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 March 31, ~~2018~~2019



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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $5.00 par value per share	RNST	The NASDAQ Stock Market LLC

As of April 30, ~~2018, 49,409,304~~2019, 58,628,340 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 March 31, ~~2018~~2019

CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Renasant Corporation and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Data)


	(Unaudited)						(Unaudited)
	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Assets
Cash and due from banks	$	163,768		$	187,838		$	208,740		$	198,515
Interest-bearing balances with banks	87,210			93,615			353,326			370,596
Cash and cash equivalents	250,978			281,453			562,066			569,111
Securities available for sale, at fair value	948,365			671,488			1,255,353			1,250,777
Mortgage loans held for sale, at fair value	204,472			108,316
Loans held for sale ($195,807 and $219,848 carried at fair value at March 31, 2019 and December 31, 2018, respectively)							318,563			411,427
Loans, net of unearned income:
Non purchased loans and leases	5,830,122			5,588,556			6,565,599			6,389,712
Purchased loans	1,867,948			2,031,766			2,522,694			2,693,417
Total loans, net of unearned income	7,698,070			7,620,322			9,088,293			9,083,129
Allowance for loan losses	(46,401		)	(46,211		)	(49,835		)	(49,026		)
Loans, net	7,651,669			7,574,111			9,038,458			9,034,103
Premises and equipment, net	184,209			183,254			267,447			209,168
Other real estate owned:
Non purchased	4,801			4,410			4,223			4,853
Purchased	9,754			11,524			5,932			6,187
Total other real estate owned, net	14,555			15,934			10,155			11,040
Goodwill	611,046			611,046			932,971			932,928
Other intangible assets, net	22,859			24,510			42,755			44,865
Bank-owned life insurance	176,978			175,863			221,973			220,608
Mortgage servicing rights	40,216			39,339			48,973			48,230
Other assets	132,966			144,667			163,681			202,621
Total assets	$	10,238,313		$	9,829,981		$	12,862,395		$	12,934,878
Liabilities and shareholders’ equity
Liabilities
Deposits
Noninterest-bearing	$	1,861,136		$	1,840,424		$	2,366,223		$	2,318,706
Interest-bearing	6,496,633			6,080,651			7,902,689			7,809,851
Total deposits	8,357,769			7,921,075			10,268,912			10,128,557
Short-term borrowings	57,753			89,814			87,590			387,706
Long-term debt	207,438			207,546			263,269			263,618
Other liabilities	82,588			96,563			153,747			111,084
Total liabilities	8,705,548			8,314,998			10,773,518			10,890,965
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; 49,392,978 and 49,321,231 shares outstanding, respectively	249,951			249,951
Treasury stock, at cost	(18,296		)	(19,906		)
Common stock, $5.00 par value – 150,000,000 shares authorized; 59,296,725 shares issued; 58,633,630 and 58,546,480 shares outstanding, respectively							296,483			296,483
Treasury stock, at cost – 663,095 and 750,245 shares, respectively							(21,590		)	(24,245		)
Additional paid-in capital	896,881			898,095			1,288,106			1,288,911
Retained earnings	421,725			397,354			533,328			500,660
Accumulated other comprehensive loss, net of taxes	(17,496		)	(10,511		)	(7,450		)	(17,896		)
Total shareholders’ equity	1,532,765			1,514,983			2,088,877			2,043,913
Total liabilities and shareholders’ equity	$	10,238,313		$	9,829,981		$	12,862,395		$	12,934,878

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

(In Thousands, Except Share Data)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Interest income
Loans	$	94,118	$	74,407	$	126,302	$	94,118
Securities
Taxable	3,994		4,352		7,925		3,994
Tax-exempt	1,685		2,574		1,409		1,685
Other	583		556		1,458		583
Total interest income	100,380		81,889		137,094		100,380
Interest expense
Deposits	8,059		5,149		19,772		8,059
Borrowings	3,081		2,725		4,175		3,081
Total interest expense	11,140		7,874		23,947		11,140
Net interest income	89,240		74,015		113,147		89,240
Provision for loan losses	1,750		1,500		1,500		1,750
Net interest income after provision for loan losses	87,490		72,515		111,647		87,490
Noninterest income
Service charges on deposit accounts	8,473		7,931		9,102		8,473
Fees and commissions	5,685		5,199		6,471		5,685
Insurance commissions	2,005		1,860		2,116		2,005
Wealth management revenue	3,262		2,884		3,324		3,262
Mortgage banking income	10,960		10,504		10,401		10,960
Net gain on sales of securities					13		—
BOLI income	945		1,113		1,407		945
Other	2,623		2,530		3,051		2,623
Total noninterest income	33,953		32,021		35,885		33,953
Noninterest expense
Salaries and employee benefits	48,784		42,209		57,350		48,784
Data processing	4,244		4,234		4,906		4,244
Net occupancy and equipment	9,822		9,319		11,835		9,822
Other real estate owned	657		532		1,004		657
Professional fees	2,138		2,067		2,454		2,138
Advertising and public relations	2,203		1,592		2,866		2,203
Intangible amortization	1,651		1,563		2,110		1,651
Communications	1,969		1,863		1,895		1,969
Extinguishment of debt	—		205
Merger and conversion related expenses	900		345		—		900
Other	5,576		5,380		4,412		5,576
Total noninterest expense	77,944		69,309		88,832		77,944
Income before income taxes	43,499		35,227		58,700		43,499
Income taxes	9,673		11,255		13,590		9,673
Net income	$	33,826	$	23,972	$	45,110	$	33,826
Basic earnings per share	$	0.69	$	0.54	$	0.77	$	0.69
Diluted earnings per share	$	0.68	$	0.54	$	0.77	$	0.68
Cash dividends per common share	$	0.19	$	0.18	$	0.21	$	0.19

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

(In Thousands)



	Three Months Ended
	March 31,
	2019			2018
Net income	$	45,110		$	33,826
Other comprehensive income (loss), net of tax:
Securities available for sale:
Unrealized holding gains (losses) on securities	11,317			(7,909		)
Reclassification adjustment for gains realized in net income	(10		)	—
Total securities	11,307			(7,909		)
Derivative instruments:
Unrealized holding (losses) gains on derivative instruments	(915		)	858
Total derivative instruments	(915		)	858
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	54			66
Total defined benefit pension and post-retirement benefit plans	54			66
Other comprehensive income (loss), net of tax	10,446			(6,985		)
Comprehensive income	$	55,556		$	26,841

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

(In Thousands, Except Share Data)

Three Months Ended
March 31,
2018 2017
Net income $ 33,826
$ 23,972
Other comprehensive (loss) income, net of tax:
Securities available for sale:
Unrealized holding (losses) gains on securities (7,909 ) 2,907
Amortization of unrealized holding gains on securities transferred to the held to maturity category —
(151 )
Total securities (7,909 ) 2,756
Derivative instruments:
Unrealized holding gains on derivative instruments 858
169
Total derivative instruments 858
169
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost 66
69
Total defined benefit pension and post-retirement benefit plans 66
69
Other comprehensive (loss) income, net of tax (6,985 ) 2,994
Comprehensive income $ 26,841
$ 26,966



	Common Stock			Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount		Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2019	58,546,480	$	296,483	$	(24,245	)	$	1,288,911		$	500,660		$	(17,896	)	$	2,043,913
Net income										45,110						45,110
Other comprehensive income (loss)													10,446			10,446
Comprehensive income																55,556
Cash dividends ($0.21 per share)										(12,442		)				(12,442		)
Issuance of common stock for stock-based compensation awards	87,150			2,655			(3,442		)							(787		)
Stock-based compensation expense							2,637									2,637
Balance at March 31, 2019	58,633,630	$	296,483	$	(21,590	)	$	1,288,106		$	533,328		$	(7,450	)	$	2,088,877

Balance at January 1, 2018	49,321,231	$	249,951	$	(19,906	)	$	898,095		$	397,354		$	(10,511	)	$	1,514,983
Net income										33,826						33,826
Other comprehensive income (loss)													(6,985		)	(6,985		)
Comprehensive income																26,841
Cash dividends ($0.19 per share)										(9,455		)				(9,455		)
Issuance of common stock for stock-based compensation awards	71,747			1,610			(3,092		)							(1,482		)
Stock-based compensation expense							1,858									1,858
Other, net							20									20
Balance at March 31, 2018	49,392,978	$	249,951	$	(18,296	)	$	896,881		$	421,725		$	(17,496	)	$	1,532,765

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(In Thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Operating activities
Net income	$	33,826		$	23,972		$	45,110		$	33,826
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses	1,750			1,500			1,500			1,750
Depreciation, amortization and accretion	650			358			409			650
Deferred income tax expense	1,990			3,946			5,949			1,990
Funding of mortgage loans held for sale	(362,803		)	(318,144		)	(384,103		)	(362,803		)
Proceeds from sales of mortgage loans held for sale	275,445			343,945			416,032			275,445
Gains on sales of mortgage loans held for sale	(8,798		)	(6,554		)	(7,888		)	(8,798		)
Penalty on prepayment of debt	—			205
Losses on sales of premises and equipment	8			512
Gains on sales of securities							(13		)	—
(Gains) losses on sales of premises and equipment							(89		)	8
Stock-based compensation expense	1,858			1,174			2,637			1,858
Payments on and proceeds from sales of other loans held for sale							70,375			—
Decrease in other assets	9,623			18,882			5,982			9,623
Decrease in other liabilities	(14,720		)	(14,662		)
Net cash (used in) provided by operating activities	(61,171		)	55,134
Increase in other liabilities							(15,794		)	(14,720		)
Net cash provided by (used in) operating activities							140,107			(61,171		)
Investing activities
Purchases of securities available for sale	(317,922		)	(52,683		)	(49,577		)	(317,922		)
Proceeds from sales of securities available for sale	—			2,946			10,611			—
Proceeds from call/maturities of securities available for sale	29,335			30,800			48,509			29,335
Proceeds from call/maturities of securities held to maturity	—			7,710
Net increase in loans	(74,344		)	(31,974		)	(808		)	(74,344		)
Purchases of premises and equipment	(4,384		)	(4,441		)	(7,242		)	(4,384		)
Proceeds from sales of premises and equipment	—			13			135			—
Proceeds from sales of FHLB stock							10,441			—
Proceeds from sales of other assets	2,085			5,307			12,965			2,085
Net cash used in investing activities	(365,230		)	(42,322		)
Other, net							(104		)	—
Net cash provided by (used in) investing activities							24,930			(365,230		)
Financing activities
Net increase in noninterest-bearing deposits	20,712			18,224			47,517			20,712
Net increase in interest-bearing deposits	416,759			154,001			93,175			416,759
Net decrease in short-term borrowings	(32,061		)	(99,721		)	(300,116		)	(32,061		)
Repayment of long-term debt	(230		)	(10,790		)	(216		)	(230		)
Cash paid for dividends	(9,455		)	(8,030		)	(12,442		)	(9,455		)
Net stock-based compensation transactions	201			(1,976		)	—			201
Net cash provided by financing activities	395,926			51,708
Net (decrease) increase in cash and cash equivalents	(30,475		)	64,520
Net cash (used in) provided by financing activities							(172,082		)	395,926
Net decrease in cash and cash equivalents							(7,045		)	(30,475		)
Cash and cash equivalents at beginning of period	281,453			306,224			569,111			281,453
Cash and cash equivalents at end of period	$	250,978		$	370,744		$	562,066		$	250,978
Supplemental disclosures
Cash paid for interest	$	12,656		$	9,635		$	23,887		$	12,656
Cash paid for income taxes	$	6,280		$	7,181		$	5,325		$	6,280
Noncash transactions:
Transfers of loans to other real estate owned	$	1,154		$	3,168		$	885		$	1,154
Financed sales of other real estate owned	$	418		$	237		$	120		$	418
Transfers of loans held for sale to loans held for investment	$	442		$	—		$	—		$	442
Recognition of operating right-of-use assets							$	54,338		$	—
Recognition of operating lease liabilities							$	57,857		$	—

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Summary of Significant Accounting Policies

(In Thousands)

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. (“Renasant Insurance”). 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~~notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the Securities and Exchange Commission on February 28, ~~2018.~~2019.

Business Combinations: The Company completed its acquisition of ~~Metropolitan BancGroup,~~Brand Group Holdings, Inc. (“~~Metropolitan”~~Brand”) on ~~July~~September 1, ~~2017. Metropolitan’s~~2018. The acquired institution’s financial condition and results of operations are included in the Company’s financial condition and results of operations as of the acquisition date. Due to the timing of the system conversion and the integration of operations into the Company’s existing operations, historical reporting for acquired operations is impracticable, and, therefore, disclosure of the amounts of revenue and expenses of the acquired institution since the acquisition date is impracticable.

In connection with the acquisition of Brand, the Company acquired a portfolio of non-mortgage consumer loans, which is included in the line item “Loans held for sale” on the Company’s Consolidated Balance Sheet with a balance of $122,756 as of March 31, 2019. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 850, “Business Combinations”, these loans were measured at fair value as of the acquisition date. Subsequent to the acquisition date, these loans are carried at the lower of amortized cost or fair value.

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, and such differences may be material.

~~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 March 31, 2018 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”)~~February 2016, FASB issued Accounting Standards Update (“ASU”) ~~2014-09,~~ ~~“Revenue from Contracts with Customers”~~ ~~(“ASU 2014-09”), which is an update to FASB Accounting Standards Codification (“ASC”) 606,~~ ~~“Revenue from Contracts with Customers”~~ (“ASC 606”). 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. For a majority of the Company’s income streams, including interest income earned on loans and leases, the recognition of revenue is governed by other accounting standards and is specifically excluded from the coverage of ASC 606. In addition, the Company’s revenue that is covered by ASC 606, the most significant of which is service charges on deposit accounts, is generally based on day-to-day contracts with Company customers and, as a result, is not impacted by the new guidance. The Company adopted ASU 2014-09 in the first quarter of 2018, and there was no impact to the financial statements at the time of adoption. The Company has included newly applicable revenue disclosures in this filing, in Note 19, “Revenue Recognition.”

~~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. The Company used an entry price notion in determining the fair value of certain financial instruments prior to its changing to the exit price notion upon adoption of this standard in the first quarter of 2018. This ASU did not have any other impact on the Company at the time of adoption.

~~In February 2016, FASB issued ASU~~ 2016-02, “Leases (Topic 842)”~~(“ASU 2016-02”). ASU 2016-02~~, which amends the accounting model and disclosure requirements for leases. Topic 842 was subsequently amended by the following updates: ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842”, ASU 2018-10, “Codification Improvements to Topic 842, Leases”, andASU 2018-11, “Targeted Improvements” (collectively, “ASC 842”).The current accounting model for leases distinguishes between capital leases, which are recognized ~~on-balance~~on the 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~~This standard became effective on January 1, 2019. A modified retrospective transition approach is ~~effective for annual and interim periods in fiscal years beginning after December 15, 2018.~~required, applying the new standard to all leases existing at the date of initial application. The Company ~~is currently evaluating~~chose to use the ~~impact ASU 2016-02 will have on its financial position~~effective date approach and, ~~results of operations, and its financial statement disclosures,~~as such, all periods presented after January 1, 2019 are in accordance with ASC 842 whereas periods presented prior to January 1, 2019 are in accordance with prior lease accounting. Financial information was not updated, and the ~~expected results include the recognition of leased assets~~disclosures required under ASC 842, were not provided for dates and ~~related lease liabilities on the balance sheet, along with leasehold amortization and interest expense recognized~~periods before January 1, 2019. The Company recorded a right-of-use asset in the ~~statement~~amount of ~~income.~~$53,042 and a corresponding lease liability in the amount of $56,562. The Company has included newly applicable lease disclosures in this filing in Note 19, “Leases.”

In June 2016, FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This 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 itthe CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model ~~would include~~includes 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~~is 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. The Company has also engaged a third party to act as a consultant and software provider to assist in the implementation of the CECL model. The implementation committee and the consultant have established the CECL blueprint for Renasant Bank, which includes the selected methodology, proper pool segmentation and loan data validation. Currently, ~~this~~the CECL committee is working with ~~a consulting firm~~the consultant to ~~develop~~build the ~~Company’s~~ CECL model ~~which includes reviewing~~and expects to run a preliminary CECL calculation in the ~~different model requirements and ensuring historical data integrity across all reporting systems.~~second quarter of 2019.

In ~~March~~January 2017, FASB issued ASU ~~2017-07,~~No. 2017-04, “~~Compensation~~Intangibles - ~~Retirement Benefits~~Goodwill and Other (Topic ~~715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”~~350)” (“ASU ~~2017-07”~~2017-04”). ASU ~~2017-07 requires employers~~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 ~~report~~perform 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 requiredquantitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. ASU 2017-04 will be ~~presented in the income statement separately from the service cost component~~effective for interim and ~~outside a subtotal of income from operations, if one~~annual periods beginning after December 15, 2019 and is ~~presented. These amendments also allow only the service cost component~~not expected to ~~be eligible for capitalization when applicable. This update became effective January 1, 2018 and did not~~ have a material impact on the Company’s financial statements.

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~~became effective ~~for interim~~January 1, 2019 and ~~annual periods beginning after December 15, 2018. The Company is evaluating~~did not have a material impact on the ~~effect that ASU 2017-08 will have on its~~Company’s financial ~~position and results of operations and its financial statement disclosures.~~statements.

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. This update became effective January 1, 2019 and did not have a material impact on the Company’s financial statements.

In August 2018, FASB issued ASU ~~2017-12~~2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 is intended to improve the disclosures on fair value measurements by eliminating, amending and adding certain disclosure requirements. These changes are intended to reduce costs for preparers while providing more useful information for financial statement users. ASU 2018-13 will be effective for interim and annual periods beginning after December 15, ~~2018.~~2019, with early adoption permitted. The Company is currently evaluating the effect that ASU ~~2017-12~~2018-13 will have on its financial position and results of operations and its financial statement disclosures.

In ~~February 2018,~~March 2019, FASB issued ASU ~~2018-02,~~2019-01, “~~Income Statement - Reporting Comprehensive Income~~Leases (Topic ~~220)”~~842): Codification Improvements” (“ASU ~~2018-02”~~2019-01”). ~~The amendments in~~ ASU ~~2018-02 allow a reclassification from accumulated other comprehensive income~~2019-01 is intended to ~~retained earnings~~clarify potential implementation questions related to ~~eliminate~~ASC 842. This includes clarification on the ~~stranded tax effects in accumulated other comprehensive income resulting from the Tax Cuts~~determination of fair value of underlying assets by lessors that are not manufacturers or dealers, cash flow presentation of sales-type and ~~Jobs Act.~~direct financing leases and transition disclosures related to accounting changes and error corrections. ASU ~~2018-02~~2019-01 will be effective for interim and annual periods beginning after December 15, ~~2018. Early~~2019, with early adoption ~~was permitted, including adoption in any interim period, for public companies for reporting periods for which financial statements had not yet been issued.~~permitted. The Company ~~adopted~~is currently evaluating the effect that ASU ~~2018-02 as~~2019-01 will have on its financial position and results of ~~December 31, 2017~~operations and as a result, reclassified $2,046 from accumulated other comprehensive income to retained earnings as of December 31, 2017. The reclassification impacted the Consolidated Balance Sheet and the Consolidated Statement of Changes in Shareholders’ Equity as of and for the twelve months ended December 31, 2017.its financial statement disclosures.

Note 2 – Mergers and Acquisitions

(Dollar Amounts In Thousands, Except Share Data)

~~Merger with~~Acquisition of Brand Group Holdings, Inc.

~~On March 28,~~Effective September 1, 2018, the Company ~~and~~completed its acquisition by merger of Brand, ~~Group Holdings, Inc. (“Brand”),~~ the parent company of The Brand Banking Company (“Brand Bank”), jointly announced the signing of a definitive merger agreement pursuant to which the Company will acquire Brand. Under the terms of the agreement, Brand will merge with and into Renasant, with Renasant continuing as the surviving corporation. Immediately after the merger of Brand with and into Renasant, Brand Bank will merge with and into Renasant Bank, with Renasant Bank continuing as the surviving banking corporation in the merger.

According to the terms of the merger agreement, each Brand shareholder will have the right to receive 32.87 shares of Renasant common stock and $77.50 in cash for each share of Brand common stock. Additionally, all in-the-money Brand stock options will be cashed out at an amount equal to the excess of $1,550 per share over the exercise price of such option (underwater options will be cancelled). The transaction's final pricing is contingent (and subject to reduction only) upon Brand's divestiture of certain assets, as outlined in the definitive merger agreement which was filed with the Securities and Exchange Commission on March 30, 2018.

As of March 31, 2018, Brand, which has 13 locations throughout the greater Atlanta market, had approximately $2,400,000 in total assets, which included approximately $1,910,000 in total loans (excluding mortgage loans held for sale), and approximately $1,920,000 in total deposits.

~~The acquisition is expected to close in the third quarter of 2018 and is subject to regulatory approval, Brand shareholder approval and other customary conditions set forth in the merger agreement.~~

~~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.~~$474,453. The Company issued ~~4,883,182~~9,306,477 shares of common stock and paid approximately ~~$4,764~~$21,879 to ~~Metropolitan~~Brand shareholders, excluding cash paid for fractional shares, and paid approximately $17,157, net of tax benefit, to Brand stock option holders for 100% of the voting equity interest in ~~Metropolitan.~~Brand. At closing, ~~Metropolitan~~Brand merged with and into the Company, with the Company the surviving corporation in the merger; immediately thereafter, ~~Metropolitan~~Brand Bank merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger. On ~~July~~September 1, ~~2017, Metropolitan~~2018, Brand operated ~~eight~~thirteen banking locations ~~in Nashville and Memphis, Tennessee and~~throughout the ~~Jackson, Mississippi Metropolitan Statistical Area.~~greater Atlanta market.

The Company recorded approximately ~~$147,478~~$349,459 in intangible assets which consist of goodwill of ~~$140,512~~$321,925 and a core deposit intangible of ~~$6,966.~~$27,534. 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.

The following table summarizes the allocation of purchase price to assets and liabilities acquired in connection with the Company’s acquisition of ~~Metropolitan~~Brand based on their fair values on ~~July~~September 1, ~~2017.~~

2018.


Purchase Price:
Shares issued to common shareholders	4,883,182					9,306,477
Purchase price per share	$	43.74				$	46.69
Value of stock paid				$	213,590				$	434,519
Cash consideration paid									21,879
Cash paid for fractional shares				5					4
Cash settlement for stock options				4,764
Deal charges, net of taxes				1,102
Cash settlement for stock options, net of tax benefit									17,157
Deal charges									894
Total Purchase Price				$	219,461				$	474,453
Net Assets Acquired:
Stockholders’ equity at acquisition date	$	89,253				$	138,896
Increase (decrease) to net assets as a result of fair value adjustments to assets acquired and liabilities assumed:
Securities	(731		)			(231		)
Mortgage loans held for sale	30
Loans, net of Metropolitan’s allowance for loan losses	(13,071		)
Loans, including loans held for sale						(20,969		)
Premises and equipment	(4,629		)			910
Intangible assets, net of Metropolitan’s existing intangibles	2,340
Other real estate owned	(1,251		)
Intangible assets						27,534
Other assets	2,731					(3,304		)
Deposits	(3,603		)			(1,367		)
Borrowings	(1,294		)			(3,236		)
Other liabilities	3,930					13,338
Deferred income taxes	5,244					957
Total Net Assets Acquired				78,949					152,528
Goodwill resulting from merger⁽¹⁾				$	140,512				$	321,925

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

The following table summarizes the estimated fair value on ~~July~~September 1, ~~2017~~2018 of assets acquired and liabilities assumed on that date in connection with the merger with ~~Metropolitan.~~Brand. These estimates are subject to change pending the finalization of all valuations.



Cash and cash equivalents	$	193,436
Securities	71,246
Loans, including loans held for sale	1,589,195
Premises and equipment	20,070
Intangible assets	349,459
Other assets	112,066
Total assets	$	2,335,472

Deposits	$	1,714,177
Borrowings	90,912
Other liabilities	55,930
Total liabilities	$	1,861,019

As part of the merger agreement, Brand agreed to divest the operations of its subsidiary Brand Mortgage Group, LLC (“BMG”), which was completed as of October 31, 2018. As a result, the balance sheet and results of operations of BMG, which the Company considers to be immaterial to the overall results of the Company, were included in the Company's balance sheet and results of operations from September 1, 2018 to October 31, 2018. The ~~Company is finalizing~~following table summarizes the ~~fair values of~~significant assets acquired and liabilities assumed ~~related to the Metropolitan acquisition; accordingly, the amounts in the table remain subject to change.~~

from BMG:

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



	September 1, 2018
Loans held for sale	$	48,100
Borrowings	34,139

Supplemental Pro Forma Combined Condensed Results of Operations

The following unaudited pro forma combined condensed consolidated financial information presents the results of operations for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 of the Company as though the ~~Metropolitan~~Brand merger had been completed as of January 1, ~~2016.~~2018. The unaudited pro forma information combines the historical results of ~~Metropolitan~~Brand with the Company’s historical consolidated results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the periods presented. The pro forma information is not necessarily indicative of what would have occurred had the acquisition taken place on January 1, ~~2016.~~2018. 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.


	(Unaudited)				(Unaudited)
	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Net interest income - pro forma	$	89,240	$	83,829	$	113,147	$	111,618

Noninterest income - pro forma					$	35,885	$	42,497

Noninterest expense - pro forma					$	88,832	$	99,774

Net income - pro forma	$	33,826	$	26,677	$	45,110	$	40,296

Earnings per share - pro forma:
Basic	$	0.69	$	0.59	$	0.77	$	0.69
Diluted	$	0.68	$	0.58	$	0.77	$	0.69

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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 available for sale were as follows as of the dates presented:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2018
March 31, 2019
Obligations of other U.S. Government agencies and corporations	$	3,549	$	27	$	(48	)	$	3,528	$	2,532	$	16	$	(23	)	$	2,525
Obligations of states and political subdivisions	222,814		4,292		(764		)	226,342		179,758		4,064		(60		)	183,762
Residential mortgage backed securities:
Government agency mortgage backed securities	416,954		444		(7,928		)	409,470		622,056		3,783		(3,773		)	622,066
Government agency collateralized mortgage obligations	244,213		42		(6,589		)	237,666		321,088		1,093		(2,734		)	319,447
Commercial mortgage backed securities:
Government agency mortgage backed securities	27,636		306		(440		)	27,502		21,816		362		(180		)	21,998
Government agency collateralized mortgage obligations	10,000		—		(128		)	9,872		46,095		273		(38		)	46,330
Trust preferred securities	12,429		—		(2,384		)	10,045		12,259		—		(2,013		)	10,246
Other debt securities	23,994		152		(206		)	23,940		48,335		766		(122		)	48,979
	$	961,589	$	5,263	$	(18,487	)	$	948,365	$	1,253,939	$	10,357	$	(8,943	)	$	1,255,353


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2017
December 31, 2018
Obligations of other U.S. Government agencies and corporations	$	3,554	$	40	$	(30	)	$	3,564	$	2,536	$	13	$	(38	)	$	2,511
Obligations of states and political subdivisions	228,589		6,161		(269		)	234,481		200,798		3,038		(567		)	203,269
Residential mortgage backed securities:
Government agency mortgage backed securities	196,121		888		(3,059		)	193,950		621,690		719		(9,126		)	613,283
Government agency collateralized mortgage obligations	180,258		133		(3,752		)	176,639		332,697		274		(5,982		)	326,989
Commercial mortgage backed securities:
Government agency mortgage backed securities	31,015		389		(234		)	31,170		21,957		257		(384		)	21,830
Government agency collateralized mortgage obligations	5,019		1		(14		)	5,006		28,446		24		(135		)	28,335
Trust preferred securities	12,442		—		(3,054		)	9,388		12,359		—		(1,726		)	10,633
Other debt securities	17,106		260		(76		)	17,290		44,046		192		(311		)	43,927
	$	674,104	$	7,872	$	(10,488	)	$	671,488	$	1,264,529	$	4,517	$	(18,269	)	$	1,250,777

~~There~~Securities sold were ~~no sales of securities~~as follows for the ~~three months ended March 31, 2018. During the same~~ period ~~in 2017, the Company sold residential mortgage backed securities with a carrying value of $2,496 at the time of the sale for net proceeds of $2,496 resulting in no gain or loss on the sale.~~presented:



	Carrying Value		Net Proceeds		Gain/(Loss)
Three months ended March 31, 2019
Obligations of states and political subdivisions	$	10,368	$	10,384	$	16
Residential mortgage backed securities:
Government agency mortgage backed securities	230		227		$	(3	)
	$	10,598	$	10,611	$	13

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

There were no securities sold during the three months ended March 31, 2018.

