10-Q 1 rnst10q9302017.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 September 30, 2017
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, 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.
Large accelerated filer
ý
Accelerated filer
o
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
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 October 31, 2017, 49,320,225 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 September 30, 2017
CONTENTS
 



PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

Renasant Corporation and Subsidiaries
Consolidated Balance Sheets

(In Thousands, Except Share Data)
 
(Unaudited)
 
 
 
September 30,
2017
 
December 31, 2016
Assets
 
 
 
Cash and due from banks
$
194,985

 
$
160,570

Interest-bearing balances with banks
137,215

 
145,654

Cash and cash equivalents
332,200

 
306,224

Securities held to maturity (fair value of as of December 31, 2016 - $362,893)

 
356,282

Securities available for sale, at fair value
1,150,459

 
674,248

Mortgage loans held for sale, at fair value
207,288

 
177,866

Loans, net of unearned income:
 
 
 
Non purchased loans and leases
5,293,467

 
4,713,572

Purchased loans
2,155,141

 
1,489,137

Total loans, net of unearned income
7,448,608

 
6,202,709

Allowance for loan losses
(44,531
)
 
(42,737
)
Loans, net
7,404,077

 
6,159,972

Premises and equipment, net
186,730

 
179,223

Other real estate owned:
 
 
 
Non purchased
4,524

 
5,929

Purchased
13,296

 
17,370

Total other real estate owned, net
17,820

 
23,299

Goodwill
611,046

 
470,534

Other intangible assets, net
26,218

 
24,074

Bank-owned life insurance
174,739

 
152,305

Mortgage servicing rights
35,930

 
26,302

Other assets
177,180

 
149,522

Total assets
$
10,323,687

 
$
8,699,851

Liabilities and shareholders’ equity
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest-bearing
$
1,835,300

 
$
1,561,357

Interest-bearing
6,283,218

 
5,497,780

Total deposits
8,118,518

 
7,059,137

Short-term borrowings
384,230

 
109,676

Long-term debt
207,703

 
202,459

Other liabilities
101,410

 
95,696

Total liabilities
8,811,861

 
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; 49,990,248 shares issued; 49,320,225 and 44,332,273 shares outstanding, respectively
249,951

 
225,535

Treasury stock, at cost
(19,919
)
 
(21,692
)
Additional paid-in capital
896,551

 
707,408

Retained earnings
388,209

 
337,536

Accumulated other comprehensive loss, net of taxes
(2,966
)
 
(15,904
)
Total shareholders’ equity
1,511,826

 
1,232,883

Total liabilities and shareholders’ equity
$
10,323,687

 
$
8,699,851

See Notes to Consolidated Financial Statements.    

1


Renasant Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In Thousands, Except Share Data)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Interest income
 
 
 
 
 
 
 
Loans
$
92,536

 
$
76,759

 
$
247,076

 
$
222,781

Securities
 
 
 
 
 
 
 
Taxable
5,061

 
3,717

 
14,040

 
12,832

Tax-exempt
2,400

 
2,425

 
7,284

 
7,378

Other
698

 
131

 
1,763

 
308

Total interest income
100,695

 
83,032

 
270,163

 
243,299

Interest expense
 
 
 
 
 
 
 
Deposits
6,834

 
4,638

 
17,297

 
13,018

Borrowings
3,844

 
2,663

 
9,231

 
7,339

Total interest expense
10,678

 
7,301

 
26,528

 
20,357

Net interest income
90,017

 
75,731

 
243,635

 
222,942

Provision for loan losses
2,150

 
2,650

 
5,400

 
5,880

Net interest income after provision for loan losses
87,867

 
73,081

 
238,235

 
217,062

Noninterest income
 
 
 
 
 
 
 
Service charges on deposit accounts
8,676

 
8,200

 
24,565

 
23,712

Fees and commissions
5,618

 
4,921

 
16,287

 
14,042

Insurance commissions
2,365

 
2,420

 
6,406

 
6,557

Wealth management revenue
2,963

 
3,040

 
8,884

 
8,803

Mortgage banking income
10,616

 
15,846

 
33,544

 
41,181

Net gain on sales of securities
57

 

 
57

 
1,186

BOLI income
1,136

 
979

 
3,234

 
2,929

Other
1,982

 
2,866

 
6,722

 
8,750

Total noninterest income
33,413

 
38,272

 
99,699

 
107,160

Noninterest expense
 
 
 
 
 
