RNST 10Q 6.30.2013
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________________________
FORM 10-Q
 ________________________________________________________
(Mark One)
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2013
Or
 
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission file number 001-13253
 ________________________________________________________
RENASANT CORPORATION
(Exact name of registrant as specified in its charter)
 ________________________________________________________
 
Mississippi
 
64-0676974
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
209 Troy Street, Tupelo, Mississippi
 
38804-4827
(Address of principal executive offices)
 
(Zip Code)
(662) 680-1001
(Registrant’s telephone number, including area code)
 ________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
ý
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  ý
As of July 31, 2013, 25,240,960 shares of the registrant’s common stock, $5.00 par value per share, were outstanding. The registrant has no other classes of securities outstanding.


Table of Contents

Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended June 30, 2013
CONTENTS
 
 
 
Page
PART I
 
Item 1.
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 


Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Renasant Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Data)
 
(Unaudited)
 
 
 
June 30, 2013
 
December 31, 2012
Assets
 
 
 
Cash and due from banks
$
45,002

 
$
63,225

Interest-bearing balances with banks
34,013

 
69,195

Cash and cash equivalents
79,015

 
132,420

Securities held to maturity (fair value of $347,155 and $334,475, respectively)
348,340

 
317,766

Securities available for sale, at fair value
398,190

 
356,311

Mortgage loans held for sale, at fair value
50,268

 
34,845

Loans, net of unearned income:
 
 
 
Covered under loss-share agreements
201,494

 
237,088

Not covered under loss-share agreements
2,683,017

 
2,573,165

Total loans, net of unearned income
2,884,511

 
2,810,253

Allowance for loan losses
(47,034
)
 
(44,347
)
Loans, net
2,837,477

 
2,765,906

Premises and equipment, net
70,117

 
66,752

Other real estate owned:
 
 
 
Covered under loss-share agreements
27,835

 
45,534

Not covered under loss-share agreements
33,247

 
44,717

Total other real estate owned, net
61,082

 
90,251

Goodwill
184,779

 
184,859

Other intangible assets, net
5,429

 
6,066

FDIC loss-share indemnification asset
30,698

 
44,153

Other assets
183,886

 
179,287

Total assets
$
4,249,281

 
$
4,178,616

Liabilities and shareholders’ equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest-bearing
$
560,965

 
$
568,214

Interest-bearing
2,944,193

 
2,893,007

Total deposits
3,505,158

 
3,461,221

Short-term borrowings
42,819

 
5,254

Long-term debt
152,970

 
159,452

Other liabilities
47,656

 
54,481

Total liabilities
3,748,603

 
3,680,408

Shareholders’ equity
 
 
 
Preferred stock, $.01 par value – 5,000,000 shares authorized; no shares issued and outstanding

 

Common stock, $5.00 par value – 75,000,000 shares authorized, 26,715,797 shares issued; 25,231,074 and 25,157,637 shares outstanding, respectively
133,579

 
133,579

Treasury stock, at cost
(24,814
)
 
(25,626
)
Additional paid-in capital
218,466

 
218,128

Retained earnings
187,618

 
180,628

Accumulated other comprehensive loss, net of taxes
(14,171
)
 
(8,501
)
Total shareholders’ equity
500,678

 
498,208

Total liabilities and shareholders’ equity
$
4,249,281

 
$
4,178,616

See Notes to Consolidated Financial Statements.

1

Table of Contents

Renasant Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In Thousands, Except Share Data)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
Interest income
 
 
 
 
 
 
 
Loans
$
34,565

 
$
34,016

 
$
68,723

 
$
68,298

Securities
 
 
 
 
 
 
 
Taxable
3,431

 
3,813

 
6,222

 
7,890

Tax-exempt
1,896

 
2,095

 
3,843

 
4,156

Other
53

 
54

 
102

 
139

Total interest income
39,945

 
39,978

 
78,890

 
80,483

Interest expense
 
 
 
 
 
 
 
