10-Q
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 September 30, 2015
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
ý
Accelerated filer
o
 
 
 
 
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 October 30, 2015, 40,264,555 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 September 30, 2015
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)
 
 
 
September 30,
2015
 
December 31, 2014
Assets
 
 
 
Cash and due from banks
$
128,758

 
$
95,793

Interest-bearing balances with banks
75,091

 
65,790

Cash and cash equivalents
203,849

 
161,583

Securities held to maturity (fair value of $490,233 and $442,488, respectively)
476,752

 
430,163

Securities available for sale, at fair value
662,801

 
553,584

Mortgage loans held for sale, at fair value
317,681

 
25,628

Loans, net of unearned income:
 
 
 
Acquired and covered by FDIC loss-share agreements ("acquired covered loans")
100,839

 
143,041

Acquired and not covered by FDIC loss-share agreements ("acquired non-covered loans")
1,570,116

 
577,347

Not acquired
3,607,005

 
3,267,486

Total loans, net of unearned income
5,277,960

 
3,987,874

Allowance for loan losses
(42,051
)
 
(42,289
)
Loans, net
5,235,909

 
3,945,585

Premises and equipment, net
167,642

 
113,735

Other real estate owned:
 
 
 
Covered under FDIC loss-share agreements
3,183

 
6,368

Not covered under FDIC loss-share agreements
33,151

 
28,104

Total other real estate owned, net
36,334

 
34,472

Goodwill
452,037

 
274,706

Other intangible assets, net
30,562

 
22,624

FDIC loss-share indemnification asset
8,044

 
12,516

Other assets
327,121

 
230,533

Total assets
$
7,918,732

 
$
5,805,129

Liabilities and shareholders’ equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest-bearing
$
1,303,884

 
$
919,872

Interest-bearing
4,930,677

 
3,918,546

Total deposits
6,234,561

 
4,838,418

Short-term borrowings
402,122

 
32,403

Long-term debt
149,618

 
156,422

Other liabilities
99,732

 
66,235

Total liabilities
6,886,033

 
5,093,478

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, 41,292,045 and 32,656,166 shares issued, respectively; 40,268,455 and 31,545,145 shares outstanding, respectively
206,460

 
163,281

Treasury stock, at cost
(22,010
)
 
(22,128
)
Additional paid-in capital
592,132

 
345,213

Retained earnings
262,057

 
232,883

Accumulated other comprehensive loss, net of taxes
(5,940
)
 
(7,598
)
Total shareholders’ equity
1,032,699

 
711,651

Total liabilities and shareholders’ equity
$
7,918,732

 
$
5,805,129

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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Interest income
 
 
 
 
 
 
 
Loans
$
67,527

 
$
49,833

 
$
165,418

 
$
150,658

Securities
 
 
 
 
 
 
 
Taxable
4,193

 
4,144

 
12,634

 
12,998

Tax-exempt
2,529

 
2,308

 
7,029

 
6,821

Other
51

 
73

 
154

 
335

Total interest income
74,300

 
56,358

 
185,235

 
170,812

Interest expense
 
 
 
 
 
 
 
Deposits
3,547

 
3,915

 
10,155

 
12,424

Borrowings
2,073

 
1,971

 
5,888

 
5,776

Total interest expense
5,620

 
5,886

 
16,043

 
18,200

Net interest income
68,680

 
50,472

 
169,192

 
152,612

Provision for loan losses
750

 
2,217

 
3,000

 
5,117

Net interest income after provision for loan losses
67,930

 
48,255

 
166,192

 
147,495

Noninterest income
 
 
 
 
 
 
 