Gross realized gains and losses on sales of securities available for sale for three months ended March 31, 2019 and 2018, respectively, were as follows:




	Three Months Ended
	March 31,
	2019			2018
Gross gains on sales of securities available for sale	$	45		$	—
Gross losses on sales of securities available for sale	(32		)	—
Gains on sales of securities available for sale, net	$	13		$	—

At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, securities with a carrying value of ~~$259,688~~$553,451 and ~~$217,867,~~$619,308, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of ~~$20,644~~$19,629 and ~~$25,888~~$18,299 were pledged as collateral for short-term borrowings and derivative instruments at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

The amortized cost and fair value of securities at March 31, ~~2018~~2019 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				Available for Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	28,692	$	29,028	$	36,647	$	36,919
Due after one year through five years	67,311		68,747		40,168		40,856
Due after five years through ten years	78,917		79,724		74,651		76,630
Due after ten years	72,703		71,335		51,868		50,926
Residential mortgage backed securities:
Government agency mortgage backed securities	416,954		409,470		622,056		622,066
Government agency collateralized mortgage obligations	244,213		237,666		321,088		319,447
Commercial mortgage backed securities:
Government agency mortgage backed securities	27,636		27,502		21,816		21,998
Government agency collateralized mortgage obligations	10,000		9,872		46,095		46,330
Other debt securities	15,163		15,021		39,550		40,181
	$	961,589	$	948,365	$	1,253,939	$	1,255,353

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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						Less than 12 Months						12 Months or More						Total
	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Available for Sale:
March 31, 2018
March 31, 2019
Obligations of other U.S. Government agencies and corporations	1	$	494	$	(6	)	2	$	1,981	$	(42	)	3	$	2,475	$	(48	)	0	$	—	$	—		2	$	1,494	$	(23	)	2	$	1,494	$	(23	)
Obligations of states and political subdivisions	52	31,417		(392		)	12	7,554		(372		)	64	38,971		(764		)	1	855		(1		)	10	7,309		(59		)	11	8,164		(60		)
Residential mortgage backed securities:
Government agency mortgage backed securities	87	298,721		(3,942		)	44	84,166		(3,986		)	131	382,887		(7,928		)	10	28,824		(72		)	96	242,222		(3,701		)	106	271,046		(3,773		)
Government agency collateralized mortgage obligations	51	173,116		(3,394		)	29	58,759		(3,195		)	80	231,875		(6,589		)	3	16,043		(41		)	64	159,212		(2,693		)	67	175,255		(2,734		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	7	8,987		(122		)	3	5,732		(318		)	10	14,719		(440		)	0	—		—			4	7,543		(180		)	4	7,543		(180		)
Government agency collateralized mortgage obligations	2	9,872		(128		)	0	—		—			2	9,872		(128		)	0	—		—			1	4,962		(38		)	1	4,962		(38		)
Trust preferred securities	0	—		—			2	10,045		(2,384		)	2	10,045		(2,384		)	0	—		—			2	10,246		(2,013		)	2	10,246		(2,013		)
Other debt securities	7	6,140		(25		)	2	6,187		(181		)	9	12,327		(206		)	8	5,763		(34		)	3	5,752		(88		)	11	11,515		(122		)
Total	207	$	528,747	$	(8,009	)	94	$	174,424	$	(10,478	)	301	$	703,171	$	(18,487	)	22	$	51,485	$	(148	)	182	$	438,740	$	(8,795	)	204	$	490,225	$	(8,943	)
December 31, 2017
December 31, 2018
Obligations of other U.S. Government agencies and corporations	1	$	497	$	(3	)	2	$	1,999	$	(27	)	3	$	2,496	$	(30	)	0	$	—	$	—		2	$	1,480	$	(38	)	2	$	1,480	$	(38	)
Obligations of states and political subdivisions	23	11,860		(59		)	12	7,728		(210		)	35	19,588		(269		)	34	22,159		(193		)	26	16,775		(374		)	60	38,934		(567		)
Residential mortgage backed securities:
Government agency mortgage backed securities	29	64,595		(659		)	44	89,414		(2,400		)	73	154,009		(3,059		)	91	354,731		(3,945		)	73	125,757		(5,181		)	164	480,488		(9,126		)
Government agency collateralized mortgage obligations	33	102,509		(1,470		)	29	62,406		(2,282		)	62	164,915		(3,752		)	24	97,451		(840		)	60	140,076		(5,142		)	84	237,527		(5,982		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	2	5,629		(17		)	3	5,872		(217		)	5	11,501		(234		)	5	6,506		(74		)	4	7,468		(310		)	9	13,974		(384		)
Government agency collateralized mortgage obligations	1	4,986		(14		)	0	—		—			1	4,986		(14		)	2	9,950		(23		)	1	4,888		(112		)	3	14,838		(135		)
Trust preferred securities	0	—		—			2	9,388		(3,054		)	2	9,388		(3,054		)	0	—		—			2	10,633		(1,726		)	2	10,633		(1,726		)
Other debt securities	2	756		(12		)	2	6,308		(64		)	4	7,064		(76		)	12	19,011		(88		)	3	5,621		(223		)	15	24,632		(311		)
Total	91	$	190,832	$	(2,234	)	94	$	183,115	$	(8,254	)	185	$	373,947	$	(10,488	)	168	$	509,808	$	(5,163	)	171	$	312,698	$	(13,106	)	339	$	822,506	$	(18,269	)

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

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

greater than twelve months, the Company is collecting principal and interest payments from the respective issuers as scheduled. As such, the Company did not record any OTTI for the three months ended March 31, ~~2018~~2019 or ~~2017.~~2018.

The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $~~12,429~~12,259 and $~~12,442~~12,359 and a fair value of $~~10,045~~10,246 and $~~9,388~~10,633 at March 31, ~~2018~~2019 and December 31, ~~2017~~2018, respectively. At March 31, ~~2018,~~2019, 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~~150 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 March 31, ~~2018~~2019, 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 three months ended March 31, ~~2018~~2019.

The following table provides information regarding the Company’s investments in pooled trust preferred securities at March 31, ~~2018~~2019:


Name	Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Loss			Lowest Credit Rating	Issuers Currently in Deferral or Default		Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Loss			Lowest Credit Rating	Issuers Currently in Deferral or Default
XXIII	Pooled	B-2	$	8,318	$	6,527	$	(1,791	)	BB	16	%	Pooled	B-2	$	8,233	$	6,593	$	(1,640	)	BB	17	%
XXVI	Pooled	B-2	4,111		3,518		(593		)	B	19	%	Pooled	B-2	4,026		3,653		(373		)	B	20	%
			$	12,429	$	10,045	$	(2,384	)						$	12,259	$	10,246	$	(2,013	)

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:


	2018			2017			2019			2018
Balance at January 1	$	(261	)	$	(3,337	)	$	(261	)	$	(261	)
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 March 31	$	(261	)	$	(261	)	$	(261	)	$	(261	)

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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:


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Commercial, financial, agricultural	$	803,146		$	763,823		$	921,081		$	875,649
Lease financing	55,898			57,354			61,539			64,992
Real estate – construction	582,430			547,658			651,119			635,519
Real estate – 1-4 family mortgage	1,785,271			1,729,534			2,114,908			2,087,890
Real estate – commercial mortgage	2,503,680			2,390,076			2,726,186			2,628,365
Installment loans to individuals	103,059			103,452			93,654			100,424
Gross loans	5,833,484			5,591,897			6,568,487			6,392,839
Unearned income	(3,362		)	(3,341		)	(2,888		)	(3,127		)
Loans, net of unearned income	$	5,830,122		$	5,588,556		$	6,565,599		$	6,389,712

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.

Table of Contents

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											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			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
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	3,078	$	1,006	$	796,898		$	800,982		$	508	$	1,555	$	101	$	2,164	$	803,146		$	3,117	$	78	$	913,608		$	916,803		$	953	$	3,145	$	180	$	4,278	$	921,081
Lease financing	481		43		55,215			55,739			—		159		—		159		55,898			440		—		61,009			61,449			—		90		—		90		61,539
Real estate – construction	3,564		50		578,816			582,430			—		—		—		—		582,430			419		—		650,700			651,119			—		—		—		—		651,119
Real estate – 1-4 family mortgage	8,812		2,176		1,771,834			1,782,822			54		1,581		814		2,449		1,785,271			16,333		1,044		2,093,721			2,111,098			1,056		1,466		1,288		3,810		2,114,908
Real estate – commercial mortgage	3,016		289		2,495,780			2,499,085			564		2,253		1,778		4,595		2,503,680			2,394		13		2,719,516			2,721,923			—		2,349		1,914		4,263		2,726,186
Installment loans to individuals	477		41		102,505			103,023			—		17		19		36		103,059			392		57		93,139			93,588			2		64		—		66		93,654
Unearned income	—		—		(3,362		)	(3,362		)	—		—		—		—		(3,362		)	—		—		(2,888		)	(2,888		)	—		—		—		—		(2,888		)
Total	$	19,428	$	3,605	$	5,797,686		$	5,820,719		$	1,126	$	5,565	$	2,712	$	9,403	$	5,830,122		$	23,095	$	1,192	$	6,528,805		$	6,553,092		$	2,011	$	7,114	$	3,382	$	12,507	$	6,565,599
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	2,722	$	22	$	759,143		$	761,887		$	205	$	1,033	$	698	$	1,936	$	763,823		$	3,397	$	267	$	870,457		$	874,121		$	—	$	1,356	$	172	$	1,528	$	875,649
Lease financing	47		—		57,148			57,195			—		159		—		159		57,354			607		89		64,296			64,992			—		—		—		—		64,992
Real estate – construction	50		—		547,608			547,658			—		—		—		—		547,658			887		—		634,632			635,519			—		—		—		—		635,519
Real estate – 1-4 family mortgage	11,810		2,194		1,712,982			1,726,986			—		1,818		730		2,548		1,729,534			10,378		2,151		2,071,401			2,083,930			238		2,676		1,046		3,960		2,087,890
Real estate – commercial mortgage	1,921		727		2,381,871			2,384,519			—		2,877		2,680		5,557		2,390,076			1,880		13		2,621,902			2,623,795			—		2,974		1,596		4,570		2,628,365
Installment loans to individuals	429		72		102,901			103,402			1		28		21		50		103,452			368		165		99,731			100,264			3		157		—		160		100,424
Unearned income	—		—		(3,341		)	(3,341		)	—		—		—		—		(3,341		)	—		—		(3,127		)	(3,127		)	—		—		—		—		(3,127		)
Total	$	16,979	$	3,015	$	5,558,312		$	5,578,306		$	206	$	5,915	$	4,129	$	10,250	$	5,588,556		$	17,517	$	2,685	$	6,359,292		$	6,379,494		$	241	$	7,163	$	2,814	$	10,218	$	6,389,712

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~~of $500 or more 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, the loan is placed on nonaccrual status and 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.

Table of Contents

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		Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	2,612	$	2,491	$	—	$	2,491	$	223	$	4,886	$	4,581	$	—	$	4,581	$	983
Lease financing	159		159		—		159		2		90		90		—		90		1
Real estate – construction	150		150		—		150		1		8,485		6,320		2,165		8,485		56
Real estate – 1-4 family mortgage	9,106		8,111		—		8,111		121		8,739		8,415		—		8,415		113
Real estate – commercial mortgage	9,373		4,817		1,356		6,173		956		9,800		5,819		1,198		7,017		723
Installment loans to individuals	106		102		—		102		1		136		129		—		129		1
Total	$	21,506	$	15,830	$	1,356	$	17,186	$	1,304	$	32,136	$	25,354	$	3,363	$	28,717	$	1,877
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	3,043	$	2,365	$	—	$	2,365	$	138	$	2,280	$	1,834	$	—	$	1,834	$	163
Lease financing	159		159		—		159		2		—		—		—		—		—
Real estate – construction	578		578		—		578		4		9,467		7,302		2,165		9,467		63
Real estate – 1-4 family mortgage	10,018		8,169		703		8,872		561		9,767		9,077		—		9,077		61
Real estate – commercial mortgage	12,463		9,652		—		9,652		1,861		8,625		4,609		1,238		5,847		689
Installment loans to individuals	121		117		—		117		1		232		223		—		223		1
Totals	$	26,382	$	21,040	$	703	$	21,743	$	2,567	$	30,371	$	23,045	$	3,403	$	26,448	$	977

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				Three Months Ended				Three Months Ended
	March 31, 2018				March 31, 2017				March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	2,338	$	11	$	2,714	$	39	$	4,634	$	10	$	2,338	$	11
Lease financing	159		—		—		—		87		—		159		—
Real estate – construction	150		18		—		—		8,485		102		150		18
Real estate – 1-4 family mortgage	8,197		67		11,088		26		8,490		51		8,197		67
Real estate – commercial mortgage	6,670		92		15,314		106		7,030		28		6,670		92
Installment loans to individuals	104		1		118		—		149		1		104		1
Total	$	17,618	$	189	$	29,234	$	171	$	28,875	$	192	$	17,618	$	189

Restructured Loans

Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrower’s financial condition and which are performing in accordance with the new terms. Such concessions may include reduction in interest rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest.

The ~~following~~ tables below illustrate the impact of modifications classified as restructured loans which were made during the periods presented and held on the Consolidated Balance Sheets at the respective period ~~end:~~

end. There were no newly restructured loans during the three months ended March 31, 2019.

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Number of
Loans

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment
Three months ended March 31, 2018
Real estate – 1-4 family mortgage 3
$ 576
$ 576
Real estate – commercial mortgage 1
83
78
Total 4
$ 659
$ 654
Three months ended March 31, 2017
Real estate – 1-4 family mortgage 2
$ 177
$ 174
Real estate – commercial mortgage 2
146
156
Total 4
$ 323
$ 330




	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Three months ended March 31, 2018
Real estate – 1-4 family mortgage	3	$	576	$	576
Real estate – commercial mortgage	1	83		78
Total	4	$	659	$	654

~~With respect to loans that were restructured during the three months ended March 31, 2017, $156 subsequently defaulted within twelve months of the restructuring.~~ With respect to loans that were restructured during the three months ended March 31, 2018, none have subsequently defaulted aswithin twelve months of the ~~date of this report.~~restructuring.

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 were no restructured loans contractually 90 days past due or more and still accruing at March 31, 2019 and four restructured loans in the amount of $571 contractually 90 days past due or more and still accruing at March 31, ~~2018 and one restructured loan in the amount of $57 contractually 90 days past due or more and still accruing at March 31, 2017.~~2018. The outstanding balance of restructured loans on nonaccrual status was ~~$2,570~~$2,976 and ~~$6,086~~$2,570 at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively.

Changes in the Company’s restructured loans are set forth in the table below:

Number of
Loans

Recorded
Investment
Totals at January 1, 2018 54
$ 5,588
Additional loans with concessions 4
657
Reductions due to:
Reclassified as nonperforming (3 ) (192 )
Paid in full (2 ) (773 )
Principal paydowns —
(64 )
Totals at March 31, 2018 53
$ 5,216



	Number of Loans		Recorded Investment
Totals at January 1, 2019	51		$	5,325
Additional advances or loans with concessions	—		2
Reclassified as performing restructured loan	1		40
Reductions due to:
Paid in full	(1	)	(160		)
Principal paydowns	—		(45		)
Totals at March 31, 2019	51		$	5,162

The allocated allowance for loan losses attributable to restructured loans was ~~$92~~$32 and ~~$241~~$92 at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively. The Company had ~~$20~~$44 and ~~$142~~$20 in remaining availability under commitments to lend additional funds on these restructured loans at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively.

Credit Quality

For commercial and commercial real estate loans, internal risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances of these loans. Loan grades range between 1 and 9, with 1 being loans with the least credit risk. Loans within the “Pass” grade (historically, those with a risk rating between 1 and 4) generally have a lower risk of loss and therefore a lower risk factor applied to the loan balances. Management has established more granular risk rating categories to better identify heightened credit risk as loans migrate downward in the risk rating system. The “Pass” grade is now reserved for loans with a risk rating between 1 and 4A, and the “Watch” grade (those with a risk rating of 4B and 4E) is utilized on a temporary basis for “Pass” grade loans where a significant adverse risk-modifying action is anticipated in the near term. Loans that migrate toward the “Substandard” grade (those with a risk rating between 5 and 9) generally have a higher risk of loss and therefore a higher risk factor applied to the related loan balances. The following table presents the Company’s loan portfolio by risk-rating grades as of the dates presented:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~higher risk factor applied to the related loan balances. The following table presents the Company’s loan portfolio by risk-rating grades as of the dates presented:~~


	Pass		Watch		Substandard		Total		Pass		Watch		Substandard		Total
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	585,850	$	11,380	$	5,758	$	602,988	$	675,107	$	15,523	$	11,533	$	702,163
Real estate – construction	512,603		8,690		440		521,733		570,637		5,469		8,157		584,263
Real estate – 1-4 family mortgage	262,107		669		7,609		270,385		319,715		4,619		3,585		327,919
Real estate – commercial mortgage	2,094,811		52,407		18,988		2,166,206		2,308,236		50,355		24,550		2,383,141
Installment loans to individuals	852		—		—		852		—		—		—		—
Total	$	3,456,223	$	73,146	$	32,795	$	3,562,164	$	3,873,695	$	75,966	$	47,825	$	3,997,486
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	554,943	$	11,496	$	4,402	$	570,841	$	615,803	$	18,326	$	6,973	$	641,102
Real estate – construction	483,498		662		81		484,241		558,494		2,317		8,157		568,968
Real estate – 1-4 family mortgage	254,643		505		8,697		263,845		321,564		4,660		4,260		330,484
Real estate – commercial mortgage	1,983,750		50,428		24,241		2,058,419		2,210,100		54,579		24,144		2,288,823
Installment loans to individuals	921		—		—		921		—		—		—		—
Total	$	3,277,755	$	63,091	$	37,421	$	3,378,267	$	3,705,961	$	79,882	$	43,534	$	3,829,377

For portfolio balances of consumer, small balance consumer mortgage loans, such as 1-4 family mortgage loans, and certain other loans originated for other than commercial purposes, allowance factors are determined based on historical loss ratios by portfolio for the preceding eight quarters and may be adjusted by other qualitative criteria. The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the dates presented:


	Performing		Non- Performing		Total		Performing		Non- Performing		Total
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	198,111	$	2,047	$	200,158	$	217,572	$	1,346	$	218,918
Lease financing	52,334		202		52,536		58,562		89		58,651
Real estate – construction	60,648		49		60,697		66,856		—		66,856
Real estate – 1-4 family mortgage	1,511,105		3,781		1,514,886		1,782,390		4,599		1,786,989
Real estate – commercial mortgage	336,584		890		337,474		342,170		875		343,045
Installment loans to individuals	102,130		77		102,207		93,532		122		93,654
Total	$	2,260,912	$	7,046	$	2,267,958	$	2,561,082	$	7,031	$	2,568,113
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	191,473	$	1,509	$	192,982	$	233,046	$	1,501	$	234,547
Lease financing	53,854		159		54,013		61,776		89		61,865
Real estate – construction	63,417		—		63,417		66,551		—		66,551
Real estate – 1-4 family mortgage	1,462,347		3,342		1,465,689		1,751,994		5,412		1,757,406
Real estate – commercial mortgage	330,441		1,216		331,657		338,367		1,175		339,542
Installment loans to individuals	102,409		122		102,531		100,099		325		100,424
Total	$	2,203,941	$	6,348	$	2,210,289	$	2,551,833	$	8,502	$	2,560,335

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Note 5 – Purchased Loans

(In Thousands, Except Number of Loans)

For purposes of this Note 5, all references to “loans” mean purchased loans.

The following is a summary of purchased loans as of the dates presented:

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Commercial, financial, agricultural	$	243,672	$	275,570	$	387,376	$	420,263
Real estate – construction	75,061		85,731		89,954		105,149
Real estate – 1-4 family mortgage	572,830		614,187		654,265		707,453
Real estate – commercial mortgage	960,273		1,037,454		1,357,446		1,423,144
Installment loans to individuals	16,112		18,824		33,653		37,408
Gross loans	1,867,948		2,031,766		2,522,694		2,693,417
Unearned income	—		—		—		—
Loans, net of unearned income	$	1,867,948	$	2,031,766	$	2,522,694	$	2,693,417

Past Due and Nonaccrual Loans

The Company’s policies with respect to placing loans on nonaccrual status or charging off loans, and its accounting for interest on any such loans, are described above in Note 4, “Non Purchased Loans.”

The following table provides an aging of past due and nonaccrual loans, segregated by class, as of the dates presented:


	Accruing Loans								Nonaccruing Loans										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		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
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	388	$	552	$	242,313	$	243,253	$	—	$	314	$	105	$	419	$	243,672	$	5,596	$	607	$	379,993	$	386,196	$	311	$	523	$	346	$	1,180	$	387,376
Real estate – construction	—		—		75,061		75,061		—		—		—		—		75,061		2,258		—		87,696		89,954		—		—		—		—		89,954
Real estate – 1-4 family mortgage	5,491		2,116		561,608		569,215		1,265		1,046		1,304		3,615		572,830		9,631		2,653		637,630		649,914		299		2,079		1,973		4,351		654,265
Real estate – commercial mortgage	3,142		1,856		954,128		959,126		—		830		317		1,147		960,273		2,605		1,903		1,351,020		1,355,528		—		1,460		458		1,918		1,357,446
Installment loans to individuals	124		40		15,789		15,953		6		52		101		159		16,112		956		273		32,045		33,274		1		128		250		379		33,653
Total	$	9,145	$	4,564	$	1,848,899	$	1,862,608	$	1,271	$	2,242	$	1,827	$	5,340	$	1,867,948	$	21,046	$	5,436	$	2,488,384	$	2,514,866	$	611	$	4,190	$	3,027	$	7,828	$	2,522,694
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	1,119	$	532	$	273,488	$	275,139	$	—	$	199	$	232	$	431	$	275,570	$	1,811	$	97	$	417,786	$	419,694	$	—	$	477	$	92	$	569	$	420,263
Real estate – construction	415		—		85,316		85,731		—		—		—		—		85,731		1,235		68		103,846		105,149		—		—		—		—		105,149
Real estate – 1-4 family mortgage	6,070		2,280		602,464		610,814		385		879		2,109		3,373		614,187		8,981		4,455		690,697		704,133		202		1,881		1,237		3,320		707,453
Real estate – commercial mortgage	2,947		2,910		1,031,141		1,036,998		191		99		166		456		1,037,454		5,711		2,410		1,413,346		1,421,467		—		1,401		276		1,677		1,423,144
Installment loans to individuals	208		9		18,443		18,660		59		—		105		164		18,824		1,342		202		35,594		37,138		2		24		244		270		37,408
Total	$	10,759	$	5,731	$	2,010,852	$	2,027,342	$	635	$	1,177	$	2,612	$	4,424	$	2,031,766	$	19,080	$	7,232	$	2,661,269	$	2,687,581	$	204	$	3,783	$	1,849	$	5,836	$	2,693,417

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Impaired Loans

The Company’s policies with respect to the determination of whether a loan is impaired and the treatment of such loans are described above in Note 4, “Non Purchased Loans.”

Loans accounted for under ASC 310-20, and which are impaired loans recognized in conformity with ASC 310, segregated by class, were as follows as of the dates presented:


	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance		Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	421	$	336	$	21	$	357	$	49	$	1,287	$	914	$	314	$	1,228	$	198
Real estate – construction	252		—		249		249		—		320		320		—		320		2
Real estate – 1-4 family mortgage	6,195		1,493		4,133		5,626		47		6,177		896		4,641		5,537		14
Real estate – commercial mortgage	1,647		1,384		245		1,629		70		2,718		1,858		567		2,425		119
Installment loans to individuals	162		153		6		159		4		409		322		57		379		3
Total	$	8,677	$	3,366	$	4,654	$	8,020	$	170	$	10,911	$	4,310	$	5,579	$	9,889	$	336
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	757	$	625	$	74	$	699	$	52	$	671	$	600	$	11	$	611	$	173
Real estate – construction	1,207		—		1,199		1,199		—		576		576		—		576		5
Real estate – 1-4 family mortgage	6,173		1,385		4,225		5,610		45		5,787		1,381		3,780		5,161		18
Real estate – commercial mortgage	901		728		165		893		6		2,266		2,066		146		2,212		338
Installment loans to individuals	165		154		9		163		4		280		246		24		270		3
Totals	$	9,203	$	2,892	$	5,672	$	8,564	$	107	$	9,580	$	4,869	$	3,961	$	8,830	$	537

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				Three Months Ended				Three Months Ended
	March 31, 2018				March 31, 2017				March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	363	$	3	$	541	$	2	$	1,242	$	3	$	363	$	3
Real estate – construction	252		1		—		—		320		—		252		1
Real estate – 1-4 family mortgage	6,320		40		5,481		21		5,577		42		6,320		40
Real estate – commercial mortgage	1,642		18		3,090		35		2,630		12		1,642		18
Installment loans to individuals	160		—		85		—		397		—		160		—
Total	$	8,737	$	62	$	9,197	$	58	$	10,166	$	57	$	8,737	$	62

Loans accounted for under ASC 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”), and which are impaired loans recognized in conformity with ASC 310, segregated by class, were as follows as of the dates presented:

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance		Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	21,363	$	5,414	$	7,519	$	12,933	$	305	$	39,542	$	3,292	$	21,555	$	24,847	$	129
Real estate – 1-4 family mortgage	60,590		16,093		34,103		50,196		486		52,787		10,715		33,109		43,824		420
Real estate – commercial mortgage	178,682		63,979		85,568		149,547		1,023		158,927		59,827		76,455		136,282		1,973
Installment loans to individuals	1,744		757		877		1,634		3		7,555		665		3,228		3,893		2
Total	$	262,379	$	86,243	$	128,067	$	214,310	$	1,817	$	258,811	$	74,499	$	134,347	$	208,846	$	2,524
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	24,179	$	5,768	$	9,547	$	15,315	$	312	$	44,403	$	3,779	$	25,364	$	29,143	$	161
Real estate – 1-4 family mortgage	65,049		15,910		38,059		53,969		572		53,823		12,169		36,074		48,243		488
Real estate – commercial mortgage	186,720		65,108		91,230		156,338		892		165,700		62,003		78,435		140,438		1,901
Installment loans to individuals	1,761		698		940		1,638		1		8,290		660		3,770		4,430		2
Totals	$	277,709	$	87,484	$	139,776	$	227,260	$	1,777	$	272,216	$	78,611	$	143,643	$	222,254	$	2,552

The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-30 and which are impaired loans for the periods presented:


	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	March 31, 2018				March 31, 2017				March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	16,899	$	225	$	14,088	$	247	$	27,403	$	427	$	16,899	$	225
Real estate – 1-4 family mortgage	58,749		673		78,341		865		44,177		572		58,749		673
Real estate – commercial mortgage	167,365		1,972		196,807		2,319		137,421		1,796		167,365		1,972
Installment loans to individuals	1,687		18		2,104		21		4,144		106		1,687		18
Total	$	244,700	$	2,888	$	291,340	$	3,452	$	213,145	$	2,901	$	244,700	$	2,888

Restructured Loans

An explanation of what constitutes a “restructured loan,” and management’s analysis in determining whether to restructure a loan, are described above in Note 4, “Non Purchased Loans.”

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Three months ended March 31, 2018
Commercial, financial, agricultural	1	$	48	$	44	1	$	48	$	44
Real estate – commercial mortgage	1	8		7		1	8		7
Total	2	$	56	$	51	2	$	56	$	51
Three months ended March 31, 2017
Real estate – 1-4 family mortgage	10	$	2,221	$	1,823
Real estate – commercial mortgage	4	2,721		1,986
Total	14	$	4,942	$	3,809

~~With respect to loans that were restructured during the three months ended March 31, 2017, $210 subsequently defaulted within twelve months of the restructuring.~~ With respect to loans that were restructured during the three months ended March 31, 2018, none have subsequently defaulted aswithin twelve months of the ~~date of this report.~~restructuring.

There were four restructured loans in the amount of $414 contractually 90 days past due or more and still accruing at March 31, 2019 and no restructured loans contractually 90 days past due or more and still accruing at March 31, ~~2018 and two restructured loans in the amount of $52 contractually 90 days past due or more and still accruing at March 31, 2017.~~2018. The outstanding balance of restructured loans on nonaccrual status was ~~$616~~$1,851 and ~~$1,201~~$616 at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively.

Changes in the Company’s restructured loans are set forth in the table below:


	Number of Loans		Recorded Investment			Number of Loans		Recorded Investment
Totals at January 1, 2018	68		$	8,965
Additional loans with concessions	2		86
Totals at January 1, 2019						54		$	7,495
Additional advances or loans with concessions						—		174
Reclassified as performing restructured loan	1		3			5		212
Reductions due to:
Reclassified to nonperforming loans						(2	)	(269		)
Paid in full	(1	)	(76		)	(2	)	(104		)
Principal paydowns	—		(371		)	—		(261		)
Totals at March 31, 2018	70		$	8,607
Totals at March 31, 2019						55		$	7,247

The allocated allowance for loan losses attributable to restructured loans was ~~$100~~$86 and ~~$31~~$100 at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively. The Company had $2$3 and ~~$1,245~~$2 in remaining availability under commitments to lend additional funds on these restructured loans at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively.

