something to be able to get that. And we’re not going to sacrifice credit, we’re not going to sacrifice yield.
We’re going to be relevant, we’re going to be competitive, but don’t want to try to force something and make a bad decision just because of trying to set an expectation of higher levels of balance sheet growth. We need it to come at the proper level of margin and have the proper level of underwriting and credit risk as well. So that’s just a level set. I think we’ve talked about this in the past. That mid-single-digit, we feel that gives us the ability to have a stable to expanding margin and grow the balance sheet at our historical credit risk.
Michael Rose (Analyst at Raymond James)
I appreciate all the color, that’s very helpful, Kevin. Thanks, everyone. I’ll step back.
Kevin Chapman (President and Chief Executive Officer)
Thank you, Michael.
OPERATOR
The next question comes from Matt Olney at Stephens. Please go ahead.
Matt Olney (Analyst at Stephens)
Hey, guys, good morning. Thanks for taking my question. I’ll ask about just expenses. Saw some really good trends in the third quarter and you mentioned, Kevin, hiring a number of new producers in 3Q on top of the ads we saw the first half of the year. So it looks like expense trends are kind of well contained. Would love to appreciate any additional outlook here on the expense outlook. Thanks.
Jim Mabry (Chief Financial Officer)
Good morning, Matt. And this is Jim. So yeah, we were pleased with the behavior of the expense line in the quarter and to see that number continue to, you know, trend down. I think as we look to Q4, our outlook is for a slight increase in expenses, which could almost be 100% tied to what Kevin referred to earlier, and that’s hires. We’ve had, you know, really good success on taking advantage of the dislocation and making some key hires and we expect that to continue in Q4.
So I would say that core behavior away from dislocation opportunities remains very solid and steadfast. But again, I think you’ll see the number inch up a little bit because of the hires we’ve made. The other thing I’d mention, which of course you would appreciate, there’ll probably be a little bit of noise in Q4 because we’ve got— we’ll have likely some merger expenses related to Liberty to Commercial.
Matt Olney (Analyst at Stephens)
Okay, great. Appreciate the color there. And then I guess going back to the margin commentary that you provided earlier, any more color you could provide on just competitive pressures on both loans and deposits. Any notable changes from what you’re hearing more recently compared to a few months ago?
Kevin Chapman (President and Chief Executive Officer)
Not really a change. I would just say this past year it’s been competitive, just particularly from a rate standpoint. What has become more pronounced maybe over the last quarter, and we saw this in Q2, is the competition on the deposit side that continues. Everybody’s searching for funding and I think if you look at our cost of deposits with what we’ve been able to grow and keeping our cost of deposits relatively flat, maybe it was up a basis point or two, it shows where our focus is around where we have the opportunity to grow core deposits.
I think Jim mentioned just some of that core deposit growth that we had in Q3 that came on at a rate, call it in the mid-twos, and that’s a percentage point to a percentage point and a half less than the wholesale rates or even some of the product offerings that we’re seeing in the market. So everything from a pricing standpoint, everything just continues to remain competitive. I think the dynamic in Q3 is that you saw the yield curve shift up. Rates were up, particularly in the 5- and the 10-year point of the curve, and we worked to move our yields up, but spreads didn’t necessarily expand during that same time. So that’s what we talk about with those competitive pressures, is that the spreads just continue to be very tight, which means competition—it just is very competitive for that good balance sheet growth that everybody’s looking for.
Matt Olney (Analyst at Stephens)
Okay, guys, thanks for all the responses. I’ll step back.
Kevin Chapman (President and Chief Executive Officer)
Thank you, Matt.
OPERATOR
The next question comes from Will Jones with KBW. Please go ahead.
Will Jones (Analyst at KBW)
Yeah. Hey, great, thanks. Good morning, guys.
Kevin Chapman (President and Chief Executive Officer)
Morning, Will.
Will Jones (Analyst at KBW)
So I know just a couple questions, one with a deal, a couple with the quarter. I know we never model, you know, revenue synergies with these transactions, but what you call kind of a nice little wealth business they got there, maybe. Kevin, just talk about what you see opportunity-wise there. And if I heard you right, if another, you know, commercial bank and trust were to come along, you know, Renasant is still very much open for M&A if that kind of size and deal parameter were to come along.
Kevin Chapman (President and Chief Executive Officer)
Yeah. So let me just clarify. So I would say that the opportunity with Commercial fits the profile of what we’re looking for. Not necessarily looking to stack up a bunch of things, but this is the profile of what we’re looking for. Just on the revenue synergies, we haven’t really modeled any revenue synergies. We do believe there’ll be opportunities for that with their wealth management. As we noted, they’ve got over a billion in assets under management in the wealth division, largely concentrated in trust. We have a trust department. So we’re excited about the opportunity to expand and enhance our trust capabilities in wealth management. And also their growth in wealth management, particularly in trust, has been at a notch or two higher than ours.
