0000715072 rnst:PerformingandNonperformingFinancialInstrumentMember rnst:LoanPortfolioPurchasedMember rnst:RealEstateOneToFourFamilyMortgageMember 2018-12-31

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,~~September 30, 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~~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)~~ (662) 680-1001

(Registrant’s telephone number, including area code)

________________________________________________________

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

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. Yesý☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yesý☒ 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 ☐	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,~~October 31, 2019, ~~58,628,340~~57,249,055 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,~~September 30, 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, 2019			December 31, 2018			September 30, 2019			December 31, 2018
Assets
Cash and due from banks	$	208,740		$	198,515		$	209,419		$	198,515
Interest-bearing balances with banks	353,326			370,596			200,242			370,596
Cash and cash equivalents	562,066			569,111			409,661			569,111
Securities available for sale, at fair value	1,255,353			1,250,777			1,238,577			1,250,777
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 held for sale ($392,448 and $219,848 carried at fair value at September 30, 2019 and December 31, 2018, respectively)							392,448			411,427
Loans, net of unearned income:
Non purchased loans and leases	6,565,599			6,389,712			7,031,818			6,389,712
Purchased loans	2,522,694			2,693,417			2,281,966			2,693,417
Total loans, net of unearned income	9,088,293			9,083,129			9,313,784			9,083,129
Allowance for loan losses	(49,835		)	(49,026		)	(50,814		)	(49,026		)
Loans, net	9,038,458			9,034,103			9,262,970			9,034,103
Premises and equipment, net	267,447			209,168			306,717			209,168
Other real estate owned:
Non purchased	4,223			4,853			1,975			4,853
Purchased	5,932			6,187			6,216			6,187
Total other real estate owned, net	10,155			11,040			8,191			11,040
Goodwill	932,971			932,928			939,683			932,928
Other intangible assets, net	42,755			44,865			38,707			44,865
Bank-owned life insurance	221,973			220,608			224,294			220,608
Mortgage servicing rights	48,973			48,230			48,286			48,230
Other assets	163,681			202,621			170,140			202,621
Total assets	$	12,862,395		$	12,934,878		$	13,039,674		$	12,934,878
Liabilities and shareholders’ equity
Liabilities
Deposits
Noninterest-bearing	$	2,366,223		$	2,318,706		$	2,607,056		$	2,318,706
Interest-bearing	7,902,689			7,809,851			7,678,980			7,809,851
Total deposits	10,268,912			10,128,557			10,286,036			10,128,557
Short-term borrowings	87,590			387,706			205,602			387,706
Long-term debt	263,269			263,618			228,104			263,618
Other liabilities	153,747			111,084			200,273			111,084
Total liabilities	10,773,518			10,890,965			10,920,015			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; 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		)
Common stock, $5.00 par value – 150,000,000 shares authorized; 59,296,725 shares issued; 57,455,306 and 58,546,480 shares outstanding, respectively							296,483			296,483
Treasury stock, at cost – 1,841,419 and 750,245 shares, respectively							(62,044		)	(24,245		)
Additional paid-in capital	1,288,106			1,288,911			1,291,927			1,288,911
Retained earnings	533,328			500,660			591,599			500,660
Accumulated other comprehensive loss, net of taxes	(7,450		)	(17,896		)
Accumulated other comprehensive income (loss), net of taxes							1,694			(17,896		)
Total shareholders’ equity	2,088,877			2,043,913			2,119,659			2,043,913
Total liabilities and shareholders’ equity	$	12,862,395		$	12,934,878		$	13,039,674		$	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					Nine Months Ended
	March 31,				September 30,					September 30,
	2019		2018		2019		2018			2019		2018
Interest income
Loans	$	126,302	$	94,118	$	124,476	$	108,577		$	377,788	$	301,351
Securities
Taxable	7,925		3,994		7,218		6,632			22,874		16,326
Tax-exempt	1,409		1,685		1,292		1,592			3,992		4,926
Other	1,458		583		1,490		994			4,778		2,146
Total interest income	137,094		100,380		134,476		117,795			409,432		324,749
Interest expense
Deposits	19,772		8,059		21,514		13,556			62,277		32,534
Borrowings	4,175		3,081		4,137		4,800			12,383		11,147
Total interest expense	23,947		11,140		25,651		18,356			74,660		43,681
Net interest income	113,147		89,240		108,825		99,439			334,772		281,068
Provision for loan losses	1,500		1,750		1,700		2,250			4,100		5,810
Net interest income after provision for loan losses	111,647		87,490		107,125		97,189			330,672		275,258
Noninterest income
Service charges on deposit accounts	9,102		8,473		8,992		8,847			26,699		25,591
Fees and commissions	6,471		5,685		3,090		5,944			16,608		17,546
Insurance commissions	2,116		2,005		2,508		2,461			6,814		6,576
Wealth management revenue	3,324		3,262		3,588		3,386			10,513		10,094
Mortgage banking income	10,401		10,960		15,710		14,350			42,731		38,149
Net gain on sales of securities	13		—
Net gain (loss) on sales of securities					343		(16		)	348		(16		)
BOLI income	1,407		945		1,734		1,186			4,481		3,326
Other	3,051		2,623		1,988		1,895			7,604		6,321
Total noninterest income	35,885		33,953		37,953		38,053			115,798		107,587
Noninterest expense
Salaries and employee benefits	57,350		48,784		65,425		55,187			183,100		155,981
Data processing	4,906		4,244		4,980		4,614			14,584		13,458
Net occupancy and equipment	11,835		9,822		12,943		10,668			36,322		30,295
Other real estate owned	1,004		657		418		278			1,674		1,167
Professional fees	2,454		2,138		2,976		2,056			7,861		6,370
Advertising and public relations	2,866		2,203		3,318		2,242			8,833		7,092
Intangible amortization	2,110		1,651		1,996		1,765			6,159		5,010
Communications	1,895		1,969		2,310		2,190			6,553		6,036
Extinguishment of debt					54		—			54		—
Merger and conversion related expenses	—		900		24		11,221			203		12,621
Other	4,412		5,576		2,056		4,525			13,279		13,686
Total noninterest expense	88,832		77,944		96,500		94,746			278,622		251,716
Income before income taxes	58,700		43,499		48,578		40,496			167,848		131,129
Income taxes	13,590		9,673		11,132		8,532			38,667		28,629
Net income	$	45,110	$	33,826	$	37,446	$	31,964		$	129,181	$	102,500
Basic earnings per share	$	0.77	$	0.69	$	0.65	$	0.61		$	2.21	$	2.03
Diluted earnings per share	$	0.77	$	0.68	$	0.64	$	0.61		$	2.21	$	2.03
Cash dividends per common share	$	0.21	$	0.19	$	0.22	$	0.20		$	0.65	$	0.59

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

(In Thousands)


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018
Net income	$	45,110		$	33,826		$	37,446		$	31,964		$	129,181		$	102,500
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		)	—
Unrealized holding (losses) gains on securities							(62		)	(4,882		)	20,648			(15,791		)
Reclassification adjustment for losses realized in net income							1,876			11			1,872			11
Total securities	11,307			(7,909		)	1,814			(4,871		)	22,520			(15,780		)
Derivative instruments:
Unrealized holding (losses) gains on derivative instruments	(915		)	858			(708		)	639			(3,164		)	1,884
Total derivative instruments	(915		)	858			(708		)	639			(3,164		)	1,884
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	54			66			78			61			234			184
Total defined benefit pension and post-retirement benefit plans	54			66			78			61			234			184
Other comprehensive income (loss), net of tax	10,446			(6,985		)	1,184			(4,171		)	19,590			(13,712		)
Comprehensive income	$	55,556		$	26,841		$	38,630		$	27,793		$	148,771		$	88,788

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

(In Thousands, Except Share Data)



	Common Stock				Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Nine Months Ended September 30, 2019	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	—		—		—			—			—			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
Net income	—		—		—			—			46,625			—			46,625
Other comprehensive income	—		—		—			—			—			7,960			7,960
Comprehensive income																	54,585
Cash dividends ($0.22 per share)	—		—		—			—			(12,971		)	—			(12,971		)
Repurchase of shares in connection with stock repurchase program	(363,704	)	—		(12,938		)	—			—			—			(12,938		)
Issuance of common stock for stock-based compensation awards	27,744		—		893			(832		)	—			—			61
Stock-based compensation expense	—		—		—			2,082			—			—			2,082
Balance at June 30, 2019	58,297,670		$	296,483	$	(33,635	)	$	1,289,356		$	566,982		$	510		$	2,119,696
Net income	—		—		—			—			37,446			—			37,446
Other comprehensive income	—		—		—			—			—			1,184			1,184
Comprehensive income																	38,630
Cash dividends ($0.22 per share)	—		—		—			—			(12,829		)	—			(12,829		)
Repurchase of shares in connection with stock repurchase program	(851,421	)	—		(28,707		)	—			—			—			(28,707		)
Issuance of common stock for stock-based compensation awards	9,057		—		298			(431		)	—			—			(133		)
Stock-based compensation expense	—		—		—			3,002			—			—			3,002
Balance at September 30, 2019	57,455,306		$	296,483	$	(62,044	)	$	1,291,927		$	591,599		$	1,694		$	2,119,659


