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Date

Wednesday, April 29, 2026 at 10 a.m. ET

Call participants

  • President and Chief Executive Officer — Kevin D. Chapman
  • Executive Vice President and Chief Financial Officer — James C. Mabry
  • Chief Banking Officer — David L. Meredith

Takeaways

  • Adjusted Earnings per Share -- $0.93, marking a 41% increase year over year.
  • Adjusted Return on Assets -- Rose to 1.33% from 0.95% year over year.
  • Adjusted Return on Tangible Equity -- Increased to 16.3% from 10.3% year over year.
  • Efficiency Ratio -- Improved to 55.7% from 65.5% year over year.
  • Loans Outstanding -- Declined $71.8 million sequentially, or 1.5% annualized, compared to the fourth quarter.
  • Deposits -- Grew $626.4 million quarter over quarter, representing 11.8% annualized growth; 50% to 60% of this came from public funds, with the remainder from core deposits.
  • Net Interest Margin -- Decreased 2 basis points to 3.87% reported, and 1 basis point to 3.61% adjusted, sequentially from Q4 2025.
  • Adjusted Total Cost of Deposits -- Declined 3 basis points to 1.94% on a linked-quarter basis.
  • Adjusted Loan Yields -- Fell 7 basis points to 6.04% quarter over quarter.
  • Allowance for Credit Losses (ACL) as a Percentage of Loans -- Rose 2 basis points to 1.56% sequentially.
  • Net Charge-Offs -- Totaled $2.3 million for the quarter.
  • Credit Loss Provision on Loans -- $8.1 million, composed of $4.2 million for funded loans and $3.9 million for unfunded commitments.
  • Noninterest Income -- Reported at $50.3 million, decreasing $0.9 million from the prior quarter; fourth quarter included a one-time $2.0 million gain from exiting low-income housing tax credit partnerships, partially offset in Q1 by higher SBA loan sales.
  • Noninterest Expense -- $155.3 million, a $4.9 million linked-quarter decrease excluding $10.6 million of merger and conversion expenses recognized in Q4.
  • Employee Count Reduction -- Combined FTEs reduced to approximately 2,950 at March 31, 2026, down from nearly 3,400 at June 2024; this reflects both merger-related and other cost discipline measures.
  • Revenue Producer Hires -- 18 added in Q1, six in Q4 2025, and nine in Q3 2025, indicating an ongoing focus on attracting talent.
  • First Quarter Nonperforming Loan (NPL) Inflow -- NPLs grew by $24 million, with $69 million in new NPLs and $45 million in outflows; inflows included $7 million in CRE, $19 million in C&I, and a portion in construction and development.
  • Regulatory Capital Ratios -- All remain above the minimum requirements for "well capitalized" status; CET1 started the year at approximately 11.25% with a goal to maintain near this level by year-end.

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Risks

  • Chapman stated, "We do not think the macro concerns have alleviated yet," referencing persistent uncertainty in consumer and business cash flows due to recent volatility such as a "30% to 40% increase in 30 days" in fuel costs, which supports a continued elevated allowance for credit losses.
  • Mabry noted that future noninterest expense could "drift up moderately" due to merit increases, day-count factors, and hiring. This is variable and hard to predict because, as Kevin points out, there are opportunities to be opportunistic and the company intends to pursue those. So that is the piece that is a little tough to forecast.
  • Loan growth progress was described as affected by March quarter-end headwinds from "some macro events" and "very aggressive pricing and terms from some incumbent banks," causing a temporary slowdown despite an increased pipeline for Q2.
  • Mabry indicated marginal additional benefit for lowering deposit funding costs, saying, "I think we have exhausted much of what we are going to see in terms of repricing opportunities on the deposit side."

Summary

Renasant Corporation (RNST 0.25%) delivered significant profitability improvements in the reported quarter, with high single- and double-digit gains in key adjusted performance metrics. Management highlighted the successful execution of cost savings and merger integration, as well as continued strategic hiring to support organic growth objectives. Repurchase activity and capital management were described as ongoing priorities, with capital ratios targeted to remain steady even as growth continues.