Deposits
4,095

 
4,969

 
8,175

 
10,388

Borrowings
1,446

 
1,599

 
2,930

 
3,842

Total interest expense
5,541

 
6,568

 
11,105

 
14,230

Net interest income
34,404

 
33,410

 
67,785

 
66,253

Provision for loan losses
3,000

 
4,700

 
6,050

 
9,500

Net interest income after provision for loan losses
31,404

 
28,710

 
61,735

 
56,753

Noninterest income
 
 
 
 
 
 
 
Service charges on deposit accounts
4,509

 
4,495

 
9,009

 
9,020

Fees and commissions
4,848

 
4,322

 
9,679

 
8,250

Insurance commissions
951

 
882

 
1,812

 
1,821

Wealth management revenue
1,715

 
1,551

 
3,439

 
3,493

Gains on sales of securities

 
869

 
54

 
1,773

BOLI income
635

 
654

 
1,365

 
1,765

Gains on sales of mortgage loans held for sale
3,870

 
2,390

 
7,435

 
3,671

Other
789

 
1,115

 
1,902

 
2,913

Total noninterest income
17,317

 
16,278

 
34,695

 
32,706

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
21,906

 
19,871

 
43,180

 
38,520

Data processing
2,045

 
2,211

 
4,088

 
4,251

Net occupancy and equipment
3,668

 
3,585

 
7,276

 
7,204

Other real estate owned
1,773

 
3,370

 
3,822

 
7,369

Professional fees
1,304

 
1,015

 
2,477

 
1,986

Advertising and public relations
1,246

 
1,302

 
2,736

 
2,499

Intangible amortization
314

 
349

 
637

 
707

Communications
1,135

 
926

 
2,262

 
2,029

Extinguishment of debt

 

 

 
898

Merger-related expenses
385

 

 
385

 

Other
3,958

 
4,121

 
8,471

 
7,949

Total noninterest expense
37,734

 
36,750

 
75,334

 
73,412

Income before income taxes
10,987

 
8,238

 
21,096

 
16,047

Income taxes
2,968

 
1,893

 
5,506

 
3,728

Net income
$
8,019

 
$
6,345

 
$
15,590

 
$
12,319

Basic earnings per share
$
0.32

 
$
0.25

 
$
0.62

 
$
0.49

Diluted earnings per share
$
0.32

 
$
0.25

 
$
0.62

 
$
0.49

Cash dividends per common share
$
0.17

 
$
0.17

 
$
0.34

 
$
0.34


See Notes to Consolidated Financial Statements.

2

Table of Contents

Renasant Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands, Except Share Data)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
Net income
$
8,019

 
$
6,345

 
$
15,590

 
$
12,319

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Securities:
 
 
 
 
 
 
 
Unrealized holding (losses) gains on securities
(7,019
)
 
1,090

 
(6,873
)
 
2,108

Reclassification adjustment for (gains) losses realized in net income

 
(537
)
 
71

 
(1,095
)
Amortization of unrealized holding gains on securities transferred to the held to maturity category
(54
)
 
(91
)
 
(120
)
 
(193
)
Total securities
(7,073
)
 
462

 
(6,922
)
 
820

Derivative instruments:
 
 
 
 
 
 
 
Unrealized holding gains (losses) on derivative instruments
992

 
(1,027
)
 
1,199

 
(1,138
)
Reclassification adjustment for gains realized in net income
(51
)
 
(94
)
 
(104
)
 
(188
)
Totals derivative instruments
941

 
(1,121
)
 
1,095

 
(1,326
)
Defined benefit pension and post-retirement benefit plans:
 
 
 
 
 
 
 
Net (loss) gain arising during the period

 

 

 

Less amortization of net actuarial loss recognized in net periodic pension cost
85

 
66

 
157

 
132

Total defined benefit pension and post-retirement benefit plans
85

 
66

 
157

 
132

Other comprehensive loss, net of tax
(6,047
)
 
(593
)
 
(5,670
)
 
(374
)
Comprehensive income
$
1,972

 
$
5,752

 
$
9,920

 
$
11,945


See Notes to Consolidated Financial Statements.

