Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-Q
________________________________________________________
(Mark One)
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ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2017
Or
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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)
________________________________________________________
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Mississippi | | 64-0676974 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
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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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ý | Accelerated filer | o |
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Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
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Emerging growth company | o | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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, 2017, 49,315,127 shares of the registrant’s common stock, $5.00 par value per share, were outstanding.
Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended June 30, 2017
CONTENTS
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PART I | | |
Item 1. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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PART II | | |
Item 1A. | | |
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Item 2. | | |
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Item 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Renasant Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Data) |
| | | | | | | |
| (Unaudited) | | |
| June 30, 2017 | | December 31, 2016 |
Assets | | | |
Cash and due from banks | $ | 152,316 |
| | $ | 160,570 |
|
Interest-bearing balances with banks | 83,745 |
| | 145,654 |
|
Cash and cash equivalents | 236,061 |
| | 306,224 |
|
Securities held to maturity (fair value of $353,064 and $362,893, respectively) | 339,619 |
| | 356,282 |
|
Securities available for sale, at fair value | 737,006 |
| | 674,248 |
|
Mortgage loans held for sale, at fair value | 232,398 |
| | 177,866 |
|
Loans, net of unearned income: | | | |
Non purchased loans and leases | 5,058,898 |
| | 4,713,572 |
|
Purchased loans | 1,312,109 |
| | 1,489,137 |
|
Total loans, net of unearned income | 6,371,007 |
| | 6,202,709 |
|
Allowance for loan losses | (44,149 | ) | | (42,737 | ) |
Loans, net | 6,326,858 |
| | 6,159,972 |
|
Premises and equipment, net | 178,277 |
| | 179,223 |
|
Other real estate owned: | | | |
Non purchased | 4,305 |
| | 5,929 |
|
Purchased | 15,409 |
| | 17,370 |
|
Total other real estate owned, net | 19,714 |
| | 23,299 |
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Goodwill | 470,534 |
| | 470,534 |
|
Other intangible assets, net | 21,018 |
| | 24,074 |
|
Bank-owned life insurance | 154,312 |
| | 152,305 |
|
Mortgage servicing rights | 31,826 |
| | 26,302 |
|
Other assets | 124,649 |
| | 149,522 |
|
Total assets | $ | 8,872,272 |
| | $ | 8,699,851 |
|
Liabilities and shareholders’ equity | | | |
Liabilities | | | |
Deposits | | | |
Noninterest-bearing | $ | 1,642,863 |
| | $ | 1,561,357 |
|
Interest-bearing | 5,559,162 |
| | 5,497,780 |
|
Total deposits | 7,202,025 |
| | 7,059,137 |
|
Short-term borrowings | 120,121 |
| | 109,676 |
|
Long-term debt | 191,956 |
| | 202,459 |
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Other liabilities | 86,384 |
| | 95,696 |
|
Total liabilities | 7,600,486 |
| | 7,466,968 |
|
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; 45,107,066 shares issued; 44,430,335 and 44,332,273 shares outstanding, respectively | 225,535 |
| | 225,535 |
|
Treasury stock, at cost | (20,107 | ) | | (21,692 | ) |
Additional paid-in capital | 706,103 |
| | 707,408 |
|
Retained earnings | 370,723 |
| | 337,536 |
|
Accumulated other comprehensive loss, net of taxes | (10,468 | ) | | (15,904 | ) |
Total shareholders’ equity | 1,271,786 |
| | 1,232,883 |
|
Total liabilities and shareholders’ equity | $ | 8,872,272 |
| | $ | 8,699,851 |
|
See Notes to Consolidated Financial Statements.
Renasant Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In Thousands, Except Share Data)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Interest income | | | | | | | |
Loans | $ | 80,133 |
| | $ | 76,785 |
| | $ | 154,540 |
| | $ | 146,022 |
|
Securities | | | | | | | |
Taxable | 4,627 |
| | 4,654 |
| | 8,979 |
| | 9,115 |
|
Tax-exempt | 2,310 |
| | 2,465 |
| | 4,884 |
| | 4,953 |
|
Other | 509 |
| | 104 |
| | 1,065 |
| | 177 |
|
Total interest income | 87,579 |
| | 84,008 |
| | 169,468 |
| | 160,267 |
|
Interest expense | | | | | | | |
Deposits | 5,314 |
| | 4,420 |
| | 10,463 |
| | 8,380 |
|
Borrowings | 2,662 |
| | 2,431 |
| | 5,387 |
| | 4,676 |
|
Total interest expense | 7,976 |
| | 6,851 |
| | 15,850 |
| | 13,056 |
|
Net interest income | 79,603 |