  • Chapman emphasized "optionality" in deploying capital, describing flexibility to allocate across dividends, stock buybacks, hiring, and M&A based on evolving market conditions.
  • The securities portfolio reached about $4 billion, noted to be $1 billion above the company’s comfort level, providing capacity to fund future loan growth as the mix shifts over upcoming periods.
  • Mabry stated that noninterest income run rate for Q1 serves as a "pretty good jumping-off point," with potential gains as mortgage, SBA, and capital markets revenue materialize and as wealth management expansion accelerates.
  • Management expects both core deposit and loan growth rates for the full year to align in the mid-single-digit range, reaffirming earlier projections despite first-quarter loan contraction.
  • Hiring of revenue producers has targeted both bench strength and expansion in markets where additional share or scale is sought, extending to back-office support and nontraditional business lines.

Industry glossary

  • CET1: Common Equity Tier 1, a regulatory capital ratio used to assess a bank’s core equity capital against its risk-weighted assets as a primary measure of financial strength.
  • ACL: Allowance for Credit Losses, the reserve set aside to cover estimated future credit losses on loans and leases.
  • NPL: Nonperforming Loans, loans that are in default or close to being in default, typically 90 days or more past due.
  • SBA Loan Sales: Sales of loans guaranteed by the U.S. Small Business Administration, generating noninterest income for the bank upon sale.
  • FTE: Full-Time Equivalent, a measurement of employment that converts the hours worked by part-time employees into the hours worked by full-time employees.

Full Conference Call Transcript

I will now turn the call over to our President and Chief Executive Officer, Kevin D. Chapman.

Kevin D. Chapman: Thank you, Kelly, and good morning. Two years ago, we challenged ourselves by setting aspirational goals to improve our financial performance. At that time, we targeted 2026 as a key measuring stick that would show the financial benefits of our work. Frankly, the strong results for the first quarter exceed our goals. Adjusted earnings per share were $0.93 in the first quarter, representing a 41% increase year over year. For the quarter, adjusted return on assets grew from 95 basis points in 2025 to 133 basis points in 2026. Our adjusted return on tangible equity grew from 10.3% to 16.3%. And last of all, the efficiency ratio improved from 65.5% to 55.7%.

I am extremely proud of our team's accomplishments to remain customer-centric while we went through our largest merger, conversion, and integration. As we move forward, the team is engaged and focused on the priorities for our company to continue to grow customer relationships and hiring talented bankers. I will now turn the call over to Jim to give more details on the financial results.

James C. Mabry: Thank you, Kevin, and good morning. Looking at the balance sheet, loans were down $71.8 million on a linked-quarter basis, or 1.5% annualized. Deposits were up $626.4 million from the fourth quarter, or 11.8% annualized. Reported net interest margin decreased 2 basis points to 3.87%, while adjusted margin decreased 1 basis point to 3.61% on a linked-quarter basis. Our adjusted total cost of deposits decreased 3 basis points to 1.94%, while our adjusted loan yields decreased 7 basis points to 6.04%. 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 $8.1 million, comprised of $4.2 million for funded loans and $3.9 million for unfunded commitments. Net charge-offs were $2.3 million, and the ACL as a percentage of total loans increased 2 basis points quarter over quarter to 1.56%. Turning to the income statement, our adjusted pre-provision net revenue was $118.3 million. Net interest income decreased $3.8 million quarter over quarter. Noninterest income was $50.3 million in the first quarter, a linked-quarter decrease of $0.9 million. The decline in noninterest income is primarily related to the recognition in the fourth quarter of a one-time gain of $2.0 million resulting from the exit of low-income housing tax credit partnerships.