Service charges on deposit accounts
8,151

 
7,107

 
21,008

 
19,851

Fees and commissions
5,704

 
5,877

 
15,150

 
15,729

Insurance commissions
2,381

 
2,270

 
6,467

 
6,221

Wealth management revenue
2,871

 
2,197

 
7,309

 
6,511

Gains on sales of securities

 
375

 
96

 
375

BOLI income
1,110

 
811

 
2,668

 
2,288

Gains on sales of mortgage loans held for sale
10,578

 
2,635

 
20,618

 
6,226

Other
1,322

 
1,291

 
3,622

 
3,449

Total noninterest income
32,117

 
22,563

 
76,938

 
60,650

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
43,048

 
29,569

 
101,702

 
87,807

Data processing
3,773

 
2,906

 
10,106

 
8,451

Net occupancy and equipment
7,733

 
5,353

 
18,816

 
15,106

Other real estate owned
861

 
1,101

 
2,347

 
3,870

Professional fees
1,242

 
1,018

 
3,238

 
3,607

Advertising and public relations
1,567

 
1,133

 
4,351

 
4,549

Intangible amortization
1,803

 
1,381

 
4,317

 
4,279

Communications
2,339

 
1,079

 
5,263

 
4,462

Merger-related expenses
7,746

 

 
9,691

 
195

Other
5,973

 
4,635

 
14,844

 
12,890

Total noninterest expense
76,085

 
48,175

 
174,675

 
145,216

Income before income taxes
23,962

 
22,643

 
68,455

 
62,929

Income taxes
7,742

 
7,108

 
21,601

 
18,944

Net income
$
16,220

 
$
15,535

 
$
46,854

 
$
43,985

Basic earnings per share
$
0.40

 
$
0.49

 
$
1.36

 
$
1.40

Diluted earnings per share
$
0.40

 
$
0.49

 
$
1.35

 
$
1.39

Cash dividends per common share
$
0.17

 
$
0.17

 
$
0.51

 
$
0.51


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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
16,220

 
$
15,535

 
$
46,854

 
$
43,985

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Securities:
 
 
 
 
 
 
 
Net change in unrealized holding gains on securities
3,717

 
866

 
2,505

 
4,856

Reclassification adjustment for gains realized in net income

 
(232
)
 
(60
)
 
(232
)
Amortization of unrealized holding gains on securities transferred to the held to maturity category
(26
)
 
(38
)
 
(86
)
 
(121
)
Total securities
3,691

 
596

 
2,359

 
4,503

Derivative instruments:
 
 
 
 
 
 
 
Net change in unrealized holding (losses) gains on derivative instruments
(1,075
)
 
42

 
(881
)
 
(773
)
Totals derivative instruments
(1,075
)
 
42

 
(881
)
 
(773
)
Defined benefit pension and post-retirement benefit plans:
 
 
 
 
 
 
 
Amortization of net actuarial loss recognized in net periodic pension cost
55

 
47

 
180

 
137

Total defined benefit pension and post-retirement benefit plans
55

 
47

 
180

 
137

Other comprehensive income, net of tax
2,671

 
685

 
1,658

 
3,867

Comprehensive income
$
18,891

 
$
16,220

 
$
48,512

 
$
47,852


See Notes to Consolidated Financial Statements.

3

Table of Contents

Renasant Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 
Nine Months Ended September 30,
 
2015
 
2014
Operating activities
 
 
 
Net income
$
46,854

 
$
43,985

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
3,000

 
5,117

Depreciation, amortization and accretion
5,053

 
5,658

Deferred income tax expense
3,794

 
12,237

Funding of mortgage loans held for sale
(992,555
)
 
(408,863
)
Proceeds from sales of mortgage loans held for sale
1,069,625

 
418,090

Gains on sales of mortgage loans held for sale
(20,618
)
 
(6,226
)
Gains on sales of securities
(96
)
 
(375
)
Losses (gains) on sales of premises and equipment
37

 
(58
)
Stock-based compensation
2,739

 
3,162

Decrease in FDIC loss-share indemnification asset, net of accretion
5,202

 
10,227

Decrease in other assets
17,182

 
16,429

Decrease in other liabilities
(11,047
)
 
