0000715072-15-000067.txt : 20150807 0000715072-15-000067.hdr.sgml : 20150807 20150807170000 ACCESSION NUMBER: 0000715072-15-000067 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20150630 FILED AS OF DATE: 20150807 DATE AS OF CHANGE: 20150807 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: 151038268 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 rnst10q6302015.htm 10-Q RNST 10Q 6.30.2015
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, 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 July 31, 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.



Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended June 30, 2015
CONTENTS
 



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

(In Thousands, Except Share Data)
 
(Unaudited)
 
 
 
June 30,
2015
 
December 31, 2014
Assets
 
 
 
Cash and due from banks
$
79,060

 
$
95,793

Interest-bearing balances with banks
75,902

 
65,790

Cash and cash equivalents
154,962

 
161,583

Securities held to maturity (fair value of $447,660 and $442,488, respectively)
439,070

 
430,163

Securities available for sale, at fair value
526,220

 
553,584

Mortgage loans held for sale, at fair value
108,023

 
25,628

Loans, net of unearned income:
 
 
 
Acquired and covered by FDIC loss-share agreements ("covered loans")
121,626

 
143,041

Acquired and not covered by FDIC loss-share agreements ("acquired non-covered loans")
507,653

 
577,347

Not acquired
3,407,925

 
3,267,486

Total loans, net of unearned income
4,037,204

 
3,987,874

Allowance for loan losses
(41,888
)
 
(42,289
)
Loans, net
3,995,316

 
3,945,585

Premises and equipment, net
121,072

 
113,735

Other real estate owned:
 
 
 
Covered under FDIC loss-share agreements
3,853

 
6,368

Not covered under FDIC loss-share agreements
23,211

 
28,104

Total other real estate owned, net
27,064

 
34,472

Goodwill
274,698

 
274,706

Other intangible assets, net
20,110

 
22,624

FDIC loss-share indemnification asset
6,659

 
12,516

Other assets
225,996

 
230,533

Total assets
$
5,899,190

 
$
5,805,129

Liabilities and shareholders’ equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest-bearing
$
972,672

 
$
919,872

Interest-bearing
3,917,772

 
3,918,546

Total deposits
4,890,444

 
4,838,418

Short-term borrowings
64,229

 
32,403

Long-term debt
154,860

 
156,422

Other liabilities
58,681

 
66,235

Total liabilities
5,168,214

 
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, 32,656,166 shares issued; 31,644,706 and 31,545,145 shares outstanding, respectively
163,281

 
163,281

Treasury stock, at cost
(21,381
)
 
(22,128
)
Additional paid-in capital
344,969

 
345,213

Retained earnings
252,718

 
232,883

Accumulated other comprehensive loss, net of taxes
(8,611
)
 
(7,598
)
Total shareholders’ equity
730,976

 
711,651

Total liabilities and shareholders’ equity
$
5,899,190

 
$
5,805,129

See Notes to Consolidated Financial Statements.    

1


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

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Interest income
 
 
 
 
 
 
 
Loans
$
50,454

 
$
51,279

 
$
97,891

 
$
100,825

Securities
 
 
 
 
 
 
 
Taxable
4,026

 
6,665

 
8,441

 
8,854

Tax-exempt
2,246

 
270

 
4,500

 
4,513

Other
43

 
63

 
103

 
262

Total interest income
56,769

 
58,277

 
110,935

 
114,454

Interest expense
 
 
 
 
 
 
 
Deposits
3,170

 
4,136

 
6,608

 
8,509

Borrowings
1,929

 
1,972

 
3,815

 
3,805

Total interest expense
5,099

 
6,108

 
10,423

 
12,314

Net interest income
51,670

 
52,169

 
100,512

 
102,140

Provision for loan losses
1,175

 
1,450

 
2,250

 
2,900

Net interest income after provision for loan losses
50,495

 
50,719

 
98,262

 
99,240

Noninterest income
 
 
 
 
 
 
 