Credit Quality

A discussion of the Company’s policies regarding internal risk-rating of loans is discussed above in Note 4, “Non Purchased Loans.” The following table presents the Company’s loan portfolio by risk-rating grades as of the dates presented:

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Pass		Watch		Substandard		Total		Pass		Watch		Substandard		Total
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	208,150	$	5,116	$	5,886	$	219,152	$	304,994	$	31,682	$	6,355	$	343,031
Real estate – construction	70,974		1,537		500		73,011		85,670		—		—		85,670
Real estate – 1-4 family mortgage	85,590		2,525		5,903		94,018		99,772		5,741		6,698		112,211
Real estate – commercial mortgage	755,454		15,789		10,048		781,291		1,109,980		65,879		13,171		1,189,030
Installment loans to individuals	662		—		3		665		—		—		1		1
Total	$	1,120,830	$	24,967	$	22,340	$	1,168,137	$	1,600,416	$	103,302	$	26,225	$	1,729,943
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	241,195	$	4,974	$	2,824	$	248,993	$	333,147	$	33,857	$	2,744	$	369,748
Real estate – construction	81,220		—		—		81,220		101,122		—		842		101,964
Real estate – 1-4 family mortgage	91,369		2,498		6,172		100,039		113,874		7,347		7,585		128,806
Real estate – commercial mortgage	827,372		17,123		9,003		853,498		1,198,540		43,046		9,984		1,251,570
Installment loans to individuals	678		—		3		681		—		—		2		2
Total	$	1,241,834	$	24,595	$	18,002	$	1,284,431	$	1,746,683	$	84,250	$	21,157	$	1,852,090

The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the dates presented:


	Performing		Non- Performing		Total		Performing		Non- Performing		Total
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	11,548	$	39	$	11,587	$	19,454	$	44	$	19,498
Real estate – construction	2,050		—		2,050		4,284		—		4,284
Real estate – 1-4 family mortgage	427,099		1,517		428,616		494,730		3,500		498,230
Real estate – commercial mortgage	29,313		122		29,435		32,023		111		32,134
Installment loans to individuals	13,617		196		13,813		29,324		435		29,759
Total	$	483,627	$	1,874	$	485,501	$	579,815	$	4,090	$	583,905
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	11,216	$	46	$	11,262	$	21,303	$	69	$	21,372
Real estate – construction	4,511		—		4,511		3,185		—		3,185
Real estate – 1-4 family mortgage	459,038		1,141		460,179		526,699		3,705		530,404
Real estate – commercial mortgage	27,495		123		27,618		30,951		185		31,136
Installment loans to individuals	16,344		161		16,505		32,676		300		32,976
Total	$	518,604	$	1,471	$	520,075	$	614,814	$	4,259	$	619,073

Loans Purchased with Deteriorated Credit Quality

Loans purchased in business combinations that exhibited, at the date of acquisition, evidence of deterioration of the credit quality since origination, such that it was probable that all contractually required payments would not be collected, were as follows as of the dates presented:

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Total Purchased Credit Deteriorated Loans		Total Purchased Credit Deteriorated Loans
March 31, 2018
March 31, 2019
Commercial, financial, agricultural	$	12,933	$	24,847
Real estate – 1-4 family mortgage	50,196		43,824
Real estate – commercial mortgage	149,547		136,282
Installment loans to individuals	1,634		3,893
Total	$	214,310	$	208,846
December 31, 2017
December 31, 2018
Commercial, financial, agricultural	$	15,315	$	29,143
Real estate – 1-4 family mortgage	53,969		48,243
Real estate – commercial mortgage	156,338		140,438
Installment loans to individuals	1,638		4,430
Total	$	227,260	$	222,254

The following table presents the fair value of loans that exhibited evidence of deteriorated credit quality at the time of acquisition at March 31, ~~2018:~~2019:


	Total Purchased Credit Deteriorated Loans			Total Purchased Credit Deteriorated Loans
Contractually-required principal and interest	$	300,368		$	297,164
Nonaccretable difference⁽¹⁾	(55,373		)	(57,848		)
Cash flows expected to be collected	244,995			239,316
Accretable yield⁽²⁾	(30,685		)	(30,470		)
Fair value	$	214,310		$	208,846


(1)	Represents contractual principal and interest cash flows of ~~$46,019~~$47,930 and ~~$9,354,~~$9,918, respectively, not expected to be collected.


(2)	Represents contractual principal and interest cash flows of ~~$1,588~~$1,606 and ~~$29,097,~~$28,864, respectively, expected to be collected.

Changes in the accretable yield of loans purchased with deteriorated credit quality were as follows as of March 31, ~~2018:~~2019:

Total Purchased Credit Deteriorated Loans
Balance at January 1, 2018 $ (32,207 )
Reclasses from nonaccretable difference (1,499 )
Accretion 2,971
Charge-offs 50
Balance at March 31, 2018 $ (30,685 )



	Total Purchased Credit Deteriorated Loans
Balance at January 1, 2019	$	(34,265	)
Reclassification from nonaccretable difference	(2,657		)
Accretion	5,582
Charge-offs	870
Balance at March 31, 2019	$	(30,470	)

The following table presents the fair value of loans purchased from ~~Metropolitan~~Brand as of the ~~July~~September 1, ~~2017~~2018 acquisition date.


At acquisition date:	July 1, 2017			September 1, 2018
Contractually-required principal and interest	$	1,198,741		$	1,625,079
Nonaccretable difference	(79,165		)	(123,399		)
Cash flows expected to be collected	1,119,576			1,501,680
Accretable yield	(154,543		)	(170,651		)
Fair value	$	965,033		$	1,331,029

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6 – Allowance for Loan Losses

(In Thousands)

The following is a summary of total non purchased and purchased loans as of the dates presented:


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Commercial, financial, agricultural	$	1,046,818		$	1,039,393		$	1,308,457		$	1,295,912
Lease financing	55,898			57,354			61,539			64,992
Real estate – construction	657,491			633,389			741,073			740,668
Real estate – 1-4 family mortgage	2,358,101			2,343,721			2,769,173			2,795,343
Real estate – commercial mortgage	3,463,953			3,427,530			4,083,632			4,051,509
Installment loans to individuals	119,171			122,276			127,307			137,832
Gross loans	7,701,432			7,623,663			9,091,181			9,086,256
Unearned income	(3,362		)	(3,341		)	(2,888		)	(3,127		)
Loans, net of unearned income	7,698,070			7,620,322			9,088,293			9,083,129
Allowance for loan losses	(46,401		)	(46,211		)	(49,835		)	(49,026		)
Net loans	$	7,651,669		$	7,574,111		$	9,038,458		$	9,034,103

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed adequate by management based on its ongoing analysis of the loan portfolio to absorb probable credit losses inherent in the entire loan portfolio, including collective impairment as recognized under ASC 450, “Contingencies”. Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310. The balance of these loans and their related allowance is included in management’s estimation and analysis of the allowance for loan losses. Management and the internal loan review staff evaluate the adequacy of the allowance for loan losses quarterly. The allowance for loan losses is evaluated based on a continuing assessment of problem loans, the types of loans, historical loss experience, new lending products, emerging credit trends, changes in the size and character of loan categories and other factors, including its risk rating system, regulatory guidance and economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses is established through a provision for loan losses charged to earnings resulting from measurements of inherent credit risk in the loan portfolio and estimates of probable losses or impairments of individual loans. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The following table provides a roll forward of the allowance for loan losses by loan category and a breakdown of the ending balance of the allowance based on the Company’s impairment methodology for the periods presented:


	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total			Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Three Months Ended March 31, 2018
Three Months Ended March 31, 2019
Allowance for loan losses:
Beginning balance	$	5,542		$	3,428	$	12,009		$	23,384		$	1,848		$	46,211		$	8,269		$	4,755	$	10,139		$	24,492		$	1,371		$	49,026
Charge-offs	(659		)	—		(671		)	(613		)	(122		)	(2,065		)	(258		)	—		(497		)	(562		)	(220		)	(1,537		)
Recoveries	235			4		133			108			25			505			374			7		197			245			23			846
Net (charge-offs) recoveries	(424		)	4		(538		)	(505		)	(97		)	(1,560		)
Net recoveries (charge-offs)																		116			7		(300		)	(317		)	(197		)	(691		)
Provision for loan losses charged to operations	1,953			766		(67		)	(965		)	63			1,750			1,237			16		(348		)	468			127			1,500
Ending balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401		$	9,622		$	4,778	$	9,491		$	24,643		$	1,301		$	49,835
Period-End Amount Allocated to:
Individually evaluated for impairment	$	272		$	1	$	168		$	1,026		$	5		$	1,472		$	1,181		$	58	$	127		$	842		$	5		$	2,213
Collectively evaluated for impairment	6,494			4,197		10,750			19,865			1,806			43,112			8,312			4,720		8,944			21,828			1,294			45,098
Purchased with deteriorated credit quality	305			—		486			1,023			3			1,817			129			—		420			1,973			2			2,524
Ending balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401		$	9,622		$	4,778	$	9,491		$	24,643		$	1,301		$	49,835


(1)	Includes lease financing receivables.

Commercial
Real Estate -
Construction

Real Estate -
1-4 Family
Mortgage

Real Estate -
Commercial
Mortgage

Installment
and Other⁽¹⁾
Total
Three Months Ended March 31, 2017
Allowance for loan losses:
Beginning balance $ 5,486
$ 2,380
$ 14,294
$ 19,059
$ 1,518
$ 42,737
Charge-offs (832 ) —
(275 ) (227 ) (264 ) (1,598 )
Recoveries 57
31
82
95
19
284
Net (charge-offs) recoveries (775 ) 31
(193 ) (132 ) (245 ) (1,314 )
Provision for loan losses charged to operations 401
(292 ) (1,939 ) 3,146
184
1,500
Ending balance $ 5,112
$ 2,119
$ 12,162
$ 22,073
$ 1,457
$ 42,923
Period-End Amount Allocated to:
Individually evaluated for impairment $ 165
$ —
$ 1,139
$ 2,670
$ 3
$ 3,977
Collectively evaluated for impairment 4,569
2,119
10,256
17,830
1,453
36,227
Purchased with deteriorated credit quality 378
—
767
1,573
1
2,719
Ending balance $ 5,112
$ 2,119
$ 12,162
$ 22,073
$ 1,457
$ 42,923




	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total

Three Months Ended March 31, 2018
Allowance for loan losses:
Beginning balance	$	5,542		$	3,428	$	12,009		$	23,384		$	1,848		$	46,211
Charge-offs	(659		)	—		(671		)	(613		)	(122		)	(2,065		)
Recoveries	235			4		133			108			25			505
Net (charge-offs) recoveries	(424		)	4		(538		)	(505		)	(97		)	(1,560		)
Provision for loan losses charged to operations	1,953			766		(67		)	(965		)	63			1,750
Ending balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401
Period-End Amount Allocated to:
Individually evaluated for impairment	$	272		$	1	$	168		$	1,026		$	5		$	1,472
Collectively evaluated for impairment	6,494			4,197		10,750			19,865			1,806			43,112
Purchased with deteriorated credit quality	305			—		486			1,023			3			1,817
Ending balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401


(1)	Includes lease financing receivables.

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table provides the recorded investment in loans, net of unearned income, based on the Company’s impairment methodology as of the dates presented:

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Commercial		Real Estate - Construction		Real Estate - 1-4 Family Mortgage		Real Estate - Commercial Mortgage		Installment and Other⁽¹⁾		Total		Commercial		Real Estate - Construction		Real Estate - 1-4 Family Mortgage		Real Estate - Commercial Mortgage		Installment and Other⁽¹⁾		Total
March 31, 2018
March 31, 2019
Individually evaluated for impairment	$	2,848	$	399	$	13,737	$	7,802	$	420	$	25,206	$	5,809	$	8,805	$	13,952	$	9,442	$	598	$	38,606
Collectively evaluated for impairment	1,031,037		657,092		2,294,168		3,306,604		169,653		7,458,554		1,277,801		732,268		2,711,397		3,937,908		181,467		8,840,841
Purchased with deteriorated credit quality	12,933		—		50,196		149,547		1,634		214,310		24,847		—		43,824		136,282		3,893		208,846
Ending balance	$	1,046,818	$	657,491	$	2,358,101	$	3,463,953	$	171,707	$	7,698,070	$	1,308,457	$	741,073	$	2,769,173	$	4,083,632	$	185,958	$	9,088,293
December 31, 2017
December 31, 2018
Individually evaluated for impairment	$	3,064	$	1,777	$	14,482	$	10,545	$	439	$	30,307	$	2,445	$	10,043	$	14,238	$	8,059	$	493	$	35,278
Collectively evaluated for impairment	1,021,014		631,612		2,275,270		3,260,648		174,211		7,362,755		1,264,324		730,625		2,732,862		3,903,012		194,774		8,825,597
Purchased with deteriorated credit quality	15,315		—		53,969		156,337		1,639		227,260		29,143		—		48,243		140,438		4,430		222,254
Ending balance	$	1,039,393	$	633,389	$	2,343,721	$	3,427,530	$	176,289	$	7,620,322	$	1,295,912	$	740,668	$	2,795,343	$	4,051,509	$	199,697	$	9,083,129


(1)	Includes lease financing receivables.

Note 7 – Other Real Estate Owned

(In Thousands)

The following table provides details of the Company’s other real estate owned (“OREO”) purchased and non purchased, net of

valuation allowances and direct write-downs, as of the dates presented:


	Purchased OREO		Non Purchased OREO		Total OREO		Purchased OREO		Non Purchased OREO		Total OREO
March 31, 2018
March 31, 2019
Residential real estate	$	1,061	$	1,087	$	2,148	$	887	$	1,764	$	2,651
Commercial real estate	3,593		1,572		5,165		2,317		1,391		3,708
Residential land development	698		1,045		1,743		675		420		1,095
Commercial land development	4,402		1,097		5,499		2,053		648		2,701
Total	$	9,754	$	4,801	$	14,555	$	5,932	$	4,223	$	10,155
December 31, 2017
December 31, 2018
Residential real estate	$	1,683	$	758	$	2,441	$	423	$	1,910	$	2,333
Commercial real estate	4,314		1,624		5,938		2,686		1,611		4,297
Residential land development	1,100		781		1,881		678		421		1,099
Commercial land development	4,427		1,247		5,674		2,400		911		3,311
Total	$	11,524	$	4,410	$	15,934	$	6,187	$	4,853	$	11,040

Changes in the Company’s purchased and non purchased OREO were as follows:


	Purchased OREO			Non Purchased OREO			Total OREO			Purchased OREO			Non Purchased OREO			Total OREO
Balance at January 1, 2018	$	11,524		$	4,410		$	15,934
Balance at January 1, 2019										$	6,187		$	4,853		$	11,040
Transfers of loans	39			1,115			1,154			509			376			885
Impairments	(305		)	(47		)	(352		)	(523		)	(204		)	(727		)
Dispositions	(1,504		)	(677		)	(2,181		)	(241		)	(802		)	(1,043		)
Balance at March 31, 2018	$	9,754		$	4,801		$	14,555
Balance at March 31, 2019										$	5,932		$	4,223		$	10,155

Components of the line item “Other real estate owned” in the Consolidated Statements of Income were as follows for the periods presented:

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~Components of the line item “Other real estate owned” in the Consolidated Statements of Income were as follows for the periods presented:~~


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2018			2017			2019			2018
Repairs and maintenance	$	113		$	197		$	95		$	113
Property taxes and insurance	112			332			107			112
Impairments	352			378			727			352
Net losses (gains) on OREO sales	96			(327		)
Net losses on OREO sales							80			96
Rental income	(16		)	(48		)	(5		)	(16		)
Total	$	657		$	532		$	1,004		$	657

Note 8 – Goodwill and Other Intangible Assets

(In Thousands)

The carrying amounts of goodwill by operating segments for the three months ended March 31, ~~2018~~2019 were as follows:

Community Banks Insurance Total
Balance at January 1, 2018 $ 608,279
$ 2,767
$ 611,046
Addition to goodwill from acquisition —
—
—
Adjustment to previously recorded goodwill —
—
—
Balance at March 31, 2018 $ 608,279
$ 2,767
$ 611,046



	Community Banks		Insurance		Total
Balance at January 1, 2019	$	930,161	$	2,767	$	932,928
Addition to goodwill from acquisition	43		—		43
Balance at March 31, 2019	$	930,204	$	2,767	$	932,971

The addition to goodwill from the Brand acquisition is due to changes in estimated values of assets acquired and liabilities assumed in the Brand acquisition. The Company is finalizing the fair values of certain assets, including loans, property and equipment, taxes and ~~taxes,~~certain other assets, related to the ~~Metropolitan~~ acquisition; as such, the recorded balance of goodwill is subject to change.

The following table provides a summary of finite-lived intangible assets as of the dates presented:


	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
March 31, 2018
March 31, 2019
Core deposit intangibles	$	54,958	$	(33,204	)	$	21,754	$	82,492	$	(40,711	)	$	41,781
Customer relationship intangible	1,970		(865		)	1,105		1,970		(996		)	974
Total finite-lived intangible assets	$	56,928	$	(34,069	)	$	22,859	$	84,462	$	(41,707	)	$	42,755
December 31, 2017
December 31, 2018
Core deposit intangibles	$	54,958	$	(31,586	)	$	23,372	$	82,492	$	(38,634	)	$	43,858
Customer relationship intangible	1,970		(832		)	1,138		1,970		(963		)	1,007
Total finite-lived intangible assets	$	56,928	$	(32,418	)	$	24,510	$	84,462	$	(39,597	)	$	44,865

Current year amortization expense for finite-lived intangible assets is presented in the table below.


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Amortization expense for:
Core deposit intangibles	$	1,618	$	1,530	$	2,077	$	1,618
Customer relationship intangible	33		33		33		33
Total intangible amortization	$	1,651	$	1,563	$	2,110	$	1,651

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The estimated amortization expense of finite-lived intangible assets for the year ending December 31, ~~2018~~2019 and the succeeding four years is summarized as follows:


	Core Deposit Intangibles		Customer Relationship Intangible		Total		Core Deposit Intangibles		Customer Relationship Intangible		Total

2018	$	6,130	$	131	$	6,261
2019	5,212		131		5,343		$	7,965	$	131	$	8,096
2020	4,186		131		4,317		6,939		131		7,070
2021	3,107		131		3,238		5,860		131		5,991
2022	2,187		131		2,318		4,940		131		5,071
2023							4,044		131		4,175

Note 9 – Mortgage Servicing Rights

(In Thousands)

The Company retains the right to service certain mortgage loans that it sells to secondary market investors. These mortgage servicing rights (“MSRs”) are recognized as a separate asset on the date the corresponding mortgage loan is sold. MSRs are amortized in proportion to and over the period of estimated net servicing income. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. Impairment losses on MSRs are recognized to the extent ~~by which the~~that unamortized cost exceeds fair value. There were no impairment losses recognized during the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018.

Changes in the Company’s MSRs were as follows:


Balance at January 1, 2018	$	39,339
Balance at January 1, 2019				$	48,230
Capitalization	2,098			2,181
Amortization	(1,221		)	(1,438		)
Balance at March 31, 2018	$	40,216
Balance at March 31, 2019				$	48,973

Data and key economic assumptions related to the Company’s MSRs are as follows as of ~~March 31, 2018~~ ~~and December 31, 2017 are as follows:~~the dates presented:


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Unpaid principal balance	$	4,089,045		$	4,012,519		$	4,684,587		$	4,635,712

Weighted-average prepayment speed (CPR)	7.42		%	8.04		%	9.75		%	7.95		%
Estimated impact of a 10% increase	$	(1,692	)	$	(1,592	)	$	(1,903	)	$	(1,264	)
Estimated impact of a 20% increase	(3,280		)	(3,095		)	(3,719		)	(2,569		)

Discount rate	9.40		%	9.69		%	9.45		%	9.45		%
Estimated impact of a 10% increase	$	(2,374	)	$	(2,027	)	$	(2,243	)	$	(2,657	)
Estimated impact of a 20% increase	(4,556		)	(3,896		)	(4,316		)	(5,103		)

Weighted-average coupon interest rate	3.89		%	3.89		%	4.07		%	4.04		%
Weighted-average servicing fee (basis points)	26.54			26.36			27.65			27.47
Weighted-average remaining maturity (in years)	8.27			7.98			7.08			8.03

The Company recorded servicing fees of ~~$2,370~~$2,254 and ~~$1,233~~$2,370 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, which are included in “Mortgage banking income” in the Consolidated Statements of Income.

Note 10 - Employee Benefit and Deferred Compensation Plans

(In Thousands, Except Share Data)

Pension and Post-retirement Medical Plans

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The Company sponsors a noncontributory defined benefit pension plan, under which participation and ~~future~~ benefit accruals ceased as of December 31, 1996.

The Company ~~also~~ provides retiree ~~health~~medical benefits, ~~for certain employees who were~~consisting of the opportunity to purchase coverage at subsidized rates under the Company’s group medical plan. Employees eligible to participate must: (i) have been employed by the Company and enrolled in the Company’s ~~health~~group medical plan as of December 31, ~~2004. To receive benefits, an eligible employee must~~2004; and (ii) retire from ~~service with~~ the Company ~~and its affiliates~~ between ~~age~~ages 55 and 65 ~~and be credited~~ with at least 15 years of service or ~~with~~ 70 points (points determined as the sum of age and ~~service at retirement.~~service.) The Company periodically determines the portion of the ~~premium~~premiums to be paid by each ~~eligible~~ retiree and the portion to be paid by the Company. Coverage ceases when ~~an employee~~a retiree attains age 65 and is eligible for Medicare. The Company also provides life insurance ~~coverage~~ for each retiree ~~in the~~who receives retiree medical benefits. The face amount of $5the coverage is $5; coverage is provided until each retiree attains age 70. Retirees ~~can~~may purchase additional insurance or continue coverage beyond age 70 at their sole expense.

~~The plan expense for~~Information related to the ~~legacy Renasant~~ defined benefit pension plan maintained by Renasant Bank (“Pension Benefits - Renasant”) and to the post-retirement health and life ~~plans~~plan (“Other Benefits”) ~~for~~as of the ~~periods~~dates presented ~~was~~is as follows:

Pension Benefits
Renasant Other Benefits
Three Months Ended Three Months Ended
March 31, March 31,
2018 2017 2018 2017
Service cost $ —
$ —
$ 2
$ 3
Interest cost 266
293
9
13
Expected return on plan assets (518 ) (484 ) —
—
Recognized actuarial loss 87
100
—
13
Settlement/curtailment/termination gains —
—
—
—
Net periodic benefit (return) cost $ (165 ) $ (91 ) $ 11
$ 29



	Pension Benefits
	Renasant						Other Benefits
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
Service cost	$	—		$	—		$	2		$	2
Interest cost	273			266			8			9
Expected return on plan assets	(363		)	(518		)	—			—
Recognized actuarial loss (gain)	86			87			(14		)	—
Net periodic benefit (return) cost	$	(4	)	$	(165	)	$	(4	)	$	11

Incentive Compensation Plans

~~In March 2011, the~~The Company ~~adopted~~maintains a long-term equity ~~incentive~~compensation plan ~~which~~that provides for the grant of stock options and the award of restricted stock. The plan replaced the long-term incentive plan adopted in 2001, which expired in October 2011. ~~The Company issues shares of treasury stock to satisfy stock options exercised or restricted stock granted under the plan.~~ Options granted under the plan ~~allow participants to acquire~~permit the acquisition of shares of the Company’s common stock at ~~a fixed~~an exercise price equal to the fair market value of the shares on the date of grant. Options are subject to time-based vesting and expire ten years after the ~~grant date. Options vest and become exercisable in installments over a three-year period measured from the grant date.~~date of grant. Options that ~~have~~do not ~~vested~~vest or expire unexercised are forfeited and ~~cancelled upon the termination of a participant’s employment.~~canceled. There were no stock options granted, nor compensation expense associated with options recorded, during the three months ended March 31, ~~2018~~2019 or ~~2017.~~2018.

The following table summarizes ~~the changes in stock~~information about options outstanding, exercised and forfeited as of and for the three months ended March 31, ~~2018~~2019:


	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding at beginning of period	89,750		$	15.67	43,750		$	15.84
Granted	—		—		—		—
Exercised	(27,000	)	15.76		(2,500	)	16.91
Forfeited	—		—		—		—
Options outstanding at end of period	62,750		$	15.64	41,250		$	15.77

The Company also awards performance-based restricted stock to executives and other officers and employees and time-based restricted stock to non-employee directors, executives, and other officers and ~~employees under the long-term equity incentive plan. The performance-based restricted stock vests upon completion of a designated service period and~~employees. Performance-based awards are subject to the attainment of ~~specified~~designated performance ~~goals. Target~~criteria during a fixed performance ~~levels are derived from~~cycle. Performance criteria may relate to the Company’s ~~budget, with threshold~~ performance ~~set at approximately 5% below~~or to the performance of an affiliate, region, division or profit center in each case measured on an absolute basis or relative to a defined peer group. The Company annually sets minimum, target, and superior ~~performance set at approximately 5% above target. Performance-based restricted stock is granted at the target level; the number~~levels of ~~shares ultimately awarded is determined at the end of the applicable performance period and may be increased or decreased~~performance. Minimum

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~depending upon~~performance must be attained for the ~~Company meeting or exceeding (or failing to meet or exceed) the financial~~vesting of any shares; superior performance ~~measures defined by the Board of Directors.~~must be attained for maximum payouts. Time-based restricted stock ~~vests~~awards relate to a fixed number of shares that vest at the end of ~~the~~a designated service ~~period defined in the respective grant. The fair value of each restricted stock grant is the closing price of the Company’s common stock on the day immediately preceding the grant date.~~ period.

The following table summarizes the changes in restricted stock as of and for the three months ended March 31, ~~2018~~2019:


	Performance-Based Restricted Stock	Weighted Average Grant-Date Fair Value		Time- Based Restricted Stock		Weighted Average Grant-Date Fair Value		Performance-Based Restricted Stock	Weighted Average Grant-Date Fair Value		Time- Based Restricted Stock		Weighted Average Grant-Date Fair Value
Nonvested at beginning of period	—	$	—	218,075		$	39.08	41,300	$	40.89	304,955		$	41.82
Awarded	95,183	40.89		110,833		40.93		154,250	30.18		189,346		30.18
Vested	—	—		(35,099	)	35.61		—	—		(58,979	)	36.75
Cancelled	—	—		(7,501	)	42.99		—	—		(6,230	)	41.11
Nonvested at end of period	95,183	$	40.89	286,308		$	40.12	195,550	$	32.44	429,092		$	37.39

During the three months ended March 31, ~~2018,~~2019, the Company reissued ~~71,747~~87,150 shares from treasury in connection with the exercise of stock options and awards of restricted stock. The Company recorded total stock-based compensation expense of ~~$1,792~~$2,637 and ~~$1,174~~$1,792 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Note 11 – Derivative Instruments

(In Thousands)

The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, as part of its ongoing efforts to mitigate its interest rate risk exposure and to facilitate the needs of its customers. The Company also from time to time enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At March 31, ~~2018~~2019, the Company had notional amounts of $~~212,840~~204,403 on interest rate contracts with corporate customers and $~~212,840~~204,403 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed-rate loans.

In June 2014, the Company entered into two forward interest rate swap contracts on floating rate liabilities at the Bank level with notional amounts of $15,000 each. The interest rate swap contracts are each accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future FHLB borrowings for a four-year and five-year period beginning June 1, 2018 and December 3, 2018 and ending June 2022 and June 2023, respectively. Under these contracts, Renasant Bank will pay a fixed interest rate and will receive a variable interest rate based on the three-month LIBOR plus a pre-determined spread, with quarterly net settlements.

In March and April 2012, the Company entered into two interest rate swap agreements effective March 30, 2014 and March 17, 2014, respectively. Under these swap agreements, the Company receives a variable rate of interest based on the three-month LIBOR plus a pre-determined spread and pays a fixed rate of interest. The agreements, which both terminate in March 2022, are accounted for as cash flow hedges to reduce the variability in cash flows resulting from changes in interest rates on $32,000 of the Company’s junior subordinated debentures.

In April 2018, the Company entered into an interest rate swap agreement effective June 15, 2018. Under this swap agreement, the Company receives a variable rate of interest based on the three-month LIBOR plus a pre-determined spread and pays a fixed rate of interest. The agreement, which terminates in June 2028, is accounted for as a cash flow hedge to reduce the variability in cash flows resulting from changes in interest rates on $30,000 of the Company’s junior subordinated debentures.

The Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate and adjustable-rate residential mortgage loans. The notional amount of commitments to fund fixed-rate and adjustable-rate mortgage loans was $~~208,883~~206,394 and ~~$131,000~~$159,464 at March 31, ~~2018~~2019 and December 31, ~~2017~~2018, respectively. The Company also enters into forward commitments to sell residential mortgage loans to secondary market investors. The notional amount of commitments to sell residential mortgage loans to secondary market investors was $~~344,000~~326,743 and ~~$199,000~~$281,343 at March 31, ~~2018~~2019 and December 31, ~~2017~~2018, respectively.