(9,526
)
Net cash provided by operating activities
$
129,170

 
$
89,857

Investing activities
 
 
 
Purchases of securities available for sale
(54,256
)
 
(100,129
)
Proceeds from sales of securities available for sale
8,444

 
1,099

Proceeds from call/maturities of securities available for sale
83,488

 
60,202

Purchases of securities held to maturity
(137,776
)
 
(154,126
)
Proceeds from call/maturities of securities held to maturity
121,438

 
130,206

Net increase in loans
(177,740
)
 
(82,319
)
Purchases of premises and equipment
(19,364
)
 
(12,494
)
Proceeds from sales of premises and equipment
448

 

Net cash received in acquisition
35,787

 

Net cash used in investing activities
(139,531
)
 
(157,561
)
Financing activities
 
 
 
Net increase in noninterest-bearing deposits
107,728

 
79,524

Net decrease in interest-bearing deposits
(85,693
)
 
(157,766
)
Net increase in short-term borrowings
355,063

 
63,363

Proceeds from long-term borrowings
42

 

Repayment of long-term debt
(307,230
)
 
(7,864
)
Cash paid for dividends
(17,681
)
 
(16,135
)
Cash received on exercise of stock-based compensation
102

 
401

Excess tax benefit from stock-based compensation
296

 
1,127

Net cash provided by (used in) financing activities
52,627

 
(37,350
)
Net increase (decrease) in cash and cash equivalents
42,266

 
(105,054
)
Cash and cash equivalents at beginning of period
161,583

 
246,648

Cash and cash equivalents at end of period
$
203,849

 
$
141,594

Supplemental disclosures
 
 
 
Cash paid for interest
$
15,936

 
$
18,674

Cash paid for income taxes
$
10,768

 
$
9,300

Noncash transactions:
 
 
 
Transfers of loans to other real estate owned
$
12,268

 
$
8,318

Financed sales of other real estate owned
$
1,017

 
$
860

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 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, 2014 filed with the Securities and Exchange Commission on March 2, 2015.
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. On October 20, 2015, the Company announced the signing of a definitive merger agreement to acquire KeyWorth Bank, the terms of which are disclosed in Note P, "Subsequent Events". The Company has determined that no other significant events occurred after September 30, 2015 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, Except Number of Securities)
The amortized cost and fair value of securities held to maturity were as follows as of the dates presented:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
September 30, 2015
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
120,602

 
$
32

 
$
(883
)
 
$
119,751

Obligations of states and political subdivisions
356,150

 
14,742

 
(410
)
 
370,482

 
$
476,752

 
$
14,774

 
$
(1,293
)
 
$
490,233

December 31, 2014
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
125,081

 
$
10

 
$
(2,915
)
 
$
122,176

Obligations of states and political subdivisions
305,082

 
15,428

 
(198
)
 
320,312

 
$
430,163

 
$
15,438

 
$
(3,113
)
 
$
442,488





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 as of the dates presented:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
September 30, 2015
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,100

 
$
150

 
$
(2
)
 
$
6,248

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
362,702

 
5,740

 
(892
)
 
367,550

Government agency collateralized mortgage obligations
178,546

 
2,422

 
(1,542
)
 
179,426

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
59,544

 
1,623

 
(14
)
 
61,153

Government agency collateralized mortgage obligations
5,211

 
237

 

 
5,448

Trust preferred securities
24,807

 

 
(5,917
)
 
18,890

Other debt securities
19,607

 
548

 
(20
)
 
20,135

Other equity securities
2,500

 
1,451

 

 
3,951

 
$
659,017

 
$
12,171

 
$
(8,387
)
 
$
662,801

 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
December 31, 2014
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,119

 
$
147

 
$
(119
)
 
$
6,147

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
292,283

 
4,908

 
(832
)
 
296,359

Government agency collateralized mortgage obligations
158,436

 
1,523

 
(2,523
)
 