	Common Stock			Treasury Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)			Total			Common Stock						Treasury Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount
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

Nine Months Ended September 30, 2018																						Shares		Amount				Treasury Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2018	49,321,231	$	249,951	$	(19,906	)		$	898,095			$	397,354			$	(10,511	)	$	1,514,983		49,321,231		$	249,951
Net income												33,826							33,826			—		—							—				—				33,826							33,826
Other comprehensive income (loss)																(6,985		)	(6,985		)
Other comprehensive loss																						—		—				—				—				—				(6,985		)	(6,985		)
Comprehensive income																			26,841																								26,841
Cash dividends ($0.19 per share)												(9,455		)					(9,455		)	—		—				—				—				(9,455		)		—			(9,455		)
Issuance of common stock for stock-based compensation awards	71,747			1,610				(3,092		)									(1,482		)	71,747		—				1,610				(3,092		)		—				—			(1,482		)
Stock-based compensation expense								1,858											1,858			—		—				—				1,858				—				—			1,858
Other, net								20											20			—		—				—				20				—				—			20
Balance at March 31, 2018	49,392,978	$	249,951	$	(18,296	)		$	896,881			$	421,725			$	(17,496	)	$	1,532,765		49,392,978		$	249,951			$	(18,296	)		$	896,881			$	421,725			$	(17,496	)	$	1,532,765
Net income																						—		—				—				—				36,710				—			36,710
Other comprehensive loss																						—		—				—				—				—				(2,556		)	(2,556		)
Comprehensive income																																											34,154
Cash dividends ($0.20 per share)																						—		—				—				—				(9,960		)		—			(9,960		)
Issuance of common stock for stock-based compensation awards																						31,361		—				773				(939		)		—				—			(166		)
Stock-based compensation expense																						—		—				—				1,854				—				—			1,854
Other, net																						—		—				—				21				—				—			21
Balance at June 30, 2018																						49,424,339		$	249,951			$	(17,523	)		$	897,817			$	448,475			$	(20,052	)	$	1,558,668
Net income																						—		—				—				—				31,964				—			31,964
Other comprehensive loss																						—		—				—				—				—				(4,171		)	(4,171		)
Comprehensive income																																											27,793
Cash dividends ($0.20 per share)																						—		—				—				—				(11,827		)		—			(11,827		)
Common stock issued in connection with an acquisition																						9,304,477		46,533				—				387,986				—				—			434,519
Issuance of common stock for stock-based compensation awards																						14,998		—				298				(604		)		—				—			(306		)
Stock-based compensation expense																						—		—				—				1,844				—				—			1,844
Other, net																						—		—				—				20				—				—			20
Balance at September 30, 2018																						58,743,814		$	296,484			$	(17,225	)		$	1,287,063			$	468,612			$	(24,223	)	$	2,010,711

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(In Thousands)


	Three Months Ended March 31,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operating activities
Net income	$	45,110		$	33,826		$	129,181		$	102,500
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,500			1,750			4,100			5,810
Depreciation, amortization and accretion	409			650			5,826			3,689
Deferred income tax expense	5,949			1,990			13,911			7,335
Funding of mortgage loans held for sale	(384,103		)	(362,803		)	(1,680,729		)	(1,318,484		)
Proceeds from sales of mortgage loans held for sale	416,032			275,445			1,543,544			1,253,680
Gains on sales of mortgage loans held for sale	(7,888		)	(8,798		)	(35,416		)	(30,805		)
Gains on sales of securities	(13		)	—
(Gains) losses on sales of premises and equipment	(89		)	8
Valuation adjustment to mortgage servicing rights							3,132			—
(Gains) losses on sales of securities							(348		)	16
Penalty on prepayment of debt							54			—
Gains on sales of premises and equipment							(1,062		)	(188		)
Stock-based compensation expense	2,637			1,858			7,721			5,556
Payments on and proceeds from sales of other loans held for sale	70,375			—
Decrease in other assets	5,982			9,623
Increase in other liabilities	(15,794		)	(14,720		)
Net cash provided by (used in) operating activities	140,107			(61,171		)
Net change in other loans held for sale							59,885			—
Increase in other assets							(12,397		)	(57		)
Decrease in other liabilities							(7,520		)	(27,084		)
Net cash provided by operating activities							29,882			1,968
Investing activities
Purchases of securities available for sale	(49,577		)	(317,922		)	(366,265		)	(576,579		)
Proceeds from sales of securities available for sale	10,611			—			212,485			2,387
Proceeds from call/maturities of securities available for sale	48,509			29,335			192,520			113,511
Net increase in loans	(808		)	(74,344		)	(93,761		)	(156,082		)
Purchases of premises and equipment	(7,242		)	(4,384		)	(23,968		)	(15,599		)
Proceeds from sales of premises and equipment	135			—			2,246			912
Proceeds from sales of FHLB stock	10,441			—
Net change in FHLB stock							6,389			—
Proceeds from sales of other assets	12,965			2,085			17,250			5,286
Net cash received in acquisition of businesses							—			153,502
Other, net	(104		)	—			917			—
Net cash provided by (used in) investing activities	24,930			(365,230		)
Net cash used in investing activities							(52,187		)	(472,662		)
Financing activities
Net increase in noninterest-bearing deposits	47,517			20,712			288,350			90,240
Net increase in interest-bearing deposits	93,175			416,759
Net decrease in short-term borrowings	(300,116		)	(32,061		)
Net (decrease) increase in interest-bearing deposits							(129,873		)	448,675
Net (decrease) increase in short-term borrowings							(182,104		)	51,606
Repayment of long-term debt	(216		)	(230		)	(33,631		)	(643		)
Cash paid for dividends	(12,442		)	(9,455		)	(38,242		)	(31,242		)
Repurchase of shares in connection with stock repurchase program							(41,645		)	—
Net stock-based compensation transactions	—			201			—			201
Net cash (used in) provided by financing activities	(172,082		)	395,926			(137,145		)	558,837
Net decrease in cash and cash equivalents	(7,045		)	(30,475		)
Net (decrease) increase in cash and cash equivalents							(159,450		)	88,143
Cash and cash equivalents at beginning of period	569,111			281,453			569,111			281,453
Cash and cash equivalents at end of period	$	562,066		$	250,978		$	409,661		$	369,596
Supplemental disclosures
Cash paid for interest	$	23,887		$	12,656
Cash paid for income taxes	$	5,325		$	6,280
Noncash transactions:
Transfers of loans to other real estate owned	$	885		$	1,154
Financed sales of other real estate owned	$	120		$	418
Transfers of loans held for sale to loans held for investment	$	—		$	442
Recognition of operating right-of-use assets	$	54,338		$	—
Recognition of operating lease liabilities	$	57,857		$	—



	Nine Months Ended September 30,
	2019		2018


Supplemental disclosures
Cash paid for interest	$	75,720	$	43,317
Cash paid for income taxes	$	25,892	$	21,305
Noncash transactions:
Transfers of loans to other real estate owned	$	3,613	$	2,657
Financed sales of other real estate owned	$	254	$	495
Transfers of mortgage loans held for sale to loans held for investment	$	189	$	1,510
Transfers of other loans held for sale to loans held for investment	$	134,335	$	—
Common stock issued in acquisition of businesses	$	—	$	434,519
Recognition of operating right-of-use assets	$	89,770	$	—
Recognition of operating lease liabilities	$	93,289	$	—

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

Business Combinations: The Company completed its acquisition of Brand Group Holdings, Inc. (“Brand”) on September 1, 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,~~previous periods, the Company ~~acquired~~carried 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~~Sheet. This portfolio consisted primarily of loans acquired in the Brand acquisition. During the third quarter of 2019, the Company made the decision to hold the portfolio for the foreseeable future and therefore transfered the loans from the held for sale category to the held for investment category.

During the third quarter of 2019, the Company redeemed its $30,000 principal amount 8.50% fixed rate subordinated notes that were assumed as part of the Brand acquisition. The Company incurred a ~~balance~~debt prepayment penalty of ~~$122,756 as of March 31, 2019. In accordance with~~$900, which was accounted for in the ~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 850, “Business Combinations”, these loans were measured at~~purchase accounting fair value ~~as of~~adjustment on the ~~acquisition date. Subsequent to the acquisition date, these loans are carried at the lower of amortized cost or fair value.~~subordinated notes.

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.