~~The following table provides details on the Company’s derivative financial instruments as of the dates presented:~~

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The following table provides details on the Company’s derivative financial instruments as of the dates presented:


		Fair Value					Fair Value
	Balance Sheet Location	March 31, 2018		December 31, 2017		Balance Sheet Location	March 31, 2019		December 31, 2018
Derivative assets:
Not designated as hedging instruments:
Interest rate contracts	Other Assets	$	3,636	$	3,171	Other Assets	$	2,391	$	2,779
Interest rate lock commitments	Other Assets	4,940		2,756		Other Assets	4,964		3,740
Forward commitments	Other Assets	735		50		Other Assets	31		—
Totals		$	9,311	$	5,977		$	7,386	$	6,519
Derivative liabilities:
Designated as hedging instruments:
Interest rate swaps	Other Liabilities	$	1,385	$	2,536	Other Liabilities	$	3,274	$	2,046
Totals		$	1,385	$	2,536		$	3,274	$	2,046
Not designated as hedging instruments:
Interest rate contracts	Other Liabilities	$	3,636	$	3,171	Other Liabilities	$	2,391	$	2,779
Interest rate lock commitments	Other Liabilities	4		4		Other Liabilities	1		—
Forward commitments	Other Liabilities	925		328		Other Liabilities	2,692		3,563
Totals		$	4,565	$	3,503		$	5,084	$	6,342

Gains (losses) included in the Consolidated Statements of Income related to the Company’s derivative financial instruments were as follows as of the periods presented:


	Three Months Ended					Three Months Ended
	March 31,					March 31,
	2018		2017			2019		2018
Derivatives not designated as hedging instruments:
Interest rate contracts:
Included in interest income on loans	$	986	$	679		$	1,046	$	986
Interest rate lock commitments:
Included in mortgage banking income	2,184		2,853			1,222		2,184
Forward commitments
Included in mortgage banking income	88		(5,869		)	901		88
Total	$	3,258	$	(2,337	)	$	3,169	$	3,258

For the Company’s derivatives designated as cash flow hedges, changes in fair value of the cash flow hedges are, to the extent that the hedging relationship is effective, recorded as other comprehensive income and are subsequently recognized in earnings at the same time that the hedged item is recognized in earnings. The ineffective portions of the changes in fair value of the hedging instruments are immediately recognized in earnings. The assessment of the effectiveness of the hedging relationship is evaluated under the hypothetical derivative method. There were no ineffective portions for the three months ended March 31, ~~2018~~2019 or ~~2017.~~2018. The impact on other comprehensive income for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, can be seen at Note 15, “Other Comprehensive ~~Income.~~Income (Loss).”

Offsetting

Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheet when the “right of offset” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments

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Notes to Consolidated Financial Statements (Unaudited)

are subject to master netting agreements; however, the Company has not elected to offset such financial instruments in the Consolidated Balance Sheets. The following table presents the Company’s gross derivative positions as recognized in the Consolidated Balance Sheets as well as the net derivative positions, including collateral pledged to the extent the application of

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~~Renasant Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement:


	Offsetting Derivative Assets				Offsetting Derivative Liabilities				Offsetting Derivative Assets				Offsetting Derivative Liabilities
	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Gross amounts recognized	$	3,232	$	717	$	3,449	$	5,303	$	659	$	1,620	$	7,719	$	6,768
Gross amounts offset in the Consolidated Balance Sheets	—		—		—		—		—		—		—		—
Net amounts presented in the Consolidated Balance Sheets	3,232		717		3,449		5,303		659		1,620		7,719		6,768
Gross amounts not offset in the Consolidated Balance Sheets
Financial instruments	2,913		717		2,913		717		659		1,620		659		1,620
Financial collateral pledged	—		—		231		4,357		—		—		4,418		2,745
Net amounts	$	319	$	—	$	305	$	229	$	—	$	—	$	2,642	$	2,403

Note 12 – Income Taxes

(In Thousands)

The following table is a summary of the Company’s temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities and their approximate tax effects as of the dates presented.


	March 31,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
Deferred tax assets
Allowance for loan losses	$	14,025	$	13,966	$	14,292	$	14,097
Loans	13,697		15,062		16,864		18,655
Deferred compensation	6,871		7,093		8,554		10,001
Securities	6,044		3,659		2,614		6,180
Net unrealized losses on securities - OCI	—		—
Impairment of assets	1,701		1,748		1,748		1,280
Federal and State net operating loss carryforwards	1,401		2,419		16,938		19,065
Intangibles	—		—
Other	5,204		4,722		16,624		3,610
Total deferred tax assets	48,943		48,669		77,634		72,888
Deferred tax liabilities
Investment in partnerships	655		757		1,469		1,572
Fixed assets	3,077		3,163		3,865		3,865
Mortgage servicing rights	10,440		10,139		12,542		12,350
Junior subordinated debt	2,363		2,394		1,652		1,607
Other	1,656		1,859		15,903		1,792
Total deferred tax liabilities	18,191		18,312		35,431		21,186
Net deferred tax assets	$	30,752	$	30,357	$	42,203	$	51,702

For the three months ended March 31, 2019 and 2018, the Company recorded a provision for income taxes totaling $13,590 and $9,673, respectively. The ~~Tax Cuts~~provision for income taxes includes both federal and ~~Jobs Act (the “Tax Act”), enacted on December 22, 2017, among other things, permanently lowered~~state income taxes and differs from the statutory ~~federal corporate~~rate due to favorable permanent differences. The effective tax rate ~~from 35% to 21%, effective~~was 23.15% and 22.24% for ~~tax years including or beginning January 1, 2018. As a result,~~ the Company calculated taxes in the current quarter based on a 21% federal corporate tax rate, whereas taxes were calculated in previous periods based on a 35% federal corporate tax rate. Under the guidance of ASC 740, “Income Taxes” (“ASC 740”), the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realizedthree months ending March 31, 2019 and 2018, respectively.

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Notes to Consolidated Financial Statements (Unaudited)

atThe Company and its subsidiary file a consolidated U.S. federal income tax return. The Company is currently open to audit under the ~~lower tax rate implemented~~statute of limitations by the ~~new legislation. After reviewing~~Internal Revenue Service and the ~~Company’s inventory~~Department of deferred tax assets and liabilities on the date of enactment and giving consideration to the future impact of the lower corporate tax rates and other provisions of the new legislation, the Company’s revaluation of its net deferred tax assets was $14,486, which was included in “Income taxes” in the Consolidated Statements of IncomeRevenue for the ~~year ended~~years ending December 31, 2017. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which cannot be fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act had not been completed as of2015 through December 31, ~~2017 and, therefore, considered its accounting for the tax effects of the Tax Act on its deferred tax assets and liabilities to have been completed as of December 31, 2017.~~2018.

The Company ~~expects to utilize its~~acquired both federal and state net operating losses ~~prior~~as part of its previous acquisitions with varying expiration periods. The federal and state net operating losses acquired in the Brand acquisition were $83,960 and $67,168, respectively, all created in 2018. As part of The Tax Cuts and Jobs Act and corresponding state tax laws, the federal net operating losses and the majority of the state net operating losses created by Brand have an indefinite carryforward period. As of December 31, 2018, there are federal and state net operating losses acquired in the Brand acquisition, without expiration periods of $71,963 and $63,218, respectively. The federal and state net operating losses acquired in the Heritage acquisition were $18,321 and $16,877, respectively, of which $4,956 and $2,365 remain to ~~expiration.~~be utilized as of December 31, 2018.These losses begin to expire in 2029 and are expected to be utilized. Because the benefits are expected to be fully realized, the Company recorded no valuation allowance against the net operating losses for the ~~three months ended~~period ending March 31, ~~2018 or 2017 or the year ended December 31, 2017.~~

2019.

Note 13 – Investments in Qualified Affordable Housing Projects

(In Thousands)

The Company has investments in qualified affordable housing projects (“QAHPs”) that provide low income housing tax credits and operating loss benefits over an extended period. At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company’s carrying value of QAHPs was ~~$7,232~~$5,626 and ~~$7,637,~~$6,037, respectively. The Company has no remaining funding obligations related to the QAHPs. The investments in QAHPs are being accounted for using the effective yield method. The investments in QAHPs are included in “Other assets” on the Consolidated Balance Sheets.

Components of the Company’s investments in QAHPs were included in the line item “Income taxes” in the Consolidated Statements of Income for the periods presented:


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2018			2017			2019			2018
Tax credit amortization	$	394		$	262		$	394		$	394
Tax credits and other benefits	(572		)	(460		)	(572		)	(572		)
Total	$	(178	)	$	(198	)	$	(178	)	$	(178	)

Note 14 – Fair Value Measurements

(In Thousands)

Fair Value Measurements and the Fair Level Hierarchy

ASC 820, “Fair Value Measurements and Disclosures,” provides guidance for using fair value to measure assets and liabilities and also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to a valuation based on quoted prices in active markets for identical assets and liabilities (Level 1), moderate priority to a valuation based on quoted prices in active markets for similar assets and liabilities and/or based on assumptions that are observable in the market (Level 2), and the lowest priority to a valuation based on assumptions that are not observable in the market (Level 3).

Recurring Fair Value Measurements

The Company carries certain assets and liabilities at fair value on a recurring basis in accordance with applicable standards. The Company’s recurring fair value measurements are based on the requirement to carry such assets and liabilities at fair value or the Company’s election to carry certain eligible assets and liabilities at fair value. Assets and liabilities that are required to be carried at fair value on a recurring basis include securities available for sale and derivative instruments. The Company has elected to carry mortgage loans held for sale at fair value on a recurring basis as permitted under the guidance in ASC 825, “Financial Instruments” (“ASC 825”).

The following methods and assumptions are used by the Company to estimate the fair values of the Company’s financial assets and liabilities that are measured on a recurring basis:

Securities available for sale: Securities available for sale consist primarily of debt securities, such as obligations of U.S. Government agencies and corporations, obligations of states and political subdivisions, mortgage-backed securities, trust preferred securities,

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Notes to Consolidated Financial Statements (Unaudited)

and other debt securities. Where quoted market prices in active markets are available, securities are classified within Level 1 of the fair value hierarchy. If quoted prices from active markets are not available, fair values are based on quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active, or model-based valuation techniques where all significant assumptions are observable in the market. Such instruments are classified within Level 2 of the fair value hierarchy. When assumptions used in model-based valuation techniques are not observable in the market, the assumptions used by management reflect estimates of assumptions used by other market participants in determining fair value. When there is limited transparency around the inputs to the valuation, the instruments are classified within Level 3 of the fair value hierarchy.

Derivative instruments: The Company uses derivatives to manage various financial risks. Most of the Company’s derivative contracts are extensively traded in over-the-counter markets and are valued using discounted cash flow models which incorporate observable market based inputs including current market interest rates, credit spreads, and other factors. Such instruments are categorized within Level 2 of the fair value hierarchy and include interest rate swaps and other interest rate contracts such as interest rate caps and/or floors. The Company’s interest rate lock commitments are valued using current market prices for mortgage-backed securities with similar characteristics, adjusted for certain factors including servicing and risk. The value of the Company’s forward commitments is based on current prices for securities backed by similar types of loans. Because these assumptions are observable in active markets, the Company’s interest rate lock commitments and forward commitments are categorized within Level 2 of the fair value hierarchy.

Mortgage loans held for sale in loans held for sale: Mortgage loans held for sale are primarily agency loans which trade in active secondary markets. The fair value of these instruments is derived from current market pricing for similar loans, adjusted for differences in loan characteristics, including servicing and risk. Because the valuation is based on external pricing of similar instruments, mortgage loans held for sale are classified within Level 2 of the fair value hierarchy.

The following table presents assets and liabilities that are measured at fair value on a recurring basis as of the dates presented:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Level 1		Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
March 31, 2018
March 31, 2019
Financial assets:
Securities available for sale:
Obligations of other U.S. Government agencies and corporations	$	—	$	3,528	$	—	$	3,528	$	—	$	2,525	$	—	$	2,525
Obligations of states and political subdivisions	—		226,342		—		$	226,342	—		183,762		—		183,762
Residential mortgage-backed securities:
Government agency mortgage backed securities	—		409,470		—		409,470		—		622,066		—		622,066
Government agency collateralized mortgage obligations	—		237,666		—		237,666		—		319,447		—		319,447
Commercial mortgage-backed securities:
Government agency mortgage backed securities	—		27,502		—		27,502		—		21,998		—		21,998
Government agency collateralized mortgage obligations	—		9,872		—		9,872		—		46,330		—		46,330
Trust preferred securities	—		—		10,045		10,045		—		—		10,246		10,246
Other debt securities	—		23,940		—		23,940		—		48,979		—		48,979
Total securities available for sale	—		938,320		10,045		948,365		—		1,245,107		10,246		1,255,353
Derivative instruments:
Interest rate contracts	—		3,636		—		3,636		—		2,391		—		2,391
Interest rate lock commitments	—		4,940		—		4,940		—		4,964		—		4,964
Forward commitments	—		735		—		735		—		31		—		31
Total derivative instruments	—		9,311		—		9,311		—		7,386		—		7,386
Mortgage loans held for sale	—		204,472		—		204,472
Mortgage loans held for sale in loans held for sale									—		195,807		—		195,807
Total financial assets	$	—	$	1,152,103	$	10,045	$	1,162,148	$	—	$	1,448,300	$	10,246	$	1,458,546
Financial liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	1,385	$	—	$	1,385	$	—	$	3,274	$	—	$	3,274
Interest rate contracts	—		3,636		—		3,636		—		2,391		—		2,391
Interest rate lock commitments	—		4		—		4		—		1		—		1
Forward commitments	—		925		—		925		—		2,692		—		2,692
Total derivative instruments	—		5,950		—		5,950		—		8,358		—		8,358
Total financial liabilities	$	—	$	5,950	$	—	$	5,950	$	—	$	8,358	$	—	$	8,358

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Level 1		Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
December 31, 2017
December 31, 2018
Financial assets:
Securities available for sale:
Obligations of other U.S. Government agencies and corporations	$	—	$	3,564	$	—	$	3,564	$	—	$	2,511	$	—	$	2,511
Obligations of states and political subdivisions	—		234,481		—		234,481		—		203,269		—		203,269
Residential mortgage-backed securities:
Government agency mortgage backed securities	—		193,950		—		193,950		—		613,283		—		613,283
Government agency collateralized mortgage obligations	—		176,639		—		176,639		—		326,989		—		326,989
Commercial mortgage-backed securities:
Government agency mortgage backed securities	—		31,170		—		31,170		—		21,830		—		21,830
Government agency collateralized mortgage obligations	—		5,006		—		5,006		—		28,335		—		28,335
Trust preferred securities	—		—		9,388		9,388		—		—		10,633		10,633
Other debt securities	—		17,290		—		17,290		—		43,927		—		43,927
Total securities available for sale	—		662,100		9,388		671,488		—		1,240,144		10,633		1,250,777
Derivative instruments:
Interest rate contracts	—		3,171		—		3,171		—		2,779		—		2,779
Interest rate lock commitments	—		2,756		—		2,756		—		3,740		—		3,740
Forward commitments	—		50		—		50
Total derivative instruments	—		5,977		—		5,977		—		6,519		—		6,519
Mortgage loans held for sale	—		108,316		—		108,316		—		219,848		—		219,848
Total financial assets	$	—	$	776,393	$	9,388	$	785,781	$	—	$	1,466,511	$	10,633	$	1,477,144
Financial liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	2,536	$	—	$	2,536	$	—	$	2,046	$	—	$	2,046
Interest rate contracts	—		3,171		—		3,171		—		2,779		—		2,779
Interest rate lock commitments	—		4		—		4
Forward commitments	—		328		—		328		—		3,563		—		3,563
Total derivative instruments	—		6,039		—		6,039		—		8,388		—		8,388
Total financial liabilities	$	—	$	6,039	$	—	$	6,039	$	—	$	8,388	$	—	$	8,388

The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Company’s ability to observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy. Transfers between levels of the hierarchy are deemed to have occurred at the end of period. There were no such transfers between levels of the fair value hierarchy during the three months ended March 31, ~~2018~~2019.

The following tables provide a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, ~~during~~as of the ~~three months endedMarch 31, 2018~~ ~~and~~ ~~2017, respectively:~~dates presented:



Three Months Ended March 31, 2019	Trust preferred securities
Balance at January 1, 2019	$	10,633
Accretion included in net income	9
Unrealized losses included in other comprehensive income	(287		)
Purchases	—
Sales	—
Issues	—
Settlements	(109		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2019	$	10,246

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



Three Months Ended March 31, 2018	Trust preferred securities
Balance at January 1, 2018	$	9,388
Accretion included in net income	9
Unrealized gains included in other comprehensive income	669
Purchases	—
Sales	—
Issues	—
Settlements	(21		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2018	$	10,045

Three Months Ended March 31, 2017
Trust preferred
securities
Balance at January 1, 2017 $ 18,389
Accretion included in net income 8
Unrealized gains included in other comprehensive income 537
Purchases —
Sales —
Issues —
Settlements (1,111 )
Transfers into Level 3 —
Transfers out of Level 3 —
Balance at March 31, 2017 $ 17,823

For ~~each of~~ the three months ended March 31, ~~2018~~2019 and ~~2017~~2018, respectively, there were no gains or losses included in earnings that were attributable to the change in unrealized gains or losses related to assets or liabilities held at the end of each respective period that were measured on a recurring basis using significant unobservable inputs.

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~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table presents information as of March 31, ~~2018~~2019 about significant unobservable inputs (Level 3) used in the valuation of assets and liabilities measured at fair value on a recurring basis:

Financial instrument

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Trust preferred securities

10,045

Discounted cash flows

Default rate

0-100%

10,246

Discounted cash flows

Default rate

0-100%

Nonrecurring Fair Value Measurements

Certain assets and liabilities may be recorded at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically are a result of the application of the lower of cost or market accounting or a write-down occurring during the period. The following table provides the fair value measurement for assets measured at fair value on a nonrecurring basis that were still held on the Consolidated Balance Sheets as of the dates presented and the level within the fair value hierarchy each is classified:


March 31, 2018	Level 1		Level 2		Level 3		Totals
March 31, 2019									Level 1		Level 2		Level 3		Totals
Impaired loans	$	—	$	—	$	4,228	$	4,228	$	—	$	—	$	8,552	$	8,552
OREO	—		—		1,636		1,636		—		—		2,764		2,764
Total	$	—	$	—	$	5,864	$	5,864	$	—	$	—	$	11,316	$	11,316


December 31, 2017	Level 1		Level 2		Level 3		Totals
December 31, 2018									Level 1		Level 2		Level 3		Totals
Impaired loans	$	—	$	—	$	9,251	$	9,251	$	—	$	—	$	21,686	$	21,686
OREO	—		—		7,392		7,392		—		—		4,319		4,319
Total	$	—	$	—	$	16,643	$	16,643	$	—	$	—	$	26,005	$	26,005

The following methods and assumptions are used by the Company to estimate the fair values of the Company’s financial assets measured on a nonrecurring basis:

Impaired loans: Loans considered impaired are reserved for at the time the loan is identified as impaired taking into account the fair value of the collateral less estimated selling costs. Collateral may be real estate and/or business assets including but not limited to equipment, inventory and accounts receivable. The fair value of real estate is determined based on appraisals by qualified licensed appraisers. The fair value of the business assets is generally based on amounts reported on the business’s financial statements.

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Appraised and reported values may be adjusted based on changes in market conditions from the time of valuation and management’s knowledge of the client and the client’s business. Since not all valuation inputs are observable, these nonrecurring fair value determinations are classified as Level 3. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors previously identified. Impaired loans that were measured or re-measured at fair value had a carrying value of $~~4,533~~9,521 and ~~$9,608~~$22,621 at March 31, ~~2018~~2019 and December 31, ~~2017~~2018, respectively, and a specific reserve for these loans of $~~305~~969 and $~~357~~935 was included in the allowance for loan losses as of such dates.

Other real estate owned: OREO is comprised of commercial and residential real estate obtained in partial or total satisfaction of loan obligations. OREO acquired in settlement of indebtedness is recorded at the fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Fair value, when recorded, is determined based on appraisals by qualified licensed appraisers and adjusted for management’s estimates of costs to sell. Accordingly, values for OREO are classified as Level 3.

The following table presents OREO measured at fair value on a nonrecurring basis that was still held in the Consolidated Balance Sheets as of the dates presented:

March 31,
2018 December 31, 2017
Carrying amount prior to remeasurement $ 1,951
$ 8,732
Impairment recognized in results of operations (315 ) (1,340 )
Fair value $ 1,636
$ 7,392

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~~Renasant Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~



	March 31, 2019			December 31, 2018
Carrying amount prior to remeasurement	$	3,491		$	5,258
Impairment recognized in results of operations	(727		)	(939		)
Fair value	$	2,764		$	4,319

Financial instrument

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Impaired loans

4,228

Appraised value of collateral less estimated costs to sell

Estimated costs to sell

4-10%

8,552

Appraised value of collateral less estimated costs to sell

Estimated costs to sell

4-10%

OREO

1,636

Appraised value of property less estimated costs to sell

Estimated costs to sell

4-10%

2,764

Appraised value of property less estimated costs to sell

Estimated costs to sell

4-10%

Fair Value Option

The Company elected to measure all mortgage loans originated for sale on or after July 1, 2012 at fair value under the fair value option as permitted under ASC 825. Electing to measure these assets at fair value reduces certain timing differences and better matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.

Net losses of $769 and net gains of ~~$1,437~~ ~~and~~ ~~$3,998~~$1,437 resulting from fair value changes of these mortgage loans were recorded in income during the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in “Mortgage banking income” in the Consolidated Statements of Income.

The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal. Interest income on mortgage loans held for sale measured at fair value is accrued as it is earned based on contractual rates and is reflected in loan interest income on the Consolidated Statements of Income.

The following table summarizes the differences between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of March 31, ~~2018:~~2019:

Aggregate
Fair Value

Aggregate
Unpaid
Principal
Balance
Difference
Mortgage loans held for sale measured at fair value $ 204,472
$ 199,539
$ 4,933
Past due loans of 90 days or more —
—
—
Nonaccrual loans —
—
—

4039

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Notes to Consolidated Financial Statements (Unaudited)



	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	195,807	$	188,188	$	7,619
Past due loans of 90 days or more	—		—		—
Nonaccrual loans	—		—		—

Fair Value of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments, including those assets and liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis, were as follows as of the dates presented:


			Fair Value										Fair Value
As of March 31, 2018	Carrying Value		Level 1		Level 2		Level 3		Total
As of March 31, 2019											Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	250,978	$	250,978	$	—	$	—	$	250,978	$	562,066	$	562,066	$	—	$	—	$	562,066
Securities available for sale	948,365		—		938,320		10,045		948,365		1,255,353		—		1,245,107		10,246		1,255,353
Mortgage loans held for sale	204,472		—		204,472		—		204,472
Loans held for sale											318,563		—		195,807		122,756		318,563
Loans, net	7,651,669		—		—		7,482,089		7,482,089		9,038,458		—		—		8,801,277		8,801,277
Mortgage servicing rights	40,216		—		—		53,426		53,426		48,973		—		—		55,334		55,334
Derivative instruments	9,311		—		9,311		—		9,311		7,386		—		7,386		—		7,386
Financial liabilities
Deposits	$	8,357,769	$	6,504,003	$	1,843,895	$	—	$	8,347,898	$	10,268,912	$	7,884,578	$	2,366,030	$	—	$	10,250,608
Short-term borrowings	57,753		57,753		—		—		57,753		87,590		87,590		—		—		87,590
Other long-term borrowings	86		86		—		—		86		35		35		—		—		35
Federal Home Loan Bank advances	7,276		—		7,362		—		7,362		6,492		—		6,622		—		6,622
Junior subordinated debentures	86,018		—		77,692		—		77,692		109,781		—		104,300		—		104,300
Subordinated notes	114,059		—		116,763		—		116,763		146,962		—		147,175		—		147,175
Derivative instruments	5,950		—		5,950		—		5,950		8,358		—		8,358		—		8,358


			Fair Value										Fair Value
As of December 31, 2017	Carrying Value		Level 1		Level 2		Level 3		Total
As of December 31, 2018											Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	281,453	$	281,453	$	—	$	—	$	281,453	$	569,111	$	569,111	$	—	$	—	$	569,111
Securities available for sale	671,488		—		662,100		9,388		671,488		1,250,777		—		1,240,144		10,633		1,250,777
Mortgage loans held for sale	108,316		—		108,316		—		108,316
Loans held for sale											411,427		—		219,848		191,579		411,427
Loans, net	7,574,111		—		—		7,514,185		7,514,185		9,034,103		—		—		8,818,039		8,818,039
Mortgage servicing rights	39,339		—		—		47,868		47,868		48,230		—		—		61,111		61,111
Derivative instruments	5,977		—		5,977		—		5,977		6,519		—		6,519		—		6,519
Financial liabilities
Deposits	$	7,921,075	$	6,114,391	$	1,809,085	$	—	$	7,923,476	$	10,128,557	$	7,765,773	$	2,337,334	$	—	$	10,103,107
Short-term borrowings	89,814		89,814		—		—		89,814		387,706		387,706		—		—		387,706
Other long-term borrowings	98		98		—		—		98		53		53		—		—		53
Federal Home Loan Bank advances	7,493		—		7,661		—		7,661		6,690		—		6,751		—		6,751
Junior subordinated debentures	85,881		—		69,702		—		69,702		109,636		—		109,766		—		109,766
Subordinated notes	114,074		—		118,650		—		118,650		147,239		—		148,875		—		148,875
Derivative instruments	6,039		—		6,039		—		6,039		8,388		—		8,388		—		8,388

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Notes to Consolidated Financial Statements (Unaudited)

Note 15 – Other Comprehensive Income (Loss)

(In Thousands)

Changes in the components of other comprehensive income (loss), net of tax, were as follows for the periods presented:


	Pre-Tax			Tax Expense (Benefit)			Net of Tax			Pre-Tax			Tax Expense (Benefit)			Net of Tax
Three months ended March 31, 2019
Securities available for sale:
Unrealized holding gains on securities										$	15,179		$	3,862		$	11,317
Reclassification adjustment for gains realized in net income										(13		)	(3		)	(10		)
Total securities available for sale										15,166			3,859			11,307
Derivative instruments:
Unrealized holding losses on derivative instruments										(1,228		)	(313		)	(915		)
Total derivative instruments										(1,228		)	(313		)	(915		)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost										72			18			54
Total defined benefit pension and post-retirement benefit plans										72			18			54
Total other comprehensive income										$	14,010		$	3,564		$	10,446
Three months ended March 31, 2018
Securities available for sale:
Unrealized holding losses on securities	$	(10,609	)	$	(2,700	)	$	(7,909	)	$	(10,609	)	$	(2,700	)	$	(7,909	)
Total securities available for sale	(10,609		)	(2,700		)	(7,909		)	(10,609		)	(2,700		)	(7,909		)
Derivative instruments:
Unrealized holding gains on derivative instruments	1,151			293			858			1,151			293			858
Total derivative instruments	1,151			293			858			1,151			293			858
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	87			21			66			87			21			66
Total defined benefit pension and post-retirement benefit plans	87			21			66			87			21			66
Total other comprehensive loss	$	(9,371	)	$	(2,386	)	$	(6,985	)	$	(9,371	)	$	(2,386	)	$	(6,985	)
Three months ended March 31, 2017
Securities available for sale:
Unrealized holding gains on securities	$	4,739		$	1,832		$	2,907
Amortization of unrealized holding gains on securities transferred to the held to maturity category	(246		)	(95		)	(151		)
Total securities available for sale	4,493			1,737			2,756
Derivative instruments:
Unrealized holding gains on derivative instruments	276			107			169
Total derivative instruments	276			107			169
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	113			44			69
Total defined benefit pension and post-retirement benefit plans	113			44			69
Total other comprehensive income	$	4,882		$	1,888		$	2,994

The accumulated balances for each component of other comprehensive income (loss), net of tax, were as follows as of the dates presented:


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Unrealized gains on securities	$	1,460		$	7,363		$	12,373		$	1,066
Non-credit related portion of other-than-temporary impairment on securities	(11,319		)	(9,313		)	(11,319		)	(11,319		)
Unrealized losses on derivative instruments	(137		)	(995		)	(1,545		)	(630		)
Unrecognized losses on defined benefit pension and post-retirement benefit plans obligations	(7,500		)	(7,566		)	(6,959		)	(7,013		)
Total accumulated other comprehensive loss	$	(17,496	)	$	(10,511	)	$	(7,450	)	$	(17,896	)

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Notes to Consolidated Financial Statements (Unaudited)

Note 16 – Net Income Per Common Share

(In Thousands, Except Share Data)

Basic net income per common share is calculated by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the pro forma dilution of shares outstanding, assuming outstanding service-based restricted stock awards fully vested and outstanding stock options were exercised into common shares, calculated in accordance with the treasury method. Basic and diluted net income per common share calculations are as follows for the periods presented:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Basic
Net income applicable to common stock	$	33,826	$	23,972	$	45,110	$	33,826
Average common shares outstanding	49,356,417		44,364,337		58,585,517		49,356,417
Net income per common share - basic	$	0.69	$	0.54	$	0.77	$	0.69
Diluted
Net income applicable to common stock	$	33,826	$	23,972	$	45,110	$	33,826
Average common shares outstanding	49,356,417		44,364,337		58,585,517		49,356,417
Effect of dilutive stock-based compensation	146,533		116,162		145,018		146,533
Average common shares outstanding - diluted	49,502,950		44,480,499		58,730,535		49,502,950
Net income per common share - diluted	$	0.68	$	0.54	$	0.77	$	0.68

~~There were no stock-based~~Stock-based compensation awards that could potentially dilute basic net income per common share in the future that were not included in the computation of diluted net income per common share due to their anti-dilutive effect were as follows for the periods ~~presented above.~~presented:



	Three Months Ended
	March 31,
	2019	2018
Number of shares	27,740	—
Exercise prices (for stock option awards)	—	—

Note 17 – Regulatory Matters

(In Thousands)

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Federal Reserve, the FDIC and the Office of the Comptroller of the Currency have issued guidelines governing the levels of capital that bank holding companies and banks must maintain. Those guidelines specify capital tiers, which include the following classifications:

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Notes to Consolidated Financial Statements (Unaudited)



Capital Tiers	Tier 1 Capital to Average Assets (Leverage)	Common Equity Tier 1 to Risk - Weighted Assets	Tier 1 Capital to Risk – Weighted Assets	Total Capital to Risk – Weighted Assets
Well capitalized	5% or above	6.5% or above	8% or above	10% or above
Adequately capitalized	4% or above	4.5% or above	6% or above	8% or above
Undercapitalized	Less than 4%	Less than 4.5%	Less than 6%	Less than 8%
Significantly undercapitalized	Less than 3%	Less than 3%	Less than 4%	Less than 6%
Critically undercapitalized	Tangible Equity / Total Assets less than 2%

The following table provides the capital and risk-based capital and leverage ratios for the Company and for Renasant Bank as of the dates presented:


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Renasant Corporation
Tier 1 Capital to Average Assets (Leverage)	$	1,000,640	10.61	%	$	979,604	10.18	%	$	1,228,640	10.44	%	$	1,188,412	10.11	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	917,501		11.38	%	896,733		11.34	%	1,124,981		11.49	%	1,085,751		11.05	%
Tier 1 Capital to Risk-Weighted Assets	1,000,640		12.41	%	979,604		12.39	%	1,228,640		12.55	%	1,188,412		12.10	%
Total Capital to Risk-Weighted Assets	1,164,193		14.44	%	1,142,926		14.46	%	1,426,332		14.57	%	1,386,507		14.12	%
Renasant Bank
Tier 1 Capital to Average Assets (Leverage)	$	1,023,486	10.88	%	$	1,000,715	10.42	%	$	1,316,336	11.20	%	$	1,276,976	10.88	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	1,023,486		12.71	%	1,000,715		12.69	%	1,316,336		13.45	%	1,276,976		13.02	%
Tier 1 Capital to Risk-Weighted Assets	1,023,486		12.71	%	1,000,715		12.69	%	1,316,336		13.45	%	1,276,976		13.02	%
Total Capital to Risk-Weighted Assets	1,073,712		13.33	%	1,050,751		13.32	%	1,370,536		14.01	%	1,331,619		13.58	%

Common equity Tier 1 capital (“CET1”) generally consists of common stock, retained earnings, accumulated other comprehensive income and certain minority interests, less certain adjustments and deductions. In addition, the Company must maintain a “capital conservation buffer,” which is a specified amount of CET1 capital in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer is designed to absorb losses during periods of economic stress. If the Company’s ratio of CET1 to risk-weighted capital is below the capital conservation buffer, the Company will face restrictions on its ability to pay dividends, repurchase outstanding stock and make certain discretionary bonus payments. ~~When fully phased in on January 1, 2019, the~~The required capital conservation buffer ~~will be~~is 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital ~~requirements;~~requirements. As shown in the tables above, as of March 31, ~~2018,~~2019, the Company’s CET1 capital was in excess of the capital conservation ~~buffer is 1.875% of risk-weighted assets.~~ buffer.