| | 77,157 |
| | 153,618 |
| | 147,211 |
|
Provision for loan losses | 1,750 |
| | 1,430 |
| | 3,250 |
| | 3,230 |
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Net interest income after provision for loan losses | 77,853 |
| | 75,727 |
| | 150,368 |
| | 143,981 |
|
Noninterest income | | | | | | | |
Service charges on deposit accounts | 7,958 |
| | 7,521 |
| | 15,889 |
| | 15,512 |
|
Fees and commissions | 5,470 |
| | 4,877 |
| | 10,669 |
| | 9,121 |
|
Insurance commissions | 2,181 |
| | 2,175 |
| | 4,041 |
| | 4,137 |
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Wealth management revenue | 3,037 |
| | 2,872 |
| | 5,921 |
| | 5,763 |
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Mortgage banking income | 12,424 |
| | 13,420 |
| | 22,928 |
| | 25,335 |
|
Net gain on sales of securities | — |
| | 1,257 |
| | — |
| | 1,186 |
|
BOLI income | 985 |
| | 996 |
| | 2,098 |
| | 1,950 |
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Other | 2,210 |
| | 2,468 |
| | 4,740 |
| | 5,884 |
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Total noninterest income | 34,265 |
| | 35,586 |
| | 66,286 |
| | 68,888 |
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Noninterest expense | | | | | | | |
Salaries and employee benefits | 45,014 |
| | 45,387 |
| | 87,223 |
| | 87,780 |
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Data processing | 3,835 |
| | 4,502 |
| | 8,069 |
| | 8,660 |
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Net occupancy and equipment | 8,814 |
| | 8,531 |
| | 18,133 |
| | 16,755 |
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Other real estate owned | 781 |
| | 1,614 |
| | 1,313 |
| | 2,571 |
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Professional fees | 1,882 |
| | 1,846 |
| | 3,949 |
| | 3,635 |
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Advertising and public relations | 2,430 |
| | 1,742 |
| | 4,022 |
| | 3,379 |
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Intangible amortization | 1,493 |
| | 1,742 |
| | 3,056 |
| | 3,439 |
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Communications | 1,908 |
| | 2,040 |
| | 3,771 |
| | 4,211 |
|
Extinguishment of debt | — |
| | 329 |
| | 205 |
| | 329 |
|
Merger and conversion related expenses | 3,044 |
| | 2,807 |
| | 3,389 |
| | 3,755 |
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Other | 5,640 |
| | 6,719 |
| | 11,020 |
| | 12,559 |
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Total noninterest expense | 74,841 |
| | 77,259 |
| | 144,150 |
| | 147,073 |
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Income before income taxes | 37,277 |
| | 34,054 |
| | 72,504 |
| | 65,796 |
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Income taxes | 11,993 |
| | 11,154 |
| | 23,248 |
| | 21,680 |
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Net income | $ | 25,284 |
| | $ | 22,900 |
| | $ | 49,256 |
| | $ | 44,116 |
|
Basic earnings per share | $ | 0.57 |
| | $ | 0.54 |
| | $ | 1.11 |
| | $ | 1.07 |
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Diluted earnings per share | $ | 0.57 |
| | $ | 0.54 |
| | $ | 1.11 |
| | $ | 1.06 |
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Cash dividends per common share | $ | 0.18 |
| | $ | 0.18 |
| | $ | 0.36 |
| | $ | 0.35 |
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See Notes to Consolidated Financial Statements.
Renasant Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands, Except Share Data)
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| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 25,284 |
| | $ | 22,900 |
| | $ | 49,256 |
| | $ | 44,116 |
|
Other comprehensive income, net of tax: | | | | | | | |
Securities available for sale: | | | | | | | |
Unrealized holding gains on securities | 2,569 |
| | 812 |
| | 5,476 |
| | 3,875 |
|
Reclassification adjustment for gains realized in net income | — |
| | (772 | ) | | — |
| | (728 | ) |
Amortization of unrealized holding gains on securities transferred to the held to maturity category | (18 | ) | | (18 | ) | | (169 | ) | | (38 | ) |
Total securities | 2,551 |
| | 22 |
| | 5,307 |
| | 3,109 |
|
Derivative instruments: | | | | | | | |
Unrealized holding (losses) gains on derivative instruments | (165 | ) | | (428 | ) | | 4 |
| | (1,694 | ) |
Total derivative instruments | (165 | ) | | (428 | ) | | 4 |
| | (1,694 | ) |
Defined benefit pension and post-retirement benefit plans: | | | | | | | |
Amortization of net actuarial loss recognized in net periodic pension cost | 56 |
| | 80 |
| | 125 |
| | 152 |
|
Total defined benefit pension and post-retirement benefit plans | 56 |
| | 80 |
| | 125 |
| | 152 |
|
Other comprehensive income (loss), net of tax | 2,442 |
| | (326 | ) | | 5,436 |
| | 1,567 |
|
Comprehensive income | $ | 27,726 |
| | $ | 22,574 |
| | $ | 54,692 |
| | $ | 45,683 |
|
See Notes to Consolidated Financial Statements.