So there could be the opportunity for revenue synergies, but it may be more on the Renasant side and what we can learn from them about strategies to pick up trust business throughout our footprint in as much as the opportunity with them.
Will Jones (Analyst at KBW)
Got it. Okay. I appreciate all that helpful commentary. Jim, maybe one for you. Just on the balance sheet, I know borrowings were a little bit higher in the quarter just as we had some of the seasonal public fund runoff. Is the expectation, as you guys feel better about the deposit pipeline next quarter, that we would start to see those balances decline as you replace with some of this expected deposit growth.
Kevin Chapman (President and Chief Executive Officer)
Good morning. Well, it’s a good question and obviously our loan-to-deposit ratio has inched up a little bit and I think we’re 90, 91%, and I think for us we wouldn’t want to get much above that. And so we’ll be looking at that funding mix, and we saw some really encouraging things in Q3 about that core deposit growth, which was sort of masked by trying to exit some higher-costing deposits. So our hope and our goal remains to match loan growth as close as we can with deposit growth.
And clearly that’s a tougher thing now than it has been historically. But we feel really good about the things we’re seeing in terms of our deposit engine working well. So the goal is to try to match that. And, you know, look, we don’t want to be reliant on wholesale funding. And whether that’s advances or brokered deposits, that’s not really part of our plan. And so I think whether it’s next quarter and subsequent quarters, our goal would be to, we like operating with zero balances both at the FHLB and with brokered deposits. And that’s a goal.
Will Jones (Analyst at KBW)
Yeah. Okay, that’s fair enough. Maybe last for me, we don’t really spend a ton of time talking about credit, especially with Renasant on. If I look at NPA trends, criticized trends, you know, everything continues to show modest improvement every quarter. You know, we still find ourselves with a pretty high level of reserves just on a percentage basis. Is there a point in time where that starts to bleed down or we can reliably feel comfortable taking reserve levels down just as we remain relatively benign credit-wise?
Dave
Hey, Will. Good morning. This is Dave and Meredith. And I think what you’ll see over the past couple quarters is you’ve seen just what you’ve stated. As we’ve continued to have improved asset quality, our criticized and classifieds have come down for four quarters in a row. As you pointed out, our NPAs have been down for the past two quarters. And commensurate with that, you could see we brought down our reserve levels just as our model dictates, based on the improvement of our asset quality.
As we continue to resolve problem loans—criticized, classified, NPLs, and so forth—past dues come down, our reserve requirements commensurate with that have come down. So we’ve seen that number come down from, I want to say, 1.56, 1.57 a couple of quarters ago, to 1.54 last quarter, to 1.50. And so we would foresee, as we continue to improve asset quality, the expectation would be our model would dictate that reserve level would continue to come down.
So we follow the model based on need for loan growth, what our asset quality is telling us. And so the past couple quarters, based on that improvement, we’ve seen just at that point the reserve level need has come down.
Will Jones (Analyst at KBW)
Okay. All right, guys, thanks for the questions.
OPERATOR
The next question comes from David Bishop with Hovde Group. Please go ahead.
David Bishop (Analyst at Hovde Group)
Yeah, good morning. Hey, I was wondering if I could circle back to Matt’s question. Just curious, Kevin or Jim, if you knew or had offhand what new rates on loan production were this quarter relative to last quarter—what you’re seeing on that front.
Jim Mabry (Chief Financial Officer)
Good morning, Dave. So I can give you a couple of data points that are hopefully helpful as you think about modeling our results. So if you look at core loan yield in Q3, it was about 6.11. And if you look at new and renewed in the quarter, it was roughly 6.19. And I’ll give you a—it’s always a little—giving spot numbers is a little treacherous because one month can be a little deceiving. But in the month of September, if you look at new and renewed loan yields, it was 6.35.
David Bishop (Analyst at Hovde Group)
6.35. Okay, got it. And then I may have missed this at the beginning and apologies if so—obviously a very strong production quarter. Just curious how the pipeline sort of compares exiting the quarter. Was that sort of dampened out, and are you seeing any impact from higher rates impacting maybe the commercial real estate pipeline?
Kevin Chapman (President and Chief Executive Officer)
Yeah. Hey, Dave, good morning. Yeah, we’ve seen a little bit of pullback in the pipeline, but honestly, it still remains a healthy pipeline. So it’s a little bit of a pullback from what we saw compared to the beginning of Q3. But we still see—we’re still having dialogue and conversations with customers. The pipeline hasn’t gone to zero, and we continue to expect to have a good quarter as we look at Q4. You know, with the holidays towards the end of the year, things may slow down a little bit.