157,436

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
45,714

 
1,608

 
(137
)
 
47,185

Government agency collateralized mortgage obligations
4,970

 
202

 

 
5,172

Trust preferred securities
26,400

 
137

 
(6,781
)
 
19,756

Other debt securities
17,517

 
487

 
(74
)
 
17,930

Other equity securities
2,331

 
1,268

 

 
3,599

 
$
553,770

 
$
10,280

 
$
(10,466
)
 
$
553,584


During the nine months ended September 30, 2015, the Company sold its pooled trust preferred security XIII with a carrying value of $1,117 at the time of sale for net proceeds of $1,213 resulting in a gain of $96. Furthermore, the Company sold certain investments acquired from Heritage shortly after acquisition with an aggregate carrying value of $7,231 at the time of sale for net proceeds of $7,231, resulting in no gain or loss on the sale. During the same period in 2014, the Company sold securities with a carrying value of $724 at the time of sale for net proceeds of $1,099 resulting in a gain of $375.


6

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


Gross realized gains on sales of securities available for sale for the three and nine months ended September 30, 2015 and 2014 were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Gross gains on sales of securities available for sale
$

 
$
375

 
$
96

 
$
375

Gross losses on sales of securities available for sale

 

 

 

Gain on sales of securities available for sale, net
$

 
$
375

 
$
96

 
$
375


At September 30, 2015 and December 31, 2014, securities with a carrying value of $721,834 and $617,189, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $37,976 and $16,410 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2015 and December 31, 2014, respectively.
The amortized cost and fair value of securities at September 30, 2015 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
$
15,035

 
$
15,227

 
$

 
$

Due after one year through five years
86,835

 
89,467

 
6,100

 
6,248

Due after five years through ten years
237,759

 
242,027

 

 

Due after ten years
137,123

 
143,512

 
24,807

 
18,890

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
362,702

 
367,550

Government agency collateralized mortgage obligations

 

 
178,546

 
179,426

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
59,544

 
61,153

Government agency collateralized mortgage obligations

 

 
5,211

 
5,448

Other debt securities

 

 
19,607

 
20,135

Other equity securities

 

 
2,500

 
3,951

 
$
476,752

 
$
490,233

 
$
659,017

 
$
662,801



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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
11
 
$
45,255

 
$
(230
)
 
12
 
$
55,050

 
$
(653
)
 
23
 
$
100,305

 
$
(883
)
Obligations of states and political subdivisions
35
 
26,941

 
(305
)
 
6
 
3,861

 
(105
)
 
41
 
30,802

 
(410
)
Total
46
 
$
72,196

 
$
(535
)
 
18
 
$
58,911

 
$
(758
)
 
64
 
131,107

 
$
(1,293
)
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
2
 
$
1,000

 
$
(1
)
 
26
 
$
119,174

 
$
(2,914
)
 
28
 
$
120,174

 
$
(2,915
)
Obligations of states and political subdivisions
3
 
3,353

 
(29
)
 
16
 
10,052

 
(169
)
 
19
 
13,405

 
(198
)
Total
5
 
$
4,353

 
$
(30
)
 
42
 
$
129,226

 
$
(3,083
)
 
47
 
$
133,579

 
$
(3,113
)
Available for Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
1
 
$
3,998

 
$
(2
)
 
0
 
$

 
$

 
1
 
$
3,998

 
$
(2
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
14
 
51,459

 
(184
)
 
9
 
28,867

 
(708
)
 
23
 
80,326

 
(892
)
Government agency collateralized mortgage obligations
3
 
6,995

 
(35
)
 
16
 
54,514

 
(1,507
)
 
19
 
61,509

 
(1,542
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
2
 
1,144

 
(11
)
 
1
 
820

 
(3
)
 
3
 
1,964

 
(14
)
Government agency collateralized mortgage obligations
0
 

 

 
0
 

 

 
0
 

 

Trust preferred securities
0
 

 

