0000715072-16-000148.txt : 20160808 0000715072-16-000148.hdr.sgml : 20160808 20160808170154 ACCESSION NUMBER: 0000715072-16-000148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 121 CONFORMED PERIOD OF REPORT: 20160630 FILED AS OF DATE: 20160808 DATE AS OF CHANGE: 20160808 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: 161814990 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 rnst10q6302016.htm 10-Q Document

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, 2016
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, 2016, 42,086,074 shares of the registrant’s common stock, $5.00 par value per share, were outstanding. The registrant has no other classes of securities outstanding as of such date.



Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended June 30, 2016
CONTENTS
 



PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

Renasant Corporation and Subsidiaries
Consolidated Balance Sheets

(In Thousands, Except Share Data)
 
(Unaudited)
 
 
 
June 30,
2016
 
December 31, 2015
Assets
 
 
 
Cash and due from banks
$
119,723

 
$
177,007

Interest-bearing balances with banks
91,085

 
34,564

Cash and cash equivalents
210,808

 
211,571

Securities held to maturity (fair value of $409,768 and $473,753, respectively)
389,145

 
458,400

Securities available for sale, at fair value
674,447

 
646,805

Mortgage loans held for sale, at fair value
276,782

 
225,254

Loans, net of unearned income:
 
 
 
Acquired and covered by FDIC loss-share agreements ("acquired covered loans")
42,171

 
93,142

Acquired and not covered by FDIC loss-share agreements ("acquired not covered loans")
1,630,709

 
1,489,886

Not acquired
4,292,549

 
3,830,434

Total loans, net of unearned income
5,965,429

 
5,413,462

Allowance for loan losses
(44,098
)
 
(42,437
)
Loans, net
5,921,331

 
5,371,025

Premises and equipment, net
178,539

 
169,128

Other real estate owned:
 
 
 
Acquired and covered by FDIC loss-share agreements ("acquired covered OREO")
2,618

 
2,818

Acquired and not covered by FDIC loss-share agreements ("acquired not covered OREO")
17,146

 
19,597

Not acquired
9,575

 
12,987

Total other real estate owned, net
29,339

 
35,402

Goodwill
470,534

 
445,871

Other intangible assets, net
27,383

 
28,811

FDIC loss-share indemnification asset
5,547

 
7,149

Other assets
345,711

 
327,080

Total assets
$
8,529,566

 
$
7,926,496

Liabilities and shareholders’ equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest-bearing
$
1,459,383

 
$
1,278,337

Interest-bearing
5,243,104

 
4,940,265

Total deposits
6,702,487

 
6,218,602

Short-term borrowings
444,989

 
422,279

Long-term debt
143,661

 
148,217

Other liabilities
114,173

 
100,580

Total liabilities
7,405,310

 
6,889,678

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

 

Common stock, $5.00 par value – 150,000,000 shares authorized, 42,972,066 and 41,292,045 shares issued, respectively; 42,085,690 and 40,293,291 shares outstanding, respectively
214,860

 
206,460

Treasury stock, at cost
(21,152
)
 
(22,385
)
Additional paid-in capital
632,558

 
585,938

Retained earnings
305,958

 
276,340

Accumulated other comprehensive loss, net of taxes
(7,968
)
 
(9,535
)
Total shareholders’ equity
1,124,256

 
1,036,818

Total liabilities and shareholders’ equity
$
8,529,566

 
$
7,926,496

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,
 
2016
 
2015
 
2016
 
2015
Interest income
 
 
 
 
 
 
 
Loans
$
76,785

 
$
50,454

 
$
146,022

 
$
97,891

Securities
 
 
 
 
 
 
 
Taxable
4,654

 
4,026

 
9,115

 
8,441

Tax-exempt
2,465

 
2,246

 
4,953

 
4,500

Other
104

 
43

 
177

 
103

Total interest income
84,008

 
56,769

 
160,267

 
110,935

Interest expense
 
 
 
 
 
 
 