Service charges on deposit accounts
6,092

 
6,193

 
12,025

 
12,109

Fees and commissions
5,384

 
5,515

 
10,278

 
10,487

Insurance commissions
2,119

 
2,088

 
4,086

 
3,951

Wealth management revenue
2,248

 
2,170

 
4,438

 
4,314

Gains on sales of securities
96

 

 
96

 

BOLI income
710

 
746

 
1,558

 
1,477

Gains on sales of mortgage loans held for sale
5,407

 
2,006

 
10,040

 
3,591

Other
861

 
753

 
2,300

 
2,158

Total noninterest income
22,917

 
19,471

 
44,821

 
38,087

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
30,394

 
29,810

 
58,654

 
58,238

Data processing
3,152

 
2,850

 
6,333

 
5,545

Net occupancy and equipment
5,524

 
4,906

 
11,083

 
9,753

Other real estate owned
954

 
1,068

 
1,486

 
2,769

Professional fees
1,172

 
1,389

 
1,996

 
2,589

Advertising and public relations
1,481

 
1,888

 
2,784

 
3,416

Intangible amortization
1,239

 
1,427

 
2,514

 
2,898

Communications
1,491

 
1,701

 
2,924

 
3,383

Merger-related expenses
1,467

 

 
1,945

 
195

Other
4,302

 
4,357

 
8,871

 
8,255

Total noninterest expense
51,176

 
49,396

 
98,590

 
97,041

Income before income taxes
22,236

 
20,794

 
44,493

 
40,286

Income taxes
6,842

 
5,941

 
13,859

 
11,836

Net income
$
15,394

 
$
14,853

 
$
30,634

 
$
28,450

Basic earnings per share
$
0.49

 
$
0.47

 
$
0.97

 
$
0.90

Diluted earnings per share
$
0.48

 
$
0.47

 
$
0.96

 
$
0.90

Cash dividends per common share
$
0.17

 
$
0.17

 
$
0.34

 
$
0.34


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
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
15,394

 
$
14,853

 
$
30,634

 
$
28,450

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Securities:
 
 
 
 
 
 
 
Net change in unrealized holding (losses) gains on securities
(3,836
)
 
1,206

 
(1,212
)
 
3,990

Reclassification adjustment for gains realized in net income
(60
)
 

 
(60
)
 

Amortization of unrealized holding gains on securities transferred to the held to maturity category
(28
)
 
(39
)
 
(60
)
 
(83
)
Total securities
(3,924
)
 
1,167

 
(1,332
)
 
3,907

Derivative instruments:
 
 
 
 
 
 
 
Net change in unrealized holding gains (losses) on derivative instruments
863

 
(396
)
 
194

 
(815
)
Totals derivative instruments
863

 
(396
)
 
194

 
(815
)
Defined benefit pension and post-retirement benefit plans:
 
 
 
 
 
 
 
Amortization of net actuarial loss recognized in net periodic pension cost
68

 
45

 
125

 
90

Total defined benefit pension and post-retirement benefit plans
68

 
45

 
125

 
90

Other comprehensive (loss) income, net of tax
(2,993
)
 
816

 
(1,013
)
 
3,182

Comprehensive income
$
12,401

 
$
15,669

 
$
29,621

 
$
31,632


See Notes to Consolidated Financial Statements.

3


Renasant Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 
Six Months Ended June 30,
 
2015
 
2014
Operating activities
 
 
 
Net income
$
30,634

 
$
28,450

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
2,250

 
2,900

Depreciation, amortization and accretion
2,687

 
8,895

Deferred income tax expense
5,918

 
5,775

Funding of mortgage loans held for sale
(407,893
)
 
(254,578
)
Proceeds from sales of mortgage loans held for sale
335,538

 
263,791

Gains on sales of mortgage loans held for sale
(10,040
)
 
(3,591
)
Gains on sales of securities
(96
)
 

Losses (gains) on sales of premises and equipment
19

 
(14
)
Stock-based compensation
1,720

 
1,818

Decrease in FDIC loss-share indemnification asset, net of accretion
3,623

 
5,390

Decrease (increase) in other assets
12,084

 
(6,534
)
(Decrease) increase in other liabilities
(8,887
)
 
