Renasant Corporation (RNST) Q4 2021 Earnings Report, Transcript and Summary

Good day, and welcome to the Renasant Corporation 2021 Year-End and Fourth Quarter Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Kelly Hutcheson with Renasant Corporation. Please go ahead.

Good morning and thank you for joining us for Renasant Corporation's 2021 fourth quarter webcast and conference call. Participating in this 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. Although business activity in the markets in which we operate increased significantly relative to 2020, the spread of multiple variants during 2021, including the most recent Omicron variant, reminds us that the impact of the pandemic and the federal, state and local measures taken to arrest the virus may remain significant factors impacting our financial condition and operating results for the foreseeable future. Other factors include, but are not limited to, interest rate fluctuation, regulatory changes, portfolio performance and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com, at the Press Releases link under the News & 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 to the most comparable GAAP measures can be found in our earnings release. And now I will turn the call over to our President and Chief Executive Officer, Mitch Waycaster.

Thank you, Kelly. Good morning. We appreciate you joining the call today. Before Kevin and Jim discuss results for the fourth quarter and our near-term outlook, I want to reflect on 2021 and the opportunities ahead. First, I am so very proud of our team as they persevere through the challenges of the health crisis. I want to thank our team for their extraordinary efforts putting each other and customers first throughout the year. Financially, we produced solid earnings, strengthened capital levels, and ended the year with considerable balance sheet liquidity. Additionally, we published an ESG report in 2021, which documents our efforts in a number of important areas, including diversity and inclusion. We expect to issue a new ESG report in 2022. As we look to the new year, the economic strength of our markets is evident and the outlook for growth is good. Industries that remain hard hit by COVID in early 2021 have largely rebounded and are better positioned. Business activity across the footprint is vibrant, and causes us to be hopeful on improving loan growth. I am optimistic about the coming year and sharing with you the results. I will now turn the call over to Kevin.

Thank you, Mitch. Our fourth quarter earnings were $37 million, or $0.66 per diluted share, compared to $40 million, or $0.71 per diluted share in the third quarter. For the year, we reported $3.12 per diluted share compared to $1.48 in 2020. Forgiveness of our PPP loan portfolio continued to slow this quarter, and was the largest factor contributing to the decline in net interest income quarter-over-quarter. We utilized some of our own balance sheet liquidity to grow our securities portfolio and the additional income generated helped to offset the impact of interest income from PPP. Our insurance and wealth management lines of business experienced seasonal slowdowns in the fourth quarter, but put forth strong results for the full year of 2021. Similarly, a seasonal decline in mortgage volumes coupled with further compression on gain on sale margins resulted in a lower contribution from our mortgage division for the fourth quarter. We continue to make noticeable progress on our expense and efficiency initiatives and are pleased with our recent results. While the fourth quarter benefited from some one-time items, the trajectory of expenses year-over-year or quarter-over-quarter are declining as expected, and we expect the impact of ongoing and new initiatives to reduce non-interest expense for the year 2022 compared to 2021. Our team is adaptive and innovative, which have been key to driving our success. Customer behavior and preferences have evolved quickly over the past two years, and our goal of understanding and meeting the needs of our customers, whether face-to-face or through mobile and digital applications, remains unchanged. Technology and innovation have always been a high priority and will continue to receive a great deal of focus from our team. I will now turn the call over to Jim.