 
3
 
18,890

 
(5,917
)
 
3
 
18,890

 
(5,917
)
Other debt securities
0
 

 

 
2
 
4,051

 
(20
)
 
2
 
4,051

 
(20
)
Total
20
 
$
63,596

 
$
(232
)
 
31
 
$
107,142

 
$
(8,155
)
 
51
 
$
170,738

 
$
(8,387
)
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
0
 
$

 
$

 
1
 
$
3,881

 
$
(119
)
 
1
 
$
3,881

 
$
(119
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
3
 
18,924

 
(39
)
 
13
 
49,612

 
(793
)
 
16
 
68,536

 
(832
)
Government agency collateralized mortgage obligations
6
 
32,169

 
(138
)
 
18
 
65,552

 
(2,385
)
 
24
 
97,721

 
(2,523
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
0
 

 

 
3
 
10,651

 
(137
)
 
3
 
10,651

 
(137
)
Government agency collateralized mortgage obligations
0
 

 

 
0
 

 

 
0
 

 

Trust preferred securities
0
 

 

 
3
 
18,503

 
(6,781
)
 
3
 
18,503

 
(6,781
)
Other debt securities
0
 

 

 
2
 
4,175

 
(74
)
 
2
 
4,175

 
(74
)
Other equity securities
0
 

 

 
0
 

 

 
0
 

 

Total
9
 
$
51,093

 
$
(177
)
 
40
 
$
152,374

 
$
(10,289
)
 
49
 
$
203,467

 
$
(10,466
)
 



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 does not intend to sell any of the securities in an unrealized loss position, and it is not more likely than not that the Company will be required to sell any such security prior to the recovery of its amortized cost basis, which may be at maturity. Furthermore, even though a number of these securities have been in a continuous unrealized loss position for a period greater than twelve months, the Company has experienced an overall improvement in the fair value of its investment portfolio on account of the decrease in interest rates from the prior year and, with the exception of one of its pooled trust preferred securities (discussed below), is collecting principal and interest payments from the respective issuers as scheduled. As such, the Company did not record any OTTI for the three or nine months ended September 30, 2015 or 2014.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $24,807 and $26,400 and a fair value of $18,890 and $19,756 at September 30, 2015 and December 31, 2014, respectively. At September 30, 2015, the investments in pooled trust preferred securities consist of three securities representing interests in various tranches of trusts collateralized by debt issued by over 250 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 before recovery of the investments' amortized cost, 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 at maturity. At September 30, 2015, 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 three trust preferred securities and recognized credit related impairment losses on these securities in 2010 and 2011. No additional impairment was recognized during the nine months ended September 30, 2015.
The Company's analysis of the pooled trust preferred securities during the second quarter of 2015 supported a return to accrual status for one of the three securities (XXVI). During the second quarter of 2014, the Company's analysis supported a return to accrual status for one of the other securities (XXIII). An observed history of principal and interest payments combined with improved qualitative and quantitative factors described above justified the accrual of interest on these securities. However, the remaining security (XXIV) is still in "payment in kind" status where interest payments are not expected until a future date and therefore, the qualitative and quantitative factors described above do not justify a return to accrual status at this time. As a result, pooled trust preferred security XXIV remains classified as nonaccruing asset at September 30, 2015, and 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 September 30, 2015:
 
Name
Single/
Pooled
 
Class/
Tranche
 
Amortized
Cost
 
Fair
Value
 
Unrealized
Loss
 
Lowest
Credit
Rating
 
Issuers
Currently in
Deferral or
Default
XXIII
Pooled
 
B-2
 
$
8,510

 
$
5,882

 
$
(2,628
)
 
Baa3
 
18
%
XXIV
Pooled
 
B-2
 
12,076

 
9,963

 
(2,113
)
 
Caa2
 
31
%
XXVI
Pooled
 
B-2
 
4,221

 
3,045

 
(1,176
)
 