Deposits
4,420

 
3,227

 
8,380

 
6,725

Borrowings
2,431

 
1,928

 
4,676

 
3,815

Total interest expense
6,851

 
5,155

 
13,056

 
10,540

Net interest income
77,157

 
51,614

 
147,211

 
100,395

Provision for loan losses
1,430

 
1,175

 
3,230

 
2,250

Net interest income after provision for loan losses
75,727

 
50,439

 
143,981

 
98,145

Noninterest income
 
 
 
 
 
 
 
Service charges on deposit accounts
7,521

 
6,522

 
15,512

 
12,857

Fees and commissions
5,045

 
3,571

 
9,376

 
7,266

Insurance commissions
2,175

 
2,119

 
4,137

 
4,086

Wealth management revenue
2,872

 
2,210

 
5,763

 
4,366

Mortgage banking income
13,420

 
6,791

 
25,335

 
12,220

Net gain on sales of securities
1,257

 
96

 
1,186

 
96

Net gain on sales of SBA loans
1,035

 
90

 
2,031

 
383

BOLI income
996

 
710

 
1,950

 
1,558

Other
1,265

 
770

 
3,598

 
1,917

Total noninterest income
35,586

 
22,879

 
68,888

 
44,749

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
45,387

 
30,394

 
87,780

 
58,655

Data processing
4,502

 
3,199

 
8,660

 
6,429

Net occupancy and equipment
8,531

 
5,524

 
16,755

 
11,083

Other real estate owned
1,614

 
954

 
2,571

 
1,486

Professional fees
1,262

 
1,172

 
2,476

 
1,996

Advertising and public relations
1,742

 
1,481

 
3,379

 
2,784

Intangible amortization
1,742

 
1,239

 
3,439

 
2,513

Communications
2,040

 
1,491

 
4,211

 
2,924

Extinguishment of debt
329

 

 
329

 

Merger and conversion related expenses
2,807

 
1,467

 
3,755

 
1,946

Other
7,303

 
4,161

 
13,718

 
8,585

Total noninterest expense
77,259

 
51,082

 
147,073

 
98,401

Income before income taxes
34,054

 
22,236

 
65,796

 
44,493

Income taxes
11,154

 
6,842

 
21,680

 
13,859

Net income
$
22,900

 
$
15,394

 
$
44,116

 
$
30,634

Basic earnings per share
$
0.54

 
$
0.49

 
$
1.07

 
$
0.97

Diluted earnings per share
$
0.54

 
$
0.48

 
$
1.06

 
$
0.96

Cash dividends per common share
$
0.18

 
$
0.17

 
$
0.35

 
$
0.34



2


See Notes to Consolidated Financial Statements.

3


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,
 
2016
 
2015
 
2016
 
2015
Net income
$
22,900

 
$
15,394

 
$
44,116

 
$
30,634

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
Unrealized holding gains (losses) on securities
812

 
(3,836
)
 
3,875

 
(1,212
)
Reclassification adjustment for gains realized in net income
(772
)
 
(60
)
 
(728
)
 
(60
)
Amortization of unrealized holding gains on securities transferred to the held to maturity category
(18
)
 
(28
)
 
(38
)
 
(60
)
Total securities
22

 
(3,924
)
 
3,109

 
(1,332
)
Derivative instruments:
 
 
 
 
 
 
 
Unrealized holding (losses) gains on derivative instruments
(428
)
 
863

 
(1,694
)
 
194

Totals derivative instruments
(428
)
 
863

 
(1,694
)
 
194

Defined benefit pension and post-retirement benefit plans:
 
 
 
 
 
 
 
Amortization of net actuarial loss recognized in net periodic pension cost
80

 
68

 
152

 
125

Total defined benefit pension and post-retirement benefit plans
80

 
68

 
152

 
125

Other comprehensive (loss) income, net of tax
(326
)
 
(2,993
)
 
1,567

 
(1,013
)
Comprehensive income
$
22,574

 
$
12,401

 
$
45,683

 
$
29,621


See Notes to Consolidated Financial Statements.