Renasant Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) |
| | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
Operating activities | | | |
Net income | $ | 49,256 |
| | $ | 44,116 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Provision for loan losses | 3,250 |
| | 3,230 |
|
Depreciation, amortization and accretion | 2,625 |
| | 1,309 |
|
Deferred income tax expense | 2,219 |
| | 3,845 |
|
Funding of mortgage loans held for sale | (772,456 | ) | | (1,006,507 | ) |
Proceeds from sales of mortgage loans held for sale | 729,532 |
| | 968,800 |
|
Gains on sales of mortgage loans held for sale | (11,608 | ) | | (12,971 | ) |
Gains on sales of securities | — |
| | (1,186 | ) |
Penalty on prepayment of debt | 205 |
| | 329 |
|
Losses on sales of premises and equipment | 546 |
| | 102 |
|
Stock-based compensation expense | 2,411 |
| | 1,715 |
|
Decrease in FDIC loss-share indemnification asset, net of accretion | — |
| | 1,049 |
|
Decrease (increase) in other assets | 10,428 |
| | (6,613 | ) |
Decrease in other liabilities | (8,715 | ) | | (3,464 | ) |
Net cash provided by (used in) operating activities | 7,693 |
| | (6,246 | ) |
Investing activities | | | |
Purchases of securities available for sale | (119,766 | ) | | (34,651 | ) |
Proceeds from sales of securities available for sale | 2,946 |
| | 4,028 |
|
Proceeds from call/maturities of securities available for sale | 60,928 |
| | 72,069 |
|
Purchases of securities held to maturity | — |
| | (9,073 | ) |
Proceeds from call/maturities of securities held to maturity | 15,507 |
| | 81,510 |
|
Net increase in loans | (163,349 | ) | | (272,514 | ) |
Purchases of premises and equipment | (7,668 | ) | | (5,651 | ) |
Proceeds from sales of premises and equipment | 1,255 |
| | 1,198 |
|
Proceeds from sales of other assets | 7,385 |
| | 7,957 |
|
Net cash received in acquisition of businesses | — |
| | 25,263 |
|
Net cash used in investing activities | (202,762 | ) | | (129,864 | ) |
Financing activities | | | |
Net increase in noninterest-bearing deposits | 81,506 |
| | 107,969 |
|
Net increase in interest-bearing deposits | 62,405 |
| | 25,791 |
|
Net increase in short-term borrowings | 10,445 |
| | 20,361 |
|
Proceeds from long-term borrowings | — |
| | 277 |
|
Repayment of long-term debt | (11,063 | ) | | (5,436 | ) |
Cash paid for dividends | (16,068 | ) | | (14,498 | ) |
Net stock-based compensation transactions | (2,319 | ) | | 401 |
|
Excess tax benefit from stock-based compensation | — |
| | 482 |
|
Net cash provided by financing activities | 124,906 |
| | 135,347 |
|
Net decrease in cash and cash equivalents | (70,163 | ) | | (763 | ) |
Cash and cash equivalents at beginning of period | 306,224 |
| | 211,571 |
|
Cash and cash equivalents at end of period | $ | 236,061 |
| | $ | 210,808 |
|
Supplemental disclosures | | | |
Cash paid for interest | $ | 16,155 |
| | $ | 12,624 |
|
Cash paid for income taxes | $ | 12,701 |
| | $ | 16,411 |
|
Noncash transactions: | | | |
Transfers of loans to other real estate owned | $ | 4,227 |
| | $ | 3,508 |
|
Financed sales of other real estate owned | $ | 257 |
| | $ | 150 |
|
Transfers of loans held for sale to loan portfolio | $ | — |
| | $ | 14,375 |
|
Common stock issued in acquisition of businesses | $ | — |
| | $ | 55,290 |
|
See Notes to Consolidated Financial Statements.
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 1 – 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, 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/A for the year ended December 31, 2016 filed with the Securities and Exchange Commission on February 28, 2017.
Business Combinations: The Company completed its acquisition of KeyWorth Bank (“KeyWorth”) on April 1, 2016. KeyWorth’s financial condition and results of operations are included in the Company's financial condition and results of operations as of the acquisition date. The Company also recently completed its acquisition of Metropolitan BancGroup, Inc. (“Metropolitan”); the Metropolitan acquisition was completed on July 1, 2017, after the date of the financial statements included in this Form 10-Q.
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. On July 1, 2017, the Company completed its previously-announced acquisition of Metropolitan. The terms of the merger with Metropolitan are disclosed in Note 2, “Mergers and Acquisitions”. The Company has determined that no other significant events occurred after June 30, 2017 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:
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of this standard to annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the impact, if any, ASU 2014-09 will have on its financial position and results of operations, and its financial statement disclosures.
In January 2016, FASB issued ASU 2016-01, “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. The Company is evaluating the impact, if any, that ASU 2016-01 will have on its financial position and results of operations, and its financial statement disclosures.
In February 2016, FASB issued ASU 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. The Company is currently evaluating the impact ASU 2016-02 will have on its financial position and results of operations, and its financial statement disclosures, and the expected results include the recognition of leased assets and related lease liabilities on the balance sheet, along with leasehold amortization and interest expense recognized in the statement of income.
In March 2016, FASB issued ASU 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 flows; (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 Company adopted ASU 2016-09 beginning January 1, 2017 and, as a result recognized as income tax expense in the Company's consolidated statement of income for the six months ended June 30, 2017 an excess tax benefit realized from the exercise of stock options and vesting of restricted stock. Furthermore, the presentation of certain elements of share-based payment transactions in the Company's consolidated statements of cash flows was updated to comply with the standard update.
In June 2016, FASB issued ASU 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. 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. The Company has formed an implementation committee comprised of both accounting and credit employees to guide Renasant Bank through the implementation of ASU 2016-13. Currently, this committee is gaining an understanding of the potential impact of the CECL model, reviewing the model requirements and ensuring data integrity across all reporting systems. The Company has also engaged consulting firms and software providers to assist in evaluating the varying approaches to the implementation of the CECL model.
In August 2016, FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows, including (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions and (8) separately identifiable cash flows and application of the predominance principle. For public companies, this amendment becomes effective for interim and annual periods beginning after December 15, 2017. ASU 2016-15 only impacts the presentation of specific items within the Statement of Cash Flows and is not expected to have a material impact on the Company's financial statements.