Ba3
 
26
%
 
 
 
 
 
$
24,807

 
$
18,890

 
$
(5,917
)
 
 
 
 


9

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


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:
 
 
2015
 
2014
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 September 30
$
(3,337
)
 
$
(3,337
)


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:
 
 
September 30,
2015
 
December 31, 2014
Commercial, financial, agricultural
$
621,121

 
$
483,283

Lease financing
25,190

 
10,427

Real estate – construction
339,370

 
212,061

Real estate – 1-4 family mortgage
1,662,505

 
1,236,360

Real estate – commercial mortgage
2,516,889

 
1,956,914

Installment loans to individuals
113,377

 
89,142

Gross loans
5,278,452

 
3,988,187

Unearned income
(492
)
 
(313
)
Loans, net of unearned income
5,277,960

 
3,987,874

Allowance for loan losses
(42,051
)
 
(42,289
)
Net loans
$
5,235,909

 
$
3,945,585


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 status 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 status. 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
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
928

 
$
1,146

 
$
618,263

 
$
620,337

 
$

 
$
503

 
$
281

 
$
784

 
$
621,121

Lease financing

 

 
24,771

 
24,771

 

 
419

 

 
419

 
25,190

Real estate – construction
789

 

 
338,581

 
339,370

 

 

 

 

 
339,370

Real estate – 1-4 family mortgage
8,947

 
5,789

 
1,635,107

 
1,649,843

 
296

 
3,618

 
8,748

 
12,662

 
1,662,505

Real estate – commercial mortgage
6,918

 
6,614

 
2,483,675

 
2,497,207

 
560

 
9,285

 
9,837

 
19,682

 
2,516,889

Installment loans to individuals
434

 
65

 
112,837

 
113,336

 

 
34

 
7

 
41

 
113,377

Unearned income

 

 
(492
)
 
(492
)
 

 

 

 

 
(492
)
Total
$
18,016

 
$
13,614

 
$
5,212,742

 
$
5,244,372

 
$
856

 
$
13,859

 
$
18,873

 
$
33,588

 
$
5,277,960

December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,113

 
$
636

 
$
480,332

 
$
482,081

 
$
16

 
$
820

 
$
366

 
$
1,202

 
$
483,283

Lease financing
462

 

 
9,965

 
10,427

 

 

 

 

 
10,427

Real estate – construction

 
37

 
211,860

 
211,897

 

 
164

 

 
164

 
212,061

Real estate – 1-4 family mortgage
8,398

 
2,382

 
1,212,214

 
1,222,994

 
355

 
4,604

 
8,407

 
13,366

 
1,236,360

Real estate – commercial mortgage
6,924

 
7,637

 
1,912,758

 
1,927,319

 
1,826

 
16,928

 
10,841

 
29,595

 
1,956,914

Installment loans to individuals
269

 
21

 
88,782

 
89,072

 

 
59

 
11

 
70

 
89,142

Unearned income

 

 
(313
)
 
(313
)
 

 

 

 

 
(313
)
Total
$
17,166

 
$
10,713

 
$
3,915,598

 
$
3,943,477

 
$
2,197

 
$
22,575

 
$
19,625

 
$
44,397

 
$
3,987,874


Restructured loans that are not performing in accordance with their restructured terms that are either contractually 90 days or more past due or placed on nonaccrual status are reported as nonperforming loans. There were no restructured loans contractually 90 days past due or more and still accruing at September 30, 2015 or December 31, 2014. The outstanding balance of restructured loans on nonaccrual status was $14,200 and $11,392 at September 30, 2015 and December 31, 2014, 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
September 30, 2015
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
8,456

 
$
6,529

 
$
49

 
$
6,578

 
$
599

Real estate – construction

 

 

 

 