4


Renasant Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 
Six Months Ended June 30,
 
2016
 
2015
Operating activities
 
 
 
Net income
$
44,116

 
$
30,634

Adjustments to reconcile net income to net cash used in operating activities, net of effects from acquisitions:
 
 
 
Provision for loan losses
3,230

 
2,250

Depreciation, amortization and accretion
88

 
2,687

Deferred income tax expense
3,845

 
5,918

Funding of mortgage loans held for sale
(1,006,507
)
 
(407,893
)
Proceeds from sales of mortgage loans held for sale
968,800

 
335,538

Gains on sales of mortgage loans held for sale
(12,971
)
 
(10,040
)
Gains on sales of securities
(1,186
)
 
(96
)
Penalty on extinguishment of debt
329

 

Losses on sales of premises and equipment
102

 
19

Stock-based compensation
1,715

 
1,720

Decrease in FDIC loss-share indemnification asset, net of accretion
1,049

 
3,623

(Increase) decrease in other assets
(5,392
)
 
12,084

Decrease in other liabilities
(3,464
)
 
(8,887
)
Net cash used in operating activities
(6,246
)
 
(32,443
)
Investing activities
 
 
 
Purchases of securities available for sale
(34,651
)
 
(29,066
)
Proceeds from sales of securities available for sale
4,028

 
1,213

Proceeds from call/maturities of securities available for sale
72,069

 
51,461

Purchases of securities held to maturity
(9,073
)
 
(119,766
)
Proceeds from call/maturities of securities held to maturity
81,510

 
109,817

Net increase in loans
(272,514
)
 
(48,164
)
Purchases of premises and equipment
(5,651
)
 
(11,194
)
Proceeds from sales of premises and equipment
1,198

 

Proceeds from sales of other assets
7,957

 

Net cash received in acquisition
25,263

 

Net cash used in investing activities
(129,864
)
 
(45,699
)
Financing activities
 
 
 
Net increase in noninterest-bearing deposits
107,969

 
52,800

Net increase (decrease) in interest-bearing deposits
25,791

 
(774
)
Net increase in short-term borrowings
20,361

 
31,826

Proceeds from long-term borrowings
277

 

Repayment of long-term debt
(5,436
)
 
(1,836
)
Cash paid for dividends
(14,498
)
 
(10,800
)
Cash received on exercise of stock options
401

 
73

Excess tax benefit from stock-based compensation
482

 
232

Net cash provided by financing activities
135,347

 
71,521

Net decrease in cash and cash equivalents
(763
)
 
(6,621
)
Cash and cash equivalents at beginning of period
211,571

 
161,583

Cash and cash equivalents at end of period
$
210,808

 
$
154,962

Supplemental disclosures
 
 
 
Cash paid for interest
$
12,624

 
$
10,586

Cash paid for income taxes
$
16,411

 
$
5,994

Noncash transactions:
 
 
 
Transfers of loans to other real estate owned
$
3,508

 
$
6,930

Financed sales of other real estate owned
$
150

 
$
637

Transfers of loans held for sale to loan portfolio
$
14,375

 
$

Common stock issued in merger and acquisition transaction
$
55,290

 
$


See Notes to Consolidated Financial Statements.

5


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, Georgia, north and central Alabama and north Florida.
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 (“GAAP”) 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 GAAP 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. Certain prior year amounts have been reclassified to conform to the current year presentation. 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, 2015 filed with the Securities and Exchange Commission on February 29, 2016.
Business Combinations: The Company completed its acquisitions of Heritage Financial Group, Inc. (“Heritage”) and KeyWorth Bank ("KeyWorth") on July 1, 2015 and April 1, 2016, respectively. The acquired institutions' financial condition and results of operations are included in the Company's results as of the respective acquisition dates.
Use of Estimates: The preparation of financial statements in conformity with GAAP 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. The Company has determined that no significant events occurred after June 30, 2016 but prior to the issuance of these financial statements that would have a material impact on its Consolidated Financial Statements.

Impact of Recently-Issued Accounting Standards and Pronouncements:

On June 16, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The update will significantly change the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the asset's remaining life. The FASB describes this impairment recognition model as the current expected credit loss (“CECL”) model and believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model would include loans, held-to-maturity debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. For public companies, this update becomes effective for interim and annual periods beginning after December 15, 2019. Management is currently evaluating the impact this ASU will have on the Company’s consolidated financial statements and will continue to monitor FASB’s progress on this topic.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718):  Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).  ASU 2016-09 is intended to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flow; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes. The amendments of ASU 2016-09 are effective for interim and annual periods beginning after December 15, 2016.  Management is currently evaluating the impact this ASU will have on the Company’s consolidated financial statements.
 