3

Table of Contents

Renasant Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 
 
Six Months Ended June 30,
 
2013
 
2012
Operating activities
 
 
 
Net cash provided by operating activities
$
57,975

 
$
101,300

Investing activities
 
 
 
Purchases of securities available for sale
(106,521
)
 
(83,426
)
Proceeds from sales of securities available for sale
9,015

 
86,850

Proceeds from call/maturities of securities available for sale
42,898

 
74,681

Purchases of securities held to maturity
(70,075
)
 
(69,564
)
Proceeds from sales of securities held to maturity
4,459

 

Proceeds from call/maturities of securities held to maturity
34,670

 
111,391

Net increase in loans
(86,810
)
 
(128,965
)
Purchases of premises and equipment
(5,908
)
 
(6,012
)
Proceeds from sales of premises and equipment

 
45

Net cash used in investing activities
(178,272
)
 
(15,000
)
Financing activities
 
 
 
Net (decrease) increase in noninterest-bearing deposits
(7,249
)
 
7,327

Net increase (decrease) in interest-bearing deposits
51,186

 
(13,368
)
Net increase (decrease) in short-term borrowings
37,565

 
(3,785
)
Repayment of long-term debt
(6,401
)
 
(80,864
)
Cash paid for dividends
(8,603
)
 
(8,554
)
Cash received on exercise of stock-based compensation
239

 
333

Excess tax benefit from stock-based compensation
155

 

Net cash provided by (used in) financing activities
66,892

 
(98,911
)
Net decrease in cash and cash equivalents
(53,405
)
 
(12,611
)
Cash and cash equivalents at beginning of period
132,420

 
209,017

Cash and cash equivalents at end of period
$
79,015

 
$
196,406

Supplemental disclosures
 
 
 
Noncash transactions:
 
 
 
Transfers of loans to other real estate owned
$
10,914

 
$
21,999


See Notes to Consolidated Financial Statements.

4

Table of Contents

Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

Note A – Summary of Significant Accounting Policies
Nature of Operations: Renasant Corporation (referred to herein as the “Company”) owns and operates Renasant Bank (“Renasant Bank” or the “Bank”) and Renasant Insurance, Inc. The Company offers a diversified range of financial, fiduciary and insurance services to its retail and commercial customers through its subsidiaries and full service offices located throughout north and north central Mississippi, Tennessee, north and central Alabama and north Georgia.
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information regarding the Company’s significant accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on March 8, 2013.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Subsequent Events: The Company has evaluated, for consideration of recognition or disclosure, subsequent events that have occurred through the date of issuance of its financial statements, and has determined that no significant events occurred after June 30, 2013 but prior to the issuance of these financial statements that would have a material impact on its Consolidated Financial Statements.

Note B – Securities
(In Thousands)
The amortized cost and fair value of securities held to maturity were as follows:
 


 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
June 30, 2013
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
126,052

 
$

 
$
(6,049
)
 
$
120,003

Obligations of states and political subdivisions
222,288

 
7,216

 
(2,352
)
 
227,152

 
$
348,340

 
$
7,216

 
$
(8,401
)
 
$
347,155

December 31, 2012
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
90,045

 
$
116

 
$
(232
)
 
$
89,929

Obligations of states and political subdivisions
227,721

 
16,860

 
(35
)
 
244,546

 
$
317,766

 
$
16,976

 
$
(267
)
 
$
334,475


In light of the ongoing fiscal uncertainty in state and local governments, the Company analyzes its exposure to potential losses in its security portfolio on at least a quarterly basis. Management reviews the underlying credit rating and analyzes the financial condition of the respective issuers. Based on this analysis, the Company sold certain securities representing obligations of state and political subdivisions that were classified as held to maturity during 2013. The securities sold showed significant credit deterioration in that an analysis of the financial condition of the respective issuers showed the issuers were operating at net deficits with little to no financial cushion to offset future contingencies. These securities had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale during the six months ended June 30, 2013. No securities classified as held to maturity were sold during the six months ended June 30, 2012.