 
 
Salaries and employee benefits
48,530

 
44,702

 
135,753

 
132,482

Data processing
4,179

 
4,560

 
12,248

 
13,220

Net occupancy and equipment
9,470

 
8,830

 
27,603

 
25,585

Other real estate owned
603

 
1,540

 
1,916

 
4,111

Professional fees
1,552

 
1,824

 
5,501

 
5,459

Advertising and public relations
1,802

 
1,661

 
5,824

 
5,040

Intangible amortization
1,766

 
1,684

 
4,822

 
5,123

Communications
1,927

 
2,097

 
5,698

 
6,308

Extinguishment of debt

 
2,210

 
205

 
2,539

Merger and conversion related expenses
6,266

 
268

 
9,655

 
4,023

Other
4,565

 
7,092

 
15,585

 
19,651

Total noninterest expense
80,660

 
76,468

 
224,810

 
223,541

Income before income taxes
40,620

 
34,885

 
113,124

 
100,681

Income taxes
14,199

 
11,706

 
37,447

 
33,386

Net income
$
26,421

 
$
23,179

 
$
75,677

 
$
67,295

Basic earnings per share
$
0.54

 
$
0.55

 
$
1.64

 
$
1.62

Diluted earnings per share
$
0.53

 
$
0.55

 
$
1.64

 
$
1.61

Cash dividends per common share
$
0.18

 
$
0.18

 
$
0.54

 
$
0.53

See Notes to Consolidated Financial Statements.

2


Renasant Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands, Except Share Data)
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
26,421

 
$
23,179

 
$
75,677

 
$
67,295

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
Unrealized holding gains on securities
(764
)
 
1,385

 
4,712

 
5,260

Reclassification adjustment for gains realized in net income

 

 

 
(728
)
Unrealized holding gains on securities transfered from held to maturity to available for sale

8,108

 

 
8,108

 

Amortization of unrealized holding gains on securities transferred to the held to maturity category
(4
)
 
(11
)
 
(173
)
 
(49
)
Total securities
7,340

 
1,374

 
12,647

 
4,483

Derivative instruments:
 
 
 
 
 
 
 
Unrealized holding gains (losses) on derivative instruments
100

 
495

 
104

 
(1,199
)
Total derivative instruments
100

 
495

 
104

 
(1,199
)
Defined benefit pension and post-retirement benefit plans:
 
 
 
 
 
 
 
Reclassification adjustment for net settlement gain realized in net income

 
(235
)
 

 
(235
)
Amortization of net actuarial loss recognized in net periodic pension cost
62

 
76

 
187

 
228

Total defined benefit pension and post-retirement benefit plans
62

 
(159
)
 
187

 
(7
)
Other comprehensive income, net of tax
7,502

 
1,710

 
12,938

 
3,277

Comprehensive income
$
33,923

 
$
24,889

 
$
88,615

 
$
70,572


See Notes to Consolidated Financial Statements.

3


Renasant Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 
Nine Months Ended September 30,
 
2017
 
2016
Operating activities
 
 
 
Net income
$
75,677

 
$
67,295

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Provision for loan losses
5,400

 
5,880

Depreciation, amortization and accretion
3,541

 
2,804

Deferred income tax expense
1,669

 
5,663

Funding of mortgage loans held for sale
(1,256,233
)
 
(1,516,650
)
Proceeds from sales of mortgage loans held for sale
1,245,301

 
1,579,476

Gains on sales of mortgage loans held for sale
(15,719
)
 
(26,687
)
Gains on sales of securities
(57
)
 
(1,186
)
Penalty on prepayment of debt
205

 
2,539

Losses on sales of premises and equipment
553

 
105

Stock-based compensation expense
3,771

 
2,563

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

 
2,442

(Increase) decrease in other assets
(2,059
)
 
5,591

Decrease in other liabilities
(9,652
)
 
(5,097
)
Net cash provided by operating activities
52,397

 
124,738

Investing activities
 
 
 
Purchases of securities available for sale
(191,679
)
 
(82,243
)
Proceeds from sales of securities available for sale
43,494

 
4,028

Proceeds from call/maturities of securities available for sale
132,044

 
117,232

Purchases of securities held to maturity

 
(10,644
)
Proceeds from sales of securities held to maturity
4,876

 

Proceeds from call/maturities of securities held to maturity
15,882

 
109,305

Net increase in loans
(272,618
)
 