In January 2017, FASB issued ASU 2017-01, “Business Combinations (Topic 805), Clarifying the Definition of a Business” (“ASU 2017-01”), that changes the definition of a business when evaluating whether transactions should be accounted for as the acquisition of assets or the acquisition of a business. ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the assets acquired are concentrated in a single asset or a group of similar identifiable assets; if so, the acquired assets or group of similar identifiable assets is not considered a business. In addition, the guidance requires that, to be considered a business, the acquired assets must include an input and a substantive process that together significantly contribute to the ability to create output. The ASU removes the evaluation of whether a market participant could replace any of the missing elements. ASU 2017-01 is effective for interim and annual periods beginning after December 15, 2017 and is not expected to have a material impact on the Company’s financial statements.
In January 2017, FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323) Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings” (“ASU 2017-03”), that provides guidance on additional qualitative disclosures required when the impact of the adoption of ASU 2014-09, ASU 2016-02 and ASU 2016-13 on a registrant's financial statements cannot reasonably be estimated by the registrant. ASU 2017-03 was effective when issued and the appropriate disclosures have been added where necessary.
In January 2017, FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350)” (“ASU 2017-04”). ASU 2017-04 will amend and simplify current goodwill impairment testing by eliminating certain testing under the current provisions. Under the new guidance, an entity should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the quantitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. ASU 2017-04 will be effective for interim and annual periods beginning after December 15, 2019 and is not expected to have a material impact on the Company’s financial statements.
In March 2017, FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”). ASU 2017-07 requires employers to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. These amendments also allow only the service cost component to be eligible for capitalization when applicable. ASU 2017-07 will be effective for interim and annual periods beginning after December 15, 2017. The Company is evaluating the effect that ASU 2017-07 will have on its financial position and results of operations and its financial statement disclosures.
In March 2017, FASB issued ASU 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”). ASU 2017-08 requires the amortization period for certain callable debt securities held at a premium to be the earliest call date. ASU 2017-08 will be effective for interim and annual periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017-08 will have on its financial position and results of operations and its financial statement disclosures.
In May 2017, FASB issued ASU 2017-09, “Compensation - Stock Compensation (Subtopic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 will be effective for interim and annual periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017-09 will have on its financial position and results of operations and its financial statement disclosures.
Note 2 – Mergers and Acquisitions
(In Thousands, Except Share Data)
Acquisition of Metropolitan BancGroup, Inc.
Effective July 1, 2017, the Company completed its acquisition of Metropolitan, the parent company of Metropolitan Bank, in a transaction valued at approximately $218,000. The Company issued 4,883,182 shares of common stock and paid approximately $4,764 to Metropolitan stock option holders for 100% of the voting equity interest in Metropolitan. At closing, Metropolitan merged with and into Renasant, with Renasant the surviving corporation in the merger; immediately thereafter, Metropolitan Bank merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger.
Prior to any determination of purchase accounting adjustments, as a result of the acquisition, the Company acquired total assets of approximately $1,220,000, which included total loans of approximately $990,000, total deposits of approximately $940,000, and eight banking locations in Nashville and Memphis, Tennessee and the Jackson, Mississippi Metropolitan Statistical Area. The Company is finalizing the fair value of assets acquired and liabilities assumed as part of the acquisition.
Acquisition of KeyWorth Bank
Effective April 1, 2016, the Company completed its acquisition of KeyWorth in a transaction valued at approximately $58,884. The Company issued 1,680,021 shares of common stock and paid approximately $3,594 to KeyWorth stock option and warrant holders for 100% of the voting equity interest in KeyWorth. At closing, KeyWorth merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger.
As a result of the KeyWorth acquisition, the Company acquired total assets with a fair value of $415,232, total loans with a fair value of $272,330 and total deposits with a fair value of $348,961, and six banking locations in the Atlanta metropolitan area.
The Company recorded approximately $22,643 in intangible assets which consist of goodwill of $20,633 and a core deposit intangible of $2,010. Goodwill resulted from a combination of revenue enhancements from expansion into new markets and efficiencies resulting from operational synergies. The fair value of the core deposit intangible is being amortized on an accelerated
basis over the estimated useful life, currently expected to be approximately 10 years. The goodwill is not deductible for income tax purposes.