7,106

Net cash (used in) provided by operating activities
$
(32,443
)
 
$
59,408

Investing activities
 
 
 
Purchases of securities available for sale
(29,066
)
 
(100,129
)
Proceeds from sales of securities available for sale
1,213

 

Proceeds from call/maturities of securities available for sale
51,461

 
37,319

Purchases of securities held to maturity
(119,766
)
 
(151,836
)
Proceeds from call/maturities of securities held to maturity
109,817

 
124,798

Net increase in loans
(48,164
)
 
(82,399
)
Purchases of premises and equipment
(11,194
)
 
(5,675
)
Net cash used in investing activities
(45,699
)
 
(177,922
)
Financing activities
 
 
 
Net increase in noninterest-bearing deposits
52,800

 
46,746

Net decrease in interest-bearing deposits
(774
)
 
(1,927
)
Net increase in short-term borrowings
31,826

 
23,222

Repayment of long-term debt
(1,836
)
 
(5,460
)
Cash paid for dividends
(10,800
)
 
(10,753
)
Cash received on exercise of stock-based compensation
73

 
281

Excess tax benefit from stock-based compensation
232

 
977

Net cash provided by financing activities
71,521

 
53,086

Net decrease in cash and cash equivalents
(6,621
)
 
(65,428
)
Cash and cash equivalents at beginning of period
161,583

 
246,648

Cash and cash equivalents at end of period
$
154,962

 
$
181,220

Supplemental disclosures
 
 
 
Cash paid for interest
$
10,586

 
$
12,481

Cash paid for income taxes
$
5,994

 
$
9,300

Noncash transactions:
 
 
 
Transfers of loans to other real estate owned
$
6,930

 
$
6,029

Financed sales of other real estate owned
$
637

 
$
634

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 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. Effective July 1, 2015 the Company completed its previously-announced merger with Heritage Financial Group, Inc. (“Heritage”), the terms of which are disclosed in Note M, “Mergers and Acquisitions”. The Company has determined that no significant events occurred after June 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
June 30, 2015
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
125,596

 
$
19

 
$
(2,603
)
 
$
123,012

Obligations of states and political subdivisions
313,474

 
12,143

 
(969
)
 
324,648

 
$
439,070

 
$
12,162

 
$
(3,572
)
 
$
447,660

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

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
June 30, 2015
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,107

 
$
142

 
$
(46
)
 
$
6,203

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
282,024

 
3,408

 
(2,021
)
 
283,411

Government agency collateralized mortgage obligations
151,403

 
1,606

 
(2,498
)
 
150,511

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
41,692

 
1,103

 
(102
)
 
42,693

Government agency collateralized mortgage obligations
3,496

 
169

 

 
3,665

Trust preferred securities
24,844

 

 
(5,717
)
 
19,127

Other debt securities
16,388

 
445

 
(52
)
 
16,781

Other equity securities
2,500

 
1,329

 

 
3,829

 
$
528,454

 
$
8,202

 
$
(10,436
)
 
$
526,220

 
 
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


Over the past several quarters, pricing on the Company's pooled trust preferred securities has improved such that the amortized cost on one of its securities (XIII) had been fully recovered as of March 31, 2015. As such, during the second quarter of 2015, the Company sold its pooled trust preferred security XIII with net proceeds of $1,213 and a carrying value of $1,117 at the time of sale for a gain of $96. There were no other sales of securities for the three or six months ended June 30, 2015 or 2014.
 
 
 
 
 
 
 
 
At June 30, 2015 and December 31, 2014, securities with a carrying value of $634,947 and $617,189, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $18,292 and $16,410 were pledged as collateral for short-term borrowings and derivative instruments at June 30, 2015 and December 31, 2014, respectively.
The amortized cost and fair value of securities at June 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.
 