(407,570
)
Purchases of premises and equipment
(11,925
)
 
(8,958
)
Proceeds from sales of premises and equipment
1,255

 
2,462

Proceeds from sales of other assets
11,485

 
11,040

Net cash received in acquisition of businesses
41,685

 
25,263

Net cash used in investing activities
(225,501
)
 
(240,085
)
Financing activities
 
 
 
Net increase in noninterest-bearing deposits
6,464

 
163,406

Net increase in interest-bearing deposits
112,854

 
85,005

Net increase (decrease) in short-term borrowings
274,554

 
(157,685
)
Proceeds from long-term borrowings

 
98,434

Repayment of long-term debt
(169,961
)
 
(46,964
)
Cash paid for dividends
(25,004
)
 
(22,108
)
Net stock-based compensation transactions
173

 
415

Excess tax benefit from stock-based compensation

 
664

Net cash provided by financing activities
199,080

 
121,167

Net increase in cash and cash equivalents
25,976

 
5,820

Cash and cash equivalents at beginning of period
306,224

 
211,571

Cash and cash equivalents at end of period
$
332,200

 
$
217,391

Supplemental disclosures
 
 
 
Cash paid for interest
$
26,974

 
$
19,658

Cash paid for income taxes
$
29,491

 
$
22,731

Noncash transactions:
 
 
 
Transfers of loans to other real estate owned
$
5,418

 
$
5,147

Financed sales of other real estate owned
$
257

 
$
538

Transfers of loans held for sale to loan portfolio
$

 
$
15,455

Common stock issued in acquisition of businesses
$
213,590

 
$
55,290



4


See Notes to Consolidated Financial Statements.

5


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, wealth management 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 acquisitions of KeyWorth Bank (“KeyWorth”) and Metropolitan BancGroup, Inc. (“Metropolitan”) on April 1, 2016 and July 1, 2017, respectively. The acquired institutions' financial condition and results of operations are included in the Company's financial condition and results of operations 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 September 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 deferred the effective date of this standard to annual and interim periods beginning after December 15, 2017. While the Company is currently evaluating the impact ASU 2014-09 will have on its financial position and results of operations, and its financial statement disclosures, the recognition of revenue for a majority of the Company’s income streams, including interest income earned on loans and leases, is governed by other accounting standards and is specifically excluded from the coverage of FASB Accounting Standards Codification (“ASC 606”), “Revenue from Contracts with Customers (“ASC 606”).  The sources of the Company's revenue covered by ASC 606, the most significant of which is service charges on deposit accounts, are generally based on day-to-day contracts with Company customers; therefore, the Company does not expect significant changes in the timing of the recognition of revenue.   The Company is continuing to evaluate the impact of the new standard on each line of revenue as well as prepare for the new disclosures required by the standard. The Company intends to adopt the standard in the first quarter of 2018 and use the modified retrospective transition method.
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.

6


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 nine months ended September 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 is 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,

7


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 August 2017, FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 is intended to simplify hedge accounting by eliminating the requirement to separately measure and report hedge effectiveness. ASU 2017-12 also seeks to expand the application of hedge accounting by modifying current requirements to include hedge accounting on partial-term hedges, the hedging of prepayable financial instruments and other strategies.  ASU 2017-12 will be effective for interim and annual periods beginning after December 15, 2018.  The Company is evaluating the effect that ASU 2017-12 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 $219,461. 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 the Company, with the Company 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. On July 1, 2017, Metropolitan operated eight banking locations in Nashville and Memphis, Tennessee and the Jackson, Mississippi Metropolitan Statistical Area.
The Company recorded approximately $147,478 in intangible assets which consist of goodwill of $140,512 and a core deposit intangible of $6,966. Goodwill resulted from a combination of revenue enhancements from expansion in existing 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.