The absence of this gain in the first quarter was partially offset by strong performance on SBA loan sales. Noninterest expense was $155.3 million for the first quarter. Excluding merger and conversion expenses of $10.6 million in the fourth quarter, this is a linked-quarter decrease of $4.9 million. I will now turn the call back over to Kevin.

Kevin D. Chapman: Thank you, Jim. We believe that Renasant Corporation is uniquely positioned to capitalize on organic growth opportunities. We appreciate your interest in Renasant Corporation and look forward to further discussing our results with you this morning. I will now turn the call over to the operator for questions.

Operator: Thank you. We will now open the call for questions. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. Please press star then 2 to withdraw your question. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Edward Rose with Raymond James. Please go ahead.

Michael Edward Rose: Hey, good morning, guys. Thanks for taking my questions. Just wanted to start on expenses. Obviously, a lot of hard work has been done on the first cost savings. The step down was maybe a little bit better than I think you guys talked about last quarter. Maybe, Kevin, if you can just give us an update on where the merger cost savings stand. I would assume that you have got most of them at this point, but wanted to see if there is anything left.

Maybe you can also talk about the reduction in employee headcount that you have had and if we can assume that there would be a little bit of growth off of this $155 million rate that we saw in the first quarter? Just trying to get a near-term outlook. Thanks.

James C. Mabry: Michael, it is Jim. I will start, and I am sure Kevin will add some color. We are really pleased with what has happened in that line item. It has been a focus, as you know, for the company for a number of years, and we started to see real progress beginning, call it, 18 months ago, even before we started to see the benefits from the merger with First, we could see it start to bend down. That has been a focus and remains a focus. In terms of where we go from here, as you point out, we hit our goals with respect to expense saves from First, so very pleased with that.

I do not see a lot of savings associated with the merger from this point on; I think we have realized most of those expense saves. That is not to say that we cannot do more just as a company as a whole, but I think expenses that are truly related to the merger are pretty much in this run rate. Looking forward, there are a couple of things. We will have merit increases, obviously, in the second quarter, and there is a day-count factor as we look to Q2 and beyond. Those things will cause expenses to drift up moderately. The other variable is we have seen and are seeing opportunities to hire.

As you know, there is a lot of dislocation going on in the marketplace, and we have seen that already and expect to see more of it. I would say that is the part of the picture on noninterest expense that will be a little hard to predict because, as Kevin points out, we see opportunities to be opportunistic and we intend to pursue those. From Q1, probably a low single-digit percent increase is a fair expectation, and that factors in some of the hiring Kevin is talking about, but that piece is tough to forecast.

At its base, day count and merit are probably low single digits, and then we will see what comes from the hiring that will add to that.

Kevin D. Chapman: Yeah, will do. Thank you, Jim. And Michael, good morning. I will just add, you mentioned headcount. If you go back to June 2024, which is when we announced the merger with First in July, but if you look at just our combined FTEs, we were just shy of 3,400 employees. If you take us plus them, that is what our FTEs were. At 3/31, that number will be about 2,950. So we have carved out 450 employees over that time period. Not all of them were due to the cost saves of the merger. Prior to that, Renasant Corporation was highly focused on accountability and ensuring that we had the right team for what we wanted to be.

I agree with Jim that our cost save number has been achieved, but the accountability measures and the requirements to be higher performing at Renasant Corporation have not changed. We will continue to focus on that, find incremental ways to improve costs, and reallocate expenses to higher-performing endeavors. That effort will not change. That did not occur because of First; that was happening long before that. Jim also mentioned the new hires. One thing that is hidden in the focus on expenses that we have had over the past couple of quarters is the hiring we have been doing.

The cost saves are cost saves, and the expenses where they land today include new hires that we have been making along the past several quarters. In Q1, we hired 18 revenue producers. In Q4, we hired 6, and in Q3 of last year, we hired 9. So if you look at the real cost saves associated with the merger and accountability measures, it is much deeper than what we are showing optically in the numbers. We are extremely excited about the hiring opportunities we have and the market dislocation that is giving us the opportunity to have conversations with extremely talented bankers all throughout the Southeast.