Impact of Recently-Issued Accounting Standards and Pronouncements:

~~In February 2016, FASB issued~~Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”and its related amendments (“ASC 842”), which ~~amends~~changes 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~~former accounting model for leases ~~distinguishes~~distinguished between capital leases, which ~~are~~were recognized on the balance sheet, and operating leases, which ~~are~~were not. Under the new standard, the lease classifications are defined as finance leases, which are similar to capital leases under ~~current~~prior GAAP, and operating leases. Further, under the new standard a lessee ~~will recognize~~recognizes 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.~~classification. The accounting model and disclosure requirements for lessors remains substantially unchanged from ~~current~~prior GAAP. ~~This standard became effective on January 1, 2019.~~ A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The Company chose to use the effective date approach and, 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 disclosures required under ASC 842, were not provided for dates and periods before January 1, 2019. ~~The~~Upon adoption, the Company recorded a right-of-use asset in the amount of $53,042 and a corresponding lease liability in the amount of ~~$56,562.~~$56,562 on January 1, 2019. The Company has included newly applicable lease disclosures in this filing in Note 19, “Leases.”

In June 2016, ~~FASB~~the Financial Accounting Standards Board (“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 the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model 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 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~~the Bank, which includes the selected methodology, proper pool segmentation and loan data validation. Currently, the CECL committee is working with the consultant to ~~build~~further develop and test the ~~CECL model and expects to run a preliminary CECL calculation~~qualitative factors used in the ~~second quarter~~model, including the reasonable and supportable forecast period. The CECL committee, along with the members of the Company's risk management team, is also currently working with an external model validation team to complete an independent validation. The Company will continue refining and testing the model throughout the remainder of 2019.

In January 2017, FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350)” (“ASU 2017-04”). ASU 2017-04 will amend and simplify current goodwill impairment testing by eliminating certain testing under the current provisions. Under the new guidance, an entity should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the ~~quantitative~~qualitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. ASU 2017-04 will be effective for interim and annual periods beginning after December 15, 2019 and is not expected to have a material impact on the Company’s financial statements.

In March 2017, FASB issued ASU 2017-08, “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 became effective January 1, 2019 and did not have a material impact on the Company’s financial 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~~expands 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 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, 2019, with early adoption permitted. The Company is currently evaluating the effect that ASU 2018-13 will have on its financial ~~position and results of operations and its financial~~ statement disclosures.

In March 2019, FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“ASU 2019-01”). ASU 2019-01 is intended to clarify potential implementation questions related to ASC 842. This includes clarification on the determination of fair value of underlying assets by lessors that are not manufacturers or dealers, cash flow presentation of sales-type and direct financing leases and transition disclosures related to accounting changes and error corrections. ASU 2019-01 will be effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the effect that ASU 2019-01 will have on its financial position and results of operations and its financial statement disclosures.

Note 2 – Mergers and Acquisitions

(Dollar Amounts In Thousands, Except Share Data)

Acquisition of Brand Group Holdings, Inc.

Effective September 1, 2018, the Company completed its acquisition by merger of Brand, the parent company of The Brand Banking Company (“Brand Bank”), in a transaction valued at approximately $474,453. The Company issued 9,306,477 shares of common stock and paid approximately $21,879 to 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 Brand. At closing, Brand merged with and into the Company, with the Company the surviving corporation in the merger; immediately thereafter,

Brand Bank merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger. On September 1, 2018, Brand operated ~~thirteen~~13 banking locations throughout the greater Atlanta market.

The Company recorded approximately ~~$349,459~~$356,171 in intangible assets which consist of goodwill of ~~$321,925~~$328,637 and a core deposit intangible of $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 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 Brand based on their fair values on September 1, 2018.


Purchase Price:
Shares issued to common shareholders	9,306,477					9,306,477
Purchase price per share	$	46.69				$	46.69
Value of stock paid				$	434,519				$	434,519
Cash consideration paid				21,879					21,879
Cash paid for fractional shares				4					4
Cash settlement for stock options, net of tax benefit				17,157					17,157
Deal charges				894					894
Total Purchase Price				$	474,453				$	474,453
Net Assets Acquired:
Stockholders’ equity at acquisition date	$	138,896				$	138,896
Increase (decrease) to net assets as a result of fair value adjustments to assets acquired and liabilities assumed:
Securities	(231		)			(323		)
Loans, including loans held for sale	(20,969		)			(27,611		)
Premises and equipment	910					910
Intangible assets	27,534					27,534
Other assets	(3,304		)			(4,495		)
Deposits	(1,367		)			(1,367		)
Borrowings	(3,236		)			(2,023		)
Other liabilities	13,338					13,338
Deferred income taxes	957					957
Total Net Assets Acquired				152,528					145,816
Goodwill resulting from merger⁽¹⁾				$	321,925				$	328,637

(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 September 1, 2018 of assets acquired and liabilities assumed on that date in connection with the merger with Brand. ~~These estimates are subject to change pending the finalization of all valuations.~~



Cash and cash equivalents	$	193,436
Securities	71,122
Loans, including loans held for sale	1,580,339
Premises and equipment	20,070
Intangible assets	356,171
Other assets	113,195
Total assets	$	2,334,333

Deposits	$	1,714,177
Borrowings	89,273
Other liabilities	56,430
Total liabilities	$	1,859,880

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 following table summarizes the significant assets acquired and liabilities assumed from BMG:



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

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~~nine months ended ~~March 31,~~September 30, 2019 and 2018 of the Company as though the Brand merger had been completed as of January 1, 2018. The unaudited pro forma information combines the historical results of 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, 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)
	Nine Months Ended
	September 30,
	2019		2018
Net interest income - pro forma	$	334,772	$	341,946

Noninterest income - pro forma	$	115,798	$	117,476

Noninterest expense - pro forma	$	278,622	$	359,386

Net income - pro forma	$	129,181	$	72,719

Earnings per share - pro forma:
Basic	$	2.21	$	1.24
Diluted	$	2.21	$	1.24

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

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

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

Net income - pro forma $ 45,110
$ 40,296

Earnings per share - pro forma:
Basic $ 0.77
$ 0.69
Diluted $ 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, 2019
September 30, 2019
U.S. Treasury securities										$	498	$	—	$	—		$	498
Obligations of other U.S. Government agencies and corporations	$	2,532	$	16	$	(23	)	$	2,525	2,523		18		(4		)	2,537
Obligations of states and political subdivisions	179,758		4,064		(60		)	183,762		211,559		5,585		(156		)	216,988
Residential mortgage backed securities:
Government agency mortgage backed securities	622,056		3,783		(3,773		)	622,066		658,830		8,723		(1,386		)	666,167
Government agency collateralized mortgage obligations	321,088		1,093		(2,734		)	319,447		189,332		2,123		(268		)	191,187
Commercial mortgage backed securities:
Government agency mortgage backed securities	21,816		362		(180		)	21,998		26,794		874		(2		)	27,666
Government agency collateralized mortgage obligations	46,095		273		(38		)	46,330		73,688		1,755		(20		)	75,423
Trust preferred securities	12,259		—		(2,013		)	10,246		12,160		—		(2,298		)	9,862
Other debt securities	48,335		766		(122		)	48,979		46,739		1,513		(3		)	48,249
	$	1,253,939	$	10,357	$	(8,943	)	$	1,255,353	$	1,222,123	$	20,591	$	(4,137	)	$	1,238,577



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2018
Obligations of other U.S. Government agencies and corporations	$	2,536	$	13	$	(38	)	$	2,511
Obligations of states and political subdivisions	200,798		3,038		(567		)	203,269
Residential mortgage backed securities:
Government agency mortgage backed securities	621,690		719		(9,126		)	613,283
Government agency collateralized mortgage obligations	332,697		274		(5,982		)	326,989
Commercial mortgage backed securities:
Government agency mortgage backed securities	21,957		257		(384		)	21,830
Government agency collateralized mortgage obligations	28,446		24		(135		)	28,335
Trust preferred securities	12,359		—		(1,726		)	10,633
Other debt securities	44,046		192		(311		)	43,927
	$	1,264,529	$	4,517	$	(18,269	)	$	1,250,777

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
December 31, 2018
Obligations of other U.S. Government agencies and corporations $ 2,536
$ 13
$ (38 ) $ 2,511
Obligations of states and political subdivisions 200,798
3,038
(567 ) 203,269
Residential mortgage backed securities:
Government agency mortgage backed securities 621,690
719
(9,126 ) 613,283
Government agency collateralized mortgage obligations 332,697
274
(5,982 ) 326,989
Commercial mortgage backed securities:
Government agency mortgage backed securities 21,957
257
(384 ) 21,830
Government agency collateralized mortgage obligations 28,446
24
(135 ) 28,335
Trust preferred securities 12,359
—
(1,726 ) 10,633
Other debt securities 44,046
192
(311 ) 43,927
$ 1,264,529
$ 4,517
$ (18,269 ) $ 1,250,777

~~Securities sold were as follows for the period 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~~

Securities sold were noas follows for the periods presented:



	Carrying Value		Net Proceeds		Gain/(Loss)
Three months ended September 30, 2019
Obligations of states and political subdivisions	$	1,112	$	1,111	$	(1	)
Residential mortgage backed securities:
Government agency mortgage backed securities	70,926		70,322		(604		)
Government agency collateralized mortgage obligations	122,404		120,606		(1,798		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	4,838		4,720		(118		)
Other debt securities	252		257		5
Other equity securities	—		2,859		2,859
	$	199,532	$	199,875	$	343
Nine months ended September 30, 2019
Obligations of states and political subdivisions	$	11,799	$	11,813	$	14
Residential mortgage backed securities:
Government agency mortgage backed securities	72,556		71,944		(612		)
Government agency collateralized mortgage obligations	122,692		120,892		(1,800		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	4,838		4,720		(118		)
Other debt securities	252		257		5
Other equity securities	—		2,859		2,859
	$	212,137	$	212,485	$	348

The sales of other equity securities ~~sold~~represents the Company’s sale of all of its shares of Visa Class B common stock during the ~~three months ended March 31, 2018.~~third quarter of 2019.