In March 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting (“ASU 2016-07”).  ASU 2016-07 requires an investor to initially apply the equity method of accounting from the date it qualifies for that method, i.e., the date the investor obtains significant influence over the operating and financial policies of an investee. The ASU eliminates the previous requirement to retroactively adjust the investment and record a cumulative catch up for the periods that the investment had been held but did not qualify for the equity method of

6


accounting. For public business entities, the amendments in ASU 2016-07 are effective for interim and annual periods beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method.  Management is currently evaluating the provisions of ASU 2016-07 to determine the potential impact the new standard will have on the Company’s consolidated financial statements.
 
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 amends the accounting model and disclosure requirements for leases.  The current accounting model for leases distinguishes between capital leases, which are recognized on-balance sheet, and operating leases, which are not.  Under the new standard, the lease classifications are defined as finance leases, which are similar to capital leases under current GAAP, and operating leases.  Further, a lessee will recognize a lease liability and a right-of-use asset for all leases with a term greater than 12 months on its balance sheet regardless of the lease’s classification, which may significantly increase reported assets and liabilities.  The accounting model and disclosure requirements for lessors remains substantially unchanged from current GAAP.  ASU 2016-02 is effective for annual and interim periods in fiscal years beginning after December 15, 2018.   Management is currently evaluating the impact ASU 2016-02 will have on the Company's financial position and results of operations as well as its consolidated financial statements.
 
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10); Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  ASU 2016-01 revises the accounting for the classification and measurement of investments in equity securities and revises the presentation of certain fair value changes for financial liabilities measured at fair value.  For equity securities, the guidance in ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income.  For financial liabilities that are measured at fair value in accordance with the fair value option, the guidance requires presenting, in other comprehensive income, the change in fair value that relates to a change in instrument-specific credit risk. ASU 2016-01 also eliminates the disclosure assumptions used to estimate fair value for financial instruments measured at amortized cost and requires disclosure of an exit price notion in determining the fair value of financial instruments measured at amortized cost.  ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017.  Management is currently evaluating the impact ASU 2016-01 will have on the Company's financial position and results of operations as well as 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, 2016
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
34,093

 
$
49

 
$
(15
)
 
$
34,127

Obligations of states and political subdivisions
355,052

 
20,595

 
(6
)
 
375,641

 
$
389,145

 
$
20,644

 
$
(21
)
 
$
409,768

December 31, 2015
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
101,155

 
$
26

 
$
(1,214
)
 
$
99,967

Obligations of states and political subdivisions
357,245

 
16,636

 
(95
)
 
373,786

 
$
458,400

 
$
16,662

 
$
(1,309
)
 
$
473,753





7

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, 2016
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
2,080

 
$
140

 
$

 
$
2,220

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
401,861

 
6,757

 
(314
)
 
408,304

Government agency collateralized mortgage obligations
166,616

 
2,301

 
(870
)
 
168,047

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
52,975

 
1,952

 
(29
)
 
54,898

Government agency collateralized mortgage obligations
4,378

 
260

 

 
4,638

Trust preferred securities
24,675

 

 
(6,496
)
 
18,179

Other debt securities
17,587

 
583

 
(9
)
 
18,161

Other equity securities

 

 

 

 
$
670,172

 
$
11,993

 
$
(7,718
)
 
$
674,447

 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
December 31, 2015
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,093

 
$
126

 
$
(19
)
 
$
6,200

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
362,669

 
3,649

 
(1,778
)
 
364,540

Government agency collateralized mortgage obligations
168,916

 
1,449

 
(2,305
)
 
168,060

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
58,864

 
1,002

 
(107
)
 
59,759

Government agency collateralized mortgage obligations
4,947

 
158

 
(1
)
 
5,104

Trust preferred securities
24,770

 

 
(5,301
)
 
19,469

Other debt securities
18,899

 
468

 
(34
)
 
19,333

Other equity securities
2,500

 
1,840

 

 
4,340

 
$
647,658

 
$
8,692

 
$
(9,545
)
 
$
646,805


During the second quarter of 2016, the Company sold an "other equity security" with a carrying value of $2,767 at the time of sale for net proceeds of $4,024 resulting in a gain of $1,257. Additionally, during the first quarter of 2016 the Company sold an "other equity security" with a carrying value of $75 at the time of sale for net proceeds of $4 resulting in a loss of $71. 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.