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 3 – 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, 2017 | | | | | | | |
Obligations of other U.S. Government agencies and corporations | $ | 12,602 |
| | $ | 6 |
| | $ | (77 | ) | | $ | 12,531 |
|
Obligations of states and political subdivisions | 327,017 |
| | 13,657 |
| | (141 | ) | | 340,533 |
|
| $ | 339,619 |
| | $ | 13,663 |
| | $ | (218 | ) | | $ | 353,064 |
|
December 31, 2016 | | | | | | | |
Obligations of other U.S. Government agencies and corporations | $ | 14,101 |
| | $ | 4 |
| | $ | (187 | ) | | $ | 13,918 |
|
Obligations of states and political subdivisions | 342,181 |
| | 8,572 |
| | (1,778 | ) | | 348,975 |
|
| $ | 356,282 |
| | $ | 8,576 |
| | $ | (1,965 | ) | | $ | 362,893 |
|
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, 2017 | | | | | | | |
Obligations of other U.S. Government agencies and corporations | $ | 2,053 |
| | $ | 81 |
| | $ | — |
| | $ | 2,134 |
|
Residential mortgage backed securities: | | | | | | | |
Government agency mortgage backed securities | 419,848 |
| | 3,317 |
| | (2,288 | ) | | 420,877 |
|
Government agency collateralized mortgage obligations | 222,110 |
| | 1,133 |
| | (1,948 | ) | | 221,295 |
|
Commercial mortgage backed securities: | | | | | | | |
Government agency mortgage backed securities | 50,167 |
| | 1,032 |
| | (146 | ) | | 51,053 |
|
Government agency collateralized mortgage obligations | 1,746 |
| | 8 |
| | — |
| | 1,754 |
|
Trust preferred securities | 21,793 |
| | — |
| | (4,801 | ) | | 16,992 |
|
Other debt securities | 22,519 |
| | 427 |
| | (45 | ) | | 22,901 |
|
| $ | 740,236 |
| | $ | 5,998 |
| | $ | (9,228 | ) | | $ | 737,006 |
|
|
| | | | | | | | | | | | | | | |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
December 31, 2016 | | | | | | | |
Obligations of other U.S. Government agencies and corporations | $ | 2,066 |
| | $ | 92 |
| | $ | — |
| | $ | 2,158 |
|
Residential mortgage backed securities: | | | | | | | |
Government agency mortgage backed securities | 414,019 |
| | 1,941 |
| | (6,643 | ) | | 409,317 |
|
Government agency collateralized mortgage obligations | 171,362 |
| | 831 |
| | (3,367 | ) | | 168,826 |
|
Commercial mortgage backed securities: | | | | | | | |
Government agency mortgage backed securities | 50,628 |
| | 696 |
| | (461 | ) | | 50,863 |
|
Government agency collateralized mortgage obligations | 2,528 |
| | 38 |
| | (16 | ) | | 2,550 |
|
Trust preferred securities | 23,749 |
| | — |
| | (5,360 | ) | | 18,389 |
|
Other debt securities | 22,053 |
| | 310 |
| | (218 | ) | | 22,145 |
|
| $ | 686,405 |
| | $ | 3,908 |
| | $ | (16,065 | ) | | $ | 674,248 |
|
During the first quarter of 2017, the Company sold residential mortgage backed securities with a carrying value of $2,946 at the time of sale for net proceeds of $2,946 resulting in no gain or loss on the sale. There were no securities sold during the second quarter of 2017. During the first six months of 2016, the Company sold "other equity" securities with a carrying value of $2,842 at the time of sale for net proceeds of $4,028 resulting in a net gain of $1,186.
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, 2017 and 2016, respectively, were as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Gross gains on sales of securities available for sale | $ | — |
| | $ | 1,257 |
| | $ | — |
| | $ | 1,257 |
|
Gross losses on sales of securities available for sale | — |
| | — |
| | — |
| | (71 | ) |
Gains on sales of securities available for sale, net | $ | — |
| | $ | 1,257 |
| | $ | — |
| | $ | 1,186 |
|
At June 30, 2017 and December 31, 2016, securities with a carrying value of $349,741 and $642,447, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $21,163 and $24,426 were pledged as collateral for short-term borrowings and derivative instruments at June 30, 2017 and December 31, 2016, respectively.
The amortized cost and fair value of securities at June 30, 2017 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 | $ | 14,605 |
| | $ | 14,735 |
| | $ | — |
| | $ | — |
|
Due after one year through five years | 108,014 |
| | 111,811 |
| | 2,053 |
| | 2,134 |
|
Due after five years through ten years | 129,897 |
| | 135,500 |
| | 3,040 |
| | 3,116 |
|
Due after ten years | 87,103 |
| | 91,018 |
| | 21,793 |
| | 16,992 |
|
Residential mortgage backed securities: | | | | | | | |
Government agency mortgage backed securities | — |
| | — |
| | 419,848 |
| | 420,877 |
|
Government agency collateralized mortgage obligations | — |
| | — |
| | 222,110 |
| | 221,295 |
|
Commercial mortgage backed securities: | | | | | | | |
Government agency mortgage backed securities | — |
| | — |
| | 50,167 |
| | 51,053 |
|
Government agency collateralized mortgage obligations | — |
| | — |
| | 1,746 |
| | 1,754 |
|
Other debt securities | — |
| | — |
| | 19,479 |
| | 19,785 |
|
| $ | 339,619 |
| | $ | 353,064 |
| | $ | 740,236 |
| | $ | 737,006 |
|
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, 2017 | | | | | | | | | | | | | | | | | |
Obligations of other U.S. Government agencies and corporations | 4 | | $ | 12,025 |
| | $ | (77 | ) | | 0 | | $ | — |
| | $ | — |
| | 4 | | $ | 12,025 |
| | $ | (77 | ) |
Obligations of states and political subdivisions | 17 | | 11,846 |
