0000715072-14-000048.txt : 20141110 0000715072-14-000048.hdr.sgml : 20141110 20141110154648 ACCESSION NUMBER: 0000715072-14-000048 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20140930 FILED AS OF DATE: 20141110 DATE AS OF CHANGE: 20141110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENASANT CORP CENTRAL INDEX KEY: 0000715072 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640676974 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13253 FILM NUMBER: 141208476 BUSINESS ADDRESS: STREET 1: 209 TROY STREET CITY: TUPELO STATE: MS ZIP: 38804-4827 BUSINESS PHONE: (662) 680-1001 MAIL ADDRESS: STREET 1: P.O. BOX 709 CITY: TUPELO STATE: MS ZIP: 38802-0709 FORMER COMPANY: FORMER CONFORMED NAME: PEOPLES HOLDING CO DATE OF NAME CHANGE: 19920703 10-Q 1 rnst10q9302014.htm 10-Q RNST 10Q 9.30.2014
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, 2014
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 October 31, 2014, 31,535,373 shares of the registrant’s common stock, $5.00 par value per share, were outstanding. The registrant has no other classes of securities outstanding.


Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended September 30, 2014
CONTENTS
 


PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Renasant Corporation and Subsidiaries
Consolidated Balance Sheets

(In Thousands, Except Share Data)
 
(Unaudited)
 
 
 
September 30,
2014
 
December 31, 2013
Assets
 
 
 
Cash and due from banks
$
56,560

 
$
87,342

Interest-bearing balances with banks
85,034

 
159,306

Cash and cash equivalents
141,594

 
246,648

Securities held to maturity (fair value of $444,926 and $408,576, respectively)
434,705

 
412,075

Securities available for sale, at fair value
545,623

 
501,254

Mortgage loans held for sale, at fair value
30,451

 
33,440

Loans, net of unearned income:
 
 
 
Acquired and covered by FDIC loss-share agreements ("covered loans")
155,319

 
181,674

Acquired and non-covered by FDIC loss-share agreements ("acquired non-covered loans")
636,628

 
813,543

Not acquired
3,165,492

 
2,885,801

Total loans, net of unearned income
3,957,439

 
3,881,018

Allowance for loan losses
(44,569
)
 
(47,665
)
Loans, net
3,912,870

 
3,833,353

Premises and equipment, net
109,098

 
101,525

Other real estate owned:
 
 
 
Covered under FDIC loss-share agreements
4,033

 
12,942

Not covered under FDIC loss-share agreements
30,026

 
39,945

Total other real estate owned, net
34,059

 
52,887

Goodwill
274,658

 
276,100

Other intangible assets, net
23,951

 
28,230

FDIC loss-share indemnification asset
17,033

 
26,273

Other assets
227,669

 
234,485

Total assets
$
5,751,711

 
$
5,746,270

Liabilities and shareholders’ equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest-bearing
$
935,544

 
$
856,020

Interest-bearing
3,828,126

 
3,985,892

Total deposits
4,763,670

 
4,841,912

Short-term borrowings
65,646

 
2,283

Long-term debt
162,018

 
169,592

Other liabilities
59,902

 
66,831

Total liabilities
5,051,236

 
5,080,618

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, 32,656,166 and 32,656,182 shares issued, respectfully; 31,533,703 and 31,387,668 shares outstanding, respectively
163,281

 
163,281

Treasury stock, at cost
(21,919
)
 
(23,023
)
Additional paid-in capital
344,549

 
342,552

Retained earnings
222,670

 
194,815

Accumulated other comprehensive loss, net of taxes
(8,106
)
 
(11,973
)
Total shareholders’ equity
700,475

 
665,652

Total liabilities and shareholders’ equity
$
5,751,711

 
$
5,746,270

See Notes to Consolidated Financial Statements.