Thank you, Kevin. As we walk through the quarter's results, I will reference slides from the earnings deck. Starting with the balance sheet, assets grew just over $650 million in the quarter with deposits growing by a similar amount on the liability side. Noninterest bearing deposits now represent 34% of total deposits. As Kevin mentioned, we invested some of the excess liquidity in our securities portfolio, increasing the balance just over $250 million from the previous quarter. We also elected to classify approximately 15% of our portfolio as held to maturity and as a result of this classification, we record a credit loss reserve of $32,000. At the end of the quarter, we had approximately $1.9 billion in cash. We anticipate the combination of additional growth in the securities portfolio and loans to reduce this cash position in the coming quarters. Loans, ex-PPP, increased $13 million from Q3 and $150 million year-over-year, which represents over 1.5% loan growth for the year. Q4 was another strong quarter in terms of production, with $820 million in new loan production and $590 million of advances, but the challenges around payoffs that have been present during much of the pandemic did not subside in Q4. Activity in our remaining PPP portfolio was nominal with balances declining $9 million for the quarter. We had $58 million in PPP loans outstanding at quarter end. All of our regulatory capital ratios are an excess of required minimums to be considered well capitalized and reflect the strength of our capital position. During the quarter, the company issued $200 million of 10-year subordinated notes at a fixed rate of 3% for the first five years. The proceeds of this offering replenish capital that we used to redeem $45 million in callable subordinated notes. Related to this, we have called for redemption another $30 million of our subordinated notes, which will occur on March 1st. We also repaid $150 million in long-term FHLB advances and incurred a prepayment penalty charge of $6.1 million. We had a credit provision release of $500,000 and net charge-offs of $5.4 million. The ACL as a percentage of loans, ex-PPP, decreased from 1.71% to 1.65%. We also had a release from our reserve for unfunded commitments of $300,000, which is reflected in other noninterest expense. Credit quality metrics are shown on pages 14 through 16. Pass dues, classified and nonperforming asset measures all remained relatively steady. The uptick in net charge-offs is largely comprised of a single credit that was fully reserved at the time of charge-off. Net interest income declined $1.8 million quarter-over-quarter. Kevin mentioned that our PPP forgiveness slowed this quarter, with PPP interest and fees declining $3 million from Q3. Interest income from our additional securities purchases helped offset decline in PPP revenue. Our core margin, which excludes purchase accounting accretion and interest recoveries, was down 11 basis points from Q3. After also excluding the impact from PPP, our core margin was down only 4 basis points. The decline in margin is the result of loan pricing pressures and the considerable on balance sheet liquidity. Our mortgage, wealth management and insurance lines of business all experienced seasonal slowdowns in Q4, but produced strong results for the year. Our treasury solutions and capital markets teams, as well as our SBA team, all outperformed this quarter, and helped offset the decline for mortgage. It is also worth noting that we terminated four cash flow hedges linked to future FHLB borrowings that are no longer expected to occur. The swap terminations resulted in a gain of $4.7 million, which is recorded in noninterest income. Noninterest expenses with exclusions were down approximately $8.6 million for the quarter. A portion of that decline is attributable to the decline in expenses in our mortgage division, as well as some other one-time items. We continue to see the benefits of expense initiatives announced in late 2020 and expect continued realization from other initiatives in 2022. I will now turn the call back over to Mitch.

Thank you, Jim. Remaining committed to the fundamentals of sound banking with a focus on core deposits, asset quality, capital strength, and improving profitability are the keys to building shareholder value. I will now turn the call over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. And the first question comes from Thomas Wendler with Stephens. Please go ahead.

Hi. Good morning, everyone.

Good morning, Tom.

On the earnings release, it says you guys have no current intent to repurchase stock. Is this driven by the company's current valuation? And then can you give us an idea of other pathways the company is finding more attractive for capital deployment?

Good morning, Thomas. This is Jim. So a couple of thoughts on capital management. Of course, it's something that we spend a lot of time thinking about and really what we're doing in that deliberation is thinking about the relative uses or the different uses of capital, which ones produce the best sort of returns on that capital. And stock price is a factor in that. But also another factor of beta, the consideration of what sort of balance sheet growth we might have. And then lastly, I would say, acquisition opportunities. So it's a constant sort of weighing of the pros and cons and merits of each. And right now, we just see the best use for capital being in those other alternatives away from share repurchases, not something we'd roll out, as we get over the course of the year, but at this point, it's not something we envision in the near term.

That's great. Thank you. And then just keeping on with that conversation, in M&A can you give me any sort of color on the asset size, geography or if it'd be a bank or a non-bank where you guys might be focused there?