And I think we have said it in the past: we grade out your employees A, B, C, D, and S. We will always hire A-rated talent when it is available, and maybe I will say it a little bit more pointedly: we will not flinch at the opportunity to hire A-rated talent. We are seeing that opportunity all around us right now.

Michael Edward Rose: That is great color. So not trying to pin you down, but just as a starting point, it sounds like with the puts and takes, a couple of million bucks higher in the second quarter is what we could expect. Is that fair? Just trying to better appreciate a starting run rate and the seasonality aspect.

James C. Mabry: I would say from Q1, probably a low single-digit percent increase, and that factors in some of the hiring Kevin is talking about, but that is variable and hard to predict because, as Kevin points out, we see opportunities to be opportunistic and we intend to pursue those. So that is the piece that is a little tough to forecast. But at its base, day count and merit are probably low single digits, and then we will see what comes from the hiring that will add to that.

Michael Edward Rose: Perfect. Appreciate that, Jim. Maybe just as a follow-up, I think the one thing you point to this quarter was just the loan contraction. It looks like production was down maybe a little bit more than some of us expected, and down year over year as well despite the addition of First. Maybe you can update loan growth expectations from here. I think last quarter, you talked about mid-single digits for the year. That could be a little tough just given the starting point. Any puts and takes, and then maybe what paydowns would look like? Thanks.

Kevin D. Chapman: Yes. We recognize loan growth was slightly down, but it has not changed our outlook for our growth profile. We think we are squarely a mid-single-digit grower. Michael, when I listen to conversations and get feedback from our team, they are active and engaged. If you break down Q1 into the three months, January and February we had good growth. In March, that growth evaporated a little bit. Two things caused that. One was some macro events. We saw some of our pipeline and some opportunities get pushed into Q2. Right now, at the beginning of the quarter, our pipeline is up 30% from where it was at the beginning of the year.

So I think some of it is our pipeline got pushed with some macro events. The other thing is that we saw some very aggressive pricing and terms from some incumbent banks that were being aggressive to retain customers. Those two things led to the slight decrease in our loan growth in Q1. We think one of those corrects with that pipeline being pushed into Q2, and we will continue to operate in a very competitive environment and make decisions that are best for Renasant Corporation. In some cases, we may try to match terms; in other cases, we may not.

In talking with our team, we still have confidence that over the course of several quarters, we are a mid-single-digit grower.

Michael Edward Rose: All right. So it sounds like you are reaffirming the outlook for the year. I will step back. Thanks, guys.

Operator: Thank you. The next question comes from Catherine Mealor with KBW. Please go ahead.

Catherine Mealor: Thanks. Good morning. I see you reaffirmed the mid-single-digit growth outlook. The deposit growth was really strong this quarter. Can you talk about if any of that was seasonal or should pull back, and how you are thinking about deposit growth relative to loan growth for the year? And with the deposits, what you are seeing on incremental deposit costs as well? Thanks.

James C. Mabry: Sure. Catherine, good morning. The first quarter was a good quarter in terms of deposit growth, and there was some seasonality to it, much of that in public funds. We felt some of those tailwinds reverse in Q1 after public fund outflows in the latter half of last year. So a meaningful, call it 50% or 60%, of the growth we saw in Q1 came from public funds, and the balance was core deposit growth. Looking forward, we will have some seasonality here in April with tax season, plus we will start to see some of those public inflows moderate as we go throughout the year and trend downward. Our outlook overall for the year is mid-single-digit growth in deposits.

That is the goal and what we are focused on in terms of growing core deposits in that mid-single-digit range. We want that growth to be roughly parallel with loan growth, and that is still our outlook for the year.