6

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


 
Held to Maturity
 
Available for Sale
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due within one year
$
12,445

 
$
12,575

 
$

 
$

Due after one year through five years
84,927

 
87,020

 
5,055

 
5,067

Due after five years through ten years
224,633

 
226,165

 
1,052

 
1,136

Due after ten years
117,065

 
121,900

 
24,844

 
19,127

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
282,024

 
283,411

Government agency collateralized mortgage obligations

 

 
151,403

 
150,511

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
41,692

 
42,693

Government agency collateralized mortgage obligations

 

 
3,496

 
3,665

Other debt securities

 

 
16,388

 
16,781

Other equity securities

 

 
2,500

 
3,829

 
$
439,070

 
$
447,660

 
$
528,454

 
$
526,220







































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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
7
 
$
25,399

 
$
(586
)
 
20
 
$
91,100

 
$
(2,017
)
 
27
 
$
116,499

 
$
(2,603
)
Obligations of states and political subdivisions
46
 
39,717

 
(781
)
 
6
 
3,782

 
(188
)
 
52
 
43,499

 
(969
)
Total
53
 
$
65,116

 
$
(1,367
)
 
26
 
$
94,882

 
$
(2,205
)
 
79
 
159,998

 
$
(3,572
)
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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
0
 
$

 
$

 
1
 
$
3,954

 
$
(46
)
 
1
 
$
3,954

 
$
(46
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
25
 
102,829

 
(885
)
 
9
 
29,712

 
(1,136
)
 
34
 
132,541

 
(2,021
)
Government agency collateralized mortgage obligations
5
 
26,834

 
(154
)
 
16
 
56,483

 
(2,344
)
 
21
 
83,317

 
(2,498
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
1
 
4,804

 
(28
)
 
2
 
5,812

 
(74
)
 
3
 
10,616

 
(102
)
Government agency collateralized mortgage obligations
0
 

 

 
0
 

 

 
0
 

 

Trust preferred securities
0
 

 

 
3
 
19,127

 
(5,717
)
 
3
 
19,127

 
(5,717
)
Other debt securities
0
 

 

 
2
 
4,040

 
(52
)
 
2
 
4,040

 
(52
)
Total
31
 
$
134,467

 
$
(1,067
)
 
33
 
$
119,128

 
$
(9,369
)
 
64
 
$
253,595

 
$
(10,436
)
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

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 six month period ending June 30, 2015 or 2014.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $24,844 and $26,400 and a fair value of $19,127 and $19,756 at June 30, 2015 and December 31, 2014, respectively. At June 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 260 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 June 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 six months ended June 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 June 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 June 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
 
$
8,547

 
$
6,139

 
$
(2,408
)
 
Baa3
 
17
%
XXIV
Pooled
 
B-2
 
12,076

 
9,963

 
(2,113
)
 
Caa2
 
29
%
XXVI
Pooled
 
B-2
 
4,221

 
3,025

 
(1,196
)
 
Ba3
 
24
%
 
 
 
 
 
$
24,844

 
$
19,127

 
$
(5,717
)
 
 
 
 

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:
 

9

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


 
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 June 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:
 
 
June 30,
2015
 
December 31, 2014
Commercial, financial, agricultural
$
480,559

 
$
483,283

Lease financing
17,956

 
10,427

Real estate – construction
212,576

 
212,061

Real estate – 1-4 family mortgage
1,275,914

 
1,236,360

Real estate – commercial mortgage
1,962,989

 
1,956,914

Installment loans to individuals
87,533

 
89,142

Gross loans
4,037,527

 
3,988,187

Unearned income
(323
)
 
(313
)
Loans, net of unearned income
4,037,204

 
3,987,874

Allowance for loan losses
(41,888
)
 
(42,289
)
Net loans
$
3,995,316

 
$
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

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, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
417

 
$
602

 
$
478,768

 
$
479,787

 
$
17

 
$
436

 
$
319

 
$
772

 
$
480,559

Lease financing

 

 
17,541

 
17,541

 

 
415

 

 
415

 
17,956

Real estate – construction
112

 
37

 
212,427

 
212,576

 

 

 

 