	Carrying Value		Net Proceeds		Gain/(Loss)
Three months ended September 30, 2018
Obligations of states and political subdivisions	$	901	$	894	$	(7	)
Residential mortgage backed securities:
Government agency mortgage backed securities	943		941		(2		)
Government agency collateralized mortgage obligations	559		552		(7		)
	$	2,403	$	2,387	$	(16	)
Nine months ended September 30, 2018
Obligations of states and political subdivisions	$	901	$	894	$	(7	)
Residential mortgage backed securities:
Government agency mortgage backed securities	943		941		(2		)
Government agency collateralized mortgage obligations	559		552		(7		)
	$	2,403	$	2,387	$	(16	)

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Gross realized gains and losses on sales of securities available for sale for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively, were as follows:




	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Gross gains on sales of securities available for sale	$	2,933		$	11		$	2,979		$	11
Gross losses on sales of securities available for sale	(2,590		)	(27		)	(2,631		)	(27		)
Gains on sales of securities available for sale, net	$	343		$	(16	)	$	348		$	(16	)

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,~~September 30, 2019 and December 31, 2018, securities with a carrying value of ~~$553,451~~$382,678 and $619,308, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of ~~$19,629~~$28,041 and $18,299 were pledged as collateral for short-term borrowings and derivative instruments at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively.

The amortized cost and fair value of securities at ~~March 31,~~September 30, 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
	Amortized Cost		Fair Value
Due within one year	$	21,604	$	21,839
Due after one year through five years	30,383		31,139
Due after five years through ten years	76,550		79,296
Due after ten years	108,713		108,264
Residential mortgage backed securities:
Government agency mortgage backed securities	658,830		666,167
Government agency collateralized mortgage obligations	189,332		191,187
Commercial mortgage backed securities:
Government agency mortgage backed securities	26,794		27,666
Government agency collateralized mortgage obligations	73,688		75,423
Other debt securities	36,229		37,596
	$	1,222,123	$	1,238,577

Available for Sale

Amortized
Cost

Fair
Value
Due within one year $ 36,647
$ 36,919
Due after one year through five years 40,168
40,856
Due after five years through ten years 74,651
76,630
Due after ten years 51,868
50,926
Residential mortgage backed securities:
Government agency mortgage backed securities 622,056
622,066
Government agency collateralized mortgage obligations 321,088
319,447
Commercial mortgage backed securities:
Government agency mortgage backed securities 21,816
21,998
Government agency collateralized mortgage obligations 46,095
46,330
Other debt securities 39,550
40,181
$ 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
	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Available for Sale:
September 30, 2019
Obligations of other U.S. Government agencies and corporations	0	$	—	$	—		1	$	1,009	$	(4	)	1	$	1,009	$	(4	)
Obligations of states and political subdivisions	10	16,669		(156		)	0	—		—			10	16,669		(156		)
Residential mortgage backed securities:
Government agency mortgage backed securities	19	143,731		(1,058		)	19	29,922		(328		)	38	173,653		(1,386		)
Government agency collateralized mortgage obligations	8	42,687		(268		)	0	—		—			8	42,687		(268		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	0	—		—			2	1,204		(2		)	2	1,204		(2		)
Government agency collateralized mortgage obligations	1	5,003		(20		)	0	—		—			1	5,003		(20		)
Trust preferred securities	0	—		—			2	9,862		(2,298		)	2	9,862		(2,298		)
Other debt securities	1	610		(1		)	1	750		(2		)	2	1,360		(3		)
Total	39	$	208,700	$	(1,503	)	25	$	42,747	$	(2,634	)	64	$	251,447	$	(4,137	)
December 31, 2018
Obligations of other U.S. Government agencies and corporations	0	$	—	$	—		2	$	1,480	$	(38	)	2	$	1,480	$	(38	)
Obligations of states and political subdivisions	34	22,159		(193		)	26	16,775		(374		)	60	38,934		(567		)
Residential mortgage backed securities:
Government agency mortgage backed securities	91	354,731		(3,945		)	73	125,757		(5,181		)	164	480,488		(9,126		)
Government agency collateralized mortgage obligations	24	97,451		(840		)	60	140,076		(5,142		)	84	237,527		(5,982		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	5	6,506		(74		)	4	7,468		(310		)	9	13,974		(384		)
Government agency collateralized mortgage obligations	2	9,950		(23		)	1	4,888		(112		)	3	14,838		(135		)
Trust preferred securities	0	—		—			2	10,633		(1,726		)	2	10,633		(1,726		)
Other debt securities	12	19,011		(88		)	3	5,621		(223		)	15	24,632		(311		)
Total	168	$	509,808	$	(5,163	)	171	$	312,698	$	(13,106	)	339	$	822,506	$	(18,269	)

Less than 12 Months 12 Months or More Total
#
Fair
Value

Unrealized
Losses
#
Fair
Value

Unrealized
Losses
#
Fair
Value

Unrealized
Losses
Available for Sale:
March 31, 2019
Obligations of other U.S. Government agencies and corporations 0 $ —
$ —
2 $ 1,494
$ (23 ) 2 $ 1,494
$ (23 )
Obligations of states and political subdivisions 1 855
(1 ) 10 7,309
(59 ) 11 8,164
(60 )
Residential mortgage backed securities:
Government agency mortgage backed securities 10 28,824
(72 ) 96 242,222
(3,701 ) 106 271,046
(3,773 )
Government agency collateralized mortgage obligations 3 16,043
(41 ) 64 159,212
(2,693 ) 67 175,255
(2,734 )
Commercial mortgage backed securities:
Government agency mortgage backed securities 0 —
—
4 7,543
(180 ) 4 7,543
(180 )
Government agency collateralized mortgage obligations 0 —
—
1 4,962
(38 ) 1 4,962
(38 )
Trust preferred securities 0 —
—
2 10,246
(2,013 ) 2 10,246
(2,013 )
Other debt securities 8 5,763
(34 ) 3 5,752
(88 ) 11 11,515
(122 )
Total 22 $ 51,485
$ (148 ) 182 $ 438,740
$ (8,795 ) 204 $ 490,225
$ (8,943 )
December 31, 2018
Obligations of other U.S. Government agencies and corporations 0 $ —
$ —
2 $ 1,480
$ (38 ) 2 $ 1,480
$ (38 )
Obligations of states and political subdivisions 34 22,159
(193 ) 26 16,775
(374 ) 60 38,934
(567 )
Residential mortgage backed securities:
Government agency mortgage backed securities 91 354,731
(3,945 ) 73 125,757
(5,181 ) 164 480,488
(9,126 )
Government agency collateralized mortgage obligations 24 97,451
(840 ) 60 140,076
(5,142 ) 84 237,527
(5,982 )
Commercial mortgage backed securities:
Government agency mortgage backed securities 5 6,506
(74 ) 4 7,468
(310 ) 9 13,974
(384 )
Government agency collateralized mortgage obligations 2 9,950
(23 ) 1 4,888
(112 ) 3 14,838
(135 )
Trust preferred securities 0 —
—
2 10,633
(1,726 ) 2 10,633
(1,726 )
Other debt securities 12 19,011
(88 ) 3 5,621
(223 ) 15 24,632
(311 )
Total 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~~nine months ended ~~March 31,~~September 30, 2019 or 2018.

The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $~~12,259~~12,160 and $12,359 and a fair value of $~~10,246~~9,862 and $10,633 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively. At ~~March 31,~~September 30, 2019, the investments in pooled trust preferred securities consisted of ~~two~~2 securities representing interests in various tranches of trusts collateralized by debt issued by over 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,~~September 30, 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. NoNaN additional impairment was recognized during the ~~three~~nine months ended~~March 31,~~September 30, 2019.