Kevin D. Chapman: Catherine, I may just add that we recognize public funds are creating some noise. But if you look through that and tie this back to the market disruption, we have seen an uptick in April in new account openings on deposits, and it is a marked improvement. One data point I learned this morning: over the last four days, we have opened up 340 deposit accounts. The normal trend line in 2025 was probably a couple of hundred accounts per month, and over the last four days, we have opened over 300. I think that is an interesting data point that will ultimately show up in the numbers.

It also speaks to how our team is responding throughout our markets and meeting the needs of customers who may be uncertain at this moment. As we get into Q2 and Q3, we will see how it plays out with balance sheet growth.

Catherine Mealor: That is great. Thank you. Then maybe thinking about average earning asset growth, it looks like the bond book increased this quarter, and maybe that replaced some of the slowness of the loan growth this quarter and that is temporary. Do you expect to continue to grow securities as we move through the year, or do you think the back half of the year is really more geared towards loan growth and the bond book will be a little bit more flat?

James C. Mabry: That is the outlook we would hope for. As you pointed out, we did not have quite the loan growth that we anticipated, and that was some of the reason you saw the growth in the bond book. As we go through the year, our securities portfolio is roughly $4 billion, plus or minus, and that is comfortably $1 billion above where we feel comfortable. So there is plenty of capacity there to fund loan growth, and we would expect and hope that the securities portfolio starts to trend downward as we have that loan growth.

Some of that will depend on what we see on the deposit side, but you are correct to point out that was a function of strong deposit growth and lower-than-average loan growth in Q1.

Catherine Mealor: Great. Thank you. Great quarter, guys.

Kevin D. Chapman: Thank you, Catherine.

Operator: The next question comes from Matthew Covington Olney with Stephens. Please go ahead.

Matthew Covington Olney: Hey, thanks. Good morning. I wanted to follow up on the net interest margin discussion. I think last time we talked on the call, we talked about the margin being relatively flattish for the year with the expectation of a few rate cuts. Would love to hear updated thoughts on the net interest margin absent any rate cuts and any kind of sensitivity you have if the Fed does cut from here? Thanks.

James C. Mabry: Good morning, Matt. Our guidance is really unchanged on the margin. Our current forecast does not have any rate cuts in it, even though, as you point out, we had two cuts in our prior model when we had the fourth quarter call. It really does not change the outlook for NIM that much. The outlook from here is stable in the core NIM. If we get a couple of cuts, we do not think that really influences it very much. So I think it is steady as she goes on core NIM for the balance of 2026.

Matthew Covington Olney: Appreciate that, Jim. Following up on that, deposit costs look great this quarter and moved down a little bit more. Any more opportunities on the overall funding side for improvement from what we saw in the first quarter?

James C. Mabry: I would say not much, Matt. I think we have exhausted much of what we are going to see in terms of repricing opportunities on the deposit side. We still do have, on the left-hand side, loans maturing. I think we have $1.2 billion to $3.0 billion over the next 12 months at about 5% or 5.1%. So that represents some repricing benefit, but not so much on the deposit side.

Kevin D. Chapman: Okay. Great. Thank you, Matt.

Operator: Next question comes from David Jason Bishop with Hovde Group. Please go ahead.

David Jason Bishop: Hey, good morning, gentlemen. Kevin, I am curious—you talked about the hiring opportunities within the market. Are there any specific niches or segments that maybe you are not in that are enticing you here? Or are these the tried and true commercial C&I bankers that you are going to be targeting? Thanks.

Kevin D. Chapman: Yes. Not so much niches per se, but we are seeing the opportunity to build out some areas outside of your traditional commercial bankers or bankers in a specific market. We are seeing the ability to more fully develop and mature some business lines that we already have, whether it is some of our secured lending conversations or, in the case of a line of business like wealth management, we are seeing opportunity there. We already have some of these throughout our footprint; this gives us the ability to get more depth and reach in those business lines.