| | (136 | ) | | 2 | | 523 |
| | (5 | ) | | 19 | | 12,369 |
| | (141 | ) |
Total | 21 | | $ | 23,871 |
| | $ | (213 | ) | | 2 | | $ | 523 |
| | $ | (5 | ) | | 23 | | 24,394 |
| | $ | (218 | ) |
December 31, 2016 | | | | | | | | | | | | | | | | | |
Obligations of other U.S. Government agencies and corporations | 4 | | $ | 11,915 |
| | $ | (187 | ) | | 0 | | $ | — |
| | $ | — |
| | 4 | | $ | 11,915 |
| | $ | (187 | ) |
Obligations of states and political subdivisions | 102 | | 83,362 |
| | (1,778 | ) | | 0 | | — |
| | — |
| | 102 | | 83,362 |
| | (1,778 | ) |
Total | 106 | | $ | 95,277 |
| | $ | (1,965 | ) | | 0 | | $ | — |
| | $ | — |
| | 106 | | $ | 95,277 |
| | $ | (1,965 | ) |
Available for Sale: | | | | | | | | | | | | | | | | | |
June 30, 2017 | | | | | | | | | | | | | | | | | |
Obligations of other U.S. Government agencies and corporations | 0 | | $ | — |
| | $ | — |
| | 0 | | $ | — |
| | $ | — |
| | 0 | | $ | — |
| | $ | — |
|
Residential mortgage backed securities: | | | | | | | | | | | | | | | | | |
Government agency mortgage backed securities | 89 | | 213,161 |
| | (1,911 | ) | | 8 | | 16,818 |
| | (377 | ) | | 97 | | 229,979 |
| | (2,288 | ) |
Government agency collateralized mortgage obligations | 29 | | 94,314 |
| | (911 | ) | | 16 | | 36,107 |
| | (1,037 | ) | | 45 | | 130,421 |
| | (1,948 | ) |
Commercial mortgage backed securities: | | | | | | | | | | | | | | | | | |
Government agency mortgage backed securities | 3 | | 7,862 |
| | (138 | ) | | 2 | | 1,082 |
| | (8 | ) | | 5 | | 8,944 |
| | (146 | ) |
Government agency collateralized mortgage obligations | 0 | | — |
| | — |
| | 0 | | — |
| | — |
| | 0 | | — |
| | — |
|
Trust preferred securities | 0 | | — |
| | — |
| | 3 | | 16,992 |
| | (4,801 | ) | | 3 | | 16,992 |
| | (4,801 | ) |
Other debt securities | 2 | | 6,658 |
| | (38 | ) | | 1 | | 1,205 |
| | (7 | ) | | 3 | | 7,863 |
| | (45 | ) |
Total | 123 | | $ | 321,995 |
| | $ | (2,998 | ) | | 30 | | $ | 72,204 |
| | $ | (6,230 | ) | | 153 | | $ | 394,199 |
| | $ | (9,228 | ) |
December 31, 2016 | | | | | | | | | | | | | | | | | |
Obligations of other U.S. Government agencies and corporations | 0 | | $ | — |
| | $ | — |
| | 0 | | $ | — |
| | $ | — |
| | 0 | | $ | — |
| | $ | — |
|
Residential mortgage backed securities: | | | | | | | | | | | | | | | | | |
Government agency mortgage backed securities | 131 | | 298,400 |
| | (6,042 | ) | | 5 | | 11,504 |
| | (601 | ) | | 136 | | 309,904 |
| | (6,643 | ) |
Government agency collateralized mortgage obligations | 40 | | 97,356 |
| | (1,845 | ) | | 14 | | 33,786 |
| | (1,522 | ) | | 54 | | 131,142 |
| | (3,367 | ) |
Commercial mortgage backed securities: | | | | | | | | | | | | | | | | | |
Government agency mortgage backed securities | 9 | | 21,933 |
| | (453 | ) | | 2 | | 1,101 |
| | (8 | ) | | 11 | | 23,034 |
| | (461 | ) |
Government agency collateralized mortgage obligations | 1 | | 1,729 |
| | (16 | ) | | 0 | | — |
| | — |
| | 1 | | 1,729 |
| | (16 | ) |
Trust preferred securities | 0 | | — |
| | — |
| | 3 | | 18,389 |
| | (5,360 | ) | | 3 | | 18,389 |
| | (5,360 | ) |
Other debt securities | 3 | | 7,946 |
| | (208 | ) | | 2 | | 2,475 |
| | (10 | ) | | 5 | | 10,421 |
| | (218 | ) |
Total | 184 | | $ | 427,364 |
| | $ | (8,564 | ) | | 26 | | $ | 67,255 |
| | $ | (7,501 | ) | | 210 | | $ | 494,619 |
| | $ | (16,065 | ) |
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 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, 2017 or 2016.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $21,793 and $23,749 and a fair value of $16,992 and $18,389 at June 30, 2017 and December 31, 2016, respectively. At June 30, 2017, 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, 2017, 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, 2017.
The Company's analysis of the pooled trust preferred securities during the second quarter of 2017 supported a return to accrual status for the last remaining security (XXIV), which had been in "payment in kind" status until December 2016. An observed history of principal and interest payments combined with improved qualitative and quantitative factors described above justified the accrual of interest on this security. The Company had in previous years placed the other two pooled trust preferred securities (XXIII and XXVI) back on accrual status.
The following table provides information regarding the Company’s investments in pooled trust preferred securities at June 30, 2017:
|
| | | | | | | | | | | | | | | | | | | | |
Name | Single/ Pooled | | Class/ Tranche | | Amortized Cost | | Fair Value | | Unrealized Loss | | Lowest Credit Rating | | Issuers Currently in Deferral or Default |
XXIII | Pooled | | B-2 | | $ | 8,293 |
| | $ | 5,788 |
| | $ | (2,505 | ) | | Baa3 | | 16 | % |
XXIV | Pooled | | B-2 | | 9,327 |
| | 8,078 |
| | (1,249 | ) | | Ba1 | | 22 | % |
XXVI | Pooled | | B-2 | | 4,173 |
| | 3,126 |
| | (1,047 | ) | | Ba3 | | 19 | % |
| | | | | $ | 21,793 |
| | $ | 16,992 |
| | $ | (4,801 | ) | | | | |
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:
|
| | | | | | | |
| 2017 | | 2016 |
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 4 – Non Purchased Loans
(In Thousands, Except Number of Loans)
For purposes of this Note 4, all references to “loans” mean non purchased loans.