8

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




Gross realized gains on sales of securities available for sale for the three and six months ended June 30, 2016 and 2015 were as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Gross gains on sales of securities available for sale
$
1,257

 
$
96

 
$
1,257

 
$
96

Gross losses on sales of securities available for sale

 

 
(71
)
 

Gains on sales of securities available for sale, net
$
1,257

 
$
96

 
$
1,186

 
$
96


At June 30, 2016 and December 31, 2015, securities with a carrying value of $681,940 and $679,492, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $35,124 and $39,275 were pledged as collateral for short-term borrowings and derivative instruments at June 30, 2016 and December 31, 2015, respectively.
The amortized cost and fair value of securities at June 30, 2016 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
$
18,252

 
$
18,408

 
$

 
$

Due after one year through five years
97,438

 
101,466

 
2,080

 
2,220

Due after five years through ten years
155,513

 
164,074

 

 

Due after ten years
117,942

 
125,820

 
24,675

 
18,179

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
401,861

 
408,304

Government agency collateralized mortgage obligations

 

 
166,616

 
168,047

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities

 

 
52,975

 
54,898

Government agency collateralized mortgage obligations

 

 
4,378

 
4,638

Other debt securities

 

 
17,587

 
18,161

Other equity securities

 

 

 

 
$
389,145

 
$
409,768

 
$
670,172

 
$
674,447



9

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, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
1
 
$
4,997

 
$
(3
)
 
2
 
$
9,981

 
$
(12
)
 
3
 
$
14,978

 
$
(15
)
Obligations of states and political subdivisions
2
 
530

 
(6
)
 
0
 

 

 
2
 
530

 
(6
)
Total
3
 
$
5,527

 
$
(9
)
 
2
 
$
9,981

 
$
(12
)
 
5
 
15,508

 
$
(21
)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
10
 
$
31,567

 
$
(414
)
 
8
 
$
38,688

 
$
(800
)
 
18
 
$
70,255

 
$
(1,214
)
Obligations of states and political subdivisions
6
 
4,815

 
(53
)
 
7
 
4,921

 
(42
)
 
13
 
9,736

 
(95
)
Total
16
 
$
36,382

 
$
(467
)
 
15
 
$
43,609

 
$
(842
)
 
31
 
$
79,991

 
$
(1,309
)
Available for Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
0
 
$

 
$

 
0
 
$

 
$

 
0
 
$

 
$

Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
10
 
17,767

 
(52
)
 
7
 
18,526

 
(262
)
 
17
 
36,293

 
(314
)
Government agency collateralized mortgage obligations
8
 
23,540

 
(159
)
 
13
 
38,135

 
(711
)
 
21
 
61,675

 
(870
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
4
 
6,120

 
(29
)
 
0
 

 

 
4
 
6,120

 
(29
)
Government agency collateralized mortgage obligations
0
 

 

 
0
 

 

 
0
 

 

Trust preferred securities
0
 

 

 
3
 
18,179

 
(6,496
)
 
3
 
18,179

 
(6,496
)
Other debt securities
2
 
3,425

 
(3
)
 
1
 
1,354

 
(6
)
 
3
 
4,779

 
(9
)
Total
24
 
$
50,852

 
$
(243
)
 
24
 
$
76,194

 
$
(7,475
)
 
48
 
$
127,046

 
$
(7,718
)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
1
 
$
3,981

 
$
(19
)
 
0
 
$

 
$

 
1
 
$
3,981

 
$
(19
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
34
 
130,306

 
(937
)
 
9
 
27,431

 
(841
)
 
43
 
157,737

 
(1,778
)
Government agency collateralized mortgage obligations
25
 
52,128

 
(347
)
 