In addition, the Basel III regulatory capital reforms and rules effecting certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 issued by the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency (the “Basel III Rules”) have revised the agencies’ rules for calculating risk-weighted assets to enhance risk sensitivity and to incorporate certain international capital standards of the Basel Committee on Banking Supervision. These revisions affect the calculation of the denominator of a banking organization’s risk-based capital ratios to reflect the higher-risk nature of certain types of loans. As applicable to Renasant Bank:

— For residential mortgages, the former 50% risk weight for performing residential first-lien mortgages and 100% risk-weight for all other mortgages has been replaced with a risk weight of between 35% and 200% determined by the mortgage’s loan-to-value ratio and whether the mortgage falls into one of two categories based on eight criteria that include the term, use of negative amortization and balloon payments, certain rate increases and documented and verified borrower income.

— For commercial mortgages, a 150% risk weight for certain high volatility commercial real estate acquisition, development and construction loans has been substituted for the former 100% risk weight.

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

— For nonperforming loans, the former 100% risk weight is now a 150% risk weight for loans, other than residential mortgages, that are 90 days past due or on nonaccrual status.

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Finally, Tier 1 capital treatment for “hybrid” capital items like trust preferred securities has been eliminated, subject to various grandfathering and transition rules.

Note 18 – Segment Reporting

(In Thousands)

The operations of the Company’s reportable segments are described as follows:

The Community Banks segment delivers a complete range of banking and financial services to individuals and small to medium-sized businesses including checking and savings accounts, business and personal loans, asset-based lending and equipment leasing, as well as safe deposit and night depository facilities.

The Insurance segment includes a full service insurance agency offering all major lines of commercial and personal insurance through major carriers.

The Wealth Management segment offers a broad range of fiduciary services which include the administration and management of trust accounts including personal and corporate benefit accounts, self-directed IRAs, and custodial accounts. In addition, the Wealth Management segment offers annuities, mutual funds and other investment services through a third party broker-dealer.

In order to give the Company’s divisional management a more precise indication of the income and expenses they can control, the results of operations for the Community Banks, the Insurance and the Wealth Management segments reflect the direct revenues and expenses of each respective segment. Indirect revenues and expenses, including but not limited to income from the Company’s investment portfolio as well as certain costs associated with data processing and back office functions, primarily support the operations of the community banks and, therefore, are included in the results of the Community Banks segment. Included in “Other” are the operations of the holding company and other eliminations which are necessary for purposes of reconciling to the consolidated amounts.

The following table provides financial information for the Company’s operating segments as of and for the periods presented:


												Community Banks		Insurance		Wealth Management		Other			Consolidated
Three months ended March 31, 2019
Net interest income (loss)												$	116,058	$	168	$	350	$	(3,429	)	$	113,147
Provision for loan losses												1,500		—		—		—			1,500
Noninterest income												29,585		2,879		3,659		(238		)	35,885
Noninterest expense												83,313		1,815		3,448		256			88,832
Income (loss) before income taxes												60,830		1,232		561		(3,923		)	58,700
Income tax expense (benefit)												14,286		320		—		(1,016		)	13,590
Net income (loss)												$	46,544	$	912	$	561	$	(2,907	)	$	45,110

Total assets												$	12,763,349	$	27,267	$	58,971	$	12,808		$	12,862,395
Goodwill												$	930,204	$	2,767	—		—			$	932,971
	Community Banks		Insurance		Wealth Management		Other			Consolidated
Three months ended March 31, 2018
Net interest income (loss)	$	91,427	$	106	$	313	$	(2,606	)	$	89,240	$	91,427	$	106	$	313	$	(2,606	)	$	89,240
Provision for loan losses	1,750		—		—		—			1,750		1,750		—		—		—			1,750
Noninterest income	27,918		2,772		3,527		(264		)	33,953		27,918		2,772		3,527		(264		)	33,953
Noninterest expense	72,633		1,731		3,392		188			77,944		72,633		1,731		3,392		188			77,944
Income (loss) before income taxes	44,962		1,147		448		(3,058		)	43,499		44,962		1,147		448		(3,058		)	43,499
Income tax expense (benefit)	10,167		297		—		(791		)	9,673		10,167		297		—		(791		)	9,673
Net income (loss)	$	34,795	$	850	$	448	$	(2,267	)	$	33,826	$	34,795	$	850	$	448	$	(2,267	)	$	33,826

Total assets	$	10,135,478	$	24,125	$	61,800	$	16,910		$	10,238,313	$	10,135,478	$	24,125	$	61,800	$	16,910		$	10,238,313
Goodwill	608,279		2,767		—		—			611,046		$	608,279	$	2,767	—		—			$	611,046

Three months ended March 31, 2017
Net interest income (loss)	$	75,956	$	92	$	487	$	(2,520	)	$	74,015
Provision for loan losses	1,500		—		—		—			1,500
Noninterest income	26,578		2,549		3,119		(225		)	32,021
Noninterest expense	64,221		1,692		2,996		400			69,309
Income (loss) before income taxes	36,813		949		610		(3,145		)	35,227
Income tax expense (benefit)	12,110		375		—		(1,230		)	11,255
Net income (loss)	$	24,703	$	574	$	610	$	(1,915	)	$	23,972

Total assets	$	8,673,576	$	24,032	$	54,537	$	12,566		$	8,764,711
Goodwill	467,767		2,767		—		—			470,534

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Notes to Consolidated Financial Statements (Unaudited)

Note 19 ~~– Revenue Recognition~~- Leases

(In Thousands)

~~As previously discussed in Note 1, “Summary of Significant Accounting Policies,” the~~The Company adopted ~~ASU 2014-09, an update to~~ ASC ~~606,~~842 in the first quarter of ~~2018.~~2019. The ~~majority~~Company enters into leases in both lessor and lessee capacities.

ASC 842 provided for a number of ~~the Company’s revenue streams are governed by other authoritative guidance and, therefore, considered out-of-scope~~optional practical expedients, of ~~ASC 606. The Company’s revenue streams that are considered in-scope of ASC 606 are discussed below.~~

Additionally, ASC 606 requires costs that are incremental to obtaining a contract to be capitalized. In the case of the Company, these costs would include sales commissions for insurance and wealth management products. ASC 606 has established, andwhich the Company has ~~utilized,~~elected several including (i) the option not to separate the lease and non-lease components; (ii) the ‘package of practical expedients,’ where the Company does not have to reassess (A) whether expired or existing contracts contain leases under the new definition of a lease, (B) lease classification for expired or existing leases and (C) previously capitalized initial direct costs would qualify for capitalization under ASC 842; and (iii) the use of hindsight in determining the lease term, which permits the use of information available after lease inception to determine the lease term via the knowledge of renewal options exercised but not available at the leases inception.

The practical expedient pertaining to ~~allow for: costs that if capitalized would have an amortization period of one year or less may instead be expensed as incurred.~~

~~Service Charges on Deposit Accounts~~

Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees. The contracts with deposit account customers are day-to-day contracts and are considered to be terminable at will by either party. Therefore, the fees are all considered to be earned when charged and simultaneously collected.

~~Insurance Commissions~~

Through Renasant Insurance, we offer a range of commercial and personal insurance products through major insurance carriers, which include health and life insurance and property and casualty insurance. Insurance commissions are earned when policies are placed by customers with the insurance carriers and are collected and recognized using two different methods: the agency bill method and the direct bill method.

~~Under the agency bill method, Renasant Insurance~~land easements is ~~responsible for billing the customers directly and then collecting and remitting the premiums~~not applicable to the insurance carriers. Agency bill revenue is recognized at the later of the invoice date or effective date of the policy. The Company has established a reserve for such policies which is derived from historical collection experience and updated annually. The contract balances (i.e. accounts receivable and accounts payable related to insurance commisions earned and premiums due) and the reserve established are considered inconsequential to the overall financial results of the Company.

Under the direct bill method, premium billing and collections are handled by the insurance carriers, and a commission is then paid to Renasant Insurance. Direct bill revenue is recognized when the cash is received from the insurance carriers. While there is recourse on these commissions in the event of policy cancellations, based on the Company’s historical data, significant or material reversals of revenue based on policy cancellations are not anticipated. The Company monitors policy cancellations on a monthly basis and, if a significant or material set of transactions occurred, the Company would adjust earnings accordingly.

Lessor Arrangements

The Company ~~also earns contingency~~provides equipment financing to its customers through sales type or direct financing lease arrangements. These leases are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased property less unearned income, which ~~it recognizes on a cash basis. Contingency~~is accreted into interest income ~~is a bonus received from~~over the ~~insurance underwriters~~lease’s term using methods that approximate the interest method. These arrangements generally do not contain non-lease components. Lease agreements may include renewal and ~~is based both on commission income~~purchase options.

As of March 31, 2019, the net investment in these leases was $8,967, comprised of $7,164 in lease receivables, $2,408 in residual balances and ~~claims experience on~~$605 in deferred income. In order to mitigate potential exposure to residual asset risk, the ~~Company’s clients’ policies during~~Company utilizes first amendment or terminal rental adjustment clause leases.

For the ~~previous year. Increases and decreases~~three months ended March 31, 2019, the Company generated $81 in ~~contingency income are reflective of corresponding increases and decreases in the amount of claims paid by insurance carriers. Contingency~~ income, which is included in ~~“Other noninterest income” in~~interest income on loans on the Consolidated Statements of Income ~~was $762 and $687 for~~from these leases.

The maturities of the ~~three months ending~~lessor arrangements outstanding at March 31, ~~2018 and 2017, respectively.~~2019 is presented in the table below.

~~Wealth Management Revenue~~

~~Wealth management consists~~



Remainder of 2019	$	349
2020	1,721
2021	1,739
2022	2,528
2023	1,984
Thereafter	646
Total lease receivables	$	8,967

Lessee Arrangements

All of the ~~Trust division~~Company’s lessee arrangements are operating leases, being real estate leases for Company facilities. Under these arrangements, the Company records right-of-use assets and ~~the Financial Services division. The Trust division operates on a custodial basis~~corresponding lease liabilities, each of which includes administration of benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal and corporate benefit accounts, self-directed IRAs, and custodial accounts. Fees for managing these accounts areis based on the present value of the remaining lease payments and are discounted at the Company’s incremental borrowing rate. Right-of-use assets ~~under management~~are reported in ~~the account, with the amount of the fee depending~~premises and equipment on the ~~type of account. Revenue~~Consolidated Balance Sheet and the related lease liabilities are reported in other liabilities. All leases are recorded on the Consolidated Balance Sheet except for leases with an initial term less than 12 months for which the Company elected the short-term lease recognition exemption. Lease expense is recognized on ~~monthly~~a straight-line basis over the lease term and ~~there~~ is ~~little~~recorded in occupancy and equipment expense in the Consolidated Statement of Income. Variable lease payments consist primarily of common area maintenance and taxes. The Company does not have any material sublease agreements currently in place.

As of March 31, 2019, right-of-use assets totaled $52,478 and lease liabilities totaled $56,049. Lease terms may contain renewal and extension options and early termination features. Many leases include one or more options to ~~no risk~~renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of ~~a material reversal of revenue. The contract balance (i.e. management fee receivable) recognized~~lease renewal options is ~~considered inconsequential to the overall financial results of the Company.~~

~~The Financial Services division provides specialized products and services to~~at the Company’s customers, which include investment guidance relating to fixed and variable annuities, mutual funds, stocks and other investments offered through a third party provider. Fees are recognized based on either trade activity, which are recognized at the time of the trade, or assets under management, which are recognized monthly.

~~Sales of Other Real Estate Owned~~sole discretion.

4645

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

~~The Company continually markets~~Renewal options which are reasonably certain to be exercised in the ~~properties~~future were included in the ~~OREO portfolio.~~ measurement of right-of-use assets and lease liabilities.

The ~~Company will~~table below provides the components of lease cost and supplemental information for the three months ended March 31, 2019.



Operating lease cost (cost resulting from lease payments)	$	2,358
Short-term lease cost	10
Variable lease cost (cost excluded from lease payments)	339
Sublease income	(126		)
Total lease cost	$	2,581
Right-of-use assets obtained in exchange for new lease liabilities during the first quarter of 2019 - operating leases	$	1,295
Operating lease - operating cash flows (fixed payments)	2,316
Operating lease - operating cash flows (liability reduction)	1,808
Weighted average lease term - operating leases	12.30
Weighted average discount rate - operating leases	3.62		%

The maturities of the lessee arrangements outstanding at ~~times,~~March 31, 2019 are presented in the ~~ordinary course~~table below.



Remainder of 2019	$	5,068
2020	6,178
2021	5,396
2022	5,238
2023	5,112
Thereafter	50,710
Total undiscounted cash flows	77,702
Discount on cash flows	21,653
Total operating lease liabilities	$	56,049

As of ~~business, provide seller-financing on the sales of OREO. In cases where a sale is seller-financed,~~March 31, 2019, the Company ~~must ensure the commitment of both~~had leases with related parties to perform their respective obligations and the collectability of the transaction price in order to properly recognize the revenue on the sale of OREO. This is accomplished through the Company’s loan underwriting process. In this process the Company considers things such as the buyer’s initial equitythat were obtained in the ~~property, the credit quality~~Brand acquisition. The related party leases have right-of-use assets of ~~the borrower, the financing terms~~$13,773 and lease liabilities of ~~the loan and the cash flow from the property, if applicable. If it is determined that the contract criteria in ASC 606 have been met, the revenue on the sale~~$16,012, with total lease cost of ~~OREO will be recognized on the closing date of the sale when the Company has transferred title to the buyer and obtained the right to receive payment~~$492 for the ~~property. In instances where sales are not seller-financed, the Company recognizes revenue on the closing date~~first quarter of ~~the sale when the Company has obtained payment for the property and transferred title to the buyer.~~ 2019.

For ~~additional~~more information on ~~OREO please~~lease accounting, see Note ~~7, “Other Real Estate Owned.~~1, “Summary of Significant Accounting Policies” and on lease financing receivables, see Note 4, “Non Purchased Loans.”

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(In Thousands, Except Share Data)

This Form 10-Q may contain or incorporate by reference statements regarding Renasant Corporation (referred to herein as the “Company”, “we”, “our”, or “us”) that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements usually include words such as “expects,” “projects,” “proposes,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible,” “approximately,” “should” and variations of such words and other similar expressions. The forward-looking statements in, or incorporated by reference into, this report reflect our current assumptions and estimates of, among other things, future economic circumstances, industry conditions, business strategy and decisions, Company performance and financial results. Management believes its assumptions and estimates are reasonable, but they are all inherently subject to significant business, economic and competitive risks and uncertainties, many beyond management’s control, that could cause the Company’s actual results and experience to differ from the anticipated results and expectations indicated or implied in such forward-looking

statements. Such differences may be material. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and, accordingly, investors should not place undue reliance on these forward-looking statements, which speak only as of the date they are made.

Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following risks: (1) the Company’s ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses, grow the acquired operations and realize the cost savings expected from an acquisition to the extent and in the time frame anticipated by ~~management, including with respect to its pending acquisition of Brand Group Holdings, Inc.;~~management; (2) the effect of economic conditions and interest rates on a national, regional or international basis; (3) timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (4) competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, mortgage lending and auto lending industries; (5) the financial resources of, and products available to, competitors; (6) changes in laws and regulations as well as changes in accounting standards; (7) changes in policy by regulatory agencies; (8) changes in the securities and foreign exchange markets; (9) the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (10) changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers; (11) an insufficient allowance for loan losses as a result of inaccurate assumptions; (12) general economic, market or business conditions, including the impact of inflation; (13) changes in demand for loan products and financial services; (14) concentration of credit exposure; (15) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (16) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (17) natural disasters and other catastrophic events in the Company’s geographic area; (18) the impact, extent and timing of technological changes; and (19) other circumstances, many of which are beyond management’s control.

The Company expressly disclaims any obligation to update or revise forward-looking statements to reflect changed assumptions or estimates, the occurrence of unanticipated events or changes to future operating results that occur after the date the forward-looking statements are made.

~~Non-GAAP Financial Measures~~

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), this document contains an adjusted efficiency ratio, which is a non-GAAP financial measure. The efficiency ratio is adjusted to exclude expenses that (1) the Company does not consider to be part of our normal operations, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as merger and conversion related expenses and debt prepayment penalties. Management uses the adjusted efficiency ratio to evaluate ongoing operating results and efficiency of the Company's operations. The reconciliation from GAAP to non-GAAP for this financial measure is below.

Efficiency Ratio
Three Months Ended March 31,
2018 2017
Interest income (fully tax equivalent basis) $ 101,947
$ 83,781
Interest expense 11,140
7,874
Net interest income (fully tax equivalent basis) 90,807
75,907

Total noninterest income 33,953
32,021
Net gains on sales of securities —
—
Adjusted noninterest income 33,953
32,021

Total noninterest expense 77,944
69,309
Intangible amortization 1,651
1,563
Merger and conversion related expenses 900
345
Extinguishment of debt —
205
Adjusted noninterest expense 75,393
67,196

Efficiency Ratio (GAAP) 62.48 % 64.22 %
Adjusted Efficiency Ratio (non-GAAP) 60.43 % 62.26 %

The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Readers of this Form 10-Q should note that, because there are no standard definitions for the calculations as well as the results, the Company’s calculations may not be comparable to other similarly titled measures presented by other companies. Also, there may be limits in the usefulness of this measure to readers of this document. As a result, the Company encourages readers to consider its consolidated financial statements and footnotes thereto in their entirety and not to rely on any single financial measure.

Financial Condition

The following discussion provides details regarding the changes in significant balance sheet accounts at March 31, ~~2018~~2019 compared to December 31, ~~2017.~~2018.

Assets

Total assets were ~~$10,238,313~~$12,862,395 at March 31, ~~2018~~2019 compared to ~~$9,829,981~~$12,934,878 at December 31, ~~2017.~~2018.

Investments

The securities portfolio is used to provide a source for meeting liquidity needs and to supply securities to be used in collateralizing certain deposits and other types of borrowings. The following table shows the carrying value of our securities portfolio, all of which are classified as available for sale, by investment type and the percentage of such investment type relative to the entire securities portfolio as of the dates presented:


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Balance		Percentage of Portfolio		Balance		Percentage of Portfolio		Balance		Percentage of Portfolio		Balance		Percentage of Portfolio
Obligations of other U.S. Government agencies and corporations	$	3,528	0.37	%	$	3,564	0.53	%	$	2,525	0.20	%	$	2,511	0.20	%
Obligations of states and political subdivisions	226,342		23.87		234,481		34.92		183,762		14.64		203,269		16.25
Mortgage-backed securities	684,510		72.18		406,765		60.58		1,009,841		80.44		990,437		79.19
Trust preferred securities	10,045		1.06		9,388		1.40		10,246		0.82		10,633		0.85
Other debt securities	23,940		2.52		17,290		2.57		48,979		3.90		43,927		3.51
	$	948,365	100.00	%	$	671,488	100.00	%	$	1,255,353	100.00	%	$	1,250,777	100.00	%

The balance of our securities portfolio at March 31, 2018 increased $276,877 to $948,365 from $671,488 at December 31, 2017. As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, in the fourth quarter of 2017, we implemented strategic initiatives, collectively referred to as our “deleveraging strategy,” to manage total assets below $10,000,000 as of December 31, 2017, which included the sale of certain investment securities. During the three months ended March 31, ~~2018,~~2019, we purchased ~~$317,922~~$49,577 in investment ~~securities as part of the releveraging of the Company’s balance sheet.~~securities. Mortgage-backed securities and collateralized mortgage obligations (“CMOs”), in the aggregate, comprised approximately ~~98%~~87% of these purchases. CMOs are included in the “Mortgage-backed securities” line item in the above table. The mortgage-backed securities and CMOs held in our investment portfolio are primarily issued by government sponsored entities.

Proceeds from maturities, calls and principal payments on securities during the first three months of ~~2018~~2019 totaled ~~$29,335. There were no~~$48,509. During the first quarter of 2019, the Company sold municipal securities ~~sold~~and residential mortgage backed securities with a carrying value of $10,598 at the time of sale for net proceeds of $10,611, resulting in a net gain on sale of $13. Proceeds from the maturities, calls and principal payments on securities during the first three months of 2018 totaled $29,335; no securities were sold in the first quarter of 2018.

For more information about the Company’s security portfolio, see Note 3, “Securities,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements, in this report.

Loans

Total loans, excluding loans held for sale, at March 31, ~~2018~~2019 were ~~$7,698,070, an increase of $77,748 from $7,620,322~~$9,088,293 and $9,083,129 at December 31, ~~2017.~~2018. Growth in non purchased loans was offset by paydowns in the portfolio of purchased loans.

The table below sets forth the balance of loans, net of unearned income and excluding loans held for sale, outstanding by loan type and the percentage of each loan type to total loans as of the dates presented:


	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Balance		Percentage of Total Loans		Balance		Percentage of Total Loans		Balance		Percentage of Total Loans		Balance		Percentage of Total Loans
Commercial, financial, agricultural	$	1,046,818	13.60	%	$	1,039,393	13.64	%	$	1,308,457	14.40	%	$	1,295,912	14.27	%
Lease financing	52,536		0.68		54,013		0.71		58,651		0.65		61,865		0.68
Real estate – construction	657,491		8.54		633,389		8.31		741,073		8.15		740,668		8.15
Real estate – 1-4 family mortgage	2,358,101		30.63		2,343,721		30.76		2,769,173		30.47		2,795,343		30.78
Real estate – commercial mortgage	3,463,953		45.00		3,427,530		44.98		4,083,632		44.93		4,051,509		44.60
Installment loans to individuals	119,171		1.55		122,276		1.60		127,307		1.40		137,832		1.52
Total loans, net of unearned income	$	7,698,070	100.00	%	$	7,620,322	100.00	%	$	9,088,293	100.00	%	$	9,083,129	100.00	%

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At March 31, ~~2018,~~2019, there were no concentrations of loans exceeding 10% of total loans which are not disclosed as a category of loans separate from the categories listed above.

Non purchased loans totaled ~~$5,830,122~~$6,565,599 at March 31, ~~2018~~2019 compared to ~~$5,588,556~~$6,389,712 at December 31, ~~2017.~~2018. With the exception of lease financing and installment loans to individuals, the Company experienced loan growth across all categories of non purchased loans, with loans from our specialty commercial business lines, which consist of our asset-based lending, healthcare, factoring, and equipment lease financing banking groups as well as loans meeting the criteria to be guaranteed by the Small Business Administration (“SBA”), contributing ~~$47,097~~$2,698 of the total increase in non purchased loans from December 31, ~~2017.~~2018.

Looking at the change in loans geographically, non purchased loans in our ~~Mississippi,~~Western Region (which includes Mississippi), Eastern Region (which includes Georgia and ~~Tennessee~~east Florida), Northern Region (which includes Tennessee) and Central Region (which includes Alabama and the Florida panhandle) markets increased ~~$29,542, $99,252,~~$39,705, $97,066, $33,849 and ~~$46,813,~~$12,087, respectively, when compared to December 31, ~~2017. Non purchased loans in our Alabama and Florida markets (collectively referred to as our “Central Region”) increased $67,181.~~2018.

Loans purchased in previous acquisitions totaled ~~$1,867,948~~$2,522,694 and ~~$2,031,766~~$2,693,417 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The following tables provide a breakdown of non purchased loans and purchased loans as of the dates presented:


	March 31, 2018						March 31, 2019
	Non Purchased		Purchased		Total Loans		Non Purchased		Purchased		Total Loans
Commercial, financial, agricultural	$	803,146	$	243,672	$	1,046,818	$	921,081	$	387,376	$	1,308,457
Lease financing, net of unearned income	52,536		—		52,536		58,651		—		58,651
Real estate – construction:
Residential	182,392		15,488		197,880		239,333		41,708		281,041
Commercial	389,639		59,573		449,212		411,595		48,246		459,841
Condominiums	10,399		—		10,399		191		—		191
Total real estate – construction	582,430		75,061		657,491		651,119		89,954		741,073
Real estate – 1-4 family mortgage:
Primary	973,836		375,972		1,349,808		1,246,840		428,966		1,675,806
Home equity	448,679		107,550		556,229		456,398		144,590		600,988
Rental/investment	282,433		69,983		352,416		300,840		53,797		354,637
Land development	80,323		19,325		99,648		110,830		26,912		137,742
Total real estate – 1-4 family mortgage	1,785,271		572,830		2,358,101		2,114,908		654,265		2,769,173
Real estate – commercial mortgage:
Owner-occupied	968,573		407,449		1,376,022		1,055,347		531,687		1,587,034
Non-owner occupied	1,401,133		507,830		1,908,963		1,528,164		772,383		2,300,547
Land development	133,974		44,994		178,968		142,675		53,376		196,051
Total real estate – commercial mortgage	2,503,680		960,273		3,463,953		2,726,186		1,357,446		4,083,632
Installment loans to individuals	103,059		16,112		119,171		93,654		33,653		127,307
Total loans, net of unearned income	$	5,830,122	$	1,867,948	$	7,698,070	$	6,565,599	$	2,522,694	$	9,088,293


	December 31, 2017						December 31, 2018
	Non Purchased		Purchased		Total Loans		Non Purchased		Purchased		Total Loans
Commercial, financial, agricultural	$	763,823	$	275,570	$	1,039,393	$	875,649	$	420,263	$	1,295,912
Lease financing, net of unearned income	54,013		—		54,013		61,865		—		61,865
Real estate – construction:
Residential	178,400		25,041		203,441		214,452		55,096		269,548
Commercial	361,345		55,734		417,079		421,067		50,053		471,120
Condominiums	7,913		4,956		12,869		—		—		—
Total real estate – construction	547,658		85,731		633,389		635,519		105,149		740,668
Real estate – 1-4 family mortgage:
Primary	924,468		403,637		1,328,105		1,221,908		458,035		1,679,943
Home equity	445,149		116,990		562,139		452,248		157,245		609,493
Rental/investment	281,662		72,590		354,252		304,309		57,878		362,187
Land development	78,255		20,970		99,225		109,425		34,295		143,720
Total real estate – 1-4 family mortgage	1,729,534		614,187		2,343,721		2,087,890		707,453		2,795,343
Real estate – commercial mortgage:
Owner-occupied	938,444		436,011		1,374,455		1,052,521		547,741		1,600,262
Non-owner occupied	1,319,453		554,239		1,873,692		1,446,353		826,506		2,272,859
Land development	132,179		47,204		179,383		129,491		48,897		178,388
Total real estate – commercial mortgage	2,390,076		1,037,454		3,427,530		2,628,365		1,423,144		4,051,509
Installment loans to individuals	103,452		18,824		122,276		100,424		37,408		137,832
Total loans, net of unearned income	$	5,588,556	$	2,031,766	$	7,620,322	$	6,389,712	$	2,693,417	$	9,083,129

~~Mortgage~~ Loans Held for Sale

~~Mortgage loans~~Loans held for sale were ~~$204,472~~$318,563 at March 31, ~~2018~~2019 compared to ~~$108,316~~$411,427 at December 31, ~~2017. The Company's aforementioned strategy~~2018. Included in the balance at March 31, 2019 is a portfolio of non-mortgage consumer loans in the amount of $122,756, as compared to ~~manage consolidated assets below $10,000,000~~$191,578 at December 31, ~~2017 included shortening the holding period of mortgage loans held for sale.~~2018. During the first quarter of ~~2018,~~2019, the ~~holding period~~Company sold approximately $42,727 of ~~mortgage loans held for sale reverted to standard practice, which was the primary reason for the increase in the balance from December 31, 2017.~~this portfolio at par.