Real estate – 1-4 family mortgage
43,363

 
32,769

 
6,118

 
38,887

 
4,773

Real estate – commercial mortgage
99,819

 
79,292

 
9,379

 
88,671

 
4,374

Installment loans to individuals
811

 
499

 
7

 
506

 
1

Total
$
152,449

 
$
119,089

 
$
15,553

 
$
134,642

 
$
9,747

December 31, 2014
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
4,871

 
$
984

 
$
1,375

 
$
2,359

 
$
171

Real estate – construction
164

 
164

 

 
164

 

Real estate – 1-4 family mortgage
31,906

 
18,401

 
7,295

 
25,696

 
4,824

Real estate – commercial mortgage
90,196

 
29,079

 
28,784

 
57,863

 
5,767

Installment loans to individuals
397

 
21

 
51

 
72

 

Totals
$
127,534

 
$
48,649

 
$
37,505

 
$
86,154

 
$
10,762


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
 
September 30, 2015
 
September 30, 2014
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
6,763

 
$
10

 
$
4,167

 
$
160

Lease financing

 

 

 

Real estate – construction

 

 
1,997

 
96

Real estate – 1-4 family mortgage
40,410

 
46

 
26,378

 
808

Real estate – commercial mortgage
91,323

 
152

 
74,648

 
3,110

Installment loans to individuals
520

 
1

 
141

 
13

Total
$
139,016

 
$
209

 
$
107,331

 
$
4,187


 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
6,519

 
$
184

 
$
4,399

 
$
165

Real estate – construction

 

 
2,023

 
98

Real estate – 1-4 family mortgage
40,203

 
917

 
27,122

 
843

Real estate – commercial mortgage
93,107

 
2,764

 
80,402

 
3,174

Installment loans to individuals
531

 
13

 
147

 
13

Total
$
140,360

 
$
3,878

 
$
114,093

 
$
4,293



12

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


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.
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
September 30, 2015
 
 
 
 
 
Commercial, financial, agricultural
2

 
$
507

 
$
460

Real estate – construction

 

 

Real estate – 1-4 family mortgage
60

 
6,084

 
5,563

Real estate – commercial mortgage
25

 
14,324

 
12,791

Installment loans to individuals
1

 
67

 
67

Total
88

 
$
20,982

 
$
18,881

December 31, 2014
 
 
 
 
 
Commercial, financial, agricultural
2

 
$
507

 
$
507

Real estate – construction

 

 

Real estate – 1-4 family mortgage
35

 
5,212

 
4,567

Real estate – commercial mortgage
16

 
10,590

 
9,263

Installment loans to individuals

 

 

Total
53

 
$
16,309

 
$
14,337


Changes in the Company’s restructured loans are set forth in the table below:
 
 
Number of
Loans
 
Recorded
Investment
Totals at January 1, 2015
53

 
$
14,337

Additional loans with concessions
53

 
12,662

Reductions due to:
 
 
 
Reclassified as nonperforming
(3
)
 
(331
)
Paid in full
(13
)
 
(4,820
)
Charge-offs
(1
)
 
(56
)
Transfer to other real estate owned

 

Principal paydowns

 
(688
)
Lapse of concession period

 

       TDR reclassified as performing loan
(1
)
 
(2,223
)
Totals at September 30, 2015
88

 
$
18,881


The allocated allowance for loan losses attributable to restructured loans was $1,343 and $1,547 at September 30, 2015 and December 31, 2014, respectively. The Company had $6 remaining availability under commitments to lend additional funds on these restructured loans at September 30, 2015 and none at December 31, 2014.
Credit Quality

13

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


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 applied to the loan balances. The “Watch” grade (those with a risk rating of 5) is utilized on a temporary basis for “Pass” grade loans where a significant adverse 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 the 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
September 30, 2015
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
460,425

 
$
7,583

 
$
4,159

 
$
472,167

Lease financing

 

 
419

 
419

Real estate – construction
256,056

 
1,692

 
38

 
257,786

Real estate – 1-4 family mortgage
250,296

 
10,736