1

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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Interest income
 
 
 
 
 
 
 
Loans
$
49,833

 
$
39,308

 
$
150,658

 
$
108,031

Securities
 
 
 
 
 
 
 
Taxable
4,144

 
3,282

 
12,998

 
9,504

Tax-exempt
2,308

 
2,001

 
6,821

 
5,844

Other
73

 
47

 
335

 
149

Total interest income
56,358

 
44,638

 
170,812

 
123,528

Interest expense
 
 
 
 
 
 
 
Deposits
3,915

 
4,313

 
12,424

 
12,488

Borrowings
1,971

 
1,577

 
5,776

 
4,507

Total interest expense
5,886

 
5,890

 
18,200

 
16,995

Net interest income
50,472

 
38,748

 
152,612

 
106,533

Provision for loan losses
2,217

 
2,300

 
5,117

 
8,350

Net interest income after provision for loan losses
48,255

 
36,448

 
147,495

 
98,183

Noninterest income
 
 
 
 
 
 
 
Service charges on deposit accounts
6,747

 
5,361

 
18,856

 
14,370

Fees and commissions
6,237

 
4,982

 
16,724

 
14,661

Insurance commissions
2,270

 
1,295

 
6,221

 
3,107

Wealth management revenue
2,197

 
2,091

 
6,511

 
5,530

Gains on sales of securities
375

 
—

 
375

 
54

BOLI income
811

 
1,904

 
2,288

 
3,268

Gains on sales of mortgage loans held for sale
2,635

 
2,788

 
6,226

 
10,223

Other
1,291

 
514

 
3,449

 
2,417

Total noninterest income
22,563

 
18,935

 
60,650

 
53,630

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
29,569

 
25,689

 
87,807

 
68,869

Data processing
2,906

 
2,236

 
8,451

 
6,324

Net occupancy and equipment
5,353

 
4,576

 
15,106

 
11,852

Other real estate owned
1,101

 
1,537

 
3,870

 
5,359

Professional fees
1,018

 
1,542

 
3,607

 
4,019

Advertising and public relations
1,133

 
1,514

 
4,549

 
4,250

Intangible amortization
1,381

 
724

 
4,279

 
1,361

Communications
1,079

 
1,310

 
4,462

 
3,572

Merger-related expenses
—

 
3,763

 
195

 
4,148

Other
4,635

 
3,722

 
12,890

 
12,193

Total noninterest expense
48,175

 
46,613

 
145,216

 
121,947

Income before income taxes
22,643

 
8,770

 
62,929

 
29,866

Income taxes
7,108

 
2,133

 
18,944

 
7,639

Net income
$
15,535

 
$
6,637

 
$
43,985

 
$
22,227

Basic earnings per share
$
0.49

 
$
0.24

 
$
1.40

 
$
0.86

Diluted earnings per share
$
0.49

 
$
0.24

 
$
1.39

 
$
0.85

Cash dividends per common share
$
0.17

 
$
0.17

 
$
0.51

 
$
0.51


See Notes to Consolidated Financial Statements.

2

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,
 
2014
 
2013
 
2014
 
2013
Net income
$
15,535

 
$
6,637

 
$
43,985

 
$
22,227

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Securities:
 
 
 
 
 
 
 
Net change in unrealized holding gains (losses) on securities
866

 
782

 
4,856

 
(6,091
)
Reclassification adjustment for (gains) losses realized in net income
(232
)
 
—

 
(232
)
 
71

Amortization of unrealized holding losses on securities transferred to the held to maturity category
(38
)
 
(49
)
 
(121
)
 
(169
)
Total securities
596

 
733

 
4,503

 
(6,189
)
Derivative instruments:
 
 
 
 
 
 
 
Net change in unrealized holding (losses) gains on derivative instruments
42

 
(297
)
 
(773
)
 
902

Reclassification adjustment for gains realized in net income
—

 
(22
)
 
—

 
(126
)
Totals derivative instruments
42

 
(319
)
 
(773
)
 
776

Defined benefit pension and post-retirement benefit plans:
 
 
 
 
 
 
 
Net gain arising during the period
—

 
—

 
—

 
—

Less amortization of net actuarial loss recognized in net periodic pension cost
47

 
113

 
137

 
270

Total defined benefit pension and post-retirement benefit plans
47

 
113

 
137

 
270

Other comprehensive income (loss), net of tax
685

 
527

 
3,867

 
(5,143
)
Comprehensive income
$
16,220

 
$
7,164

 
$
47,852

 
$
17,084


See Notes to Consolidated Financial Statements.