We are not necessarily looking to add a new vertical in a lending unit; it is really about adding more bench strength within already established lines of business or some of our established secured lending lines. That is outside of your traditional C&I or market-specific banking team. The opportunity for conversations and hiring is all throughout. With the disruption and how we overlay with the disruption—we created an internal map that overlays our footprint with the markets that are going through disruption—and we overlay nicely with that. To quantify the opportunity, there is over $90 billion in deposits that are currently going through a transformational merger.

I am not saying we are going to pick up $90 billion, but it shows the level of disruption that is happening. We also firmly believe there is going to continue to be M&A in the Southeast, and that disruption just gets louder. To be in a position where Renasant Corporation is today—converted, merged, integrated, and focused on customers and employees—that is a very good place to be right now in a world of disruption. Stability is a great place to be in a world of disruption. Specifically to your question, we are having conversations with people that bring sticky business and sticky revenue that will enhance and complement what we do.

David Jason Bishop: Great. And one follow-up on the buyback and the aggressiveness there. Holistically, is there any targeted CET1 or regulatory capital ratios that govern how aggressive you are going to be? Thanks.

James C. Mabry: Thanks, Dave. Our outlook there is similar to what we talked about in the Q4 call. If we pick CET1 as a ratio, we started the year at roughly 11.25%, plus or minus. Our desired outcome would be to roughly finish somewhere in that range at year end. Balance sheet growth will play a role in that, but our expectation is to take care of whatever balance sheet growth comes our way and make sure we capitalize that, and then continue to lean into buybacks. As you saw, we were active in Q1, and we continued that activity in early Q2. Our goal is to continue to avail ourselves of buybacks.

We are very optimistic about our performance outlook as a company, and we like the opportunity to invest in our stock, bearing in mind those capital guardrails. Our goal is to continue to take advantage of opportunities to buy back our stock.

David Jason Bishop: Great. Appreciate the color.

Operator: The next question comes from Stephen Kendall Scouten with Piper Sandler. Please go ahead.

Stephen Kendall Scouten: Yes, thanks, guys. Good morning. Maybe a little bit following up on that line of questioning, but just wondering how aggressive you would see yourselves being in this macro environment—the level of cautiousness versus the opportunity set before you—and a mindset of always wanting to hire A talent when it is out there. How do you balance that as you look ahead to the rest of this year?

Kevin D. Chapman: Great question, and I will be very holistic because I think it speaks to our capital plan. This is a long-term plan, and if you look at what we have been doing over the last couple of quarters, we have been fully enacting this. That plan starts with a strong balance sheet, strong capital ratios, and a strong allowance for loan loss. We try to think in terms of optionality and being best positioned in a variety of scenarios. We believe we are well positioned to be opportunistic to deploy capital for future hiring and have capital allocated for future growth.

If things get bad from a macro level—if you start looking at the stability of a balance sheet or the strength of a holding company, the cash on hand at a holding company, or in a stress scenario with allowance—we are going to screen out very well in that draconian scenario as well. We can be opportunistic in a good environment or defensive in a bad environment. That is a great place to be in a world of uncertainty where the whole world can change in a matter of minutes. From a return on tangible common equity or return on Tier 1 capital, being at 16% gives us a lot of optionality.

It gives us the ability to pay roughly a 30% dividend payout ratio, stockpile capital for future growth, and have extra capital to either stockpile for future M&A, stockpile for future hires and their growth, or look at the option of buying back in the form of a stock buyback. With where we have gotten the profitability of the company, particularly from our return on Tier 1 capital and return on tangible common equity, that gives us a lot of optionality to choose which way we want to lean based on how we see hiring, performance of the stock, M&A, or simply being defensive.

We feel like we are well positioned to have that option in our control as opposed to being behind as the environment changes, and it could change rapidly.

Stephen Kendall Scouten: That is great color, Kevin. I appreciate the idea of the optionality there. One follow-up: as you think about the concentration of new hires, would you say it has been more about where those opportunities exist currently based on dislocation, or has there been any incremental effort to deepen the newer markets that you entered into from First? Where are those hires concentrated, if at all?