Thomas, good morning. Again, this is Mitch. As we continue to evaluate those opportunities, certainly we would be looking at banks and non-banks relative to size. For us, it would most likely be in that 1 billion to 5 billion range, not to say they we wouldn't go below that 1 billion if we were building out in existing markets. But certainly in the -- you mentioned non-banks, I would say in that space, particularly for those opportunities that would complement business lines that we already have in place today, and we're enjoying success there, as I talk about production here in a moment. But also, I would say new business lines that would align with our business model and risk appetite and opportunities that we see today across our footprint.

All right, that's great. I'll hop back in the queue. Thank you.

Thank you.

The next question comes from Joseph Yanchunis with Raymond James. Please go ahead.

Hi, there.

Good morning, Joe.

Good morning. I believe in your prepared remarks, you discussed potentially increasing the security portfolio in 2022. And at 18.1% of [indiscernible] assets in the quarter, I was wondering if there is a kind of a cap that you had in your mind on where that could rise to?

Good morning, Joe. This is Jim. So I would say there's no absolute cap that we have in our mind, and start with the fact that we view that portfolio is really a source of liquidity. And certainly, liquidity is not a concern, but we realize that things can change and deposit behavior can change. So the way we envision at least the next quarter or two is that we will continue to slightly build that securities portfolio along the lines of what we've done in some prior quarters, and then we'll reevaluate. As we get further in the year, we'll see what we've got in the way of loan growth and also to the extent that there's been any change in deposit behavior. So it's sort of a -- we'll play as it comes. But near term, I do expect to see some growth in that securities portfolio.

Understood. That's great. I appreciate it. And then I was also hoping to get your thoughts on where you think the NIM will trend from here? And when do you expect for it to bottom out?

I think some of this at the end of -- in the third quarter call. We do see signs of the NIM stabilizing and those trends and signs have continued. So our hope is and expectation is that as we get to the end of the second quarter, that we've got stabilization in the margin. And I guess the other thing I'd comment on in that regard is in terms of net interest income, we do see -- that's something that we obviously focus on a lot. We do see the chance for that to grow in the coming quarters, and that's largely a function of balance sheet growth and the expectation that margin will start to stabilize. But I would say from both, as part of that equation is the expectation that we do have improved loan growth as we go through the year. The other thing I'd say is both of these comments that I just made about NIM and net interest income ignore the benefit of any rate increases.

Got it. And then kind of on that interest rate sensitivity, do you guys have an update for where things are trending in 4Q or at 12/31 of the impact to NII from rising rates? I believe you guys were at about 8.5% in 3Q.

I would say this. We obviously will -- we're updating that data. And when we put out the Q, we'll publish it. But I would expect, even with no adjustments or deposit beta that that 8.5% would probably go up a touch. And then the other thing is it's obviously hard to compare. But I also think it's likely that our deposit betas are probably higher than some of our peers. So our sensitivity is probably a little understated would be my guess, as you look at our interest rate sensitivity position.

Perfect. I really appreciate it. Thanks for taking my questions.

Thank you, Joe.

The next question comes from Jennifer Demba with Truist Securities. Please go ahead.

Thanks. Good morning.

Good morning, Jennifer.

You mentioned that expenses are likely to be down in '22. Just wondered if you could give us a profitable range there and what kind of hiring and investment environment that contemplates?