The following is a summary of non purchased loans and leases as of the dates presented:
|
| | | | | | | |
| June 30, 2017 | | December 31, 2016 |
Commercial, financial, agricultural | $ | 657,713 |
| | $ | 589,290 |
|
Lease financing | 52,347 |
| | 49,250 |
|
Real estate – construction | 424,861 |
| | 483,926 |
|
Real estate – 1-4 family mortgage | 1,551,934 |
| | 1,425,730 |
|
Real estate – commercial mortgage | 2,281,220 |
| | 2,075,137 |
|
Installment loans to individuals | 94,104 |
| | 92,648 |
|
Gross loans | 5,062,179 |
| | 4,715,981 |
|
Unearned income | (3,281 | ) | | (2,409 | ) |
Loans, net of unearned income | 5,058,898 |
| | 4,713,572 |
|
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 status 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.
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, 2017 | | | | | | | | | | | | | | | | | |
Commercial, financial, agricultural | $ | 975 |
| | $ | — |
| | $ | 654,670 |
| | $ | 655,645 |
| | $ | — |
| | $ | 1,770 |
| | $ | 298 |
| | $ | 2,068 |
| | $ | 657,713 |
|
Lease financing | — |
| | 170 |
| | 52,177 |
| | 52,347 |
| | — |
| | — |
| | — |
| | — |
| | 52,347 |
|
Real estate – construction | — |
| | — |
| | 424,861 |
| | 424,861 |
| | — |
| | — |
| | — |
| | — |
| | 424,861 |
|
Real estate – 1-4 family mortgage | 6,722 |
| | 538 |
| | 1,540,332 |
| | 1,547,592 |
| | — |
| | 1,999 |
| | 2,343 |
| | 4,342 |
| | 1,551,934 |
|
Real estate – commercial mortgage | 1,068 |
| | 517 |
| | 2,274,705 |
| | 2,276,290 |
| | 634 |
| | 2,395 |
| | 1,901 |
| | 4,930 |
| | 2,281,220 |
|
Installment loans to individuals | 293 |
| | 58 |
| | 93,680 |
| | 94,031 |
| | — |
| | 65 |
| | 8 |
| | 73 |
| | 94,104 |
|
Unearned income | — |
| | — |
| | (3,281 | ) | | (3,281 | ) | | — |
| | — |
| | — |
| | — |
| | (3,281 | ) |
Total | $ | 9,058 |
| | $ | 1,283 |
| | $ | 5,037,144 |
| | $ | 5,047,485 |
| | $ | 634 |
| | $ | 6,229 |
| | $ | 4,550 |
| | $ | 11,413 |
| | $ | 5,058,898 |
|
December 31, 2016 | | | | | | | | | | | | | | | | | |
Commercial, financial, agricultural | $ | 811 |
| | $ | 720 |
| | $ | 586,730 |
| | $ | 588,261 |
| | $ | — |
| | $ | 932 |
| | $ | 97 |
| | $ | 1,029 |
| | $ | 589,290 |
|
Lease financing | 193 |
| | — |
| | 48,919 |
| | 49,112 |
| | — |
| | 138 |
| | — |
| | 138 |
| | 49,250 |
|
Real estate – construction | 995 |
| | — |
| | 482,931 |
| | 483,926 |
| | — |
| | — |
| | — |
| | — |
| | 483,926 |
|
Real estate – 1-4 family mortgage | 6,189 |
| | 1,136 |
| | 1,414,254 |
| | 1,421,579 |
| | 161 |
| | 1,222 |
| | 2,768 |
| | 4,151 |
| | 1,425,730 |
|
Real estate – commercial mortgage | 2,283 |
| | 99 |
| | 2,066,821 |
| | 2,069,203 |
| | 580 |
| | 2,778 |
| | 2,576 |
| | 5,934 |
| | 2,075,137 |
|
Installment loans to individuals | 324 |
| | 124 |
| | 92,179 |
| | 92,627 |
| | — |
| | 21 |
| | — |
| | 21 |
| | 92,648 |
|
Unearned income | — |
| | — |
| | (2,409 | ) | | (2,409 | ) | | — |
| | — |
| | — |
| | — |
| | (2,409 | ) |
Total | $ | 10,795 |
| | $ | 2,079 |
| | $ | 4,689,425 |
| | $ | 4,702,299 |
| | $ | 741 |
| | $ | 5,091 |
| | $ | 5,441 |
| | $ | 11,273 |
| | $ | 4,713,572 |
|
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.