Mortgage loans to be sold are sold either on a “best efforts” basis or under a mandatory delivery sales agreement. Under a “best efforts” sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and the Company is obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. Our standard practice is to sell the loans within 30-40 days after the loan is funded. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.

Deposits

The Company relies on deposits as its major source of funds. Total deposits were ~~$8,357,769~~$10,268,912 and ~~$7,921,075~~$10,128,557 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. Noninterest-bearing deposits were ~~$1,861,136~~$2,366,223 and ~~$1,840,424~~$2,318,706 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, while interest-bearing deposits were ~~$6,496,633~~$7,902,689 and ~~$6,080,651~~$7,809,851 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Management continues to focus on growing and maintaining a stable source of funding, specifically core deposits. Under certain circumstances, however, management may seek to acquire non-core deposits in the form of public fund deposits or time deposits. The source of funds that we select depends on the terms and how those terms assist us in mitigating interest rate risk, maintaining our liquidity position and managing our net interest margin. Accordingly, funds are acquired to meet anticipated funding needs at the rate and with other terms that, in management’s view, best address our interest rate risk, liquidity and net interest margin parameters. During the fourth quarter of 2017, as part of our efforts to manage consolidated assets below $10,000,000 at December 31, 2017, the Company reduced the balance of its wholesale deposit funding sources. These deposits were reacquired during the first quarter of 2018 accounting for a portion of the increase in deposits from December 31, 2017.

Public fund deposits are those of counties, municipalities or other political subdivisions and may be readily obtained based on the Company’s pricing bid in comparison with competitors. Since public fund deposits are obtained through a bid process, these deposit balances may fluctuate as competitive and market forces change. ~~The~~Although the Company has focused on growing stable sources of deposits to reduce reliance on public fund ~~deposits. However, the Company continues to participate~~deposits, it participates in the bidding process for public fund deposits when pricing and other terms make it is reasonable ~~under the circumstances.~~given market conditions and other factors. Our public fund transaction accounts are principally obtained from municipalities including school boards and utilities. Public fund deposits were ~~$1,067,663~~$1,356,208 and ~~$1,000,324~~$1,271,139 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Looking at the change in deposits geographically, deposits in our ~~Mississippi, Georgia~~Western Region, Eastern Region and ~~Tennessee~~Northern Region markets increased ~~$161,951, $40,385~~$213,770, $38,657 and ~~$79,432,~~$194, respectively, from December 31, ~~2017,~~2018, while deposits in our Central ~~Division market~~Region markets decreased ~~$13,324~~$64,070 from December 31, ~~2017.~~2018 primarily due to a decrease in public fund deposits.

Borrowed Funds

Total borrowings include securities sold under agreements to repurchase, ~~short-term borrowings,~~ advances from the FHLB, subordinated notes and junior subordinated debentures and are classified on the Consolidated Balance Sheets as either short-term borrowings or long-term debt. Short-term borrowings have original maturities less than one year and typically include securities sold under agreements to repurchase, federal funds purchased and short-term FHLB advances. At March 31, ~~2018,~~2019, short-term borrowings consisted of ~~$7,753~~$7,590 in security repurchase agreements and short-term borrowings from the FHLB of ~~$50,000,~~$80,000, compared to security repurchase agreements of ~~$6,814~~$7,706 and short-term borrowings from the FHLB of ~~$83,000~~$380,000 at December 31, ~~2017.~~2018.

At March 31, ~~2018,~~2019, long-term debt, consisting of long-term FHLB advances, our junior subordinated debentures and our subordinated notes, totaled ~~$207,438~~$263,269 compared to ~~$207,546~~$263,618 at December 31, ~~2017.~~2018. Funds are borrowed from the FHLB primarily to match-fund against certain loans, negating interest rate exposure when rates rise. Such match-funded loans are typically large, fixed rate commercial or real estate loans with long-term maturities. Long-term FHLB advances were ~~$7,276~~$6,492 and ~~$7,493~~$6,690 at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. At March 31, ~~2018,~~2019, there were no$1,731 in long-term FHLB advances outstanding scheduled to mature within twelve months or less. The Company had ~~$2,706,761~~$3,548,225 of availability on unused lines of credit with the FHLB at March 31, ~~2018~~2019 compared to ~~$2,670,141~~$3,301,543 at December 31, ~~2017.~~2018.

The Company owns the outstanding common securities of business trusts that issued corporation-obligated mandatorily redeemable preferred capital securities to third-party investors. The trusts used the proceeds from the issuance of their preferred capital securities and common securities (collectively referred to as “capital securities”) to buy floating rate junior subordinated debentures issued by the Company (or by companies that the Company subsequently acquired.) The debentures are the trusts’ only assets and interest payments from the debentures finance the distributions paid on the capital securities. The Company’s junior subordinated debentures totaled ~~$86,018~~$109,781 at March 31, ~~2018~~2019, compared to ~~$85,881~~$109,636 at December 31, ~~2017.~~2018.

~~The Company’s~~During 2016, the Company completed an underwritten public offering and sale of $60,000 of its 5.00% fixed-to-floating rate subordinated notes due September 1, 2026, and $40,000 of its 5.50% fixed-to-floating rate subordinated notes due September 1, 2031. As part of the Brand acquisition, the Company assumed $30,000 of 8.50% fixed rate subordinated notes due June 27, 2024, and as part of the Metropolitan acquisition, the Company assumed $15,000 of 6.50% fixed-to-floating rate subordinated notes due July 1, 2026 (collectively, the “Notes”). The Notes, net of unamortized debt issuance costs, totaled ~~$114,059~~$146,962 at March 31, ~~2018~~2019 compared to ~~$114,074~~$147,239 at December 31, ~~2017.~~2018. The Company has used, and intends to continue to use, the net proceeds from the Notes offerings for general corporate purposes, which may include providing capital to support the Company's growth organically or through strategic acquisitions, repaying indebtedness and financing investments and capital expenditures, and for investments in the Bank as regulatory capital. The Notes qualify as Tier 2 capital under the current regulatory guidelines.

Results of Operations

Net Income

Net income for the ~~three months ended March 31, 2018~~first quarter of 2019 was ~~$33,826~~$45,110 compared to net income of ~~$23,972~~$33,826 for the ~~three months ended March 31, 2017~~.first quarter of 2018. Basic and diluted ~~EPS~~earnings per share (“EPS”) for the ~~three months ended March 31, 2018~~first quarter of 2019 were ~~$0.69~~ ~~and $0.68, respectively,~~$0.77, as compared to basic and diluted EPS of ~~$0.54~~$0.69 and $0.68, respectively, for the ~~three months ended March 31, 2017~~.

first quarter of 2018.

The Company incurred expenses and charges in connection with certain transactions with respect to which management is unable to accurately predict the timing of when these expenses or charges will be incurred or, when incurred, the amount of such expenses or charges. The following table presents the impact of these expenses and charges on reported earnings per share for the dates presented:

Three Months Ended
March 31, 2018 March 31, 2017
Pre-tax After-tax Impact to Diluted EPS Pre-tax After-tax Impact to Diluted EPS
Merger and conversion expenses $ 900
$ 700
$ 0.02
$ 345
$ 235
$ 0.01
Debt prepayment penalties —
—
—
205
140
—



	Three Months Ended
	March 31, 2019						March 31, 2018
	Pre-tax		After-tax		Impact to Diluted EPS		Pre-tax		After-tax		Impact to Diluted EPS
Merger and conversion expenses	$	—	$	—	$	—	$	900	$	700	$	0.02

Net Interest Income

Net interest income, the difference between interest earned on assets and the cost of interest-bearing liabilities, is the largest component of our net income, comprising ~~72.79%~~76.16% of total ~~net~~ revenue ~~for the first three months of 2018. Total net revenue consists of~~(i.e., net interest income on a fully taxable equivalent basis and noninterest ~~income.~~income) for the first quarter of 2019. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.

Net interest income ~~increased to~~ ~~$89,240~~was $113,147 for the three months ended March 31, ~~2018~~2019 as compared to ~~$74,015~~$89,240 for the same period in ~~2017~~.2018. On a tax equivalent basis, net interest income was ~~$90,807~~ ~~for the~~ ~~three months ended March 31, 2018~~ ~~as compared to~~ ~~$75,907~~ ~~for the~~ ~~three months ended March 31, 2017~~. The increases to the target federal funds rate implemented by the Federal Reserve Board over the last two years have resulted in higher yields on loans in our portfolio that earn a variable rate of interest. Net interest margin, the tax equivalent net yield on earning assets, increased to 4.20% during the three months ended March 31, 2018, as compared to 4.01%$114,631 for the three months ended March 31, ~~2017.~~ 2019 as compared to $90,807 for the same respective time periods in 2018.

The following ~~table presents reported net~~tables set forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest ~~margin.~~earned or interest paid and the average yield or average rate paid on each such category for the periods presented:




	Three Months Ended March 31,
	2019						2018
	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning assets:
Loans held for investment:
Non purchased	$	6,454,870	$	81,184	5.10	%	$	5,689,210	$	64,611	4.61	%
Purchased	2,604,932		40,185		6.26		1,957,781		28,762		5.96
Total loans held for investment	9,059,802		121,369		5.43		7,646,991		93,373		4.95
Loans held for sale	345,264		5,837		6.86		152,299		1,671		4.45
Securities:
Taxable⁽¹⁾	1,061,983		7,892		3.01		606,642		3,914		2.62
Tax-exempt	191,241		2,022		4.29		226,434		2,406		4.31
Interest-bearing balances with banks	236,915		1,458		2.50		128,313		583		1.84
Total interest-earning assets	10,895,205		138,578		5.16		8,760,679		101,947		4.72
Cash and due from banks	191,863						163,141
Intangible assets	976,820						634,898
Other assets	667,051						497,037
Total assets	$	12,730,939					$	10,055,755
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽²⁾	$	4,790,184	$	10,074	0.85	%	$	3,911,802	$	3,407	0.35	%
Savings deposits	630,671		292		0.19		581,194		151		0.11
Time deposits	2,379,037		9,406		1.60		1,821,118		4,501		1.00
Total interest-bearing deposits	7,799,892		19,772		1.03		6,314,114		8,059		0.52
Borrowed funds	363,140		4,175		4.66		314,228		3,081		3.98
Total interest-bearing liabilities	8,163,032		23,947		1.19		6,628,342		11,140		0.68
Noninterest-bearing deposits	2,342,406						1,817,848
Other liabilities	160,131						85,692
Shareholders’ equity	2,065,370						1,523,873
Total liabilities and shareholders’ equity	$	12,730,939					$	10,055,755
Net interest income/net interest margin			$	114,631	4.27	%			$	90,807	4.20	%

Three Months Ended
March 31,
2018 2017
Taxable equivalent net interest income $ 90,807
$ 75,907

Average earning assets 8,760,679
7,668,582

Net interest margin 4.20 % 4.01 %

~~The impact from interest income collected on problem loans and purchase accounting adjustments on loans to net interest income and net interest margin is shown in the following table.~~

Three Months Ended
March 31,
2018 2017
Net interest income collected on problem loans $ 358
$ 556
Accretable yield recognized on purchased loans⁽¹⁾
6,118
5,604
Total impact to net interest income $ 6,476
$ 6,160

Impact to net interest margin 0.30 % 0.32 %



⁽¹⁾	Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $3,358 and $2,731 for the three months ended March 31, 2018 and 2017, respectively, which increased net interest margin by 16 basis points and 14 basis points for the same periods, respectively.

(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which we operate.

(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.

The average balances of nonaccruing assets are included in the tables above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21% and a state tax rate of 4.45%, which is net of federal tax benefit.

Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes in volume, mix and pricing decisions. External factors include changes in market interest rates, competition and the shape of the interest rate yield curve. ~~Growth~~As discussed in more detail below, for the three months ended March 31, 2019, as compared to the corresponding period in 2018, growth in the Company’s loan portfolio iswas the largest contributing factor to the increase in net interest ~~income. Furthermore,~~income over these periods. Also, the ~~Company is continuing its~~Company’s continued efforts to replace maturing loans with new or renewed loans at similar or higher rates, ~~driving~~bolstered by the rate environment resulting from the Federal Reserve Board’s increases to the target federal funds rate over the last two years, and coupled with our efforts to limit the growth in deposits and borrowing costs (while

remaining competitive), drove further interest income and interest margin expansion ~~(before and after~~(after excluding the impact from purchase accounting adjustments).

The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or interest paid and the average yield or average rate paid on each such category for the periods presented:

Three Months Ended March 31,
2018 2017

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate
Assets
Interest-earning assets:
Loans:
Non purchased $ 5,689,210
$ 64,611
4.61 % $ 4,752,628
$ 51,143
4.36 %
Purchased 1,957,781
28,762
5.96
1,446,077
22,567
6.33
Total Loans 7,646,991
93,373
4.95
6,198,705
73,710
4.82
Mortgage loans held for sale 152,299
1,671
4.45
112,105
1,148
4.15
Securities:
Taxable⁽¹⁾
606,642
3,914
2.62
704,805
4,070
2.34
Tax-exempt 226,434
2,406
4.31
338,892
4,297
5.14
Interest-bearing balances with banks 128,313
583
1.84
314,075
556
0.72
Total interest-earning assets 8,760,679
101,947
4.72
7,668,582
83,781
4.43
Cash and due from banks 163,141
131,874

Intangible assets 634,898
493,816

Other assets 497,037
465,176

Total assets $ 10,055,755
$ 8,759,448

Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽²⁾
$ 3,911,802

$ 3,407
0.35
$ 3,410,606
$ 1,813
0.22
Savings deposits 581,194
151
0.11
553,985
96
0.07
Time deposits 1,821,118
4,501
1.00
1,617,262
3,240
0.81
Total interest-bearing deposits 6,314,114
8,059
0.52
5,581,853
5,149
0.37
Borrowed funds 314,228
3,081
3.98
282,008
2,725
3.92
Total interest-bearing liabilities 6,628,342
11,140
0.68
5,863,861
7,874
0.54
Noninterest-bearing deposits 1,817,848
1,558,809

Other liabilities 85,692
89,875

Shareholders’ equity 1,523,873
1,246,903

Total liabilities and shareholders’ equity $ 10,055,755
$ 8,759,448

Net interest income/net interest margin $ 90,807
4.20 % $ 75,907
4.01 %

~~(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which we operate.~~

~~(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.~~

The average balances of nonaccruing assets are included in the table above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21% and a state tax rate of 4.45%, which is net of federal tax benefit.

The following table sets forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from changes in volume and rates for the Company for ~~the~~ three months ended March 31, ~~2018~~2019 compared to the same period in ~~2017~~2018 (the changes attributable to the combined impact of yield/rate and volume have been allocated on a pro-rata basis using the absolute ratio value of amounts calculated):


										Three Months Ended March 31, 2019
	Volume			Rate			Net			Volume			Rate			Net
Interest income:
Loans:
Loans held for investment:
Non purchased	$	10,508		$	2,960		$	13,468		$	9,215		$	7,358		$	16,573
Purchased	7,598			(1,403		)	6,195			9,920			1,503			11,423
Mortgage loans held for sale	441			82			523
Loans held for sale										4,078			88			4,166
Securities:
Taxable	(634		)	478			(156		)	3,309			669			3,978
Tax-exempt	(1,195		)	(696		)	(1,891		)	(372		)	(12		)	(384		)
Interest-bearing balances with banks	(844		)	871			27			617			258			875
Total interest-earning assets	15,874			2,292			18,166			26,767			9,864			36,631
Interest expense:
Interest-bearing demand deposits	437			1,157			1,594			913			5,754			6,667
Savings deposits	7			48			55			14			127			141
Time deposits	504			757			1,261			1,659			3,246			4,905
Borrowed funds	316			40			356			519			575			1,094
Total interest-bearing liabilities	1,264			2,002			3,266			3,105			9,702			12,807
Change in net interest income	$	14,610		$	290		$	14,900		$	23,662		$	162		$	23,824

Interest income, on a tax equivalent basis, was ~~$101,947~~$138,578 for the three months ended March 31, ~~2018~~2019 compared to ~~$83,781~~$101,947 for the same period in ~~2017.~~2018. This increase in interest income, on a tax equivalent basis, is due primarily to the additional earning assets from the ~~Metropolitan~~Brand acquisition ~~and~~which was completed on September 1, 2018, as well as loan growth in the Company’s non purchased loan ~~portfolio, slightly offset by a decrease in the Company’s investment~~ portfolio. As of March 31, 2018, we intentionally had not yet repurchased investment securities in an amount completely offsetting the sales of investment securities effected as part of the deleveraging strategy implemented in the fourth quarter of 2017. We delayed fully re-leveraging the balance sheet during the first quarter of 2018 due to the rising rate environment. The increase in interest income is also being driven by an overall increase in the yield on the Company’s earning assets due to replacing maturing assets with assets earning similar or higher rates of interest.

The following ~~table~~tables presents the percentage of total average earning assets, by type and yield, for the periods presented:



	Percentage of Total Average Earning Assets				Yield
	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Loans held for investment	83.15	%	87.29	%	5.43	%	4.95	%
Loans held for sale	3.18		1.74		6.86		4.45
Securities	11.50		9.51		3.21		3.08
Other	2.17		1.46		2.50		1.84
Total earning assets	100.00	%	100.00	%	5.16	%	4.72	%

Percentage of Total Average Earning Assets Yield
Three Months Ended Three Months Ended
March 31, March 31,
2018 2017 2018 2017
Loans 87.29 % 80.83 % 4.95 % 4.82 %
Mortgage loans held for sale 1.74
1.46
4.45
4.15
Securities 9.51
13.61
3.08
3.25
Interest-bearing balances with banks

1.46
4.10
1.84
0.72
Total earning assets 100.00 % 100.00 % 4.72 % 4.43 %

For the ~~three months ending March 31, 2018, loan~~first quarter of 2019, interest income on loans held for investment, on a tax equivalent basis, increased ~~$19,663~~$27,996 to ~~$93,373~~$121,369 from ~~$73,710 in the same period in 2017. The average balance of loans increased $1,448,286 for the three months ended March 31, 2018~~$93,373 compared to the same period in ~~2017~~2018. Interest income on loans held for investment increased as a result of the increase in the average balance of loans due to the ~~Metropolitan acquisition coupled with strong organic~~Brand acquisitions and non purchased loan growth. ~~The~~For the first quarter of 2019, interest income on loans held for sale, on a tax equivalent ~~yield on loans was 4.95% for the three months ending March 31, 2018, a 13~~ basis, ~~point increase~~increased $4,166 to $5,837 from $1,671 compared to the same period in ~~2017.~~2018. This increase is primarily due to the impact from the portfolio of non-mortgage consumer loans, acquired

from Brand, that is classified in loans held for sale. The following table presents reported taxable equivalent yield on ~~loans.~~

loans for the periods presented.


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2018			2017			2019			2018
Taxable equivalent interest income on loans	$	93,373		$	73,710		$	127,206		$	95,044

Average loans	7,646,991			6,198,705
Average loans, including loans held for sale							9,405,066			7,799,290

Loan yield	4.95		%	4.82		%	5.49		%	4.94		%

The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans, ~~and~~including loans held for sale, loan yield and net interest margin is shown in the following ~~table.~~table for the periods presented.


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2018			2017			2019			2018
Net interest income collected on problem loans	$	358		$	556		$	812		$	358
Accretable yield recognized on purchased loans⁽¹⁾	6,118			5,604			7,542			6,118
Total impact to interest income on loans	$	6,476		$	6,160		$	8,354		$	6,476

Impact to loan yield	0.34		%	0.40		%	0.36		%	0.34		%

Impact to net interest margin							0.31		%	0.30		%

⁽¹⁾

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of ~~$3,358~~$3,833 and ~~$2,731~~$3,358 for the ~~three months ended March 31,~~first quarter of 2019 and 2018, ~~and 2017, respectively, which~~respectively. This additional interest income increased ~~our~~ taxable equivalent loan yield by 1817 basis points for both the first quarter of 2019 and 2018, while increasing net interest margin by 14 basis points and 16 basis points for the ~~same periods.~~first quarter of 2019 and 2018, respectively.

Investment income, on a tax equivalent basis, ~~decreased $2,047~~increased $3,594 to $9,914 for the first quarter of 2019 from $6,320 for the first quarter of 2018. In addition to the average balance in the investment portfolio being higher for the three months ended March 31, ~~2018 from $8,367 for~~2019 as compared to the same period in ~~2017. The average balance in~~2018, the ~~investment portfolio for the three months ended March 31, 2018~~Company was ~~$833,076 compared~~able to ~~$1,043,697 for the same period in 2017. The decrease in the average balance of the investment portfolio was due~~add higher yielding securities to the ~~pace at which we repurchased investment securities following~~portfolio, bolstering the ~~deleveraging strategy implemented by the Company~~increase in ~~the fourth quarter of 2017.~~interest income. The tax equivalent yield on the investment portfolio for the first ~~three months~~quarter of ~~2018~~2019 was ~~3.08%~~3.21%, ~~down 17~~up 13 basis points from ~~3.25%~~3.08% in the same period in ~~2017.~~

2018.

Interest expense for the three months ended March 31, ~~2018~~2019 was ~~$11,140~~$23,947 as compared to ~~$7,874~~$11,140 for the same period in ~~2017. The cost of interest-bearing liabilities was 0.68% for the three months ended March 31, 2018 as compared to 0.54% for the same period in 2017.~~

2018.

The following ~~table presents,~~tables present, by type, the Company’s funding sources, which consist of total average deposits and borrowed funds, and the total cost of each funding source for the periods presented:



	Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds
	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Noninterest-bearing demand	22.30	%	21.52	%	—	%	—	%
Interest-bearing demand	45.60		46.31		0.85		0.35
Savings	6.00		6.88		0.19		0.11
Time deposits	22.65		21.56		1.60		1.00
Short term borrowings	0.95		1.27		2.66		1.45
Long-term Federal Home Loan Bank advances	0.06		0.09		3.28		3.41
Subordinated notes	1.40		1.35		6.13		5.63
Other borrowed funds	1.04		1.02		4.60		4.97
Total deposits and borrowed funds	100.00	%	100.00	%	0.92	%	0.53	%

Percentage of Total Average Deposits and Borrowed Funds Cost of Funds
Three Months Ended Three Months Ended
March 31, March 31,
2018 2017 2018 2017
Noninterest-bearing demand 21.52 % 21.00 % — % — %
Interest-bearing demand 46.31
45.96
0.35
0.22
Savings 6.88
7.46
0.11
0.07
Time deposits 21.56
21.79
1.00
0.81
Short-term borrowings 1.27
1.12
1.45
0.54
Long-term Federal Home Loan Bank advances 0.09
0.11
3.41
3.50
Subordinated notes 1.35
1.32
5.63
5.52
Other long term borrowings 1.02
1.24
4.97
5.32
Total deposits and borrowed funds 100.00 % 100.00 % 0.53 % 0.43 %

Interest expense on deposits was ~~$8,059~~$19,772 and ~~$5,149~~$8,059 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. The cost of total deposits was ~~0.40%~~0.79% and ~~0.29%~~0.40% for the same respective periods. The increase in both deposit expense and cost is attributable to both the increase in the average balance of all interest-bearing deposits resulting from the ~~Metropolitan~~Brand acquisition and organic deposit growth as well as an increase in

the interest rates on interest-bearing deposits. Although the Company continues to seek changes in the mix of ~~our~~its deposits from higher costing time deposits to lower costing interest-bearing deposits and noninterest-bearing deposits, rates offered on the Company’s interest-bearing deposit accounts, including time deposits, have increased to match competitive market interest rates in order to maintain stable sources of funding.

Interest expense on total borrowings was ~~$3,081~~$4,175 and ~~$2,725~~$3,081 for the first three months of ~~2018~~2019 and ~~2017,~~2018, respectively. The Company assumed subordinated notes and junior subordinated debentures in its acquisition of Brand, increasing the average balance of borrowings increased $32,220 to $314,228 for the three months ended March 31, 2018, as compared to $282,008 for the same period in 2017. The increase is attributable to an increase in short-term borrowings from the Federal Home Loan Bank and an increase in subordinated notes which were assumed in the Metropolitan acquisition. The cost of total borrowed funds was 3.98% and 3.92% for the first three months of ~~2018 and 2017, respectively. The increases~~2019 as compared to the same period in ~~borrowing expense and cost~~2018. This increase in the average balance of ~~total~~ borrowings, ~~are both attributable to a~~together with higher ~~rate~~rates charged on short-term FHLB advances, is the ~~short-term borrowings from~~primary driver for the ~~Federal Home Loan Bank and the higher costing subordinated notes that were assumed~~increase in ~~the Metropolitan acquisition.~~

interest expense on borrowings.

A more detailed discussion of the cost of our funding sources is set forth below under the heading “Liquidity and Capital Resources” in this item.

Noninterest Income

			Noninterest Income to Average Assets	Three Months Ended March 31,
2018	2017
1.37%	1.48%
2019		2018
1.14%		1.37%

Noninterest income was ~~$33,953~~$35,885 for the three months ended March 31, ~~2018~~2019 as compared to ~~$32,021~~$33,953 for the same period in ~~2017. The increase in~~2018. While the acquisition of Brand improved the growth of our noninterest income, ~~and its related components is attributable to the addition~~our continued focus on diversification of ~~Metropolitan, coupled with~~our income streams also resulted in an increase in ~~service charges on deposit accounts, fee income on loan and deposit products and mortgage banking~~nearly all of the Company’s components of noninterest income.

Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees. Service charges on deposit accounts were ~~$8,473~~$9,102 and ~~$7,931~~$8,473 for the three months ended March 31, ~~2018~~2019 and ~~2017~~,2018, respectively. Overdraft fees, the largest component of service charges on deposits, were ~~$5,908~~$6,139 for the three months ended March 31, ~~2018~~2019 compared to ~~$5,679~~$5,908 for the same period in ~~2017~~.

2018.

Fees and commissions ~~increased to~~ ~~$5,685~~were $6,471 for the first three months of ~~March 31, 2018~~2019 as compared to ~~$5,199~~$5,685 for the same period in ~~2017~~.2018. Fees and commissions include fees related to deposit services, such as ATM fees and interchange fees on debit card transactions. Interchange fees ~~on debit card transactions, the largest component of fees and commissions,~~ were ~~$4,787~~$5,328 for the three months ending March 31, ~~2018~~2019 as compared to ~~$4,299~~$4,787 for the same period in ~~2017. If~~2018. As a result of our total assets ~~remain~~being above $10,000,000, ~~at December 31, 2018, then~~ beginning on July 1, 2019 we will ~~become~~be subject to the limitations on interchange fees imposed pursuant to §1075 of the Dodd-Frank Act (this provision, which is commonly referred to as the “Durbin Amendment,” is discussed in more detail in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017)~~2018). We expect the Durban Amendment limitations to reduce interchange fees by approximately $10,000-$11,000 annually. Management is continuing to ~~examine this issue~~develop and ~~develop~~enhance strategies to offset ~~the impact of the Durbin Amendment.~~this impact.