Hi, Jenny. It’s Kevin. As we look at our expenses and are making guidance about them being lower, looking at a couple of things. If you just look at the annual run rate of what we've done since '20, each of the quarters last year, expenses being down, we know there's headwinds when it comes to hiring or even some wage inflation. But we still think that given where our base is, our efficiency that we've got room to improve. That's why we were comfortable in projecting that that guidance be lower. It's going to come from a variety of areas. The largest percentage of our expenses continues to be salaries and employee benefits will be. We will hire when the right opportunity to hire is there. So we're not going to not make a good hire for fear that it may cause a blip or an uptick in expenses. We'll continue to be opportunistic in the hiring. I would also say that when it comes to other expense line items, whether it's occupancy and equipment or data processing, we expect those to continue to trend down as well. But whether it's going to come from our ongoing initiatives, whether it's branch closures, contract renegotiations, we're going to continue to be very disciplined around all of our line items. As we look out as far as guidance, I would say that our trend line of what you've seen, whether year-over-year or quarter-over-quarter is going to continue to be there, particularly on a year-to-year basis. As we look at Q1, we will have a small uptick in salaries and employee benefits just due to routine merit increases. We mentioned in the call that Q4 was helped a little bit with some adjustments. If you just look at salaries and employee benefits, I think it's down close to 7 million. Those adjustments comprised about 3 million, so there was still an appreciable decrease in our salaries and employee benefits line item. So as we look out, we think that if you take the year-to-date expenses as your baseline and assume a decrease, I think that's going to be in line with where we end up for '22.

Thanks, Kevin.

Thank you, Jennifer.

The next question comes from Brad Milsaps with Piper Sandler. Please go ahead.

Hi. Good morning.

Good morning, Brad.

I hope you guys are doing well. I'd hopped on a little late, but just wanted to follow up on the expense question. Just kind of curious, maybe in terms of total headcount, kind of where you were from quarter-to-quarter, just wanted to get a sense of kind of how much of it was purely related to mortgage and maybe other efforts that you guys are taking in other ways to reduce costs?

Sure. Good morning, Brad. On the expenses and headcount, let me first by saying with what we are dealing with on the pandemic, the headcount -- just like we need every able body that we can have right now, particularly in certain areas, whether it's branches or wires or call center. There are some critical functions that just due to protocols, we just want to be absolutely certain we don't put too much strain on our employees and still be able to provide customer service. But if you look at our headcount, our headcount's down year-over-year probably about 100 employees, but would also add that there are certain areas that we continue to hire. And, again, would also add that there's a lot of fatigue in the system, and we want to make sure that we don't compound that fatigue in our employees or in our customers, because of what we're having to address when it comes to staffing just due to the pandemic. As we look at where the expenses -- where the expense reduction will come, everything is on the table, whether it's some long-term benefits. In Q4, we saw a nice reduction in our health and life insurance. And I know that's a little bit counterintuitive, considering some of the health care increases that we've seen. But we've taken steps to change contractual obligations or just reevaluate our total benefit package to ensure that we're providing the maximum amount of benefit to our employees. And not only minimizing the company's cost, but minimizing the cost to employee. This is not an effort to shift costs from the employer to the employee, but actually maximize benefits and reduce the employee cost as well, but at the same time, reduce the employer costs. And I would say that's in health care. That's another benefits as well. And so as we look at salaries and employee benefits, maybe some headcounts, but it's also going to be reevaluating all components of that line item, which would include some of the benefits. On mortgage, mortgage did have a decrease in expenses. Their salaries and employee benefits were down. We're down about 1.5 million to 2 million, largely coming from the commission line item, which is going to be reflected as mortgage kind of returns to normal. We started to see this at the end of Q2, Q3 and now in Q4 where mortgage is having its reversion back to a normal operating environment. And so some of the cyclicality is now back into mortgage that we didn't see for the past two years because of low rates.

Okay, great. Thank you, Kevin. And just maybe as a follow up for Jim, I apologize if I missed this. But do you feel like your sort of legacy loan yields have more or less kind of stabilized here around 385 or so? And secondly, just kind of curious, and I apologize if you mentioned this, but where are you putting on new bonds as you buy them? I think your yield actually it was down around 129. Just kind of curious what kind of improvement you think you could see there.