5

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


The amortized cost and fair value of securities available for sale were as follows:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
June 30, 2013
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,157

 
$
156

 
$
(193
)
 
$
6,120

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
173,460

 
2,442

 
(4,000
)
 
171,902

Government agency collateralized mortgage obligations
132,927

 
1,378

 
(2,949
)
 
131,356

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
41,621

 
1,605

 
(473
)
 
42,753

Government agency collateralized mortgage obligations
5,050

 
28

 

 
5,078

Trust preferred securities
27,711

 

 
(11,751
)
 
15,960

Other debt securities
20,834

 
539

 
(93
)
 
21,280

Other equity securities
2,775

 
966

 

 
3,741

 
$
410,535

 
$
7,114

 
$
(19,459
)
 
$
398,190

 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
December 31, 2012
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
2,169

 
$
273

 
$

 
$
2,442

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
139,699

 
5,209

 
(91
)
 
144,817

Government agency collateralized mortgage obligations
115,647

 
2,273

 
(399
)
 
117,521

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
41,981

 
3,077

 

 
45,058

Government agency collateralized mortgage obligations
5,091

 
316

 

 
5,407

Trust preferred securities
28,612

 

 
(13,544
)
 
15,068

Other debt securities
22,079

 
852

 
(1
)
 
22,930

Other equity securities
2,355

 
713

 

 
3,068

 
$
357,633

 
$
12,713

 
$
(14,035
)
 
$
356,311


Gross realized gains and gross realized losses on sales of securities available for sale for the three and six months ended June 30, 2013 and 2012 were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2013
 
2012
 
2013
 
2012
Gross gains on sales of securities available for sale
$

 
$
946

 
$

 
$
1,850

Gross losses on sales of securities available for sale

 
(77
)
 
(115
)
 
(77
)
(Loss) Gain on sales of securities available for sale, net
$

 
$
869

 
$
(115
)
 
$
1,773

 

6

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


At June 30, 2013 and December 31, 2012, securities with a carrying value of $398,924 and $308,362, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $14,229 and $19,006 were pledged as collateral for short-term borrowings and derivative instruments at June 30, 2013 and December 31, 2012, respectively.
The amortized cost and fair value of securities at June 30, 2013 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
 
 
Held to Maturity
 
Available for Sale
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due within one year
$
9,446

 
$
9,509

 
$

 
$

Due after one year through five years
32,811

 
33,950

 

 

Due after five years through ten years
167,412

 
163,309

 
6,157

 
6,120

Due after ten years
138,671

 
140,387

 
27,711

 
15,960

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
173,460

 
171,902

Government agency collateralized mortgage obligations

 

 
132,927

 
131,356

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
41,621

 
42,753

Government agency collateralized mortgage obligations

 

 
5,050

 
5,078

Other debt securities

 

 
20,834

 
21,280

Other equity securities

 

 
2,775

 
3,741

 
$
348,340

 
$
347,155

 
$
410,535

 
$
398,190


7

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


The following table presents the age of gross unrealized losses and fair value by investment category as of the dates presented:
 
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Held to Maturity:
 
 
 
 
 
 
 
 
 
 
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
119,503

 
$
(6,049
)
 
$

 
$

 
$
119,503

 
$
(6,049
)
Obligations of states and political subdivisions
45,312

 
(2,352
)
 

 

 
45,312

 
(2,352
)
Total
$
164,815

 
$
(8,401
)
 
$

 
$

 
164,815

 
$
(8,401
)
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
35,224

 
$
(232
)
 
$

 
$

 
$
35,224

 
$
(232
)
Obligations of states and political subdivisions
2,861

 
(34
)
 
126

 
(1
)
 
2,987

 
(35
)
Total
$
38,085

 
$
(266
)
 
$
126

 
$
(1
)
 
$
38,211

 
$
(267
)
Available for Sale:
 
 
 
 
 
 
 
 
 
 
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
3,807

 
$
(193
)
 
$

 
$

 
$
3,807

 
$
(193
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
103,728

 
(4,000
)
 
103,728

 
(4,000
)
Government agency collateralized mortgage obligations
87,325

 
(2,930
)
 