8


The following table summarizes the allocation of purchase price to assets and liabilities acquired in connection with the Company's acquisition of Metropolitan based on their fair values on July 1, 2017.
Purchase Price:
 
 
Shares issued to common shareholders
4,883,182

 
Purchase price per share
$
43.74

 
Value of stock paid
 
$
213,590

Cash paid for fractional shares
 
5

Cash settlement for stock options
 
4,764

Deal charges, net of taxes
 
1,102

  Total Purchase Price
 
$
219,461

Net Assets Acquired:
 
 
Stockholders’ equity at acquisition date
$
89,253

 
Increase (decrease) to net assets as a result of fair value adjustments
to assets acquired and liabilities assumed:
 
 
  Securities
(731
)
 
Mortgage loans held for sale
30

 
Loans, net of Metropolitan's allowance for loan losses
(13,071
)
 
Premises and equipment
(4,629
)
 
Intangible assets, net of Metropolitan's existing intangibles
2,340

 
Other real estate owned
(1,251
)
 
Other assets
2,731

 
  Deposits
(3,603
)
 
  Borrowings
(1,294
)
 
  Other liabilities
3,930

 
  Deferred income taxes
5,244

 
     Total Net Assets Acquired
 
78,949

Goodwill resulting from merger(1)
 
$
140,512

(1) The goodwill resulting from the merger has been assigned to the Community Banks operating segment.

The following table summarizes the fair value on July 1, 2017 of assets acquired and liabilities assumed at acquisition date in connection with the merger with Metropolitan. The Company is finalizing the fair values of assets acquired and liabilities assumed related to the Metropolitan acquisition; accordingly, the amounts in the table remain subject to change.

Cash and cash equivalents
 
$
47,556

Securities
 
108,697

Loans, including mortgage loans held for sale, net of unearned income
 
967,804

Premises and equipment
 
8,576

Other real estate owned
 
1,203

Intangible assets
 
147,478

Other assets
 
69,567

Total assets
 
1,350,881

 
 
 
Deposits
 
942,084

Borrowings
 
174,522

Other liabilities
 
20,685

Total liabilities
 
1,137,291


The following unaudited pro forma combined condensed consolidated financial information presents the results of operations for the nine months ended September 30, 2017 and 2016 of the Company as though the Metropolitan merger had been completed as of January 1, 2016 (and that the KeyWorth merger, discussed below, was still completed on April 1, 2016). The unaudited estimated pro forma information combines the historical results of Metropolitan with the Company's historical consolidated results and

9


includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the periods presented. The pro forma information is not indicative of what would have occurred had the acquisition taken place on January 1, 2016. The pro forma information does not include the effect of any cost-saving or revenue-enhancing strategies. Merger expenses are reflected in the period in which they were incurred.

 
Nine Months Ended
 
September 30,
 
2017
 
2016
Net interest income - pro forma (unaudited)
$
263,525

 
$
252,366

 
 
 
 
Net income - pro forma (unaudited)
$
72,915

 
$
75,744

 
 
 
 
Earnings per share - pro forma (unaudited):
 
 
 
Basic
$
1.50

 
$
1.68

Diluted
$
1.50

 
$
1.67


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.


10

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
September 30, 2017
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$

 
$

 
$

 
$

Obligations of states and political subdivisions

 

 

 

 
$

 
$

 
$

 
$

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



In light of the ongoing fiscal uncertainty in many state and local governments, and the fact that the Company’s held to maturity portfolio consisted primarily of municipal securities, the Company analyzes its exposure to potential losses in its security portfolio on at least a quarterly basis. Management reviews the underlying credit rating and analyzes the financial condition of the respective issuers. Although the Company’s analysis of its securities portfolio in the third quarter of 2017 showed that the municipal securities held by the Company had not experienced significant deterioration as of the date of such analysis, the Company transferred all held to maturity securities to available for sale during the third quarter of 2017. This transfer gives management the flexibility to quickly liquidate any municipal securities should further analysis reveal more significant deterioration than has been experienced to date. At the date of transfer, the securities transferred had a carrying value of $365,941, which includes an unrealized gain of $13,218. At transfer, the unrealized gain was included in the carrying value of the securities portfolio and in accumulated other comprehensive loss presented in the Consolidated Balance Sheet.

11

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




The amortized cost and fair value of securities available for sale were as follows as of the dates presented:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
September 30, 2017
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
14,648

 
$
74

 
$
(84
)
 
$
14,638

Obligations of states and political subdivisions
337,725

 
12,787

 
(158
)
 
350,354

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
459,336

 
2,876

 
(2,654
)
 
459,558

Government agency collateralized mortgage obligations
234,224

 
764

 
(2,330
)
 
232,658

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
45,340

 
762

 
(173
)
 
45,929

Government agency collateralized mortgage obligations
11,354

 
89

 

 
11,443

Trust preferred securities
12,454

 

 
(3,494
)
 
8,960

Other debt securities
26,546

 
429

 
(56
)
 
26,919

 
$
1,141,627

 
$
17,781

 
$
(8,949
)
 
$
1,150,459

 
 
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 third quarter of 2017, the Company sold one of its pooled trust preferred securities (XXIV) with a carrying value of $9,346 at the time of sale for net proceeds of $9,403 resulting in a gain of $57 on the sale. The Company also sold certain securities acquired in connection with its acquisition of Metropolitan. These included $14,750 in mortgage backed securities and $16,395 in collateralized mortgage obligations, which were classified as available for sale, and $4,876 in obligations of states and political subdivisions, which were classified as held to maturity. These securities were sold at carrying value and did not result in a gain or loss. During the first nine months of 2017, the Company also 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. During the first nine 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.