Good morning, Brad. So you're correct. Core loan yields, they were down a touch Q4 of Q3, but not much at all, which gives us -- which is part of the reason we've got the confidence in terms of directionally where the margin goes. And then in terms of the securities portfolio, in terms of we're able to put that money to work at, we're roughly 50 or 60 basis points higher than we were in Q3 in terms of we're able to put to work at and that's not -- and we're not extending duration with that. Generally, we're running three and a half to four years in terms of the securities that we're putting on the books, so a nice uptick there from Q3.

Great. Thank you, guys.

Thank you, Brad.

The next question comes from Kevin Fitzsimmons with D.A. Davidson. Please go ahead.

Hi. Good morning, everyone.

Good morning, Kevin.

It seems like payoffs, paydowns have been a real headwind for quite a while and it seems like it's been a little more for you all. And I know that's a tough thing to project. But when you think about what's causing that to happen, and maybe the anticipation of rates going up or potential tax changes, do you guess or do you hope that we may have hit a high point on that headwind, and then maybe some of this strong loan production will start translating into more substantial loan growth? I'm just curious how you feel about that?

Kevin, this is Mitch. And I think you make a key point in your question. Let me start with your last comment and reflecting on that, and I'll start with production. But I'm going to end with relative to payoffs something we saw in the fourth quarter as we ended the year. So just beginning with production, we had record production this quarter. We actually produced 820 million in production. That's up 17% from 700 million in 3Q. And actually for each quarter in '21, we saw increases in production. So a strong -- as I mentioned in the opening comments, we've seen really strong production and it continues to grow, which is a reflection of our talent and some of the investments that Kevin was referring to earlier. But one thing we saw with that strong production in 4Q, we did continued the elevated payoffs, but there was one segment of those payoffs that we saw increase quite a bit in the quarter, sale of asset the prior quarter had run about 46% of those payoffs. We saw that accelerate to about 60% in the fourth quarter, and we saw a lot of those come toward the end of year, as people just took the opportunity to sell the underlying asset, which I think in large part to your point is driven by cap rates and other things that we're seeing in the market right now driven, just given where we are with rates. But if you simply adjusted for that change in that sale of asset, our net growth this quarter would have been more in the range of, say, 7% given the production. So yes, I would like to think that we're hopefully seeing some of that began to change. And we will see that change going forward. But what I'm really optimistic about is our ability to produce and also the granularity, either geographically that we see in our pipeline going forward, which is evident by the production we're seeing, but also the granularity of types of loans that we're producing, whether that be in the consumer one to four family, which was about 24% or in our small business commercial, which was about 15%, and another 25% in commercial credits greater than 2.5 million. And then on top of that, our corporate banking group, our larger C&I credits and some of our specialty loans were about 36%. So whether you look at it geographically or by type, we're seeing really good results from production and maybe some outliers back to your point in payoffs that's driven by just sale of asset, which we are hopeful we see that change as we go into '22.

Okay. Thanks, Mitch. That was really helpful. Just one follow on, there's been a few questions on the margin, but just trying to think about all the different moving parts here. So is the way to think about it that even you see it stabilizing, but there's probably further headwind to come at least in the first quarter from PPP -- with the remaining PPP going off and the income effectively going away, maybe partly offset by this mix shift, right, putting cash to work. And then as it stabilizes getting toward midyear, that mix shift I would think would continue. And then you have the dual tailwind of rising rates. And so I think the margin benefit is the optimal scenario that that plays out plus deposit growth moderates, but not to the degree of actually declining. So you would have -- you're building or stabilizing your average earning assets, but now NII maybe used a bit being driven more by percentage NIM than it has been in the past few years. I'm just trying to put altogether, curious how you think about it?

I think you did a good job, Kevin, of putting it together. All those things -- I think underlying it -- if we look at new and renewed loan rates or core loan yields, all that sort of behaving and trending in the right direction. I would say the biggest key for us on margin is the outlook for loan growth. That's probably the biggest variable. Again, I'm ignoring sort of potential rate increases that we may get. I think that's because we certainly have some remixing that we'll continue to do and take some of that excess liquidity and put in securities, and that will help particularly at these higher rates that we're able to invest that money. But as we run our models and look at it, loan growth is I'd say the biggest sort of variable and the optimism we've got around improving that net loan growth will be key to the margin outlook.