3

Renasant Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 
 
Nine Months Ended September 30,
 
2014
 
2013
Operating activities
 
 
 
Net cash provided by operating activities
$
90,232

 
$
124,122

Investing activities
 
 
 
Purchases of securities available for sale
(100,129
)
 
(106,521
)
Proceeds from sales of securities available for sale
724

 
9,015

Proceeds from call/maturities of securities available for sale
60,202

 
62,606

Purchases of securities held to maturity
(154,126
)
 
(70,075
)
Proceeds from sales of securities held to maturity
—

 
4,461

Proceeds from call/maturities of securities held to maturity
130,206

 
84,667

Net increase in loans
(82,319
)
 
(190,010
)
Purchases of premises and equipment
(12,494
)
 
(8,685
)
Net cash received in acquisition
—

 
170,061

Net cash used in investing activities
(157,936
)
 
(44,481
)
Financing activities
 
 
 
Net increase in noninterest-bearing deposits
79,524

 
20,770

Net (decrease) increase in interest-bearing deposits
(157,766
)
 
26,735

Net increase (decrease) in short-term borrowings
63,363

 
(5,394
)
Repayment of long-term debt
(7,864
)
 
(7,326
)
Cash paid for dividends
(16,135
)
 
(13,951
)
Cash received on exercise of stock-based compensation
401

 
99

Excess tax benefit from stock-based compensation
1,127

 
155

Net cash (used) provided by financing activities
(37,350
)
 
21,088

Net (decrease) increase in cash and cash equivalents
(105,054
)
 
100,729

Cash and cash equivalents at beginning of period
246,648

 
132,420

Cash and cash equivalents at end of period
$
141,594

 
$
233,149

Supplemental disclosures
 
 
 
Cash paid for interest
$
18,674

 
$
16,900

Cash paid for income taxes
$
9,300

 
$
9,393

Noncash transactions:
 
 
 
Transfers of loans to other real estate owned
$
8,318

 
$
13,747

Financed sales of other real estate owned
$
860

 
$
6,783


See Notes to Consolidated Financial Statements.

4

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, 2013 filed with the Securities and Exchange Commission on March 11, 2014.

On September 1, 2013, the Company completed its acquisition of First M&F Corporation (“First M&F”). The financial condition and results of operation for First M&F are included in the Company’s financial statements since the date of the acquisition. See Note M, “Mergers and Acquisitions,” in these Notes to Consolidated Financial Statements for further details regarding the terms and conditions of the Company’s merger with First M&F.
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 September 30, 2014 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:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
September 30, 2014
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
125,573

 
$
1

 
$
(4,336
)
 
$
121,238

Obligations of states and political subdivisions
309,132

 
14,927

 
(371
)
 
323,688

 
$
434,705

 
$
14,928

 
$
(4,707
)
 
$
444,926

December 31, 2013
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
125,061

 
$
14

 
$
(8,727
)
 
$
116,348

Obligations of states and political subdivisions
287,014

 
7,897

 
(2,683
)
 
292,228

 
$
412,075

 
$
7,911

 
$
(11,410
)
 
$
408,576








5
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)




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. The securities sold during the first nine months of 2013 had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale. No such securities were sold during the same period in 2014.