But just looking at our pipeline, our pipeline continues to remain healthy.
David Bishop (Analyst at Hovde Group)
Got it. And then, Kevin, obviously the opportunity sort of jumps off the page with the Commercial acquisition on the deposit front. Any prospects to grow the loan book—anything, any niches there or markets they operate in that excites you from a loan growth perspective?
Kevin Chapman (President and Chief Executive Officer)
Yeah. So I think in a couple of areas. I mean, one, they have a very similar, very granular loan portfolio—so very similar to us. So there will absolutely be opportunities where we can help enhance what they already do. You know, particularly from a consumer or a commercial side, we’ll be able to manage larger relationships that maybe today they can’t manage the full relationship. So we think that there’s—I say manage it from a balance sheet capacity standpoint, not so much from a talent standpoint, but a balance sheet capacity standpoint.
So I think there’s real opportunity to be able to complement one another, no different than how we’ve done in prior mergers, but just on a combined basis. Be able to enhance, provide more opportunity from what Renasant would bring to the table as well as complement what their team has there in Memphis. And the exciting thing about this is that we do overlap in Memphis with Commercial, but there’s still plenty of opportunity in that market where we won’t be stepping on each other’s toes. So expecting a good integration of both teams there in that one overlapping market in Memphis.
Jim Mabry (Chief Financial Officer)
And Dave, I’ll add too, just like Kevin said—just expanding on it a little bit—we did with the First the complementary lines of business we have on offer, be that asset-based lending, SBA, factoring. We saw it with the First, the ability to leverage their C&I customer book into some of those specialty lines of business has paid huge dividends for us, and with the acquisition with Commercial we would expect the same results.
David Bishop (Analyst at Hovde Group)
Got it. I guess one final question circling back to credit. I think the narrative noted one credit driving the increase in charge-offs and provisions. Any color around that single credit? Thanks.
Dave
Sure, Dave. We recognized that as a problem loan back in Q1 of this year. So we’ve been carrying a material level of impairment on that asset for a couple of quarters while we sought to fully value the assets. We received the value of that back in Q3, and so we went ahead and charged it down to what we believe to be the realizable value. It’s a single credit in the C&I space. We view it to be a one-off transaction, and hopefully, based on that valuation, we’ve written it down to our realizable value.
David Bishop (Analyst at Hovde Group)
Appreciate all the color.
OPERATOR
The next question comes from Janet with TD Cowen. Please go ahead.
Janet (Analyst at TD Cowen)
Hi, good morning. Apologies if I missed, but in your expectations around core NIM improving a little bit, what is the cycle-to-date or through-the-cycle interest-bearing deposit beta being assumed in that assumption?
Jim Mabry (Chief Financial Officer)
Good morning, Janet, this is Jim. So in terms of interest-bearing deposit beta, I think near term it’s probably upper 40s, low 50s, and it sort of graduates from there to mid-50s is what we’ve got in our model.
Janet (Analyst at TD Cowen)
Okay, got it. And maybe for Kevin, you’ve been adding a lot of revenue producers—11 this quarter—and there continues to be a fair amount of disruption across your markets. You’ve talked about this a little bit, but can you just give us more details around where you think you are in this investment cycle today? And as you balance continued opportunities to add talent with getting productivity from the investments you’ve already made, how should we think about the trajectory for ROTC over the next 12 months?
Kevin Chapman (President and Chief Executive Officer)
Yeah. So thank you. I still think that when it comes to some of the talent displacement, we’re still in the middle innings of this. We still see the opportunity to pick up good talent that complements what we’re already doing. Janet, in some cases it’s replacing existing talent. It’s not just necessarily a net add to staff; it’s replacing maybe some holes that we have, and we’re trying to upgrade talent in certain markets. So we have put a premium on wealth management—on wealth management talent—on treasury management, cash management talent, as well as solid, well-known bankers throughout our market—not lenders, but bankers.
And I still feel like we’re a little bit in the middle innings of this. And as we look at how that should change our growth projections right now, what we really see is it more just solidifying our outlook on that mid-single-digit—and that’s just not only loan growth, that’s deposit growth as well—and gives us greater confidence that the opportunity to grow at a faster pace is there if we can get it at the proper spreads and under the proper credit underwriting terms.
But again, just to kind of summarize the question, still feel like we’re in the middle innings, but where we are focusing has really been on the revenue producers that really drive the sticky type of revenue, and that’s around wealth management, treasury management, and then solid core bankers.