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, 2017 | | | | | | | | | |
Commercial, financial, agricultural | $ | 2,298 |
| | $ | 2,068 |
| | $ | — |
| | $ | 2,068 |
| | $ | 150 |
|
Real estate – construction | 314 |
| | 314 |
| | — |
| | 314 |
| | 2 |
|
Real estate – 1-4 family mortgage | 10,692 |
| | 8,860 |
| | — |
| | 8,860 |
| | 830 |
|
Real estate – commercial mortgage | 16,543 |
| | 13,742 |
| | 568 |
| | 14,310 |
| | 2,148 |
|
Installment loans to individuals | 144 |
| | 142 |
| | — |
| | 142 |
| | — |
|
Total | $ | 29,991 |
| | $ | 25,126 |
| | $ | 568 |
| | $ | 25,694 |
| | $ | 3,130 |
|
December 31, 2016 | | | | | | | | | |
Commercial, financial, agricultural | $ | 1,577 |
| | $ | 1,175 |
| | $ | — |
| | $ | 1,175 |
| | $ | 136 |
|
Real estate – construction | 517 |
| | 517 |
| | — |
| | 517 |
| | 1 |
|
Real estate – 1-4 family mortgage | 10,823 |
| | 9,207 |
| | — |
| | 9,207 |
| | 1,091 |
|
Real estate – commercial mortgage | 15,007 |
| | 10,053 |
| | 568 |
| | 10,621 |
| | 2,397 |
|
Installment loans to individuals | 87 |
| | 87 |
| | — |
| | 87 |
| | 1 |
|
Totals | $ | 28,011 |
| | $ | 21,039 |
| | $ | 568 |
| | $ | 21,607 |
| | $ | 3,626 |
|
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, 2017 | | June 30, 2016 |
| Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
Commercial, financial, agricultural | $ | 1,873 |
| | $ | — |
| | $ | 1,232 |
| | $ | 21 |
|
Real estate – construction | 295 |
| | 6 |
| | 117 |
| | 2 |
|
Real estate – 1-4 family mortgage | 8,911 |
| | 89 |
| | 16,157 |
| | 123 |
|
Real estate – commercial mortgage | 14,487 |
| | 176 |
| | 11,660 |
| | 91 |
|
Installment loans to individuals | 160 |
| | 2 |
| | 67 |
| | 1 |
|
Total | $ | 25,726 |
| | $ | 273 |
| | $ | 29,233 |
| | $ | 238 |
|
|
| | | | | | | | | | | | | | | |
| Six Months Ended | | Six Months Ended |
| June 30, 2017 | | June 30, 2016 |
| Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
Commercial, financial, agricultural | $ | 2,187 |
| | $ | — |
| | $ | 1,265 |
| | $ | 23 |
|
Real estate – construction | 268 |
| | 6 |
| | 58 |
| | 2 |
|
Real estate – 1-4 family mortgage | 8,892 |
| | 110 |
| | 16,415 |
| | 195 |
|
Real estate – commercial mortgage | 14,635 |
| | 279 |
| | 11,986 |
| | 196 |
|
Installment loans to individuals | 166 |
| | 2 |
| | 67 |
| | 1 |
|
Total | $ | 26,148 |
| | $ | 397 |
| | $ | 29,791 |
| | $ | 417 |
|
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
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
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 tables illustrate the impact of modifications classified as restructured loans which were held on the Consolidated Balance Sheet at period end and are segregated by class for the periods presented.
|
| | | | | | | | | | |
| Number of Loans | | Pre- Modification Outstanding Recorded Investment | | Post- Modification Outstanding Recorded Investment |
Three months ended June 30, 2017 | | | | | |
Real estate – 1-4 family mortgage | 3 |
| | $ | 127 |
| | $ | 126 |
|
Real estate – commercial mortgage | 1 |
| | 366 |
| | 62 |
|
Installment loans to individuals | 1 |
| | 4 |
| | 4 |
|
Total | 5 |
| | $ | 497 |
| | $ | 192 |
|
Three months ended June 30, 2016 | | | | | |
Real estate – 1-4 family mortgage | 3 |
| | $ | 676 |
| | $ | 662 |
|
Total | 3 |
| | $ | 676 |
| | $ | 662 |
|
|
| | | | | | | | | | |
| Number of Loans | | Pre- Modification Outstanding Recorded Investment | | Post- Modification Outstanding Recorded Investment |
Six months ended June 30, 2017 | | | | | |
Real estate – 1-4 family mortgage | 5 |
| | $ | 304 |
| | $ | 297 |
|
Real estate – commercial mortgage | 2 |
| | 453 |
| | 147 |
|
Installment loans to individuals | 1 |
| | 4 |
| | 4 |
|
Total | 8 |
| | $ | 761 |
| | $ | 448 |
|
Six months ended June 30, 2016 | | | | | |
Real estate – 1-4 family mortgage | 7 |
| | $ | 987 |
| | $ | 963 |
|
Total | 7 |
| | $ | 987 |
| | $ | 963 |
|
Restructured loans 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 $71 contractually 90 days past due or more and still accruing at June 30, 2017 and no restructured loans contractually 90 days past due or more and still accruing at June 30, 2016. The outstanding balance of restructured loans on nonaccrual status was $4,409 and $5,562 at June 30, 2017 and June 30, 2016, respectively.
Changes in the Company’s restructured loans are set forth in the table below:
|
| | | | | | |
| Number of Loans | | Recorded Investment |
Totals at January 1, 2017 | 53 |
| | $ | 7,447 |
|
Additional loans with concessions | 9 |
| | 536 |
|
Reductions due to: | | | |
Reclassified as nonperforming | (2 | ) | | (126 | ) |
Paid in full | (6 | ) | | (368 | ) |
Charge-offs | (1 | ) | | (250 | ) |
Principal paydowns | — |
| | (181 | ) |
Totals at June 30, 2017 | 53 |
| |