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, 2014
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,126

 
$
150

 
$
(163
)
 
$
6,113

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
289,008

 
3,718

 
(2,042
)
 
290,684

Government agency collateralized mortgage obligations
157,135

 
1,480

 
(3,643
)
 
154,972

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
45,938

 
1,457

 
(308
)
 
47,087

Government agency collateralized mortgage obligations
5,146

 
180

 
—

 
5,326

Trust preferred securities
26,738

 
142

 
(7,307
)
 
19,573

Other debt securities
18,044

 
451

 
(106
)
 
18,389

Other equity securities
2,331

 
1,148

 
—

 
3,479

 
$
550,466

 
$
8,726

 
$
(13,569
)
 
$
545,623

 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
December 31, 2013
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,144

 
$
125

 
$
(201
)
 
$
6,068

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
261,659

 
2,747

 
(4,414
)
 
259,992

Government agency collateralized mortgage obligations
149,682

 
1,542

 
(4,679
)
 
146,545

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
41,252

 
1,373

 
(584
)
 
42,041

Government agency collateralized mortgage obligations
5,007

 
59

 
—

 
5,066

Trust preferred securities
27,531

 
73

 
(9,933
)
 
17,671

Other debt securities
19,544

 
240

 
(230
)
 
19,554

Other equity securities
2,775

 
1,542

 
—

 
4,317

 
$
513,594

 
$
7,701

 
$
(20,041
)
 
$
501,254


Gross realized gains and gross realized losses on sales of securities available for sale for the three and nine months ended September 30, 2014 and 2013 were as follows:
 

6
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Gross gains on sales of securities available for sale
$
375

 
$
—

 
$
375

 
$
—

Gross losses on sales of securities available for sale
—

 
—

 
—

 
(115
)
Loss on sales of securities available for sale, net
$
375

 
$
—

 
$
375

 
$
(115
)
 
At September 30, 2014 and December 31, 2013, securities with a carrying value of $636,313 and $604,571, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $15,099 and $7,626 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2014 and December 31, 2013, respectively.
The amortized cost and fair value of securities at September 30, 2014 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
$
10,976

 
$
11,093

 
$
—

 
$
—

Due after one year through five years
51,890

 
53,654

 
1,067

 
1,141

Due after five years through ten years
232,081

 
232,491

 
5,059

 
4,972

Due after ten years
139,758

 
147,688

 
26,738

 
19,573

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
—

 
—

 
289,008

 
290,684

Government agency collateralized mortgage obligations
—

 
—

 
157,135

 
154,972

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
—

 
—

 
45,938

 
47,087

Government agency collateralized mortgage obligations
—

 
—

 
5,146

 
5,326

Other debt securities
—

 
—

 
18,044

 
18,389

Other equity securities
—

 
—

 
2,331

 
3,479

 
$
434,705

 
$
444,926

 
$
550,466

 
$
545,623


7
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, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
1
 
$
1,486

 
$
(5
)
 
27
 
$
118,251

 
$
(4,331
)
 
28
 
$
119,737

 
$
(4,336
)
Obligations of states and political subdivisions
7
 
6,102

 
(29
)
 
28
 
15,697

 
(342
)
 
35
 
21,799

 
(371
)
Total
8
 
$
7,588

 
$
(34
)
 
55
 
$
133,948

 
$
(4,673
)
 
63
 
141,536

 
$
(4,707
)
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
26
 
$
105,747

 
$
(7,826
)
 
2
 
$
9,090

 
$
(901
)
 
28
 
$
114,837

 
$
(8,727
)
Obligations of states and political subdivisions
111
 
59,503

 
(2,578
)
 
2
 
933

 
(105
)
 
113
 
60,436

 
(2,683
)
Total
137
 
$
165,250

 
$
(10,404
)
 
4
 
$
10,023

 
$
(1,006
)
 
141
 
$
175,273

 
$
(11,410
)
Available for Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
0
 
$
—

 
$
—

 
1
 
$
3,837

 
$
(163
)
 
1
 
$
3,837

 
$
(163
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
15
 
67,667

 
(195
)
 