Great. Thanks, Jim.

Thank you, Kevin.

The next question comes from Catherine Mealor with KBW. Please go ahead.

Hi. Good morning. I just have a follow-up question on the margin and just thinking about loan yields and loans repricing. Can you remind us what percentage of your loan portfolio is variable rate, the impact of floors and just how quickly you see that benefit once the rates start to move?

Good morning, Catherine. It's Jim.

Good morning.

Good morning. So roughly 50% of our portfolio is fixed. I think just a hair under that 40% is variable and about 11% is adjustable. And around 75% of those variable rate loans have no floors or above the floor. And, of course, as we get moves in rates, that 75 percentage number starts to go up. And I'd say that with a 50 basis point move, you're up above 80% in terms of those variable rate loans being above the floor. And the other thing I'd say -- the other thing we've seen in our mix, if you look at our loan production over the last couple of quarters, and this ties back into the these questions about margin and our sensitivity, we have seen the percent of variable rate loans as a percent of production increase. It's not dramatic, but we've seen that increase over the last quarter or two and that's certainly helped.

Great. Okay. And then looking back on expenses, is there a way to think about how much of the expense base came from mortgage this quarter or the reduction came from mortgage? And I guess is there -- as we look forward to mortgage being a lower part of revenue next year, how do we kind of think about core efficiency ratio versus the mortgage efficiency ratio just as put together our model?

Catherine, good morning. This is Kevin. When we look at mortgage, it's reverting back to mortgage, the cyclicality of it. And so over the course of a year, we still expect mortgage to outperform -- our mortgage company to outperform the industry. And as everybody knows, the industry is under headwinds, particularly coming out of -- compared to the last two years. But if we can look back to '19 or '18, what's happened over the last couple of years is that mortgage has become more efficient. The margins, although they may be down in Q4 compared to Q3, they're still higher than what they were in Q4 of '19 or Q4 of '18. So there's some underlying trends that are positive around mortgage. That said, mortgage is reverting back to cyclicality. And so there are several times over the last two years where mortgage benefitted the efficiency ratio as opposed to with a headwind. And right now we're starting to see it -- it's now become a headwind again. So the efficiency ratio in mortgage for Q4 was about 75%. It typically runs in that -- for the year, it will typically run in the high 60, low 70, so it's a little bit above that. But we expect cyclicality and that Q4 is probably going to be a little bit elevated on efficiency ratio. And then in Q2 and Q3 of next year, that would improve and not be as much of a drag. But overall, our corporate goal is to drive the company's efficiency ratio back down below 60 in the short run, and then continue to improve it. But mortgage is probably still going to be a headwind when running -- over the course of the year well run, by the way, is still going to be in the high 60s, low 70s, so it's going to be a headwind. Just some of the initiatives that have gone on there is not only the variable comp, but mortgage is taking steps to continue to become more efficient. There's been some headcount reductions as production has ebbed and flowed. And there's other investments that we're making. That's a little bit of quiet time to just improve how mortgage will operate. But at the end of the day, we still expect mortgage to outperform at least what the industry is doing and be a benefit to the company. But it will -- it is reverting back to its normal state and will continue to be a headwind on efficiency. It doesn't mean it's a bad business line. It just means it's a less efficient business line. And just for the benefit, while we're talking about efficiency, the company's efficiency ratio, there is about 3 to 5 percentage points of the efficiency ratio that is attributable to some non-bank business lines; insurance, mortgage, wealth management. Again, good business lines, but just less efficient, and they will weigh -- they will weigh on the corporate or consolidated efficiency ratio while the bank is operating at a little bit more efficient run rate.

And the 60% corporate efficiency ratio that you're targeting, do you think that's achievable? I know it's probably a higher margin with better rates is part of the ticket there, and of course I'm sure improves loan growth too. But is that something that you see achievable in a year, in two years or how long do you think it takes you to get there?