Kevin D. Chapman: They are really targeted in markets where we do not necessarily have the market share that we want to have. For example, in North Mississippi, we have done some selective hiring, but our teams have mainly been focused on customer acquisition as opposed to talent acquisition because of the overlap. In other areas and markets, it has given us the opportunity to build bench strength. There are certain parts of our company where it always feels like we are a player or two behind; this has given us the opportunity to get a player or two ahead in those areas and build bench strength, taking pressure off of our current employees.

They do a great job, but we want to give them additional support. We are also taking the opportunity to pick up back-office talent. Our back office has tremendous talent, and this gives us the ability to build bench strength and extend our runway to have the potential to grow to higher levels than we are currently contemplating. By adding that staff today, it will give us that runway and optionality to become a bigger bank without immediately meeting growing pains.

We are being very selective, but I would say most of it is targeted in either new markets where we want to build out additional footprint and market share, or very selective places where we are adding talent to provide more bench strength.

Stephen Kendall Scouten: Great. Very helpful. Congrats on a great start to the year.

Operator: The next question comes from Analyst with TD Cowen. Please go ahead.

Analyst: Good morning. You have already touched on it, and I understand that payoffs and paydowns you can never really predict precisely. But is it realistic to assume that your CRE loans are going to continue to decline from here and a lot of your growth will be coming from C&I? Or do you have a line of sight into where the low point is on CRE and things are likely to improve in 2026?

David L. Meredith: Janet, good morning. This is David Meredith. We will look at it a few different ways. One, CRE is not an area we intend to shrink. We continue to have a great deal of focus on our commercial real estate business. We have some great lines of business that continue to pursue commercial real estate, so it is a dedicated effort we have. There is a lot of noise in commercial real estate. We have had the expectation for an increased level of payoffs for some time based on interest rates and the aging of some properties, so there is going to be a certain level of rotation or volatility in that space as some of them pay off.

But we continue to look at new opportunities and continue to be aggressive in that space. Looking at increasing commitments over the last couple of quarters, we have increased commitment levels in our construction book. With the level of equity going into construction projects, it may be six to nine months before you start to see fundings, but we are growing our commitment levels in those areas, and we have done those for the past couple of quarters as well. We will continue to see, based on the interest rate environment, some rotation of loans as they have matured.

In the normal course of business for commercial real estate opportunities, borrowers are going to either sell the asset, go to the private debt market, or look for private placement long-term rates—things that are not traditionally a bank-type financing vehicle. So we will continue to see some volatility in that space, but it is definitely an area we are still pursuing at a high level as part of our growth strategy. Along with that, we have seen increased levels of C&I. As you pointed out, we invested in those lines of business—the factoring, asset-based lending, and the corporate C&I effort—and we continue to focus there. But it is a broad base; it is commercial real estate and C&I.

We are not being specific in any one area.

Analyst: Got it. Thank you for that. It looks like the first quarter fee income saw some strong performance on the SBA loan sales. Where do you see the most upside in terms of fee income opportunities? It looks like there are different puts and takes within the specific line items within fee, but overall it has been growing nicely. How should we think about the pace of your fee income growth from here?

James C. Mabry: Good morning. I would say, as you mentioned, SBA is one area that has done really well, and our outlook for the balance of the year would be that, while there are some puts and takes, generally the first quarter is a pretty good jumping-off point. I think there is a chance for some modest improvement there, but it is a good run rate to think about. Mortgage had a good quarter in Q1; it was up a bit from Q4. SBA was good. We did not see—and this relates to some of the commentary about loan production—the capital markets performance that we typically do in Q1.

As we start to see that production fall through and become loan growth, I would expect capital markets would exhibit higher levels of fee income. Lastly, wealth is an area that has been very steady. I think that holds promise as we look forward for solid single-digit, mid-single-digit growth and potentially better down the road. We are putting a lot of effort and energy into that area, and with the things we are doing internally with legacy Renasant Corporation and the dislocation around us, I see that as an area that will do well in coming years.