18
 
65,621

 
(1,847
)
 
33
 
133,288

 
(2,042
)
Government agency collateralized mortgage obligations
6
 
29,885

 
(377
)
 
18
 
67,360

 
(3,266
)
 
24
 
97,245

 
(3,643
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
1
 
5,220

 
(52
)
 
3
 
10,569

 
(256
)
 
4
 
15,789

 
(308
)
Government agency collateralized mortgage obligations
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Trust preferred securities
0
 
—

 
—

 
2
 
18,315

 
(7,307
)
 
2
 
18,315

 
(7,307
)
Other debt securities
0
 
—

 
—

 
3
 
4,419

 
(106
)
 
3
 
4,419

 
(106
)
Total
22
 
$
102,772

 
$
(624
)
 
45
 
$
170,121

 
$
(12,945
)
 
67
 
$
272,893

 
$
(13,569
)
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
1
 
$
3,799

 
$
(201
)
 
0
 
$
—

 
$
—

 
1
 
$
3,799

 
$
(201
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
32
 
134,858

 
(3,451
)
 
3
 
13,239

 
(963
)
 
35
 
148,097

 
(4,414
)
Government agency collateralized mortgage obligations
17
 
68,496

 
(3,468
)
 
4
 
16,750

 
(1,211
)
 
21
 
85,246

 
(4,679
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
4
 
16,570

 
(584
)
 
0
 
—

 
—

 
4
 
16,570

 
(584
)
Government agency collateralized mortgage obligations
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Trust preferred securities
0
 
—

 
—

 
3
 
16,456

 
(9,933
)
 
3
 
16,456

 
(9,933
)
Other debt securities
3
 
7,100

 
(217
)
 
1
 
1,897

 
(13
)
 
4
 
8,997

 
(230
)
Other equity securities
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Total
57
 
$
230,823

 
$
(7,921
)
 
11
 
$
48,342

 
$
(12,120
)
 
68
 
$
279,165

 
$
(20,041
)
 


8
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 $26,738 and $27,531 and a fair value of $19,573 and $17,671, at September 30, 2014 and December 31, 2013, 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 320 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 September 30, 2014, 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 nine months ended September 30, 2014.
The Company's analysis of the pooled trust preferred securities during the previous quarter supported a return to accrual status for two of the four securities (XIII and 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, one of the remaining securities (XXIV) is still in "payment in kind" status where interest payments are not expected until a future date, and, although the Company has received principal payments from the fourth security (XXVI), the Company's analysis of the qualitative and quantitative factors described above does not justify a return to accrual status at this time. As a result, pooled trust preferred securities XXIV and XXVI remain classified as nonaccruing assets at September 30, 2014, 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, 2014:
 
Name
Single/
Pooled
 
Class/
Tranche
 
Amortized
Cost
 
Fair
Value
 
Unrealized
Loss
 
Lowest
Credit
Rating
 
Issuers
Currently in
Deferral or
Default
XIII
Pooled
 
B-2
 
$
1,116

 
$
1,258

 
$
142

 
Caa1
 
24
%
XXIII
Pooled
 
B-2
 
8,701

 
5,917

 
(2,784
)
 
Baa3
 
20
%
XXIV
Pooled
 
B-2
 
12,076

 
8,585

 
(3,491
)
 
Ca
 
34
%
XXVI
Pooled
 
B-2
 
4,845

 
3,813

 
(1,032
)
 
B3
 
27
%
 
 
 
 
 
$
26,738

 
$
19,573

 
$
(7,165
)
 
 
 
 

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:
 
 
2014
 
2013
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
)



9
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:
 
 
September 30,
2014
 
December 31, 2013
Commercial, financial, agricultural
$
450,559

 
$
468,963

Lease financing
5,564

 
53

Real estate – construction
197,066

 
161,436

Real estate – 1-4 family mortgage
1,221,579

 
1,208,233

Real estate – commercial mortgage
1,991,052

 
1,950,572

Installment loans to individuals
91,806

 
91,762

Gross loans
3,957,626

 
3,881,019

Unearned income
(187
)
 