The following table provides information regarding the Company’s investments in pooled trust preferred securities at ~~March 31,~~September 30, 2019:



Name	Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Loss			Lowest Credit Rating	Issuers Currently in Deferral or Default
XXIII	Pooled	B-2	$	8,174	$	6,360	$	(1,814	)	BB	16	%
XXVI	Pooled	B-2	3,986		3,502		(484		)	B	19	%
			$	12,160	$	9,862	$	(2,298	)

Name
Single/
Pooled

Class/
Tranche

Amortized
Cost

Fair
Value

Unrealized
Loss

Lowest
Credit
Rating

Issuers
Currently in
Deferral or
Default
XXIII Pooled B-2 $ 8,233
$ 6,593
$ (1,640 ) BB 17 %
XXVI Pooled B-2 4,026
3,653
(373 ) B 20 %
$ 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:



	2019			2018
Balance at January 1	$	(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	—			—
Balance at September 30	$	(261	)	$	(261	)

2019 2018
Balance at January 1 $ (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 —
—
Balance at March 31 $ (261 ) $ (261 )

1316

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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.~~loans excluding loans held for sale.

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



	September 30, 2019			December 31, 2018
Commercial, financial, agricultural	$	988,867		$	875,649
Lease financing	73,617			64,992
Real estate – construction	764,589			635,519
Real estate – 1-4 family mortgage	2,235,908			2,087,890
Real estate – commercial mortgage	2,809,470			2,628,365
Installment loans to individuals	163,031			100,424
Gross loans	7,035,482			6,392,839
Unearned income	(3,664		)	(3,127		)
Loans, net of unearned income	$	7,031,818		$	6,389,712

March 31,
2019 December 31, 2018
Commercial, financial, agricultural $ 921,081
$ 875,649
Lease financing 61,539
64,992
Real estate – construction 651,119
635,519
Real estate – 1-4 family mortgage 2,114,908
2,087,890
Real estate – commercial mortgage 2,726,186
2,628,365
Installment loans to individuals 93,654
100,424
Gross loans 6,568,487
6,392,839
Unearned income (2,888 ) (3,127 )
Loans, net of unearned income $ 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.

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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



	Accruing Loans										Nonaccruing Loans
	30-89 Days Past Due		90 Days or More Past Due		Current Loans			Total Loans			30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		Total Loans
September 30, 2019
Commercial, financial, agricultural	$	931	$	917	$	981,535		$	983,383		$	—	$	5,301	$	183	$	5,484	$	988,867
Lease financing	676		404		72,537			73,617			—		—		—		—		73,617
Real estate – construction	139		128		764,068			764,335			—		—		254		254		764,589
Real estate – 1-4 family mortgage	9,420		4,373		2,216,947			2,230,740			613		2,961		1,594		5,168		2,235,908
Real estate – commercial mortgage	799		1,435		2,802,517			2,804,751			420		2,927		1,372		4,719		2,809,470
Installment loans to individuals	837		68		162,018			162,923			—		39		69		108		163,031
Unearned income	—		—		(3,664		)	(3,664		)	—		—		—		—		(3,664		)
Total	$	12,802	$	7,325	$	6,995,958		$	7,016,085		$	1,033	$	11,228	$	3,472	$	15,733	$	7,031,818
December 31, 2018
Commercial, financial, agricultural	$	3,397	$	267	$	870,457		$	874,121		$	—	$	1,356	$	172	$	1,528	$	875,649
Lease financing	607		89		64,296			64,992			—		—		—		—		64,992
Real estate – construction	887		—		634,632			635,519			—		—		—		—		635,519
Real estate – 1-4 family mortgage	10,378		2,151		2,071,401			2,083,930			238		2,676		1,046		3,960		2,087,890
Real estate – commercial mortgage	1,880		13		2,621,902			2,623,795			—		2,974		1,596		4,570		2,628,365
Installment loans to individuals	368		165		99,731			100,264			3		157		—		160		100,424
Unearned income	—		—		(3,127		)	(3,127		)	—		—		—		—		(3,127		)
Total	$	17,517	$	2,685	$	6,359,292		$	6,379,494		$	241	$	7,163	$	2,814	$	10,218	$	6,389,712

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
March 31, 2019
Commercial, financial, agricultural $ 3,117
$ 78
$ 913,608
$ 916,803
$ 953
$ 3,145
$ 180
$ 4,278
$ 921,081
Lease financing 440
—
61,009
61,449
—
90
—
90
61,539
Real estate – construction 419
—
650,700
651,119
—
—
—
—
651,119
Real estate – 1-4 family mortgage 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 2,394
13
2,719,516
2,721,923
—
2,349
1,914
4,263
2,726,186
Installment loans to individuals 392
57
93,139
93,588
2
64
—
66
93,654
Unearned income —
—
(2,888 ) (2,888 ) —
—
—
—
(2,888 )
Total $ 23,095
$ 1,192
$ 6,528,805
$ 6,553,092
$ 2,011
$ 7,114
$ 3,382
$ 12,507
$ 6,565,599
December 31, 2018
Commercial, financial, agricultural $ 3,397
$ 267
$ 870,457
$ 874,121
$ —
$ 1,356
$ 172
$ 1,528
$ 875,649
Lease financing 607
89
64,296
64,992
—
—
—
—
64,992
Real estate – construction 887
—
634,632
635,519
—
—
—
—
635,519
Real estate – 1-4 family mortgage 10,378
2,151
2,071,401
2,083,930
238
2,676
1,046
3,960
2,087,890
Real estate – commercial mortgage 1,880
13
2,621,902
2,623,795
—
2,974
1,596
4,570
2,628,365
Installment loans to individuals 368
165
99,731
100,264
3
157
—
160
100,424
Unearned income —
—
(3,127 ) (3,127 ) —
—
—
—
(3,127 )
Total $ 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 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.

1518

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Loans accounted for under FASB ~~ASC~~Accounting Standards Codification (“ASC”) 310-20, “Nonrefundable Fees and Other Cost” (“ASC 310-20”), and which are impaired loans recognized in conformity with ASC 310, “Receivables” (“ASC 310”), segregated by class, were as follows as of the dates presented:



	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
September 30, 2019
Commercial, financial, agricultural	$	5,993	$	5,609	$	—	$	5,609	$	1,100
Lease financing	—		—		—		—		—
Real estate – construction	12,128		3,573		8,551		12,124		22
Real estate – 1-4 family mortgage	12,406		12,067		—		12,067		163
Real estate – commercial mortgage	13,410		9,497		1,120		10,617		444
Installment loans to individuals	131		125		—		125		1
Total	$	44,068	$	30,871	$	9,671	$	40,542	$	1,730
December 31, 2018
Commercial, financial, agricultural	$	2,280	$	1,834	$	—	$	1,834	$	163
Lease financing	—		—		—		—		—
Real estate – construction	9,467		7,302		2,165		9,467		63
Real estate – 1-4 family mortgage	9,767		9,077		—		9,077		61
Real estate – commercial mortgage	8,625		4,609		1,238		5,847		689
Installment loans to individuals	232		223		—		223		1
Totals	$	30,371	$	23,045	$	3,403	$	26,448	$	977

Unpaid
Contractual
Principal
Balance

Recorded
Investment
With
Allowance

Recorded
Investment
With No
Allowance

Total
Recorded
Investment

Related
Allowance
March 31, 2019
Commercial, financial, agricultural $ 4,886
$ 4,581
$ —
$ 4,581
$ 983
Lease financing 90
90
—
90
1
Real estate – construction 8,485
6,320
2,165
8,485
56
Real estate – 1-4 family mortgage 8,739
8,415
—
8,415
113
Real estate – commercial mortgage 9,800
5,819
1,198
7,017
723
Installment loans to individuals 136
129
—
129
1
Total $ 32,136
$ 25,354
$ 3,363
$ 28,717
$ 1,877
December 31, 2018
Commercial, financial, agricultural $ 2,280
$ 1,834
$ —
$ 1,834
$ 163
Lease financing —
—
—
—
—
Real estate – construction 9,467
7,302
2,165
9,467
63
Real estate – 1-4 family mortgage 9,767
9,077
—
9,077
61
Real estate – commercial mortgage 8,625
4,609
1,238
5,847
689
Installment loans to individuals 232
223
—
223
1
Totals $ 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, 2019				March 31, 2018				September 30, 2019				September 30, 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	$	4,634	$	10	$	2,338	$	11	$	5,705	$	5	$	1,979	$	11
Lease financing	87		—		159		—		—		—		—		—
Real estate – construction	8,485		102		150		18		12,128		111		9,725		42
Real estate – 1-4 family mortgage	8,490		51		8,197		67		12,203		50		8,136		51
Real estate – commercial mortgage	7,030		28		6,670		92		10,692		41		6,258		37
Installment loans to individuals	149		1		104		1		130		—		118		1
Total	$	28,875	$	192	$	17,618	$	189	$	40,858	$	207	$	26,216	$	142

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



	Nine Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	5,656	$	23	$	2,204	$	31
Lease financing	—		—		—		—
Real estate – construction	11,756		321		9,621		109
Real estate – 1-4 family mortgage	12,323		153		8,388		174
Real estate – commercial mortgage	10,652		122		6,354		117
Installment loans to individuals	130		1		121		2
Total	$	40,517	$	620	$	26,688	$	433

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 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. 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)~~

September 30, 2018.