Through Renasant Insurance, we offer a range of commercial and personal insurance products through major insurance carriers. Income earned on insurance products was ~~$2,005~~$2,116 and ~~$1,860~~$2,005 for the three months ended March 31, ~~2018~~2019 and ~~2017~~,2018, respectively. Contingency income is a bonus received from the insurance underwriters and is based both on commission income and claims experience on our clients’ policies during the previous year. Increases and decreases in contingency income are reflective of corresponding increases and decreases in the amount of claims paid by insurance carriers. Contingency income, which is included in “Other noninterest income” in the Consolidated Statements of Income, was ~~$762~~$757 and ~~$687~~$762 for the three months ended March 31, 2019 and 2018, respectively.

Our Wealth Management segment has two primary divisions: Trust and ~~2017, respectively.~~

Financial Services. The Trust division ~~within the Wealth Management segment~~ operates on ~~both~~ a ~~fully discretionary and a directed~~custodial basis which includes administration of employee benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal ~~corporate~~ and ~~employee benefit~~corporate accounts, self-directed IRAs, and custodial accounts. Fees for managing these accounts are based on changes in market values of the assets under management in the account, with the amount of the fee depending on the type of account. ~~Additionally, the~~The Financial Services division ~~within the Wealth Management segment~~ provides specialized products and services to our customers, which include fixed and variable annuities, mutual funds, and stocks offered through a

third party provider. Wealth Management revenue was ~~$3,262~~$3,324 for the three months ended March 31, ~~2018~~2019 compared to ~~$2,884~~$3,262 for the same period in ~~2017~~.2018. The market value of assets under management or administration was ~~$3,234,775~~$3,492,135 and ~~$3,021,347~~$3,234,775 at March 31, ~~2018~~2019 and March 31, ~~2017,~~2018, respectively.

Mortgage banking income is derived from the origination and sale of mortgage loans and the servicing of mortgage loans that the Company has sold but retained the right to service. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market. ~~Originations of mortgage loans to be sold~~Mortgage loan originations totaled ~~$362,803~~$384,103 in the three months ended March 31, ~~2018~~2019 compared to ~~$318,144~~$362,803 for the same period in ~~2017.~~2018. The increase in mortgage loan originations is due to an increase in producers throughout our ~~footprint.~~footprint during the current year. The ~~following~~ table below presents the components of mortgage banking income included in noninterest income for the three months ending March 31:


					Three Months Ended March 31,
	2018		2017		2019		2018
Mortgage servicing income, net	$	1,154	$	410	$	821	$	1,154
Gain on sales of loans, net	8,798		6,554		7,888		8,798
Fees, net	1,008		3,540		1,692		1,008
Mortgage banking income, net	$	10,960	$	10,504	$	10,401	$	10,960

Bank-owned life insurance (“BOLI”) income is derived from changes in the cash surrender value of the bank-owned life insurance policies and death benefits received on covered individuals. BOLI income ~~decreased to $945~~was $1,407 for the ~~first~~ three months ofended March 31, ~~2018~~2019 as compared to ~~$1,113~~$945 for the same period in ~~2017.~~2018.

Other noninterest income was ~~$2,623~~$3,051 and ~~$2,530~~$2,623 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. Other noninterest income includes ~~contingency income from our insurance underwriters,~~ income from our SBA banking division and other miscellaneous income and can fluctuate based on ~~the claims experience at Renasant Insurance,~~ production in our SBA banking division and recognition of other unseasonal income items.

Noninterest Expense

			Noninterest Expense to Average Assets	Three Months Ended March 31,
2018	2017
3.14%	3.21%
2019		2018
2.83%		3.14%

Noninterest expense was ~~$77,944~~$88,832 and ~~$69,309~~$77,944 for the three months ended March 31, ~~2018~~2019 and ~~2017~~,2018, respectively. ~~Merger~~The Company did not record any merger and conversion ~~expense was $900~~related expenses for the three months ended March 31, ~~2018~~,2019, while $900 was recorded during the first quarter of 2018. The increase year over year for the first three months was primarily driven by the additional expenses associated with the acquisition Brand’s operations, as discussed in more detail in the remainder of this section.

Salaries and employee benefits increased $8,566 to $57,350 for the three months ended March 31, 2019 as compared to ~~$345~~$48,784 for the same period in 2017. The Company recognized a penalty charge of $205 in connection with the prepayment of $10,310 of junior subordinated debentures in the first quarter of 2017. There was no such penalty incurred during the first three months of 2018.

~~Salaries and employee benefits increased $6,575 to $48,784 for the~~ ~~three months ended March 31, 2018~~ ~~as compared to $42,209 for the same period in~~ ~~2017~~. The increase in salaries and employee benefits is primarily due to the ~~Metropolitan acquisition.~~Brand acquisition and annual merit based pay increases.

Data processing costs were ~~$4,244~~$4,906 for the three months ended March 31, ~~2018~~2019 as compared to ~~$4,234~~$4,244 for the same period in ~~2017. Increased~~2018. The increased costs ~~arising on account of our greater size were almost completely offset by~~are primarily due to the ~~cost savings realized through contract renegotiations.~~Brand acquisition.

Net occupancy and equipment expense for the first three months of ~~2018~~2019 was ~~$9,822,~~$11,835, up from ~~$9,319~~$9,822 for the same period in ~~2017~~.2018. The increase in occupancy and equipment expense is primarily attributable to the additional locations and assets added from the ~~Metropolitan acquisition.~~

Brand acquisitions.

Expenses related to other real estate owned were $1,004 and $657, respectively, for the first three months of ~~2018 were $657 compared to $532 for the same period in 2017.~~2019 and 2018. Expenses on other real estate owned ~~for the three months ended March 31, 2018~~ included write downs ~~of $352~~ of the carrying value to fair value on certain pieces of property held in other real estate ~~owned. Other~~owned of $727 and $352 for the first three months of 2019 and 2018, respectively. For the three months ended March 31, 2019 and 2018, other real estate owned with a cost basis of $1,043 and $2,181, respectively, was sold ~~during the three months ended March 31, 2018,~~ resulting in a net loss of $96. Expenses on other real estate owned for the three months ended March 31, 2017 included write downs of $378 of the carrying value to fair value on certain pieces of property held in other real estate owned. Other real estate owned with a cost basis of $4,719 was sold during the three months ended March 31, 2017, resulting in a net gain of $327.$80 and $96, respectively.

Professional fees include fees for legal and accounting services. Professional fees were ~~$2,138~~$2,454 for the three months ended March 31, ~~2018~~2019 as compared to ~~$2,067~~$2,138 for the same period in ~~2017~~.2018. Professional fees remain elevated in large part due to additional

legal, accounting and consulting fees associated with compliance costs of newly enacted as well as existing banking and governmental regulation.

Advertising and public relations expense was ~~$2,203~~$2,866 for the three months ended March 31, ~~2018~~2019 compared to ~~$1,592~~$2,203 for the same period in ~~2017.~~2018. This increase is primarily attributable to an increased focus on digital marketing and branding throughout our footprint, an increase in the overall size of the Company and also an increase in the marketing of the Company’s community involvement.

Amortization of intangible assets totaled ~~$1,651~~$2,110 and ~~$1,563~~$1,651 for the three months ended March 31, ~~2018~~2019 and ~~2017~~,2018, respectively. This amortization relates to finite-lived intangible assets which are being amortized over the useful lives as determined at acquisition. These finite-lived intangible assets have remaining estimated useful lives ranging from approximately ~~3 years~~1 year to approximately 10 years.

Communication expenses, those expenses incurred for communication to clients and between employees, were ~~$1,969~~$1,895 for the three months ended March 31, ~~2018~~2019 as compared to ~~$1,863~~$1,969 for the same period in ~~2017. The increase in communication expenses is primarily attributable to the additional locations added as part of the Metropolitan acquisition.~~

2018.

Efficiency Ratio


	Efficiency Ratio		Efficiency Ratio
	Three Months Ended March 31,		Three Months Ended March 31,
	2018	2017	2019		2018
Efficiency ratio	62.48%	64.22%
Efficiency ratio (GAAP)			59.02	%	62.48	%
Impact on efficiency ratio from:
Net gains on sales of securities			(0.01	)	—
Intangible amortization	(1.33)%	(1.45)%	(1.39	)	(1.33	)
Merger and conversion related expenses	(0.72)%	(0.32)%	—		(0.72	)
Extinguishment of debt	—%	(0.19)%
Adjusted efficiency ratio	60.43%	62.26%
Adjusted efficiency ratio (Non-GAAP)⁽¹⁾			57.62	%	60.43	%


⁽¹⁾	A reconciliation of this financial measure from GAAP to non-GAAP can be found under the “Non-GAAP Financial Measures” heading at the end of this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. The Company calculates this ratio by dividing noninterest expense by the sum of net interest income on a fully tax equivalent basis and noninterest income. The table above shows the impact on the efficiency ratio of expenses that (1) the Company does not consider to be part of our normal operations, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as merger and conversion related ~~expenses and debt prepayment penalties.~~expenses. We remain committed to aggressively managing our costs within the framework of our business model. We expect the efficiency ratio to continue to improve from currently reported levels as a result of revenue growth while at the same time controlling noninterest expenses.

Income Taxes

Income tax expense for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 was ~~$9,673~~$13,590 and ~~$11,255,~~$9,673, respectively. The effective tax rates for those periods were ~~22.24%~~23.15% and ~~31.95%~~22.24%, respectively. ~~Although~~The increase in taxable income ~~has continued to~~is the primary driver in the increase in income tax expense from the ~~decreased effective tax rate for the three months ended March 31,~~first quarter of 2018 ~~as compared~~ to the ~~same period in 2017 is the result~~first quarter of ~~the lower corporate tax rate that resulted from the enactment of the Tax Cuts and Jobs Act.~~

2019.

Risk Management

The management of risk is an on-going process. Primary risks that are associated with the Company include credit, interest rate and liquidity risk. Credit risk and interest rate risk are discussed below, while liquidity risk is discussed in the next subsection under the heading “Liquidity and Capital Resources.”

Credit Risk and Allowance for Loan Losses

Inherent in any lending activity is credit risk, that is, the risk of loss should a borrower default. The Company’s credit quality remained strong in the first quarter of ~~2018,~~2019, and the Company continues to see the lowest levels of charge-offs and nonperforming loans since the 2008-2009 recession. These results are due in part to current economic conditions both nationally and in the ~~pace of the economic recovery,~~Company’s markets, including declining unemployment levels, improved labor participation rate and improved performance of the housing market, ~~and~~as well as the Company’s continued efforts to bring problem credits to resolution.

Management of Credit Risk. Credit risk is monitored and managed on an ongoing basis by a credit administration department, a loss management committee and the Board of Directors ~~loan committee.~~Loan Committee. Credit quality, adherence to policies and loss mitigation are major concerns of credit administration and these committees. The Company’s central appraisal review department reviews and approves third-party appraisals obtained by the Company on real estate collateral and monitors loan maturities to ensure updated appraisals are obtained. This department is managed by a State Certified General Real Estate Appraiser and employs two additional State Certified General Real Estate appraisers, one Appraisal Intern and ~~four~~three real estate evaluators.

We have a number of documented loan policies and procedures that set forth the approval and monitoring process of the lending function. Adherence to these policies and procedures is monitored by management and the Board of Directors. A number of committees and an underwriting staff oversee the lending operations of the Company. These include in-house loss management committees and the Board of Directors ~~loan committee.~~Loan Committee. In addition, we maintain a loan review staff separate from the credit administration department to independently monitor loan quality and lending practices. Loan review personnel monitor and, if necessary, adjust the grades assigned to loans through periodic examination, focusing their review on commercial and real estate loans rather than consumer and small balance consumer mortgage loans, such as 1-4 family mortgage loans.

In compliance with loan policy, the lending staff is given lending limits based on their knowledge and experience. In addition, each lending officer’s prior performance is evaluated for credit quality and compliance as a tool for establishing and enhancing lending limits. Before funds are advanced on consumer and commercial loans below certain dollar thresholds, loans are reviewed and scored using centralized underwriting methodologies. Loan quality, or “risk-rating,” grades are assigned based upon certain factors, which include the scoring of the loans. This information is used to assist management in monitoring credit quality. Loan requests of amounts greater than an officer’s lending limits are reviewed by senior credit officers or the ~~loan committee~~Loan Committee of the Board of Directors.

For commercial and commercial real estate secured loans, risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Loan grades range from 1 to 9, with 1 being loans with the least credit risk. Allowance factors established by management are applied to the total balance of loans in each grade to determine the amount needed in the allowance for loan losses. The allowance factors are established based on historical loss ratios experienced by the Company for these loan types, as well as the credit quality criteria underlying each grade, adjusted for trends and expectations about losses inherent in our existing portfolios. In making these adjustments to the allowance factors, management takes into consideration factors which it believes are causing, or are likely in the future to cause, losses within our loan portfolio but that may not be fully reflected in our historical loss ratios. For portfolio balances of consumer, small balance consumer mortgage loans, such as 1-4 family mortgage loans, and certain other ~~loans originated other than for commercial purposes,~~similar loan types, allowance factors are determined based on historical loss ratios by portfolio for the preceding eight quarters and may be adjusted by other qualitative criteria.

The loss management committee and the Board of Directors’ ~~loan committee~~Loan Committee monitor loans that are past due or those that have been downgraded and placed on the Company’s internal watch list due to a decline in the collateral value or cash flow of the ~~debtor;~~debtor or other adverse factors relating to the loan; the committees then adjust loan grades accordingly. This information is used to assist management in monitoring credit quality.

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 and interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for problem loans of $500 or greater 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. For real estate collateral, the fair market value of the collateral is based upon a recent appraisal by a qualified and licensed appraiser of the underlying collateral. When the ultimate collectability of a loan’s principal is in doubt, wholly or partially, the loan is placed on nonaccrual.

After all collection efforts have failed, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings initiated. The collateral is sold at public auction for fair market value (based upon recent appraisals described in the above paragraph), with fees associated with the foreclosure being deducted from the sales price. The purchase price is applied to the outstanding loan balance. If the loan balance is greater than the sales proceeds, the deficient balance is sent to the Board of Directors’ ~~loan committee~~Loan Committee for charge-off approval. These charge-offs reduce the allowance for loan losses. Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for loan losses.

The Company’s practice is to charge off estimated losses as soon as such ~~loss is~~losses are identified and reasonably quantified. Net charge-offs for the first quarter of ~~2018~~2019 were ~~$1,560,~~$691, or ~~0.08%~~0.03% of average loans (annualized), compared to net charge-offs of ~~$1,314,~~$1,560, or ~~0.09%~~0.08% of average loans (annualized), for the same period in ~~2017.~~2018. The charge-offs in ~~2018~~2019 were fully reserved for in the Company’s allowance for loan losses and resulted in no additional provision for loan loss expense.

Allowance for Loan Losses; Provision for Loan Losses. The allowance for loan losses is available to absorb probable credit losses inherent in the entire loan portfolio. The appropriate level of the allowance is based on an ongoing analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including collective impairment as recognized under the Financial Accounting Standards Board Accounting Standards Codification ~~Topic~~ (“ASC”) Topic 450, “Contingencies.” Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310, “Receivables.” The balance of these loans and their related allowance is included in management’s estimation and analysis of the allowance for loan losses.

The allowance for loan losses is established after input from management, loan review and the loss management committee. Factors considered by management in evaluating the adequacy of the allowance, which occurs on a quarterly basis, include the internal risk rating of individual credits, new loan products, loan segmentation, historical and current trends in net charge-offs, trends in nonperforming loans, trends in past due loans, trends in the market values of underlying collateral securing loans and the unemployment rate and other current economic conditions in the markets in which we operate. In addition, on a regular basis, management and the Board of Directors review loan ratios. These ratios include the allowance for loan losses as a percentage of total loans, net charge-offs as a percentage of average loans, the provision for loan losses as a percentage of average loans, nonperforming loans as a percentage of total loans and the allowance coverage on nonperforming loans. Also, management reviews past due ratios by officer, community bank and the Company as a whole.

The following table presents the allocation of the allowance for loan losses by loan category as of the dates presented:


							March 31, 2019				December 31, 2018				March 31, 2018
	March 31, 2018		December 31, 2017		March 31, 2017		Balance		% of Total		Balance		% of Total		Balance		% of Total
Commercial, financial, agricultural	$	7,071	$	5,542	$	5,112	$	9,622	19.31	%	$	8,269	16.87	%	$	7,071	15.24	%
Lease financing	596		555		225		662		1.33	%	709		1.44	%	596		1.28	%
Real estate – construction	4,198		3,428		2,119		4,778		9.59	%	4,755		9.70	%	4,198		9.05	%
Real estate – 1-4 family mortgage	11,404		12,009		12,162		9,491		19.04	%	10,139		20.68	%	11,404		24.58	%
Real estate – commercial mortgage	21,914		23,384		22,073		24,643		49.45	%	24,492		49.96	%	21,914		47.23	%
Installment loans to individuals	1,218		1,293		1,232		639		1.28	%	662		1.35	%	1,218		2.62	%
Total	$	46,401	$	46,211	$	42,923	$	49,835	100.00	%	$	49,026	100.00	%	$	46,401	100.00	%

For impaired loans, specific reserves are established to adjust the carrying value of the loan to its estimated net realizable value. The following table quantifies the amount of the specific reserves component of the allowance for loan losses, ~~and~~ the amount of the allowance determined by applying allowance factors to graded loans, and the amount of the allowance allocated to credit-deteriorated purchased loans, as of the dates presented:


	March 31, 2018		December 31, 2017		March 31, 2017		March 31, 2019		December 31, 2018		March 31, 2018
Specific reserves for impaired loans	$	1,472	$	2,674	$	3,977	$	2,213	$	1,514	$	1,472
Allocated reserves for remaining portfolio	43,112		41,760		36,227		45,098		44,960		43,112
Purchased with deteriorated credit quality	1,817		1,777		$	2,719	2,524		2,552		$	1,817
Total	$	46,401	$	46,211	$	42,923	$	49,835	$	49,026	$	46,401

The provision for loan losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for loan losses at a level that is believed to be adequate to meet the inherent risks of losses in our loan portfolio. The provision for loan losses was ~~$1,750~~$1,500 and ~~$1,500~~$1,750 for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. Although the Company ~~has experienced lower~~continues to experience low levels of classified loans and nonperforming loans, ~~in the current year,~~ as illustrated in the nonperforming loan tables later in this section, and while our other credit quality measures have also improved or otherwise remained at satisfactory levels, the growth in non purchased loans has dictated that we increase the provision for loans losses in

order to maintain the allowance for loan losses at an acceptable level in light of the increased size of our non purchased loan portfolio.

For a purchased loan, as part of the acquisition we establish a “Day 1 Fair Value,” which equals the outstanding customer balance of a purchased loan on the acquisition date less any credit and/or yield discount applied against the purchased loan. A purchased loan will either meet or exceed the performance expectations established in determining the Day 1 Fair Values or deteriorate from such expected performance. If the purchased loan’s performance deteriorates from expectations established in determining the Day 1 Fair Values or since our most recent review of such portfolio’s performance, then the Company provides for such loan in the provision for loan losses and may ultimately partially or fully charge-off the carrying value of such purchased loan. If performance expectations are exceeded, then the Company reverses any previous provision for such loan. If the purchased loan continues to exceed expectations subsequent to the reversal of previously-established provision, then an adjustment to accretable yield is warranted, which has a positive impact on interest income.

Certain loans purchased are accounted for under ASC 310-30, “Loans and Debt Securities Purchased with Deteriorated Credit Quality” (“ASC 310-30”), and are carried at values which, in management’s opinion, reflect the estimated future cash flows, based on the facts and circumstances surrounding each respective loan at the date of acquisition. As of March 31, ~~2018,~~2019, the fair value of loans accounted for in accordance with ASC 310-30 was ~~$214,310.~~$208,846. The Company continually monitors these loans as part of our normal credit review and monitoring procedures for changes in the estimated future cash flows; to the extent future cash flows deteriorate below initial projections, the Company may be required to reserve for these loans in the allowance for loan losses through future provision for loan losses. Of the entire allowance for loan losses as of March 31, 2019 and 2018, $2,524 and ~~2017,~~ $1,817, ~~and $2,719,~~ respectively, is allocated to loans accounted for under ASC 310-30.

The table below reflects the activity in the allowance for loan losses for the periods presented:


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2018			2017			2019			2018
Balance at beginning of period	$	46,211		$	42,737		$	49,026		$	46,211
Charge-offs
Commercial, financial, agricultural	659			832			258			659
Lease financing							—			—
Real estate – construction							—			—
Real estate – 1-4 family mortgage	671			275			497			671
Real estate – commercial mortgage	613			227			562			613
Installment loans to individuals	122			264			220			122
Total charge-offs	2,065			1,598			1,537			2,065
Recoveries
Commercial, financial, agricultural	235			57			374			235
Lease financing							—			—
Real estate – construction	4			31			7			4
Real estate – 1-4 family mortgage	133			82			197			133
Real estate – commercial mortgage	108			95			245			108
Installment loans to individuals	25			19			23			25
Total recoveries	505			284			846			505
Net charge-offs	1,560			1,314			691			1,560
Provision for loan losses	1,750			1,500			1,500			1,750
Balance at end of period	$	46,401		$	42,923		$	49,835		$	46,401
Net charge-offs (annualized) to average loans	0.08		%	0.09		%	0.03		%	0.08		%
Allowance for loan losses to:
Total non purchased loans	0.80		%	0.89		%	0.76		%	0.80		%
Nonperforming non purchased loans	356.71		%	289.94		%	363.79		%	356.71		%

The following table provides further details of the Company’s net charge-offs (recoveries) of loans secured by real estate for the periods presented:


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2018			2017			2019			2018
Real estate – construction:
Residential	$	(4	)	$	(31	)	$	(7	)	$	(4	)
Commercial	—			—
Condominiums	—			—
Total real estate – construction	(4		)	(31		)	(7		)	(4		)
Real estate – 1-4 family mortgage:
Primary	29			207			248			29
Home equity	39			11			129			39
Rental/investment	63			10			(2		)	63
Land development	407			(35		)	(75		)	407
Total real estate – 1-4 family mortgage	538			193			300			538
Real estate – commercial mortgage:
Owner-occupied	546			43			236			546
Non-owner occupied	(41		)	92			128			(41		)
Land development	—			(3		)	(47		)	—
Total real estate – commercial mortgage	505			132			317			505
Total net charge-offs of loans secured by real estate	$	1,039		$	294		$	610		$	1,039

Nonperforming Assets. Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. Management, the loss management committee and our loan review staff closely monitor loans that are considered to be nonperforming.

Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for loan losses. Reductions in the carrying value subsequent to acquisition are charged to earnings and are included in “Other real estate owned” in the Consolidated Statements of Income.

The following table provides details of the Company’s non purchased and purchased nonperforming assets as of the dates presented.


	Non Purchased		Purchased		Total			Non Purchased		Purchased		Total
March 31, 2018
March 31, 2019
Nonaccruing loans	$	9,403	$	5,340	$	14,743		$	12,507	$	7,828	$	20,335
Accruing loans past due 90 days or more	3,605		4,564		8,169			1,192		5,436		6,628
Total nonperforming loans	13,008		9,904		22,912			13,699		13,264		26,963
Other real estate owned	4,801		9,754		14,555			4,223		5,932		10,155
Total nonperforming loans and OREO	17,809		19,658		37,467
Total nonperforming assets	$	17,809	$	19,658	$	37,467		$	17,922	$	19,196	$	37,118
Nonperforming loans to total loans					0.30		%					0.30		%
Nonperforming assets to total assets					0.37		%					0.29		%

December 31, 2017
December 31, 2018
Nonaccruing loans	$	10,250	$	4,424	$	14,674		$	10,218	$	5,836	$	16,054
Accruing loans past due 90 days or more	3,015		5,731		8,746			2,685		7,232		9,917
Total nonperforming loans	13,265		10,155		23,420			12,903		13,068		25,971
Other real estate owned	4,410		11,524		15,934			4,853		6,187		11,040
Total nonperforming loans and OREO	17,675		21,679		39,354
Total nonperforming assets	$	17,675	$	21,679	$	39,354		$	17,756	$	19,255	$	37,011
Nonperforming loans to total loans					0.31		%					0.29		%
Nonperforming assets to total assets					0.40		%					0.29		%

~~The Company experienced improving credit quality metrics during the first three months of 2018.~~ The level of nonperforming loans ~~decreased $508~~increased $992 from December 31, ~~2017~~2018 while OREO decreased ~~$1,379~~$885 during the same period. As of March 31, 2019, the acquisition of Brand added nonperforming loans of $3,894. These loans were recorded at fair value as of the acquisition date, which mitigates the Company's potential loss.

The following table presents nonperforming loans by loan category as of the dates presented:


	March 31, 2018		December 31, 2017		March 31, 2017		March 31, 2019		December 31, 2018		March 31, 2018
Commercial, financial, agricultural	$	4,141	$	2,921	$	3,807	$	6,143	$	2,461	$	4,141
Real estate – construction:
Residential	49		—		—		—		68		49
Total real estate – construction	49		—		—		—		68		49
Real estate – 1-4 family mortgage:
Primary	6,963		6,221		7,802		8,547		10,102		6,963
Home equity	2,557		2,701		2,413		2,073		2,047		2,557
Rental/investment	459		395		1,962		772		757		459
Land development	378		1,078		1,624		466		980		378
Total real estate – 1-4 family mortgage	10,357		10,395		13,801		11,858		13,886		10,357
Real estate – commercial mortgage:
Owner-occupied	4,118		5,473		7,062		3,901		3,779		4,118
Non-owner occupied	2,764		3,087		8,316		3,854		3,933		2,764
Land development	1,005		1,090		1,826		342		958		1,005
Total real estate – commercial mortgage	7,887		9,650		17,204		8,097		8,670		7,887
Installment loans to individuals	276		295		384		775		797		276
Lease financing	202		159		—		90		89		202
Total nonperforming loans	$	22,912	$	23,420	$	35,196	$	26,963	$	25,971	$	22,912

~~The decrease in the level of nonperforming loans from December 31, 2017 is a reflection of the Company’s continued strategy to aggressively manage problem loans and assets.~~ The Company continues its efforts to bring problem credits to resolution. Total nonperforming loans as a percentage of total loans were 0.30% as of March 31, ~~2018~~2019 as compared to ~~0.31%~~0.29% as of December 31, ~~2017~~2018 and ~~0.56%~~0.30% as of March 31, ~~2017.~~2018. The Company’s coverage ratio, or its allowance for loan losses as a percentage of nonperforming loans, was 184.83% as of March 31, 2019 as compared to 188.77% as of December 31, 2018 and 202.52% as of March 31, ~~2018 as compared to 197.31% as of December 31, 2017 and 121.95% as of March 31, 2017.~~2018. The coverage ratio for non purchased, nonperforming loans was 363.79% as of March 31, 2019 as compared to 379.96% as of December 31, 2018 and 356.71% as of March 31, ~~2018 as compared to 348.37% as of December 31, 2017 and 289.94% as of March 31, 2017.~~2018.

Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for loan losses at March 31, ~~2018.~~2019. Management also continually monitors past due loans for potential credit quality deterioration. Total loans 30-89 days past due were $44,141 at March 31, 2019 as compared to $36,597 at December 31, 2018 and $28,573 at March 31, ~~2018 as compared to $27,738 at December 31, 2017 and $13,955~~2018. The acquisition of Brand added $13,821 of purchased, loans 30-89 days past due at March 31, ~~2017.~~2019.

Although not classified as nonperforming loans, restructured loans are another category of assets that contribute to our credit ~~risk is restructured loans.~~risk. Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrower’s financial condition and are performing in accordance with the new terms. Such concessions may include reduction in interest rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest. Restructured loans that are not performing in accordance with their restructured terms that are either contractually 90 days past due or placed on nonaccrual status are reported as nonperforming loans.

As shown below, restructured loans totaled ~~$13,823~~$12,409 at March 31, ~~2018~~2019 compared to ~~$14,553~~$12,820 at December 31, ~~2017~~2018 and ~~$14,935~~$13,823 at March 31, ~~2017~~.2018. At March 31, ~~2018~~,2019, loans restructured through interest rate concessions represented ~~26%~~28% of total restructured loans, while loans restructured by a concession in payment terms represented the remainder. The following table provides further details of the Company’s restructured loans in compliance with their modified terms as of the dates presented:


	March 31, 2018		December 31, 2017		March 31, 2017		March 31, 2019		December 31, 2018		March 31, 2018
Commercial, financial, agricultural	$	372	$	331	$	—	$	332	$	337	$	372
Real estate – 1-4 family mortgage:
Primary	6,490		6,213		5,854		6,169		6,261		6,490
Home equity	460		282		253		184		186		460
Rental/investment	1,960		2,247		2,264		1,987		2,005		1,960
Land development	4		4		10		—		1		4
Total real estate – 1-4 family mortgage	8,914		8,746		8,381		8,340		8,453		8,914
Real estate – commercial mortgage:
Owner-occupied	3,296		3,503		4,361		3,076		3,189		3,296
Non-owner occupied	747		1,466		1,550		548		722		747
Land development	428		440		577		50		56		428
Total real estate – commercial mortgage	4,471		5,409		6,488		3,674		3,967		4,471
Installment loans to individuals	66		67		66		63		63		66

Total restructured loans in compliance with modified terms	$	13,823	$	14,553	$	14,935	$	12,409	$	12,820	$	13,823

Changes in the Company’s restructured loans are set forth in the table below:


	2018			2017			2019			2018
Balance at January 1,	$	14,553		$	11,475		$	12,820		$	14,553
Additional loans with concessions	743			4,160			176			743
Reclassified as performing	3			—
Reclassified as performing restructured loan							252			3
Reductions due to:
Reclassified as nonperforming	(192		)	(56		)	(269		)	(192		)
Paid in full	(849		)	(217		)	(264		)	(849		)
Charge-offs	—			(267		)
Paydowns	(435		)	(160		)	(306		)	(435		)
Balance at March 31,	$	13,823		$	14,935		$	12,409		$	13,823

The following table shows the principal amounts of nonperforming and restructured loans as of the dates presented. All loans where information exists about possible credit problems that would cause us to have serious doubts about the borrower’s ability to comply with the current repayment terms of the loan have been reflected in the table below.