3,686

 
(19
)
 
91,011

 
(2,949
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
16,808

 
(473
)
 
16,808

 
(473
)
Government agency collateralized mortgage obligations

 

 

 

 

 

Trust preferred securities

 

 
15,960

 
(11,751
)
 
15,960

 
(11,751
)
Other debt securities
2,883

 
(91
)
 
2,140

 
(2
)
 
5,023

 
(93
)
Total
$
94,015

 
$
(3,214
)
 
$
142,322

 
$
(16,245
)
 
$
236,337

 
$
(19,459
)
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$

 
$

 
$

 
$

 
$

 
$

Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
15,431

 
(91
)
 

 

 
15,431

 
(91
)
Government agency collateralized mortgage obligations
44,616

 
(389
)
 
1,605

 
(10
)
 
46,221

 
(399
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 

 

 

 

Government agency collateralized mortgage obligations

 

 

 

 

 

Trust preferred securities

 

 
15,068

 
(13,544
)
 
15,068

 
(13,544
)
Other debt securities

 

 
2,188

 
(1
)
 
2,188

 
(1
)
Other equity securities

 

 

 

 

 

Total
$
60,047

 
$
(480
)
 
$
18,861

 
$
(13,555
)
 
$
78,908

 
$
(14,035
)

8

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


 
The Company evaluates its investment portfolio for other-than-temporary-impairment (“OTTI”) on a quarterly basis. Impairment is assessed at the individual security level. The Company considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. Impairment is considered to be other-than-temporary if the Company intends to sell the investment security or if the Company does not expect to recover the entire amortized cost basis of the security before the Company is required to sell the security or before the security’s maturity.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $27,711 and $28,612 and a fair value of $15,960 and $15,068, at June 30, 2013 and December 31, 2012, respectively. The investments in pooled trust preferred securities consist of four securities representing interests in various tranches of trusts collateralized by debt issued by over 340 financial institutions. Management’s determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Company’s tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the investments’ amortized cost, which may be maturity. At June 30, 2013, management did not, and does not currently, believe such securities will be settled at a price less than the amortized cost of the investment, but the Company previously concluded that it was probable that there had been an adverse change in estimated cash flows for all four trust preferred securities and recognized credit related impairment losses on these securities in 2010 and 2011. No additional impairment was recognized during the three or six months ended June 30, 2013.
However, based on the qualitative factors discussed above, each of the four pooled trust preferred securities was classified as a nonaccruing asset at June 30, 2013. Investment interest is recorded on the cash-basis method until qualifying for return to accrual status.
The following table provides information regarding the Company’s investments in pooled trust preferred securities at June 30, 2013:
 
Name
Single/
Pooled
 
Class/
Tranche
 
Amortized
Cost
 
Fair
Value
 
Unrealized
Loss
 
Lowest
Credit
Rating
 
Issuers
Currently in
Deferral or
Default
XIII
Pooled
 
B-2
 
$
1,179

 
$
1,109

 
$
(70
)
 
Ca
 
30
%
XXIII
Pooled
 
B-2
 
8,889

 
5,449

 
(3,440
)
 
B1
 
25
%
XXIV
Pooled
 
B-2
 
12,076

 
6,274

 
(5,802
)
 
Ca
 
35
%
XXVI
Pooled
 
B-2
 
5,567

 
3,128

 
(2,439
)
 
Ca
 
30
%
 
 
 
 
 
$
27,711

 
$
15,960

 
$
(11,751
)
 
 
 
 

The following table provides a summary of the cumulative credit related losses recognized in earnings for which a portion of OTTI has been recognized in other comprehensive income:
 
 
2013
 
2012
Balance at January 1
$
(3,337
)
 
$
(3,337
)
Additions related to credit losses for which OTTI was not previously recognized

 

Increases in credit loss for which OTTI was previously recognized

 

Balance at June 30
$
(3,337
)
 
$
(3,337
)



9

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


Note C – Loans and the Allowance for Loan Losses
(In Thousands, Except Number of Loans)
The following is a summary of loans as of the dates presented:
 