(1
)
Loans, net of unearned income
3,957,439

 
3,881,018

Allowance for loan losses
(44,569
)
 
(47,665
)
Net loans
$
3,912,870

 
$
3,833,353


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
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, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,056

 
$
599

 
$
446,907

 
$
448,562

 
$
650

 
$
953

 
$
394

 
$
1,997

 
$
450,559

Lease financing
—

 
—

 
5,564

 
5,564

 
—

 
—

 
—

 
—

 
5,564

Real estate – construction
237

 
281

 
194,900

 
195,418

 
—

 
1,648

 
—

 
1,648

 
197,066

Real estate – 1-4 family mortgage
6,739

 
5,248

 
1,193,594

 
1,205,581

 
208

 
6,197

 
9,593

 
15,998

 
1,221,579

Real estate – commercial mortgage
7,966

 
11,381

 
1,937,174

 
1,956,521

 
2,641

 
20,803

 
11,087

 
34,531

 
1,991,052

Installment loans to individuals
250

 
22

 
91,431

 
91,703

 
—

 
90

 
13

 
103

 
91,806

Unearned income
—

 
—

 
(187
)
 
(187
)
 
—

 
—

 
—

 
—

 
(187
)
Total
$
16,248

 
$
17,531

 
$
3,869,383

 
$
3,903,162

 
$
3,499

 
$
29,691

 
$
21,087

 
$
54,277

 
$
3,957,439

December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
2,067

 
$
607

 
$
463,521

 
$
466,195

 
$
138

 
$
1,959

 
$
671

 
$
2,768

 
$
468,963

Lease financing
—

 
—

 
53

 
53

 
—

 
—

 
—

 
—

 
53

Real estate – construction
664

 
—

 
159,124

 
159,788

 
—

 
1,648

 
—

 
1,648

 
161,436

Real estate – 1-4 family mortgage
10,168

 
2,206

 
1,179,703

 
1,192,077

 
1,203

 
6,041

 
8,912

 
16,156

 
1,208,233

Real estate – commercial mortgage
8,870

 
1,286

 
1,888,745

 
1,898,901

 
966

 
37,439

 
13,266

 
51,671

 
1,950,572

Installment loans to individuals
706

 
88

 
90,880

 
91,674

 
—

 
80

 
8

 
88

 
91,762

Unearned income
—

 
—

 
(1
)
 
(1
)
 
—

 
—

 
—

 
—

 
(1
)
Total
$
22,475

 
$
4,187

 
$
3,782,025

 
$
3,808,687

 
$
2,307

 
$
47,167

 
$
22,857

 
$
72,331

 
$
3,881,018


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. Restructured loans contractually 90 days past due or more totaled $0 at December 31, 2013. This balance increased to $1,872 in restructured loans contractually 90 days past due or more at September 30, 2014. The outstanding balance of restructured loans on nonaccrual status was $12,709 and $10,078 at September 30, 2014 and December 31, 2013, 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
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, 2014
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
5,513

 
$
349

 
$
2,383

 
$
2,732

 
$
229

Real estate – construction
2,723

 
—

 
1,768

 
1,768

 
48

Real estate – 1-4 family mortgage
31,657

 
15,576

 
8,440

 
24,016

 
2,316

Real estate – commercial mortgage
105,441

 
30,921

 
32,373

 
63,294

 
10,681

Installment loans to individuals
433

 
50

 
56

 
106

 
—

Total
$
145,767

 
$
46,896

 
$
45,020

 
$
91,916

 
$
13,274

December 31, 2013
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
6,575

 
$
743

 
$
2,043

 
$
2,786

 
$
260

Real estate – construction
2,447

 
—

 
1,648

 
1,648

 
—

Real estate – 1-4 family mortgage
42,868

 
25,374

 
8,542

 
33,916

 
7,353

Real estate – commercial mortgage
108,963

 
30,624

 
38,517

 
69,141

 
7,036

Installment loans to individuals
620

 
183

 
77

 
260

 
1

Totals
$
161,473

 
$
56,924

 
$
50,827

 
$
107,751

 
$
14,650


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, 2014
 
September 30, 2013
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized(1)
Commercial, financial, agricultural
$
4,167