	March 31, 2018		December 31, 2017		March 31, 2017		March 31, 2019		December 31, 2018		March 31, 2018
Nonaccruing loans	$	14,743	$	14,674	$	21,124	$	20,335	$	16,054	$	14,743
Accruing loans past due 90 days or more	8,169		8,746		14,072		6,628		9,917		8,169
Total nonperforming loans	22,912		23,420		35,196		26,963		25,971		22,912
Restructured loans in compliance with modified terms	13,823		14,553		14,935		12,409		12,820		13,823
Total nonperforming and restructured loans	$	36,735	$	37,973	$	50,131	$	39,372	$	38,791	$	36,735

The following table provides details of the Company’s other real estate owned as of the dates presented:


	March 31, 2018		December 31, 2017		March 31, 2017		March 31, 2019		December 31, 2018		March 31, 2018
Residential real estate	$	2,148	$	2,441	$	2,981	$	2,651	$	2,333	$	2,148
Commercial real estate	5,165		5,938		7,923		3,708		4,297		5,165
Residential land development	1,743		1,881		3,264		1,095		1,099		1,743
Commercial land development	5,499		5,674		7,154		2,701		3,311		5,499
Total other real estate owned	$	14,555	$	15,934	$	21,322	$	10,155	$	11,040	$	14,555

Changes in the Company’s other real estate owned were as follows:


	2018			2017			2019			2018
Balance at January 1,	$	15,934		$	23,299		$	11,040		$	15,934
Transfers of loans	1,154			3,168			885			1,154
Impairments	(352		)	(378		)	(727		)	(352		)
Dispositions	(2,181		)	(4,719		)	(1,043		)	(2,181		)
Other	—			(48		)
Balance at March 31,	$	14,555		$	21,322		$	10,155		$	14,555

Other real estate owned with a cost basis of $1,043 was sold during the three months ended March 31, 2019, resulting in a net loss of $80, while other real estate owned with a cost basis of $2,181 was sold during the three months ended March 31, 2018, resulting in a net loss of ~~$96, while other real estate owned with a cost basis of $4,719 was sold during the three months ended March 31, 2017, resulting in a net gain of $327.~~$96.

Interest Rate Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets and inventories. Our market risk arises primarily from interest rate risk inherent in lending and deposit-taking activities. Management believes a significant impact on the Company’s financial results stems from our ability to react to changes in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.

Because of the impact of interest rate fluctuations on our profitability, the Board of Directors and management actively monitor and manage our interest rate risk exposure. We have an Asset/Liability Committee (“ALCO”) ~~which~~that is authorized by the Board of Directors to monitor our interest rate sensitivity and to make decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital. The ALCO uses an asset/liability model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model is used to perform both net interest income forecast simulations for multiple year horizons and economic value of equity (“EVE”) analyses, each under various interest rate scenarios.

Net interest income simulations measure the short and medium-term earnings exposure from changes in market interest rates in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate

net interest income under ~~varying~~various hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet.

The following table presents the projected impact of a change in interest rates on (1) static EVE and (2) earnings at risk (that is, net interest income) for the 1-12 and 13-24 month periods commencing April 1, ~~2018,~~2019, in each case as compared to the result under rates present in the market on March 31, ~~2018.~~2019. The changes in interest rates assume an instantaneous and parallel shift in the yield curve and ~~does~~do not take into account changes in the slope of the yield curve.


	Percentage Change In:			Percentage Change In:
Immediate Change in Rates of (in basis points):	Economic Value Equity (EVE)	Earning at Risk (EAR) (Net Interest Income)		Economic Value Equity (EVE)	Earning at Risk (Net Interest Income)
Immediate Change in Rates of (in basis points):	Static	1-12 Months	13-24 Months	Static	1-12 Months	13-24 Months
+400	15.39%	15.02%	24.07%	17.28%	7.00%	10.95%
+300	12.07%	11.16%	17.94%	16.54%	5.44%	8.58%
+200	7.58%	7.93%	12.78%	12.74%	3.73%	5.87%
+100	3.46%	3.92%	6.24%	7.23%	1.96%	3.08%
-100	(5.32)%	(8.67)%	(11.11)%	(9.63)%	(2.69)%	(3.57)%

The rate shock results for the net interest income simulations for the next twenty-four months produce an asset sensitive position at March 31, 2018. The Company’s interest rate risk strategy is to remain in an asset sensitive position with a focus on increasing variable rate loan production and generating deposits that are less sensitive to increases in interest rates.

2019. The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. The measures do not reflect future actions the ALCO may undertake in response to such changes in interest rates. The above results of the interest rate shock analysis are within the parameters set by the Board of Directors. The scenarios assume instantaneous movements in interest rates in increments of plus 100, 200, 300 and 400 basis points and minus 100 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results will differ from simulated results.

The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, forward commitments, and interest rate lock commitments, as part of its ongoing efforts to mitigate its interest rate risk exposure. For more information about the Company’s derivative financial instruments, see the “Off-Balance Sheet Transactions” section below and Note 11, “Derivative Instruments,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.

Liquidity and Capital Resources

Liquidity management is the ability to meet the cash flow requirements of customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs.

Core deposits, which are deposits excluding time deposits and public fund deposits, are athe major source of funds used by Renasant Bank to meet cash flow needs. Maintaining the ability to acquire these funds as needed in a variety of markets is the key to assuring Renasant Bank’s liquidity. Management continually monitors the Bank’s liquidity and non-core dependency ratios to ensure compliance with targets established by the Asset/Liability Management Committee.

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Within the next twelve months the securities portfolio is forecasted to generate cash flow through principal payments and maturities equal to approximately ~~14.14%~~19.57% of the carrying value of the total securities portfolio. Securities within our investment portfolio are also used to secure certain deposit types and short-term borrowings. At March 31,

~~2018~~ 2019, securities with a carrying value of ~~$280,332~~$573,080 were pledged to secure public fund deposits and as collateral for short-term borrowings and derivative instruments as compared to securities with a carrying value of ~~$243,755~~$637,607 similarly pledged at December 31, ~~2017~~2018.

Other sources available for meeting liquidity needs include federal funds purchased and short-term and long-term advances from the FHLB. Interest is charged at the prevailing market rate on federal funds purchased and FHLB advances. There were short-term borrowings from the FHLB in the amount of ~~$50,000~~$80,000 at March 31, ~~2018~~2019 compared to~~$83,000~~ $380,000 at December 31, ~~2017~~2018. Long-term funds obtained from the FHLB are used primarily to match-fund fixed rate loans in order to minimize interest rate risk and also are used to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. At March 31, ~~2018~~2019, the balance of our outstanding long-term advances with the FHLB was ~~$7,276.~~$6,492 compared to $6,690 at December 31, 2018. The total amount of the remaining credit available to us from the FHLB at March 31, ~~2018~~2019 was ~~$2,706,761.~~$3,548,225. We also maintain lines of credit with other commercial banks totaling ~~$80,000.~~$150,000. These are unsecured lines of credit with the majority maturing at various times within the next twelve months. There were no amounts outstanding under these lines of credit at March 31, ~~2018~~2019 or December 31, ~~2017~~2018.

In 2016 we accessed the capital markets to generate liquidity in the form of subordinated notes. As part of the Metropolitan acquisition, the Company assumed $15,000 aggregate principal amount of 6.50% fixed-to-floating rate subordinated notes due July 1, 2026. ~~Additionally, in 2016, we accessed~~In connection with the ~~debt capital market to generate liquidity in~~acquisition of Brand, the ~~form~~Company assumed $30,000 aggregate principal amount of 8.50% subordinated ~~notes.~~notes due June 27, 2024. The carrying value of the ~~combined~~ subordinated notes, net of unamortized debt issuance costs, was ~~$114,059~~$146,962 at March 31, ~~2018.~~2019.

The following table presents, by type, the Company’s funding sources, which consist of total average deposits and borrowed funds, and the total cost of each funding source for the periods presented:


	Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds				Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds
	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	March 31,				March 31,				March 31,				March 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Noninterest-bearing demand	21.52	%	21.00	%	—	%	—	%	22.30	%	21.52	%	—	%	—	%
Interest-bearing demand	46.31		45.96		0.35		0.22		45.60		46.31		0.85		0.35
Savings	6.88		7.46		0.11		0.07		6.00		6.88		0.19		0.11
Time deposits	21.56		21.79		1.00		0.81		22.65		21.56		1.60		1.00
Short-term borrowings	1.27		1.12		1.45		0.54		0.95		1.27		2.66		1.45
Long-term Federal Home Loan Bank advances	0.09		0.11		3.41		3.50		0.06		0.09		3.28		3.41
Subordinated notes	1.35		1.32		5.63		5.52		1.40		1.35		6.13		5.63
Other borrowed funds	1.02		1.24		4.97		5.32		1.04		1.02		4.60		4.97
Total deposits and borrowed funds	100.00	%	100.00	%	0.53	%	0.43	%	100.00	%	100.00	%	0.92	%	0.53	%

Our strategy in choosing funds is focused on minimizing cost in the context of our balance sheet composition and interest rate risk position. Accordingly, management targets growth of noninterest-bearing deposits. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. We constantly monitor our funds position and evaluate the effect that various funding sources have on our financial position.

Cash and cash equivalents were $562,066 at March 31, 2019 compared to $250,978 at March 31, 2018 ~~compared to $370,744 at~~ ~~March 31, 2017~~. Cash ~~used in~~provided by investing activities for the three months ended March 31, ~~2018~~2019 was ~~$365,230~~$24,930 compared to ~~$42,322~~cash used in investing activities of $365,230 for the three months ended March 31, ~~2017~~2018. Proceeds from the sale, maturity or call of securities within our investment portfolio were ~~$29,335~~$59,120 for the three months ended March 31, ~~2018~~2019 compared to ~~$41,456~~$29,335 for the same period in ~~2017.~~2018. These proceeds were reinvested into the investment portfolio or used to fund loan growth. Purchases of investment securities were ~~$317,922~~$49,577 for the first three months of ~~2018~~2019 compared to ~~$52,683~~$317,922 for the same period in ~~2017~~2018. The large increase in purchases of investment securities in 2018 is related to the releveraging of the Company's balance sheet.

Cash ~~provided by~~used in financing activities for the three months ended March 31, 2019 and 2018 ~~and 2017~~ was ~~$395,926 and $51,708, respectively.~~$172,082, compared to cash provided by financing activities for the same period in 2018 was $395,926. Deposits increased ~~$437,471~~$140,692 and ~~$172,225~~$437,471 for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018, respectively. A portion of the increase in deposits during the first ~~quarter~~three months of 2018 ~~is the result of~~was the Company reacquiring certain wholesale deposit funding sources which had been reduced during the fourth quarter of 2017 as part of the Company’s ~~efforts to manage consolidated assets below $10,000,000.~~deleveraging strategy. Cash provided through deposit growth was primarily used to ~~fund loan growth and purchase investment securities.~~pay down short-term borrowings.

Restrictions on Bank Dividends, Loans and Advances

The Company’s liquidity and capital resources, as well as its ability to pay dividends to its shareholders, are substantially dependent on the ability of Renasant Bank to transfer funds to the Company in the form of dividends, loans and advances. Under Mississippi law, a Mississippi bank may not pay dividends unless its earned surplus is in excess of three times capital stock. A Mississippi bank with earned surplus in excess of three times capital stock may pay a dividend, subject to the approval of the Mississippi Department of Banking and Consumer Finance (the “DBCF”). In addition, the FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the ~~Bank,~~bank, could include the payment of dividends. Accordingly, the approval of the DBCF is required prior to Renasant Bank paying dividends to the Company, and under certain circumstances the approval of the FDIC may be required.

Federal Reserve regulations also limit the amount Renasant Bank may loan to the Company unless such loans are collateralized by specific obligations. At March 31, ~~2018~~2019, the maximum amount available for transfer from Renasant Bank to the Company in the form of loans was ~~$107,371.~~$137,053. The Company maintains a line of credit collateralized by cash with Renasant Bank totaling ~~$3,045.~~$3,052. There were no amounts outstanding under this line of credit at March 31, ~~2018~~2019.

These restrictions did not have any impact on the Company’s ability to meet its cash obligations in the three months ended March 31, ~~2018,~~2019, nor does management expect such restrictions to materially impact the Company’s ability to meet its currently-anticipated cash obligations.

Off-Balance Sheet Transactions

The Company enters into loan commitments and standby letters of credit in the normal course of its business. Loan commitments are made to accommodate the financial needs of the Company’s customers. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to customers and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the customer.

Loan commitments and standby letters of credit do not necessarily represent future cash requirements of the Company in that while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon. The Company’s unfunded loan commitments and standby letters of credit outstanding were as follows as of the dates presented:


	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Loan commitments	$	1,667,704	$	1,619,022	$	2,165,063	$	2,068,749
Standby letters of credit	66,203		68,946		88,660		104,664

The Company closely monitors the amount of remaining future commitments to borrowers in light of prevailing economic conditions and adjusts these commitments as necessary. The Company will continue this process as new commitments are entered into or existing commitments are renewed.

The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, as part of its ongoing efforts to mitigate its interest rate risk exposure and to facilitate the needs of its customers. The Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position with other financial institutions. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At March 31, ~~2018,~~2019, the Company had notional amounts of ~~$212,840~~$204,403 on interest rate contracts with corporate customers and ~~$212,840~~$204,403 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ ~~contracts.~~contracts and certain fixed rate loans.

Additionally, the Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate and adjustable rate residential mortgage loans and also enters into forward commitments to sell residential mortgage loans to secondary market investors.

The Company has also entered into forward interest rate swap contracts on FHLB borrowings, as well as interest rate swap agreements on junior subordinated debentures that are all accounted for as cash flow hedges. Under each of these contracts, the Company will pay a fixed rate of interest and will receive a variable rate of interest based on the three-month LIBOR plus a predetermined spread.

For more information about the Company’s off-balance sheet transactions, see Note 11, “Derivative Instruments,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.

Shareholders’ Equity and Regulatory Matters

Total shareholders’ equity of the Company was $~~1,532,765~~2,088,877 at March 31, ~~2018~~2019 compared to $~~1,514,983~~2,043,913 at December 31, ~~2017~~2018. Book value per share was ~~$31.03~~$35.63 and ~~$30.72~~$34.91 at March 31, ~~2018~~2019 and December 31, ~~2017~~2018, respectively. The growth in shareholders’ equity was attributable to the acquisition of Brand as well as earnings retention offset by changes in accumulated other comprehensive loss and dividends declared.

~~On September 15, 2015, the~~The Company ~~filed~~maintains a shelf registration statement with the Securities and Exchange Commission (“SEC”). The shelf registration statement, which was ~~automatically~~ effective upon filing, allows the Company to raise capital from time to time through the sale of common stock, preferred stock, depositary shares, debt securities, rights, warrants and units, or a combination thereof, subject to market conditions. Specific terms and prices will be determined at the time of any offering under a separate prospectus supplement that the Company will file with the SEC at the time of the specific offering. The proceeds of the sale of securities, if and when offered, will be used for general corporate purposes or as otherwise described in the prospectus supplement applicable to the offering and could include the expansion of the Company’s banking, insurance and wealth management operations as well as other business opportunities.

The Company has junior subordinated debentures with a carrying value of ~~$86,018~~$109,781 at March 31, ~~2018~~2019, of which ~~$83,140~~$106,190 are included in the Company’s Tier 1 capital. Federal Reserve guidelines limit the amount of securities that, similar to our junior subordinated debentures, are includable in Tier 1 capital, but these guidelines did not impact the amount of debentures we include in Tier 1 capital at March 31, ~~2018.~~2019. Although our existing junior subordinated debentures are currently unaffected by these Federal Reserve guidelines, on account of changes enacted as part of the Dodd-Frank Act, any new trust preferred securities are not includable in Tier 1 capital. Further, if as a result of an acquisition we exceed $15,000,000 in assets, or if we make any acquisition after we have exceeded $15,000,000 in assets, we will lose Tier 1 treatment of our junior subordinated debentures.

The Company has subordinated notes with a carrying value of ~~$114,059~~$146,962 at March 31, ~~2018~~2019~~. These notes~~, of which $143,493 are included in the Company’s Tier 2 capital.



Capital Tiers	Tier 1 Capital to Average Assets (Leverage)	Common Equity Tier 1 to Risk - Weighted Assets	Tier 1 Capital to Risk – Weighted Assets	Total Capital to Risk – Weighted Assets
Well capitalized	5% or above	6.5% or above	8% or above	10% or above
Adequately capitalized	4% or above	4.5% or above	6% or above	8% or above
Undercapitalized	Less than 4%	Less than 4.5%	Less than 6%	Less than 8%
Significantly undercapitalized	Less than 3%	Less than 3%	Less than 4%	Less than 6%
Critically undercapitalized	Tangible Equity / Total Assets less than 2%

The following table provides the capital and risk-based capital and leverage ratios for the Company and for Renasant Bank as of the dates presented:


	Actual				Minimum Capital Requirement to be Well Capitalized				Minimum Capital Requirement to be Adequately Capitalized (including the phase-in of the Capital Conservation Buffer)				Actual				Minimum Capital Requirement to be Well Capitalized				Minimum Capital Requirement to be Adequately Capitalized (including the phase-in of the Capital Conservation Buffer)
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2018
March 31, 2019
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	917,501	11.38	%	$	524,152	6.50	%	$	514,072	6.375	%	$	1,124,981	11.49	%	$	636,422	6.50	%	$	685,377	7.00	%
Tier 1 risk-based capital ratio	1,000,640		12.41	%	645,110		8.00	%	635,030		7.875	%	1,228,640		12.55	%	783,289		8.00	%	832,244		8.50	%
Total risk-based capital ratio	1,164,193		14.44	%	806,388		10.00	%	796,308		9.875	%	1,426,332		14.57	%	979,111		10.00	%	1,028,066		10.50	%
Leverage capital ratios:
Tier 1 leverage ratio	1,000,640		10.61	%	471,556		5.00	%	377,245		4.00	%	1,228,640		10.44	%	588,346		5.00	%	470,677		4.00	%

Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	1,023,486	12.71	%	$	523,381	6.50	%	$	513,316	6.375	%	$	1,316,336	13.45	%	$	635,970	6.50	%	$	684,891	7.00	%
Tier 1 risk-based capital ratio	1,023,486		12.71	%	644,161		8.00	%	634,096		7.875	%	1,316,336		13.45	%	782,733		8.00	%	831,654		8.50	%
Total risk-based capital ratio	1,073,712		13.33	%	805,202		10.00	%	795,137		9.875	%	1,370,536		14.01	%	978,416		10.00	%	1,027,337		10.50	%
Leverage capital ratios:
Tier 1 leverage ratio	1,023,486		10.88	%	470,445		5.00	%	376,356		4.00	%	1,316,336		11.20	%	587,764		5.00	%	470,211		4.00	%

December 31, 2017
December 31, 2018
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	896,733	11.34	%	$	513,827	6.50	%	$	454,539	5.75	%	$	1,085,751	11.05	%	$	638,468	6.50	%	$	626,189	6.375	%
Tier 1 risk-based capital ratio	979,604		12.39	%	632,402		8.00	%	573,114		7.25	%	1,188,412		12.10	%	785,806		8.00	%	773,528		7.875	%
Total risk-based capital ratio	1,142,926		14.46	%	790,503		10.00	%	731,215		9.25	%	1,386,507		14.12	%	982,258		10.00	%	969,979		9.875	%
Leverage capital ratios:
Tier 1 leverage ratio	979,604		10.18	%	481,086		5.00	%	384,968		4.00	%	1,188,412		10.11	%	587,939		5.00	%	470,352		4.00	%

Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	1,000,715	12.69	%	$	512,570	6.50	%	$	453,427	5.75	%	$	1,276,976	13.02	%	$	637,552	6.50	%	$	625,291	6.375	%
Tier 1 risk-based capital ratio	1,000,715		12.69	%	630,856		8.00	%	571,713		7.25	%	1,276,976		13.02	%	784,679		8.00	%	772,418		7.875	%
Total risk-based capital ratio	1,050,751		13.32	%	788,569		10.00	%	729,427		9.25	%	1,331,619		13.58	%	980,849		10.00	%	968,588		9.875	%
Leverage capital ratios:
Tier 1 leverage ratio	1,000,715		10.42	%	480,353		5.00	%	384,282		4.00	%	1,276,976		10.88	%	587,090		5.00	%	469,672		4.00	%

On October 24, 2018, the Company’s Board of Directors authorized the repurchase of up to $50,000 million of the Company’s outstanding common stock, either in open market purchases or privately-negotiated transactions. The stock repurchase program will remain in effect for one year or, if earlier, the repurchase of the entire amount of common stock authorized to be repurchased by the Board. There were no repurchases of common stock during the first quarter of 2019.

For more information regarding the capital adequacy guidelines applicable to the Company and Renasant Bank, please refer to Note 17, “Regulatory Matters,” in Item 1, Financial Statements.

Non-GAAP Financial Measures

This report presents the Company's efficiency ratio in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Additionally, this report presents an adjusted efficiency ratio, which is a non-GAAP financial measure. We calculated the efficiency ratio by dividing noninterest expense by the sum of net interest income on a fully tax equivalent basis and noninterest income.The adjusted efficiency ratio excludes expenses that (1) the Company does not consider to be part of our normal operations, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as merger and conversion related expenses and debt prepayment penalties. Management uses the adjusted efficiency ratio to evaluate ongoing operating results and efficiency of the Company's operations. The reconciliation from GAAP to non-GAAP for this financial measure is below.



Efficiency Ratio
	Three months ended March 31,
	2019			2018
Interest income (fully tax equivalent basis)	$	138,578		$	101,947
Interest expense	23,947			11,140
Net interest income (fully tax equivalent basis)	114,631			90,807

Total noninterest income	35,885			33,953
Net gains on sales of securities	13			—
Adjusted noninterest income	35,872			33,953

Total noninterest expense	88,832			77,944
Intangible amortization	2,110			1,651
Merger and conversion related expenses	—			900
Adjusted noninterest expense	86,722			75,393

Efficiency Ratio (GAAP)	59.02		%	62.48		%
Adjusted Efficiency Ratio (non-GAAP)	57.62		%	60.43		%

The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Readers of this Form 10-Q should note that, because there are no standard definitions for the calculations as well as the results, the Company’s calculations may not be comparable to a similarly-titled measure presented by other companies. Also, there may be limits in the usefulness of this measure to readers of this document. As a result, the Company encourages readers to consider its consolidated financial statements and footnotes thereto in their entirety and not to rely on any single financial measure.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk since December 31, ~~2017.~~2018. For additional information regarding our market risk, see our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 4. CONTROLS AND PROCEDURES

Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and

15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Principal Executive and Principal Financial Officers, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company’s

internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1A. RISK FACTORS

Information regarding risk factors appears in Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018. There have been no material changes in the risk factors disclosed in the Annual Report on Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

During the three month period ended March 31, ~~2018,~~2019, the Company repurchased shares of its common stock as indicated in the following table:

Total Number of Shares Repurchased⁽¹⁾
Average Price per Share Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Shares Maximum Number of Shares or Approximate Dollar Value That May Yet Be Purchased Under Share Repurchase Plans
January 1, 2018 to January 31, 2018 7,783
$ 42.37
—
—
February 1, 2018 to February 28, 2018 28,638
40.89
—
—
March 1, 2018 to March 31, 2018 136
43.07
—
—
Total 36,557
$ 41.21
—
—



	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs⁽³⁾
January 1, 2019 to January 31, 2019	8,692	$	30.18	—	$	42,938
February 1, 2019 to February 28, 2019	—	—		—	42,938
March 1, 2019 to March 31, 2019	29,862	38.00		—	42,938
Total	38,554	$	36.24	—


(1)	Represents ~~the number of~~ shares withheld to satisfy federal and state tax liabilities related to the vesting of ~~performance-based~~time-based and ~~time-based~~performance-based restricted stock awards during the three month period ended March 31, ~~2018.~~2019.

(2)

The Company announced a $50.0 million stock repurchase program on October 24, 2018, under which the Company may repurchase outstanding shares of its common stock either in open market purchases or privately-negotiated transactions. The stock repurchase program will remain in effect for one year or, if earlier, the repurchase of the entire amount of common stock authorized to be repurchased by the Board. No shares were repurchased in the first quarter of 2019.


(3)	Dollars in thousands

Please refer to the information discussing restrictions on the Company’s ability to pay dividends under the heading “Liquidity and Capital Resources” in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report, which is incorporated by reference herein.

Item 6. EXHIBITS



Exhibit Number		Description

(2)(i)		Agreement and Plan of Merger by and among Renasant Corporation, Renasant Bank, ~~Metropolitan BancGroup, Inc. and Metropolitan Bank dated as of January 17, 2017 (1)~~

~~(2)(ii)~~		~~Agreement and Plan of Merger by and among Renasant Corporation, Renasant Bank,~~ Brand Group Holdings, Inc. and The Brand Banking Company dated as of March 28, ~~2018(2)~~2018(1)

(3)(i)		Articles of Incorporation of Renasant Corporation, as amended ~~(3)~~(2)

(3)(ii)		Amended and Restated Bylaws of Renasant Corporation, as amended ~~(4)~~(3)

(4)(i)		Articles of Incorporation of Renasant Corporation, as amended ~~(3)~~(2)

(4)(ii)		Amended and Restated Bylaws of Renasant Corporation, as amended ~~(4)~~(3)

(31)(i)		Certification of the Principal Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31)(ii)		Certification of the Principal Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32)(i)		Certification of the Principal Executive Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(32)(ii)		Certification of the Principal Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(101)		The following materials from Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2018~~2019 were formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements (Unaudited).


(1)	Filed as exhibit 2.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on ~~January 19, 2017 and incorporated herein by reference.~~


~~(2)~~	~~Filed as exhibit 2.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on~~ March 30, 2018 and incorporated herein by reference.


~~(3)~~(2)	Filed as exhibit 3.1 to the Form 10-Q of the Company filed with the Securities and Exchange Commission on May 10, 2016 and incorporated herein by reference.


~~(4)~~(3)	Filed as exhibit ~~3.2~~3(ii) to the ~~Pre-Effective Amendment No. 1 to~~ Form ~~S-4 Registration Statement~~8-K of the Company ~~(File No. 333-208753)~~ filed with the ~~Securities and Exchange~~ Commission on ~~January 29, 2016~~July 20, 2018 and incorporated herein by reference.

The Company does not have any long-term debt instruments under which securities are authorized exceeding ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company will furnish to the Securities and Exchange Commission, upon its request, a copy of all long-term debt instruments.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		RENASANT CORPORATION
		(Registrant)

Date:	May ~~9, 2018~~8, 2019	/s/ C. Mitchell Waycaster
		C. Mitchell Waycaster
		President and
		Chief Executive Officer
		(Principal Executive Officer)

Date:	May ~~9, 2018~~8, 2019	/s/ Kevin D. Chapman
		Kevin D. Chapman
		Executive Vice President and
		Chief Financial and Operating Officer
		(Principal Financial Officer)

7775



		Page
PART I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	21
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Changes in Shareholders’ Equity	4
	Consolidated Statements of Cash Flows	45
	Notes to Consolidated Financial Statements	56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4746

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7371

Item 4.	Controls and Procedures	7371

PART II	Other Information
Item 1A.	Risk Factors	7573

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7573

Item 6.	Exhibits	7674

SIGNATURES		7775



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



	Total Purchased Credit Deteriorated Loans
Balance at January 1, 2018	$	(32,207	)
Reclasses from nonaccretable difference	(1,499		)
Accretion	2,971
Charge-offs	50
Balance at March 31, 2018	$	(30,685	)



Three Months Ended March 31, 2017	Trust preferred securities
Balance at January 1, 2017	$	18,389
Accretion included in net income	8
Unrealized gains included in other comprehensive income	537
Purchases	—
Sales	—
Issues	—
Settlements	(1,111		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at March 31, 2017	$	17,823



	Total Number of Shares Repurchased⁽¹⁾	Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Shares	Maximum Number of Shares or Approximate Dollar Value That May Yet Be Purchased Under Share Repurchase Plans
January 1, 2018 to January 31, 2018	7,783	$	42.37	—	—
February 1, 2018 to February 28, 2018	28,638	40.89		—	—
March 1, 2018 to March 31, 2018	136	43.07		—	—
Total	36,557	$	41.21	—	—