 
June 30,
2013
 
December 31, 2012
Commercial, financial, agricultural
$
318,001

 
$
317,050

Lease financing
105

 
195

Real estate – construction
118,987

 
105,706

Real estate – 1-4 family mortgage
920,293

 
903,423

Real estate – commercial mortgage
1,464,522

 
1,426,643

Installment loans to individuals
62,605

 
57,241

Gross loans
2,884,513

 
2,810,258

Unearned income
(2
)
 
(5
)
Loans, net of unearned income
2,884,511

 
2,810,253

Allowance for loan losses
(47,034
)
 
(44,347
)
Net loans
$
2,837,477

 
$
2,765,906


Past Due and Nonaccrual Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, the recognition of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer and other retail loans are typically charged-off no later than the time the loan is 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Loans may be placed on nonaccrual regardless of whether or not such loans are considered past due. All interest accrued for the current year, but not collected, for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

10

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


The following table provides an aging of past due and nonaccrual loans, segregated by class, as of the dates presented:
 
 
Accruing Loans
 
Nonaccruing Loans
 
 
 
30-89 Days
Past Due
 
90 Days
or More
Past Due
 
Current
Loans
 
Total
Loans
 
30-89 Days
Past Due
 
90 Days
or More
Past Due
 
Current
Loans
 
Total
Loans
 
Total
Loans
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
405

 
$

 
$
313,942

 
$
314,347

 
$
390

 
$
3,094

 
$
170

 
$
3,654

 
$
318,001

Lease financing

 

 
105

 
105

 

 

 

 

 
105

Real estate – construction

 

 
117,339

 
117,339

 

 
1,648

 

 
1,648

 
118,987

Real estate – 1-4 family mortgage
6,497

 
943

 
891,322

 
898,762

 
1,827

 
8,184

 
11,520

 
21,531

 
920,293

Real estate – commercial mortgage
2,068

 
1,075

 
1,420,485

 
1,423,628

 
222

 
32,521

 
8,151

 
40,894

 
1,464,522

Installment loans to individuals
280

 
91

 
62,126

 
62,497

 

 
108

 

 
108

 
62,605

Unearned income

 

 
(2
)
 
(2
)
 

 

 

 

 
(2
)
Total
$
9,250

 
$
2,109

 
$
2,805,317

 
$
2,816,676

 
$
2,439

 
$
45,555

 
$
19,841

 
$
67,835

 
$
2,884,511

December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
484

 
$
15

 
$
312,943

 
$
313,442

 
$
215

 
$
3,131

 
$
262

 
$
3,608

 
$
317,050

Lease financing

 

 
195

 
195

 

 

 

 

 
195

Real estate – construction
80

 

 
103,978

 
104,058

 

 
1,648

 

 
1,648

 
105,706

Real estate – 1-4 family mortgage
6,685

 
1,992

 
867,053

 
875,730

 
1,249

 
13,417

 
13,027

 
27,693

 
903,423

Real estate – commercial mortgage
5,084

 
1,250

 
1,373,470

 
1,379,804

 
325

 
38,297

 
8,217

 
46,839

 
1,426,643

Installment loans to individuals
197

 
50

 
56,715

 
56,962

 
7

 
265

 
7

 
279

 
57,241

Unearned income

 

 
(5
)
 
(5
)
 

 

 

 

 
(5
)
Total
$
12,530

 
$
3,307

 
$
2,714,349

 
$
2,730,186

 
$
1,796

 
$
56,758

 
$
21,513

 
$
80,067

 
$
2,810,253


Restructured loans contractually 90 days past due totaled $646 at December 31, 2012. There were no restructured loans contractually 90 days past due at June 30, 2013. The outstanding balance of restructured loans on nonaccrual status was $9,580 and $11,420 at June 30, 2013 and December 31, 2012, respectively.
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for commercial, consumer and construction loans above a minimum dollar amount threshold by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are evaluated collectively for impairment. When the ultimate collectability of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal. Once the recorded balance has been reduced to zero, future cash receipts are applied to interest income, to the extent any interest has been foregone, and then they are recorded as recoveries of any amounts previously charged-off. For impaired loans, a specific reserve is established to adjust the carrying value of the loan to its estimated net realizable value.