Janet (Analyst at TD Cowen)
Got it. Thanks for that. And if I could add just one more—Commercial deal makes a lot of sense: small, strong core deposits, wealth angle on M&A. When your ROTC was below peers, it was easier to see how M&A and cost saves could help close that gap. And now that you’re more in line with peers at that 15 to 16%, how has your thinking around M&A changed? What do you need to get out of a deal for it to create incremental value from here?
Kevin Chapman (President and Chief Executive Officer)
Yeah. So, one, I think all M&A is at a higher bar just looking at what the market opportunities are. And so as we looked at the opportunity to partner with Commercial, that was one of our decisions—one of the go/no-go decisions—was would this create a distraction? Would it take us away from our organic growth? And just given its size, given that it’s really, really isolated in one area of our footprint, it will be—we will go through a conversion, we’ll go through an integration, we are not dismissing that—but we didn’t feel like it would be a broad-based distraction throughout the company.
So the rest of our teams will continue to focus on just continuing to grow organically, capturing opportunity, capturing market share. But it does require a higher hurdle—M&A does—just given, one, our baseline of where ROTC is today compared to the past, but then also just the risk associated with the distraction. It just requires a higher hurdle. Jim, any specifics you want to give as it relates to the impact on ROA, ROTC, or efficiency just from the deal itself?
Jim Mabry (Chief Financial Officer)
Yeah, be happy to. So, Janet, on ROTC—these are fully phased-in numbers—we’ve got, I think, roughly half of our expense saves occurring in ’27 and 100% in ’28. But that sort of fully phased impact is about 70 basis points accretive to ROTC, roughly 5 basis points accretive to NIM, and 5 basis points to ROA.
Janet (Analyst at TD Cowen)
Thank you.
Kevin Chapman (President and Chief Executive Officer)
Thank you, Janet.
OPERATOR
As a reminder, if you wish to register for a question, you may press star and one. Our next question is a follow-up from Matt Olney. Please go ahead.
Matt Olney (Analyst at Stephens)
Yeah, hey guys, just a few follow-ups here. The accretion levels took a little step down this quarter. Jim, any color or guidance you can provide on expectations for the accretion from here?
Jim Mabry (Chief Financial Officer)
And Matt, I want to correct one thing I said to you earlier about core loan yields. So in the quarter we were at 608 and for the month of September it was 611. I think I misspoke on that. But yeah, on accretable yield I would say this. You know, it’s really difficult and challenging to predict the accelerated part of that. And with this, the backdrop of higher rates, payoffs have probably been pushed out some. So that’s definitely affected that accelerated piece of accretable yield. And I think the way we’re looking at Q4 is to maybe give you some numbers that might be helpful. I think total accretable yield would be around $10 million.
That’s our current sort of estimate. And about a million and a half of that would be accelerated. And clearly the rate environment will have a lot to do with this. But that accelerated piece will start to move itself down and both pieces will. But the accelerated piece will probably move itself down during the course of 27.
Matt Olney (Analyst at Stephens)
Okay, thank you, that’s helpful and appreciate that’s as you said, not easy to predict there. And then just on the fee side, anything to call out. And the fees look like mortgage a little bit softer this quarter. Not a big surprise, given what we’ve seen from some of your peers with higher rates. Any other thing to call out on the fee side? Any outlook there you can share?
Jim Mabry (Chief Financial Officer)
Thanks. Sure. I would say the fee outlook for Q4 is for probably a little more softness. So I think there’s, and that’s much of that’s driven by mortgage. It’s just a very challenging environment. There are a lot of good things going on within mortgage. We’ve made some really good hires in legacy Renasant markets, but also some of the new markets. But it’s just a difficult backdrop with rates where they are. So I think we’re expecting mortgage to again be soft in Q4 and it’s a seasonally tough quarter as well.
So in terms of other income, I would think that what we’d see is largely, probably a modest decline there driven mainly by mortgage. We’ve not seen, you know, capital markets has been soft for us during the year. I think that’s, you know, I think we hopefully will see some encouraging signs in the quarters ahead there that we’ll see that line item grow. Wealth has been very stable and we’ve had some low single digit increases in wealth and expect that to continue.
Matt Olney (Analyst at Stephens)
Okay, thank you very much.
Jim Mabry (Chief Financial Officer)
Thank you, Matt.
OPERATOR
Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Kevin Chapman for any closing remarks.
Kevin Chapman (President and Chief Executive Officer)
Thank you, George. And thank you to those that listened to our call this morning. We appreciate your interest in the company and look forward to meeting with you throughout the quarter. Thank you.
OPERATOR
Ladies and gentlemen, the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Goodbye.
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