16
 
51,574

 
(1,958
)
 
41
 
103,702

 
(2,305
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
8
 
16,782

 
(104
)
 
1
 
814

 
(3
)
 
9
 
17,596

 
(107
)
Government agency collateralized mortgage obligations
1
 
1,882

 
(1
)
 
0
 

 

 
1
 
1,882

 
(1
)
Trust preferred securities
0
 

 

 
3
 
19,469

 
(5,301
)
 
3
 
19,469

 
(5,301
)
Other debt securities
1
 
1,316

 
(3
)
 
2
 
3,866

 
(31
)
 
3
 
5,182

 
(34
)
Other equity securities
0
 

 

 
0
 

 

 
0
 

 

Total
70
 
$
206,395

 
$
(1,411
)
 
31
 
$
103,154

 
$
(8,134
)
 
101
 
$
309,549

 
$
(9,545
)
 

10

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 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 months ended June 30, 2016 or 2015.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $24,675 and $24,770 and a fair value of $18,179 and $19,469 at June 30, 2016 and December 31, 2015, respectively. At June 30, 2016, the investments in pooled trust preferred securities consisted 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 June 30, 2016, 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, 2016.
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 a nonaccruing asset at June 30, 2016, 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, 2016:
 
Name
Single/
Pooled
 
Class/
Tranche
 
Amortized
Cost
 
Fair
Value
 
Unrealized
Loss
 
Lowest
Credit
Rating
 
Issuers
Currently in
Deferral or
Default
XXIII
Pooled
 
B-2
 
$
8,377

 
$
5,621

 
$
(2,756
)
 
Baa3
 
17
%
XXIV
Pooled
 
B-2
 
12,077

 
9,578

 
(2,499
)
 
Caa2
 
28
%
XXVI
Pooled
 
B-2
 
4,221

 
2,980

 
(1,241
)
 
Ba3
 
25
%
 
 
 
 
 
$
24,675

 
$
18,179

 
$
(6,496
)
 
 
 
 


11

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:
 
 
2016
 
2015
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,
2016
 
December 31, 2015
Commercial, financial, agricultural
$
682,936

 
$
636,837

Lease financing
44,989

 
35,978

Real estate – construction
452,731

 
357,665

Real estate – 1-4 family mortgage
1,849,046

 
1,735,323

Real estate – commercial mortgage
2,823,676

 
2,533,729

Installment loans to individuals
113,924

 
115,093

Gross loans
5,967,302

 
5,414,625

Unearned income
(1,873
)
 
(1,163
)
Loans, net of unearned income
5,965,429

 
5,413,462

Allowance for loan losses
(44,098
)
 
(42,437
)
Net loans
$
5,921,331

 
$
5,371,025


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.

12

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, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,337

 
$
1,466

 
$
678,795

 
$
681,598

 
$

 
$
758

 
$
580

 
$
1,338

 
$
682,936

Lease financing

 

 
44,989

 
44,989

 

 

 

 

 
44,989

Real estate – construction
1,482

 
675

 
450,574

 
452,731

 

 

 

 

 
452,731

Real estate – 1-4 family mortgage
8,736

 
5,926

 
1,823,323

 
1,837,985

 
180

 
3,218

 
7,663

 
11,061

 
1,849,046

Real estate – commercial mortgage
7,802

 
8,813

 
2,793,656

 
2,810,271

 
2,133

 
3,229

 
8,043

 
13,405

 
2,823,676

Installment loans to individuals
291

 
274

 
113,199

 
113,764

 

 
37

 
123

 
160

 
113,924

Unearned income

 

 
(1,873
)
 
(1,873
)
 

 

 

 

 
(1,873
)
Total
$
19,648

 
$
17,154

 
$
5,902,663

 
$
5,939,465

 
$
2,313

 
$
7,242

 
$
16,409

 
$
25,964

 
$
5,965,429

December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,296

 
$
1,077

 
$
634,037

 
$
636,410

 
$
30

 
$
133

 
$
264

 
$
427

 
$
636,837

Lease financing

 

 
35,978

 
35,978

 

 

 

 