11

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


Impaired loans recognized in conformity with Financial Accounting Standards Board Accounting Standards Codification Topic ("ASC") 310, “Receivables” (“ASC 310”), segregated by class, were as follows as of the dates presented:
 
 
Unpaid
Contractual
Principal
Balance
 
Recorded
Investment
With
Allowance
 
Recorded
Investment
With No
Allowance
 
Total
Recorded
Investment
 
Related
Allowance
June 30, 2013
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
6,895

 
$
1,515

 
$
2,120

 
$
3,635

 
$
834

Lease financing

 

 

 

 

Real estate – construction
2,447

 

 
1,648

 
1,648

 

Real estate – 1-4 family mortgage
42,185

 
26,596

 
6,172

 
32,768

 
7,843

Real estate – commercial mortgage
101,581

 
25,275

 
36,266

 
61,541

 
7,267

Installment loans to individuals

 

 

 

 

Total
$
153,108

 
$
53,386

 
$
46,206

 
$
99,592

 
$
15,944

December 31, 2012
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
5,142

 
$
1,620

 
$
1,620

 
$
3,240

 
$
708

Lease financing

 

 

 

 

Real estate – construction
2,447

 

 
1,648

 
1,648

 

Real estate – 1-4 family mortgage
80,022

 
28,848

 
10,094

 
38,942

 
9,201

Real estate – commercial mortgage
118,167

 
34,400

 
39,450

 
73,850

 
7,688

Installment loans to individuals

 

 

 

 

Totals
$
205,778

 
$
64,868

 
$
52,812

 
$
117,680

 
$
17,597


The following table presents the average recorded investment and interest income recognized on impaired loans for the periods presented:
 
 
Three Months Ended
 
Three Months Ended
 
June 30, 2013
 
June 30, 2012
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized(1)
Commercial, financial, agricultural
$
5,601

 
$

 
$
3,667

 
$
7

Lease financing

 

 

 

Real estate – construction
1,650

 

 
6,093

 

Real estate – 1-4 family mortgage
34,732

 
108

 
48,109

 
274

Real estate – commercial mortgage
69,168

 
123

 
89,510

 
558

Installment loans to individuals

 

 

 

Total
$
111,151

 
$
231

 
$
147,379

 
$
839

 
(1)
Includes interest income recognized using the cash-basis method of income recognition of $100. No interest income was recognized using the cash-basis method of income recognition during the three months ended June 30, 2013.


12

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


 
Six Months Ended
 
Six Months Ended
 
June 30, 2013
 
June 30, 2012
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized(1)
Commercial, financial, agricultural
$
5,551

 
$

 
$
3,730

 
$
15

Lease financing

 

 

 

Real estate – construction
1,650

 

 
6,141

 

Real estate – 1-4 family mortgage
34,874

 
291

 
48,755

 
598

Real estate – commercial mortgage
69,579

 
466

 
90,995

 
1,077

Installment loans to individuals

 

 

 

Total
$
111,654

 
$
757

 
$
149,621

 
$
1,690


(1)
Includes interest income recognized using the cash-basis method of income recognition of $314. No interest income was recognized using the cash-basis method of income recognition during the six months ended June 30, 2013.
Restructured Loans
Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrower’s financial condition and which are performing in accordance with the new terms. Such concessions may include reduction in interest rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest. Restructured loans that are not performing in accordance with their restructured terms that are either contractually 90 days past due or placed on nonaccrual status are reported as nonperforming loans. The following table presents restructured loans segregated by class as of the dates presented:
 
 
Number of
Loans
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
June 30, 2013
 
 
 
 
 
Commercial, financial, agricultural

 
$

 
$

Lease financing

 

 

Real estate – construction

 

 

Real estate – 1-4 family mortgage
20

 
18,353

 
9,929

Real estate – commercial mortgage
15

 
13,646

 
12,608

Installment loans to individuals
1

 
184

 
172

Total
36

 
$
32,183

 
$
22,709

December 31, 2012
 
 
 