 
212,576

Real estate – 1-4 family mortgage
4,782

 
1,832

 
1,256,170

 
1,262,784

 
667

 
5,903

 
6,560

 
13,130

 
1,275,914

Real estate – commercial mortgage
9,205

 
5,651

 
1,926,430

 
1,941,286

 
817

 
11,224

 
9,662

 
21,703

 
1,962,989

Installment loans to individuals
389

 
48

 
87,030

 
87,467

 
8

 
58

 

 
66

 
87,533

Unearned income

 

 
(323
)
 
(323
)
 

 

 

 

 
(323
)
Total
$
14,905

 
$
8,170

 
$
3,978,043

 
$
4,001,118

 
$
1,509

 
$
18,036

 
$
16,541

 
$
36,086

 
$
4,037,204

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 was one restructured loan in the amount of $21 contractually 90 days past due or more and still accruing at June 30, 2015. There were no restructured loans 90 days or more past due and accruing at December 31, 2014. The outstanding balance of restructured loans on nonaccrual status was $8,512 and $11,392 at June 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

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, 2015
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
3,662

 
$
1,746

 
$
72

 
$
1,818

 
$
342

Real estate – construction

 

 

 

 

Real estate – 1-4 family mortgage
31,118

 
18,231

 
7,607

 
25,838

 
4,454

Real estate – commercial mortgage
62,015

 
32,352

 
11,431

 
43,783

 
3,898

Installment loans to individuals
799

 
470

 
11

 
481

 
211

Total
$
97,594

 
$
52,799

 
$
19,121

 
$
71,920

 
$
8,905

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
 
June 30, 2015
 
June 30, 2014
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
1,970

 
$
7

 
$
5,279

 
$

Lease financing

 

 

 

Real estate – construction

 

 
2,034

 

Real estate – 1-4 family mortgage
27,571

 
172

 
21,747

 
170

Real estate – commercial mortgage
45,758

 
262

 
93,402

 
752

Installment loans to individuals
506

 

 

 

Total
$
75,805

 
$
441

 
$
122,462

 
$
922


 
Six Months Ended
 
Six Months Ended
 
June 30, 2015
 
June 30, 2014
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
2,009

 
$
15

 
$
5,382

 
$

Real estate – construction

 

 
2,036

 
2

Real estate – 1-4 family mortgage
27,776

 
244

 
22,122

 
204

Real estate – commercial mortgage
46,563

 
536

 
94,641

 
816

Installment loans to individuals
513

 

 

 

Total
$
76,861

 
$
795

 
$
124,181

 
$
1,022



12

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
June 30, 2015
 
 
 
 
 
Commercial, financial, agricultural
2

 
$
507

 
$
479

Real estate – construction

 

 

Real estate – 1-4 family mortgage
58

 
7,163

 
6,581

Real estate – commercial mortgage
22

 
16,126

 
14,958

Installment loans to individuals

 

 

Total
82

 
$
23,796

 
$
22,018

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
38

 
9,490

Reductions due to:
 
 
 
Reclassified as nonperforming
(1
)
 
(21
)
Paid in full
(8
)
 
(1,494
)
Principal paydowns

 
(294
)
Totals at June 30, 2015
82

 
$
22,018


The allocated allowance for loan losses attributable to restructured loans was $1,622 and $1,547 at June 30, 2015 and December 31, 2014, respectively. The Company had no remaining availability under commitments to lend additional funds on these restructured loans at June 30, 2015 or December 31, 2014.
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 applied to the loan balances. The “Watch” grade (those with a risk rating

13

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


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
June 30, 2015
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
325,883

 
$
3,686

 
$
1,122

 
$
330,691

Lease financing

 

 
415

 
415

Real estate – construction
148,161

 
635

 

 
148,796

Real estate – 1-4 family mortgage
126,332

 
4,079

 
12,110

 
142,521

Real estate – commercial mortgage
1,430,488

 
25,347

 
23,434

 
1,479,269

Installment loans to individuals
9

 

 

 
9

Total
$
2,030,873

 
$
33,747

 
$
37,081

 
$
2,101,701

December 31, 2014
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
337,998

 
$
5,255

 
$
1,451

 
$
344,704

Lease financing

 

 

 

Real estate – construction
150,683

 
855

 

 
151,538