Yes, if I can choose the environment, we'll be there in a week or two. But I don't think that's peculiar [ph]. I think if we don't have, so let's talk about what we don't have. If we don't have rates, yes, I think it's a next year event if we don't have rate increases. If we have rate increases, the timing and how many, we could be scaling [ph] 60% as we enter next year. Again, that's assuming rates move and they move quick -- they move earlier on in the year. That said, our focus is still going to have to be on the efficiency, the operating expenses of the company regardless of what happens in the macro environment. And so our focus, whether we have rate increases, 60% is only a short-term goal. Our longer-term goal is to drive it to the mid 50s. And if we're in the mid 50s, that means the bank, a community bank model is operating in the low 50s. And we think that's about as efficient as a community bank model can operate. So that's our longer-term goals. But yes, if we have rate increases, the asset sensitivity that Jim mentioned, our core funding, but what we aren't talking about is what we've -- the deposit growth that we've had, and now our noninterest bearing DDA as a percentage of total deposits are sitting at 35% plus. So we continue to focus on some of the fundamentals. And as the rate environment maybe normalizes, whatever normal is, we do expect the value of those deposits, that rate sensitivity, to help drive maybe a little bit more outweighed improvement in income when and if they ever do rise.

And to be clear, you're talking of a relative efficiency ratio of 60 relative to today's adjusted 64. Is that apples-to-apples?

That's correct.

Okay, great. Super helpful, Kevin. Thank you.

Thank you, Catherine.

[Operator Instructions]. The next question is a follow up from Thomas Wendler from Stephens. Please go ahead.

Hi, guys. Just one final question from me. We're starting to see a lot of banks change their policies around NSF fees. Is that something you've been looking at?

Thomas, it's Kevin. So yes, we have. And not to get historical on you, but may take you back to '09, because we saw at least in '09 the winds [ph] or the commentary around NSF fees or service charges around consumer deposits starting to change. And at that time, a large portion of our noninterest income was being driven by those exact line items. And so at that time, we had a long-term initiative to reduce our reliance on them, or to lessen the contribution of those to noninterest income. And so we invested in insurance, wealth management, mortgage, all of those that I just talked about how inefficient they were. But they're also very good business lines to be in and are very effective use of capital. And so what we've seen over the last, call it, 10 to 12 years is that our consumer service charges and NSF fees, although the balance sheet has increased threefold, those line items are flat to down, and their contribution to the total company are down. So yes, this is something we've been looking at and talking about. Not only over the last couple of months as we've seen some peers come out with commentary or changes to their model, but we just seen this as something that's building and a headwind that's been growing. I would also add that even steps that we've taken sooner than 10 to 12 years ago to help our customers more effectively manage their accounts, we've taken significant steps along the way to help provide more education and more benefit to the customer so they can effectively manage those service charges. But also we've completely restructured our consumer deposit accounts and simplified the offerings that we have with less. And we have many less deposit options. And there's also a variety of options in those that the customer can choose to help tailor to their needs. So I'd just say yes, it's top of mind with NSF fees and service charges. We're evaluating right now how that looks in the future. We don't have any definitive answer yet. But we would also add that over the last couple of years, our customers have acknowledged that they like how we interact with them. We have been named the best bank in several of the markets and several of the states that we operate in. And that is ultimately what drives our decisions, our customer feedback and their satisfaction. So that's going to be our guide. But I would also say is top of mind and it's something that we've been working on not only the last couple of months, but the last couple of years and almost a decade now around specifically NSF fees and service charges.

Great. Thank you.

Thank you, Thomas.

We have no further questions. So this concludes our question-and-answer session. I'll now turn the conference back over to Mitch Waycaster for any closing remarks.

Thank you, Tom, and to everyone who joined the call. We appreciate your interest in Renasant and look forward to talking again soon. We next plan to participate in the KBW Conference in February. Thank you.

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