 
 
Commercial, financial, agricultural

 
$

 
$

Lease financing

 

 

Real estate – construction

 

 

Real estate – 1-4 family mortgage
19

 
18,450

 
10,853

Real estate – commercial mortgage
16

 
18,985

 
18,409

Installment loans to individuals
1

 
184

 
174

Total
36

 
$
37,619

 
$
29,436



13

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


Changes in the Company’s restructured loans are set forth in the table below:
 
 
Number of
Loans
 
Recorded
Investment
Totals at January 1, 2013
36

 
$
29,436

Additional loans with concessions
6

 
1,277

Reductions due to:
 
 
 
Reclassified as nonperforming
1

 
(620
)
Charge-offs
1

 
(374
)
Transfer to other real estate owned

 

Principal paydowns
 
 
(1,269
)
Lapse of concession period
4

 
(5,741
)
Totals at June 30, 2013
36

 
$
22,709


The allocated allowance for loan losses attributable to restructured loans was $3,330 and $3,969 at June 30, 2013 and December 31, 2012, respectively. The Company had $286 and $288 in remaining availability under commitments to lend additional funds on these restructured loans at June 30, 2013 and December 31, 2012, respectively.
Credit Quality
For loans originated for commercial purposes, internal risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances of these loans. Loan grades range between 1 and 9, with 1 being loans with the least credit risk. Loans that migrate toward the “Pass” grade (those with a risk rating between 1 and 4) or within the “Pass” grade generally have a lower risk of loss and therefore a lower risk factor. The “Watch” grade (those with a risk rating of 5) is utilized on a temporary basis for “Pass” grade loans where a significant risk-modifying action is anticipated in the near term. Loans that migrate toward the “Substandard” grade (those with a risk rating between 6 and 9) generally have a higher risk of loss and therefore a higher risk factor applied to those related loan balances. The following table presents the Company’s loan portfolio by risk-rating grades as of the dates presented:
 
 
Pass
 
Watch
 
Substandard
 
Total
June 30, 2013
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
228,692

 
$
3,086

 
$
1,923

 
$
233,701

Real estate – construction
84,121

 
659

 
11

 
84,791

Real estate – 1-4 family mortgage
102,217

 
13,716

 
31,419

 
147,352

Real estate – commercial mortgage
1,042,788

 
33,049

 
36,438

 
1,112,275

Installment loans to individuals

 

 

 

Total
$
1,457,818

 
$
50,510

 
$
69,791

 
$
1,578,119

December 31, 2012
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
226,540

 
$
1,939

 
$
3,218

 
$
231,697

Real estate – construction
71,633

 
651

 

 
72,284

Real estate – 1-4 family mortgage
96,147

 
24,138

 
32,589

 
152,874

Real estate – commercial mortgage
989,095

 
46,148

 
37,996

 
1,073,239

Installment loans to individuals
7

 

 

 
7

Total
$
1,383,422

 
$
72,876

 
$
73,803

 
$
1,530,101



14

Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


For portfolio balances of consumer, consumer mortgage and certain other loans originated for other than commercial purposes, allowance factors are determined based on historical loss ratios by portfolio for the preceding eight quarters and may be adjusted by other qualitative criteria. The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the dates presented:
 
 
Performing
 
Non-
Performing
 
Total
June 30, 2013
 
 
 
 
 
Commercial, financial, agricultural
$
73,510

 
$
386

 
$
73,896

Lease financing
103

 

 
103

Real estate – construction
32,548

 

 
32,548

Real estate – 1-4 family mortgage
706,724

 
3,397

 
710,121

Real estate – commercial mortgage
215,780

 
931

 
216,711

Installment loans to individuals
60,766

 
166

 
60,932

Total
$
1,089,431

 
$
4,880

 
$
1,094,311

December 31, 2012
 
 
 
 
 
Commercial, financial, agricultural
$
74,003

 
$
210

 
$
74,213

Lease financing
195