12

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




Gross realized gains and losses on sales of securities available for sale for the three and nine months ended September 30, 2017 and 2016, respectively, were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Gross gains on sales of securities available for sale
$
57

 
$

 
$
57

 
$
1,257

Gross losses on sales of securities available for sale

 

 

 
(71
)
Gains on sales of securities available for sale, net
$
57

 
$

 
$
57

 
$
1,186


At September 30, 2017 and December 31, 2016, securities with a carrying value of $459,369 and $642,447, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $27,164 and $24,426 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2017 and December 31, 2016, respectively.
The amortized cost and fair value of securities at September 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.
 
 
Available for Sale
 
Amortized
Cost
 
Fair
Value
Due within one year
$
23,491

 
$
23,798

Due after one year through five years
106,577

 
110,274

Due after five years through ten years
147,761

 
153,199

Due after ten years
94,150

 
93,983

Residential mortgage backed securities:
 
 
 
Government agency mortgage backed securities
459,336

 
459,558

Government agency collateralized mortgage obligations
234,224

 
232,658

Commercial mortgage backed securities:
 
 
 
Government agency mortgage backed securities
45,340

 
45,929

Government agency collateralized mortgage obligations
11,354

 
11,443

Other debt securities
19,394

 
19,617

 
$
1,141,627

 
$
1,150,459



13

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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
4
 
$
12,018

 
$
(84
)
 
0
 
$

 
$

 
4
 
$
12,018

 
$
(84
)
Obligations of states and political subdivisions

16
 
11,248

 
(105
)
 
3
 
2,037

 
(53
)
 
19
 
13,285

 
(158
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
97
 
249,318

 
(1,902
)
 
12
 
31,392

 
(752
)
 
109
 
280,710

 
(2,654
)
Government agency collateralized mortgage obligations
34
 
126,612

 
(974
)
 
19
 
44,790

 
(1,356
)
 
53
 
171,402

 
(2,330
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
4
 
9,906

 
(25
)
 
3
 
5,978

 
(148
)
 
7
 
15,884

 
(173
)
Government agency collateralized mortgage obligations
0
 

 

 
0
 

 

 
0
 

 

Trust preferred securities
0
 

 

 
2
 
8,960

 
(3,494
)
 
2
 
8,960

 
(3,494
)
Other debt securities
5
 
9,105

 
(48
)
 
1
 
1,205

 
(8
)
 
6
 
10,310

 
(56
)
Total
160
 
$
418,207

 
$
(3,138
)
 
40
 
$
94,362

 
$
(5,811
)
 
200
 
$
512,569

 
$
(8,949
)
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
)
 



14

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 securities in an unrealized loss position that it holds, 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 nine months ended September 30, 2017 or 2016.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $12,454 and $23,749 and a fair value of $8,960 and $18,389 at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the investments in pooled trust preferred securities consisted of two securities representing interests in various tranches of trusts collateralized by debt issued by over 160 financial institutions. Management’s determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Company’s tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments before recovery of the investments' amortized cost, and it is not more likely than not that the Company will be required to sell the investments before recovery of the investments’ amortized cost, which may be at maturity. At September 30, 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 both trust preferred securities and recognized credit related impairment losses on these securities in 2011. No additional impairment was recognized during the nine months ended September 30, 2017.
The following table provides information regarding the Company’s investments in pooled trust preferred securities at September 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
 
$
8,302

 
$
5,813

 
$
(2,489
)
 
A1
 
15
%
XXVI
Pooled
 
B-2
 
4,152

 
3,147

 
(1,005
)
 
Ba3
 
19
%
 
 
 
 
 
$
12,454

 
$
8,960

 
$
(3,494
)
 
 
 
 


15

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

 

Reductions for securities sold during the period
$
3,076

 
$

Balance at September 30
$
(261
)
 
$
(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:
 
 
September 30,
2017
 
December 31, 2016
Commercial, financial, agricultural
$
707,835

 
$
589,290

Lease financing
54,688

 
49,250

Real estate – construction
477,638

 
483,926

Real estate – 1-4 family mortgage
1,644,060

 
1,425,730

Real estate – commercial mortgage
2,311,340

 
2,075,137

Installment loans to individuals
100,692

 
92,648

Gross loans
5,296,253

 
4,715,981

Unearned income
(2,786
)
 
(2,409
)
Loans, net of unearned income
5,293,467

 
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.