 
35,978

Real estate – construction
69

 
176

 
357,420

 
357,665

 

 

 

 

 
357,665

Real estate – 1-4 family mortgage
9,196

 
6,457

 
1,707,230

 
1,722,883

 
528

 
3,663

 
8,249

 
12,440

 
1,735,323

Real estate – commercial mortgage
4,849

 
8,581

 
2,504,192

 
2,517,622

 
568

 
2,263

 
13,276

 
16,107

 
2,533,729

Installment loans to individuals
260

 
102

 
114,671

 
115,033

 

 
53

 
7

 
60

 
115,093

Unearned income

 

 
(1,163
)
 
(1,163
)
 

 

 

 

 
(1,163
)
Total
$
15,670

 
$
16,393

 
$
5,352,365

 
$
5,384,428

 
$
1,126

 
$
6,112

 
$
21,796

 
$
29,034

 
$
5,413,462

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.

13

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


Loans accounted for under FASB Accounting Standards Codification Topic (“ASC”) 310-20, “Nonrefundable Fees and Other Cost” (“ASC 310-20”), and which are impaired loans recognized in conformity with 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, 2016
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,306

 
$
1,295

 
$

 
$
1,295

 
$
164

Lease financing

 

 

 

 

Real estate – construction
167

 

 
167

 
167

 

Real estate – 1-4 family mortgage
19,033

 
17,673

 

 
17,673

 
4,924

Real estate – commercial mortgage
16,872

 
13,285

 

 
13,285

 
2,531

Installment loans to individuals
78

 
78

 

 
78

 

Total
$
37,456

 
$
32,331

 
$
167

 
$
32,498

 
$
7,619

December 31, 2015
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,308

 
$
358

 
$
12

 
$
370

 
$
6

Lease financing

 

 

 

 

Real estate – construction
2,710

 
2,698

 

 
2,698

 
20

Real estate – 1-4 family mortgage
18,193

 
16,650

 

 
16,650

 
4,475

Real estate – commercial mortgage
20,169

 
16,819

 

 
16,819

 
3,099

Installment loans to individuals
90

 
90

 

 
90

 

Totals
$
42,470

 
$
36,615

 
$
12

 
$
36,627

 
$
7,600


The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-20 and which are impaired loans for the periods presented:

 
Three Months Ended
 
Three Months Ended
 
June 30, 2016
 
June 30, 2015
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
1,470

 
$
23

 
$
785

 
$
7

Lease financing

 

 

 

Real estate – construction
117

 
2

 

 

Real estate – 1-4 family mortgage
17,800

 
128

 
17,712

 
140

Real estate – commercial mortgage
14,164

 
126

 
24,683

 
185

Installment loans to individuals
79

 
1

 
437

 

Total
$
33,630

 
$
280

 
$
43,617

 
$
332


14

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


 
Six Months Ended
 
Six Months Ended
 
June 30, 2016
 
June 30, 2015
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
1,506

 
$
25

 
$
803

 
$
14

Lease financing

 

 

 

Real estate – construction
58

 
2

 

 

Real estate – 1-4 family mortgage
18,049

 
209

 
17,869

 
207

Real estate – commercial mortgage
14,460

 
240

 
25,212

 
363

Installment loans to individuals
80

 
1

 
441

 

Total
$
34,153

 
$
477

 
$
44,325

 
$
584


Loans accounted for under ASC 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”), and which are impaired loans recognized in conformity with 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, 2016
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
23,495

 
$
4,222

 
$
9,199

 
$
13,421

 
$
401

Lease financing

 

 

 

 

Real estate – construction
3,587

 

 
3,157

 
3,157

 

Real estate – 1-4 family mortgage
103,248

 
17,677

 
68,747

 
86,424

 
344

Real estate – commercial mortgage
269,205

 
57,800

 
154,862

 
212,662

 
1,426

Installment loans to individuals
2,989

 
413

 
1,882

 
2,295

 
1

Total
$
402,524

 
$
80,112

 
$
237,847

 
$
317,959

 
$
2,172

December 31, 2015
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
27,049

 
$
5,197

 
$
11,292

 
$
16,489

 
$
353

Lease financing