	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
Three months ended September 30, 2019
Real estate – 1-4 family mortgage	3	$	576	$	576	1	$	16	$	16
Real estate – commercial mortgage	1	83		78
Total	4	$	659	$	654	1	$	16	$	16




	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Nine months ended September 30, 2019
Commercial, financial, agricultural	2	$	187	$	185
Real estate – 1-4 family mortgage	4	321		320
Total	6	$	508	$	505
Nine months ended September 30, 2018
Real estate – 1-4 family mortgage	4	$	625	$	625
Real estate – commercial mortgage	1	83		78
Total	5	$	708	$	703

With respect to loans that were restructured during the ~~three~~nine months ended ~~March 31,~~September 30, 2019, $61 have subsequently defaulted as of the date of this report. With respect to loans that were restructured during the nine months ended September 30, 2018, ~~none have~~NaN subsequently defaulted within twelve months of the 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~~was 1 restructured ~~loans~~loan in the amount of $40 contractually 90 days past due or more and still accruing at ~~March 31,~~September 30, 2019 and ~~four~~2 restructured loans in the amount of ~~$571~~ $228

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

contractually 90 days past due or more and still accruing at ~~March 31,~~September 30, 2018. The outstanding balance of restructured loans on nonaccrual status was ~~$2,976~~$3,101 and ~~$2,570~~$3,147 at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 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, 2019	51		$	5,325
Additional advances or loans with concessions	6		522
Reclassified as performing restructured loan	2		78
Reductions due to:
Reclassified as nonperforming	(6	)	(505		)
Paid in full	(6	)	(416		)
Principal paydowns	—		(119		)
Totals at September 30, 2019	47		$	4,885

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 ~~$32~~$30 and ~~$92~~$33 at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018, respectively. The Company had ~~$44~~$1 and ~~$20~~$19 in remaining availability under commitments to lend additional funds on these restructured loans at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 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:



	Pass		Watch		Substandard		Total
September 30, 2019
Commercial, financial, agricultural	$	742,438	$	12,351	$	12,803	$	767,592
Real estate – construction	691,112		2,923		8,914		702,949
Real estate – 1-4 family mortgage	320,874		3,520		3,010		327,404
Real estate – commercial mortgage	2,419,230		34,179		25,801		2,479,210
Installment loans to individuals	28		—		—		28
Total	$	4,173,682	$	52,973	$	50,528	$	4,277,183
December 31, 2018
Commercial, financial, agricultural	$	615,803	$	18,326	$	6,973	$	641,102
Real estate – construction	558,494		2,317		8,157		568,968
Real estate – 1-4 family mortgage	321,564		4,660		4,260		330,484
Real estate – commercial mortgage	2,210,100		54,579		24,144		2,288,823
Installment loans to individuals	—		—		—		—
Total	$	3,705,961	$	79,882	$	43,534	$	3,829,377

1721

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Pass Watch Substandard Total
March 31, 2019
Commercial, financial, agricultural $ 675,107
$ 15,523
$ 11,533
$ 702,163
Real estate – construction 570,637
5,469
8,157
584,263
Real estate – 1-4 family mortgage 319,715
4,619
3,585
327,919
Real estate – commercial mortgage 2,308,236
50,355
24,550
2,383,141
Installment loans to individuals —
—
—
—
Total $ 3,873,695
$ 75,966
$ 47,825
$ 3,997,486
December 31, 2018
Commercial, financial, agricultural $ 615,803
$ 18,326
$ 6,973
$ 641,102
Real estate – construction 558,494
2,317
8,157
568,968
Real estate – 1-4 family mortgage 321,564
4,660
4,260
330,484
Real estate – commercial mortgage 2,210,100
54,579
24,144
2,288,823
Installment loans to individuals —
—
—
—
Total $ 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
September 30, 2019
Commercial, financial, agricultural	$	219,469	$	1,806	$	221,275
Lease financing	69,549		404		69,953
Real estate – construction	61,258		382		61,640
Real estate – 1-4 family mortgage	1,899,433		9,071		1,908,504
Real estate – commercial mortgage	328,755		1,505		330,260
Installment loans to individuals	162,827		176		163,003
Total	$	2,741,291	$	13,344	$	2,754,635
December 31, 2018
Commercial, financial, agricultural	$	233,046	$	1,501	$	234,547
Lease financing	61,776		89		61,865
Real estate – construction	66,551		—		66,551
Real estate – 1-4 family mortgage	1,751,994		5,412		1,757,406
Real estate – commercial mortgage	338,367		1,175		339,542
Installment loans to individuals	100,099		325		100,424
Total	$	2,551,833	$	8,502	$	2,560,335

Performing
Non-
Performing
Total
March 31, 2019
Commercial, financial, agricultural $ 217,572
$ 1,346
$ 218,918
Lease financing 58,562
89
58,651
Real estate – construction 66,856
—
66,856
Real estate – 1-4 family mortgage 1,782,390
4,599
1,786,989
Real estate – commercial mortgage 342,170
875
343,045
Installment loans to individuals 93,532
122
93,654
Total $ 2,561,082
$ 7,031
$ 2,568,113
December 31, 2018
Commercial, financial, agricultural $ 233,046
$ 1,501
$ 234,547
Lease financing 61,776
89
61,865
Real estate – construction 66,551
—
66,551
Real estate – 1-4 family mortgage 1,751,994
5,412
1,757,406
Real estate – commercial mortgage 338,367
1,175
339,542
Installment loans to individuals 100,099
325
100,424
Total $ 2,551,833
$ 8,502
$ 2,560,335

Note 5 – Purchased Loans

(In Thousands, Except Number of Loans)

For purposes of this Note 5, all references to “loans” mean purchased ~~loans.~~loans excluding loans held for sale.

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



	September 30, 2019		December 31, 2018
Commercial, financial, agricultural	$	339,693	$	420,263
Real estate – construction	52,106		105,149
Real estate – 1-4 family mortgage	561,725		707,453
Real estate – commercial mortgage	1,212,905		1,423,144
Installment loans to individuals	115,537		37,408
Gross loans	2,281,966		2,693,417
Unearned income	—		—
Loans, net of unearned income	$	2,281,966	$	2,693,417

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

March 31,
2019 December 31, 2018
Commercial, financial, agricultural $ 387,376
$ 420,263
Real estate – construction 89,954
105,149
Real estate – 1-4 family mortgage 654,265
707,453
Real estate – commercial mortgage 1,357,446
1,423,144
Installment loans to individuals 33,653
37,408
Gross loans 2,522,694
2,693,417
Unearned income —
—
Loans, net of unearned income $ 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 accruing and ~~nonaccrual~~nonaccruing loans, segregated by class, as of the dates presented:

Accruing Loans Nonaccruing Loans

30-89 Days
Past Due

90 Days
or More
Past Due

Current
Loans

Total
Loans

30-89 Days
Past Due

90 Days
or More
Past Due

Current
Loans

Total
Loans

Total
Loans
March 31, 2019
Commercial, financial, agricultural $ 5,596
$ 607
$ 379,993
$ 386,196
$ 311
$ 523
$ 346
$ 1,180
$ 387,376
Real estate – construction 2,258
—
87,696
89,954
—
—
—
—
89,954
Real estate – 1-4 family mortgage 9,631
2,653
637,630
649,914
299
2,079
1,973
4,351
654,265
Real estate – commercial mortgage 2,605
1,903
1,351,020
1,355,528
—
1,460
458
1,918
1,357,446
Installment loans to individuals 956
273
32,045
33,274
1
128
250
379
33,653
Total $ 21,046
$ 5,436
$ 2,488,384
$ 2,514,866
$ 611
$ 4,190
$ 3,027
$ 7,828
$ 2,522,694
December 31, 2018
Commercial, financial, agricultural $ 1,811
$ 97
$ 417,786
$ 419,694
$ —
$ 477
$ 92
$ 569
$ 420,263
Real estate – construction 1,235
68
103,846
105,149
—
—
—
—
105,149
Real estate – 1-4 family mortgage 8,981
4,455
690,697
704,133
202
1,881
1,237
3,320
707,453
Real estate – commercial mortgage 5,711
2,410
1,413,346
1,421,467
—
1,401
276
1,677
1,423,144
Installment loans to individuals 1,342
202
35,594
37,138
2
24
244
270
37,408
Total $ 19,080
$ 7,232
$ 2,661,269
$ 2,687,581
$ 204
$ 3,783
$ 1,849
$ 5,836
$ 2,693,417