16

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


The following table provides an aging of past due and nonaccrual loans, segregated by class, as of the dates presented:
 
 
Accruing Loans
 
Nonaccruing Loans
 
 
 
30-89 Days
Past Due
 
90 Days
or More
Past Due
 
Current
Loans
 
Total
Loans
 
30-89 Days
Past Due
 
90 Days
or More
Past Due
 
Current
Loans
 
Total
Loans
 
Total
Loans
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
1,808

 
$
774

 
$
703,574

 
$
706,156

 
$
538

 
$
863

 
$
278

 
$
1,679

 
$
707,835

Lease financing
476

 

 
54,047

 
54,523

 

 
165

 

 
165

 
54,688

Real estate – construction
403

 

 
477,235

 
477,638

 

 

 

 

 
477,638

Real estate – 1-4 family mortgage
6,307

 
984

 
1,632,983

 
1,640,274

 
210

 
1,342

 
2,234

 
3,786

 
1,644,060

Real estate – commercial mortgage
3,140

 
1,505

 
2,302,423

 
2,307,068

 

 
1,303

 
2,969

 
4,272

 
2,311,340

Installment loans to individuals
258

 
32

 
100,334

 
100,624

 

 
45

 
23

 
68

 
100,692

Unearned income

 

 
(2,786
)
 
(2,786
)
 

 

 

 

 
(2,786
)
Total
$
12,392

 
$
3,295

 
$
5,267,810

 
$
5,283,497

 
$
748

 
$
3,718

 
$
5,504

 
$
9,970

 
$
5,293,467

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, as applicable, 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.

17

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


Loans accounted for under FASB 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
September 30, 2017
 
 
 
 
 
 
 
 
 
Commercial, financial, agricultural
$
2,118

 
$
1,843

 
$

 
$
1,843

 
$
30

Real estate – construction
897

 
897

 

 
897

 
4

Real estate – 1-4 family mortgage
10,508

 
8,004

 
704

 
8,708

 
809

Real estate – commercial mortgage
9,777

 
7,189

 

 
7,189

 
1,958

Installment loans to individuals
140

 
136

 

 
136

 
1

Total
$
23,440

 
$
18,069

 
$
704

 
$
18,773

 
$
2,802

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
 
September 30, 2017
 
September 30, 2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
1,960

 
$
8

 
$
1,841

 
$
22

Real estate – construction
897

 
33

 
862

 
26

Real estate – 1-4 family mortgage
8,897

 
71

 
16,119

 
97

Real estate – commercial mortgage
7,575

 
46

 
10,953

 
46

Installment loans to individuals
140

 
1

 
67

 
1

Total
$
19,469

 
$
159

 
$
29,842

 
$
192

 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Commercial, financial, agricultural
$
2,140

 
$
8

 
$
1,762

 
$
42

Real estate – construction
861

 
36

 
671

 
27

Real estate – 1-4 family mortgage
8,944

 
165

 
16,354

 
283

Real estate – commercial mortgage
7,844

 
134

 
11,800

 
236

Installment loans to individuals
148

 
2

 
67

 
2

Total
$
19,937

 
$
345

 
$
30,654

 
$
590


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

18

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 Sheets 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 September 30, 2017
 
 
 
 
 
Real estate – 1-4 family mortgage
4

 
$
307

 
$
307

Real estate – commercial mortgage
1

 
230

 
175

Installment loans to individuals

 

 

Total
5

 
$
537

 
$
482

Three months ended September 30, 2016
 
 
 
 
 
Real estate – construction
1

 
510

 
510

Real estate – 1-4 family mortgage
2

 
$
194

 
$
147

Total
3

 
$
704

 
$
657


 
Number of
Loans
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
Nine months ended September 30, 2017
 
 
 
 
 
Real estate – 1-4 family mortgage
9

 
$
611