Kevin D. Chapman: Jim, I may just add that some of the hiring we have done has enhanced wealth management. You will start to see that revenue lift as we start to exit Q2 and get into Q3 and Q4. I do want to take the opportunity to talk about mortgage. Mortgage was an interesting quarter. If you go back to February, prior to the macro Middle East conflict events and the subsequent rise in rates, the 30-year rate had gotten down to a five handle on a conventional mortgage, and our pipeline popped immediately. It really speaks to how we have built mortgage with the retooling of production we have added. As rates cooperate, that pipeline’s revenue immediately shows up.

I know we are not in a position where rates are cooperating with mortgage today; they will continue to slug it out and be profitable. But when rates cooperate, you will see almost an immediate impact for mortgage. You see that a little bit in Q1 because of what happened with rates in February. We wait for the day that we do not have to apologize for mortgage and for being in the mortgage industry. We continue to be well positioned and invest in that arm of our company, and feel like we are really well positioned if rates ever cooperate with us.

Operator: We have a follow-up from David Jason Bishop with Hovde Group. Please go ahead.

David Jason Bishop: Yes, just a quick follow-up on credit. Trends look fairly well behaved. It looks like there is a little bit of inflow on the nonaccrual side. Maybe some color there. And then, Kevin, holistically, you have taken pride in the reserves as a rainy day fund. Do you think the ACL on loans sits in this mid-1.50% range as you go through the year, or is there a little bit of a bleed if things improve from a macroeconomic perspective? Thanks.

David L. Meredith: David, good morning. On the NPL question, we did see a little bit of an inflow and that number has increased somewhat over the last couple of quarters. That increase has been broad-based; there is nothing in particular. For the period, we had about a $24 million increase—about $69 million of new NPLs on $45 million of outflows. We continue to resolve our NPL loans. The inflow was centered in a few larger-dollar transactions—about $7 million in CRE, $19 million in C&I, and a little bit in construction and development—and it was centered in just a handful of loans that we believe we are in a position to work out.

The composition of our NPL book continues to be somewhat consistent quarter over quarter. There is not any one area concentrated from an asset type or a geography standpoint. Our average NPL size is small. Looking at our general asset quality, we see some positives. Our 30–89 day numbers continue to be low, and within the breadth of our portfolio, we do not see a broader level of losses. Our charge-offs in Q1 were only 5 basis points. Over the last 12 months, we resolved a high level of NPLs with minimal charge. We feel comfortable that our underwriting is solid and that we are structuring loans properly as we continue to resolve those problems.

We will continue to work through NPLs and have processes in place to identify loans early so we can resolve them quickly and mitigate any loss.

Kevin D. Chapman: And Dave, I will just add on the allowance. As we look around, credit quality is stable. One thing that concerns us—and this goes back to when we built the allowance in 2020—is all the volatility and uncertainty that is out there putting strain on either consumers’ or commercial businesses’ cash flows. We do not think the macro concerns have alleviated yet. Take what happened in March with energy costs; all you have to do is go fill up your car, and you saw a 30% to 40% increase in 30 days in what it costs just to fill up your car. Ultimately, that has to catch up with people in some way in their cash flows.

We will continue to keep what we think is an appropriate level of allowance given the uncertainty. As we have clearer pictures from a macro level, at that point in time we will reevaluate the sufficiency of the allowance. Right now, there is enough macro uncertainty—even though it may not be showing up quantitatively in our credit quality numbers—to keep the level of reserve where it is.

David Jason Bishop: Excellent. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Kevin D. Chapman, President and CEO, for any closing remarks.

Kevin D. Chapman: Thank you, and thank you to all of those that have joined us this morning. We appreciate your interest in the company and look forward to meeting with you throughout the quarter.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Unknown Speaker: Goodbye.