1922

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



	Accruing Loans								Nonaccruing Loans
	30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		Total Loans
September 30, 2019
Commercial, financial, agricultural	$	2,133	$	1,676	$	334,410	$	338,219	$	—	$	1,184	$	290	$	1,474	$	339,693
Real estate – construction	375		—		51,731		52,106		—		—		—		—		52,106
Real estate – 1-4 family mortgage	5,829		2,943		549,220		557,992		333		1,852		1,548		3,733		561,725
Real estate – commercial mortgage	3,674		2,345		1,206,299		1,212,318		—		254		333		587		1,212,905
Installment loans to individuals	4,458		70		110,680		115,208		24		41		264		329		115,537
Total	$	16,469	$	7,034	$	2,252,340	$	2,275,843	$	357	$	3,331	$	2,435	$	6,123	$	2,281,966
December 31, 2018
Commercial, financial, agricultural	$	1,811	$	97	$	417,786	$	419,694	$	—	$	477	$	92	$	569	$	420,263
Real estate – construction	1,235		68		103,846		105,149		—		—		—		—		105,149
Real estate – 1-4 family mortgage	8,981		4,455		690,697		704,133		202		1,881		1,237		3,320		707,453
Real estate – commercial mortgage	5,711		2,410		1,413,346		1,421,467		—		1,401		276		1,677		1,423,144
Installment loans to individuals	1,342		202		35,594		37,138		2		24		244		270		37,408
Total	$	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
September 30, 2019
Commercial, financial, agricultural	$	2,565	$	2,495	$	20	$	2,515	$	282
Real estate – construction	256		256		—		256		2
Real estate – 1-4 family mortgage	5,982		2,983		2,282		5,265		23
Real estate – commercial mortgage	1,172		930		208		1,138		6
Installment loans to individuals	354		247		83		330		2
Total	$	10,329	$	6,911	$	2,593	$	9,504	$	315
December 31, 2018
Commercial, financial, agricultural	$	671	$	600	$	11	$	611	$	173
Real estate – construction	576		576		—		576		5
Real estate – 1-4 family mortgage	5,787		1,381		3,780		5,161		18
Real estate – commercial mortgage	2,266		2,066		146		2,212		338
Installment loans to individuals	280		246		24		270		3
Totals	$	9,580	$	4,869	$	3,961	$	8,830	$	537

Unpaid
Contractual
Principal
Balance

Recorded
Investment
With
Allowance

Recorded
Investment
With No
Allowance

Total
Recorded
Investment

Related
Allowance
March 31, 2019
Commercial, financial, agricultural $ 1,287
$ 914
$ 314
$ 1,228
$ 198
Real estate – construction 320
320
—
320
2
Real estate – 1-4 family mortgage 6,177
896
4,641
5,537
14
Real estate – commercial mortgage 2,718
1,858
567
2,425
119
Installment loans to individuals 409
322
57
379
3
Total $ 10,911
$ 4,310
$ 5,579
$ 9,889
$ 336
December 31, 2018
Commercial, financial, agricultural $ 671
$ 600
$ 11
$ 611
$ 173
Real estate – construction 576
576
—
576
5
Real estate – 1-4 family mortgage 5,787
1,381
3,780
5,161
18
Real estate – commercial mortgage 2,266
2,066
146
2,212
338
Installment loans to individuals 280
246
24
270
3
Totals $ 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, 2019				March 31, 2018				September 30, 2019				September 30, 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	$	1,242	$	3	$	363	$	3	$	2,533	$	2	$	331	$	3
Real estate – construction	320		—		252		1		256		—		520		1
Real estate – 1-4 family mortgage	5,577		42		6,320		40		5,364		30		4,817		33
Real estate – commercial mortgage	2,630		12		1,642		18		1,150		11		1,511		12
Installment loans to individuals	397		—		160		—		333		—		244		—
Total	$	10,166	$	57	$	8,737	$	62	$	9,636	$	43	$	7,423	$	49




	Nine Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	2,312	$	6	$	334	$	8
Real estate – construction	256		3		520		2
Real estate – 1-4 family mortgage	5,468		96		4,907		107
Real estate – commercial mortgage	1,185		36		1,545		43
Installment loans to individuals	340		—		244		—
Total	$	9,561	$	141	$	7,550	$	160

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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



	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
September 30, 2019
Commercial, financial, agricultural	$	54,354	$	3,417	$	27,693	$	31,110	$	128
Real estate – construction	624		—		605		605		—
Real estate – 1-4 family mortgage	45,511		11,203		26,421		37,624		350
Real estate – commercial mortgage	136,472		58,068		57,714		115,782		2,068
Installment loans to individuals	6,013		646		2,347		2,993		2
Total	$	242,974	$	73,334	$	114,780	$	188,114	$	2,548
December 31, 2018
Commercial, financial, agricultural	$	44,403	$	3,779	$	25,364	$	29,143	$	161
Real estate – 1-4 family mortgage	53,823		12,169		36,074		48,243		488
Real estate – commercial mortgage	165,700		62,003		78,435		140,438		1,901
Installment loans to individuals	8,290		660		3,770		4,430		2
Totals	$	272,216	$	78,611	$	143,643	$	222,254	$	2,552

~~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
March 31, 2019
Commercial, financial, agricultural $ 39,542
$ 3,292
$ 21,555
$ 24,847
$ 129
Real estate – 1-4 family mortgage 52,787
10,715
33,109
43,824
420
Real estate – commercial mortgage 158,927
59,827
76,455
136,282
1,973
Installment loans to individuals 7,555
665
3,228
3,893
2
Total $ 258,811
$ 74,499
$ 134,347
$ 208,846
$ 2,524
December 31, 2018
Commercial, financial, agricultural $ 44,403
$ 3,779
$ 25,364
$ 29,143
$ 161
Real estate – 1-4 family mortgage 53,823
12,169
36,074
48,243
488
Real estate – commercial mortgage 165,700
62,003
78,435
140,438
1,901
Installment loans to individuals 8,290
660
3,770
4,430
2
Totals $ 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, 2019				March 31, 2018				September 30, 2019				September 30, 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	$	27,403	$	427	$	16,899	$	225	$	32,150	$	283	$	11,705	$	162
Real estate – construction									558		8		—		—
Real estate – 1-4 family mortgage	44,177		572		58,749		673		38,031		538		51,957		621
Real estate – commercial mortgage	137,421		1,796		167,365		1,972		117,179		1,541		141,780		1,705
Installment loans to individuals	4,144		106		1,687		18		3,192		86		1,608		18
Total	$	213,145	$	2,901	$	244,700	$	2,888	$	191,110	$	2,456	$	207,050	$	2,506




	Nine Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	35,304	$	1,145	$	12,117	$	579
Real estate – construction	560		8		—		—
Real estate – 1-4 family mortgage	38,682		1,699		53,093		1,941
Real estate – commercial mortgage	119,327		5,015		144,530		5,610
Installment loans to individuals	3,576		287		1,616		54
Total	$	197,449	$	8,154	$	211,356	$	8,184

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
Three months ended September 30, 2019
Commercial, financial, agricultural	1	$	258	$	258
Real estate – 1-4 family mortgage	1	$	34	$	34
Total	2	$	292	$	292




	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Nine months ended September 30, 2019
Commercial, financial, agricultural	2	$	2,778	$	2,778
Real estate – 1-4 family mortgage	1	$	34	$	34
Real estate – commercial mortgage	1	80		76
Total	4	$	2,892	$	2,888
Nine months ended September 30, 2018
Commercial, financial, agricultural	1	$	48	$	44
Real estate – 1-4 family mortgage	1	$	18	$	17
Real estate – commercial mortgage	1	8		7
Total	3	$	74	$	68

~~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
Commercial, financial, agricultural 1
$ 48
$ 44
Real estate – commercial mortgage 1
8
7
Total 2
$ 56
$ 51

With respect to loans that were restructured during the ~~three~~nine months ended ~~March 31,~~September 30, 2019, NaN have subsequently defaulted as of the date of this report. With respect to loans that were restructured during the nine months ended September 30, 2018, ~~none~~$5 have subsequently defaulted within twelve months of the restructuring.

There were ~~four~~2 restructured loans in the amount of ~~$414~~$272 contractually 90 days past due or more and still accruing at ~~March 31,~~September 30, 2019 and no3 restructured loans in the amount of $503 contractually 90 days past due or more and still accruing at ~~March 31,~~September 30, 2018. The outstanding balance of restructured loans on nonaccrual status was ~~$1,851~~$707 and ~~$616~~$493 at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018, respectively.