 
$
160

 
$
5,183

 
$
4

Real estate – construction
1,997

 
96

 
1,650

 
—

Real estate – 1-4 family mortgage
26,378

 
808

 
32,274

 
158

Real estate – commercial mortgage
74,648

 
3,110

 
75,312

 
379

Installment loans to individuals
141

 
13

 
—

 
—

Total
$
107,331

 
$
4,187

 
$
114,419

 
$
541

 
(1)
Includes interest income recognized using the cash-basis method of income recognition of $0. No interest income was recognized using the cash-basis method of income recognition during the three months ended September 30, 2014.

 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2014
 
September 30, 2013
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized(1)
Commercial, financial, agricultural
$
4,399

 
$
165

 
$
5,123

 
$
4

Real estate – construction
2,023

 
98

 
1,650

 
—

Real estate – 1-4 family mortgage
27,122

 
843

 
33,181

 
449

Real estate – commercial mortgage
80,402

 
3,174

 
75,997

 
845

Installment loans to individuals
147

 
13

 
—

 
—

Total
$
114,093

 
$
4,293

 
$
115,951

 
$
1,298



12
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


(1)
Includes interest income recognized using the cash-basis method of income recognition of $0. No interest income was recognized using the cash-basis method of income recognition during the nine months ended September 30, 2014.
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, 2014
 
 
 
 
 
Commercial, financial, agricultural
—

 
$
—

 
$
—

Real estate – construction
—

 
—

 
—

Real estate – 1-4 family mortgage
32

 
6,739

 
5,165

Real estate – commercial mortgage
16

 
11,686

 
10,439

Installment loans to individuals
—

 
—

 
—

Total
48

 
$
18,425

 
$
15,604

December 31, 2013
 
 
 
 
 
Commercial, financial, agricultural
1

 
$
20

 
$
19

Real estate – construction
—

 
—

 
—

Real estate – 1-4 family mortgage
23

 
19,371

 
10,354

Real estate – commercial mortgage
16

 
12,785

 
10,934

Installment loans to individuals
1

 
182

 
171

Total
41

 
$
32,358

 
$
21,478



13
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, 2014
41

 
$
21,478

Additional loans with concessions
17

 
2,622

Reductions due to:
 
 
 
Reclassified as nonperforming
(3
)
 
(1,895
)
Paid in full
(7
)
 
(6,008
)
Charge-offs
—

 
—

Transfer to other real estate owned
—

 
—

Principal paydowns
—

 
(593
)
Lapse of concession period
—

 
—

Totals at September 30, 2014
48

 
$
15,604


The allocated allowance for loan losses attributable to restructured loans was $1,805 and $2,984 at September 30, 2014 and December 31, 2013, respectively. The Company had $0 and $93 in remaining availability under commitments to lend additional funds on these restructured loans at September 30, 2014 and December 31, 2013, 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 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 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
September 30, 2014
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
314,774

 
$
5,156

 
$
1,383

 
$
321,313

Real estate – construction
131,329

 
1,173

 
—

 
132,502

Real estate – 1-4 family mortgage
125,625

 
10,020

 
8,226

 
143,871

Real estate – commercial mortgage
1,402,321

 
30,728

 
42,649

 
1,475,698

Installment loans to individuals
2,537

 
—

 
—

 
2,537

Total
$
1,976,586

 
$
47,077

 
$
52,258

 
$
2,075,921

December 31, 2013
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
328,959

 
$
10,588

 
$
4,266

 
$
343,813

Real estate – construction
114,428