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

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Number of
Loans

Recorded
Investment
Totals at January 1, 2019 54
$ 7,495
Additional advances or loans with concessions —
174
Reclassified as performing restructured loan 5
212
Reductions due to:
Reclassified to nonperforming loans (2 ) (269 )
Paid in full (2 ) (104 )
Principal paydowns —
(261 )
Totals at March 31, 2019 55
$ 7,247



	Number of Loans		Recorded Investment
Totals at January 1, 2019	54		$	7,495
Additional advances or loans with concessions	4		3,128
Reclassified as performing restructured loan	13		1,788
Reductions due to:
Reclassified to nonperforming loans	(9	)	(746		)
Paid in full	(7	)	(370		)
Measurement period adjustment on recently acquired loans	—		(2,376		)
Principal paydowns	—		(375		)
Totals at September 30, 2019	55		$	8,544

The allocated allowance for loan losses attributable to restructured loans was ~~$86~~$91 and ~~$100~~$62 at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018, respectively. The Company had $3$5 and $2 in remaining availability under commitments to lend additional funds on these restructured loans at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 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:



	Pass		Watch		Substandard		Total
September 30, 2019
Commercial, financial, agricultural	$	281,746	$	7,323	$	5,208	$	294,277
Real estate – construction	49,431		—		—		49,431
Real estate – 1-4 family mortgage	80,714		3,874		5,448		90,036
Real estate – commercial mortgage	1,006,704		44,714		15,971		1,067,389
Installment loans to individuals	—		—		—		—
Total	$	1,418,595	$	55,911	$	26,627	$	1,501,133
December 31, 2018
Commercial, financial, agricultural	$	333,147	$	33,857	$	2,744	$	369,748
Real estate – construction	101,122		—		842		101,964
Real estate – 1-4 family mortgage	113,874		7,347		7,585		128,806
Real estate – commercial mortgage	1,198,540		43,046		9,984		1,251,570
Installment loans to individuals	—		—		2		2
Total	$	1,746,683	$	84,250	$	21,157	$	1,852,090

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~~Renasant Corporation and Subsidiaries~~

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

Pass Watch Substandard Total
March 31, 2019
Commercial, financial, agricultural $ 304,994
$ 31,682
$ 6,355
$ 343,031
Real estate – construction 85,670
—
—
85,670
Real estate – 1-4 family mortgage 99,772
5,741
6,698
112,211
Real estate – commercial mortgage 1,109,980
65,879
13,171
1,189,030
Installment loans to individuals —
—
1
1
Total $ 1,600,416
$ 103,302
$ 26,225
$ 1,729,943
December 31, 2018
Commercial, financial, agricultural $ 333,147
$ 33,857
$ 2,744
$ 369,748
Real estate – construction 101,122
—
842
101,964
Real estate – 1-4 family mortgage 113,874
7,347
7,585
128,806
Real estate – commercial mortgage 1,198,540
43,046
9,984
1,251,570
Installment loans to individuals —
—
2
2
Total $ 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:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Performing
Non-
Performing
Total
March 31, 2019
Commercial, financial, agricultural $ 19,454
$ 44
$ 19,498
Real estate – construction 4,284
—
4,284
Real estate – 1-4 family mortgage 494,730
3,500
498,230
Real estate – commercial mortgage 32,023
111
32,134
Installment loans to individuals 29,324
435
29,759
Total $ 579,815
$ 4,090
$ 583,905
December 31, 2018
Commercial, financial, agricultural $ 21,303
$ 69
$ 21,372
Real estate – construction 3,185

—
3,185
Real estate – 1-4 family mortgage 526,699
3,705
530,404
Real estate – commercial mortgage 30,951
185
31,136
Installment loans to individuals 32,676
300
32,976
Total $ 614,814
$ 4,259
$ 619,073



	Performing		Non- Performing		Total
September 30, 2019
Commercial, financial, agricultural	$	14,012	$	294	$	14,306
Real estate – construction	2,070		—		2,070
Real estate – 1-4 family mortgage	430,549		3,516		434,065
Real estate – commercial mortgage	29,629		105		29,734
Installment loans to individuals	112,198		346		112,544
Total	$	588,458	$	4,261	$	592,719
December 31, 2018
Commercial, financial, agricultural	$	21,303	$	69	$	21,372
Real estate – construction	3,185		—		3,185
Real estate – 1-4 family mortgage	526,699		3,705		530,404
Real estate – commercial mortgage	30,951		185		31,136
Installment loans to individuals	32,676		300		32,976
Total	$	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:



	Total Purchased Credit Deteriorated Loans
September 30, 2019
Commercial, financial, agricultural	$	31,110
Real estate – construction	605
Real estate – 1-4 family mortgage	37,624
Real estate – commercial mortgage	115,782
Installment loans to individuals	2,993
Total	$	188,114
December 31, 2018
Commercial, financial, agricultural	$	29,143
Real estate – 1-4 family mortgage	48,243
Real estate – commercial mortgage	140,438
Installment loans to individuals	4,430
Total	$	222,254

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~~Renasant Corporation and Subsidiaries~~

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

Total Purchased Credit Deteriorated Loans
March 31, 2019
Commercial, financial, agricultural $ 24,847
Real estate – 1-4 family mortgage 43,824
Real estate – commercial mortgage 136,282
Installment loans to individuals 3,893
Total $ 208,846
December 31, 2018
Commercial, financial, agricultural $ 29,143
Real estate – 1-4 family mortgage 48,243
Real estate – commercial mortgage 140,438
Installment loans to individuals 4,430
Total $ 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,~~September 30, 2019:


	Total Purchased Credit Deteriorated Loans			Total Purchased Credit Deteriorated Loans
Contractually-required principal and interest	$	297,164		$	276,348
Nonaccretable difference⁽¹⁾	(57,848		)	(62,180		)
Cash flows expected to be collected	239,316			214,168
Accretable yield⁽²⁾	(30,470		)	(26,054		)
Fair value	$	208,846		$	188,114

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


(1)	Represents contractual principal and interest cash flows of ~~$47,930~~$52,839 and ~~$9,918,~~$9,341, respectively, not expected to be collected.


(2)	Represents contractual principal and interest cash flows of ~~$1,606~~$1,625 and ~~$28,864,~~$24,429, respectively, expected to be collected.

Changes in the accretable yield of loans purchased with deteriorated credit quality were as follows as of ~~March 31,~~September 30, 2019:



	Total Purchased Credit Deteriorated Loans
Balance at January 1, 2019	$	(34,265	)
Measurement period adjustment on recently acquired loans	(3,712		)
Reclassification from nonaccretable difference	(6,056		)
Accretion	16,442
Charge-offs	1,537
Balance at September 30, 2019	$	(26,054	)

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 Brand as of the September 1, 2018 acquisition date.



At acquisition date:	September 1, 2018
Contractually-required principal and interest	$	1,625,079
Nonaccretable difference	(164,554		)
Cash flows expected to be collected	1,460,525
Accretable yield	(138,318		)
Fair value	$	1,322,207

At acquisition date: September 1, 2018
  Contractually-required principal and interest $ 1,625,079
  Nonaccretable difference (123,399 )
  Cash flows expected to be collected 1,501,680
  Accretable yield (170,651 )
      Fair value $ 1,331,029

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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:



	September 30, 2019			December 31, 2018
Commercial, financial, agricultural	$	1,328,560		$	1,295,912
Lease financing	73,617			64,992
Real estate – construction	816,695			740,668
Real estate – 1-4 family mortgage	2,797,633			2,795,343
Real estate – commercial mortgage	4,022,375			4,051,509
Installment loans to individuals	278,568			137,832
Gross loans	9,317,448			9,086,256
Unearned income	(3,664		)	(3,127		)
Loans, net of unearned income	9,313,784			9,083,129
Allowance for loan losses	(50,814		)	(49,026		)
Net loans	$	9,262,970		$	9,034,103

March 31,
2019 December 31, 2018
Commercial, financial, agricultural $ 1,308,457
$ 1,295,912
Lease financing 61,539
64,992
Real estate – construction 741,073
740,668
Real estate – 1-4 family mortgage 2,769,173
2,795,343
Real estate – commercial mortgage 4,083,632
4,051,509
Installment loans to individuals 127,307
137,832
Gross loans 9,091,181
9,086,256
Unearned income (2,888 ) (3,127 )
Loans, net of unearned income 9,088,293
9,083,129
Allowance for loan losses (49,835 ) (49,026 )
Net loans $ 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.

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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, 2019
Three Months Ended September 30, 2019
Allowance for loan losses:
Beginning balance	$	8,269		$	4,755	$	10,139		$	24,492		$	1,371		$	49,026		$	9,534		$	5,302		$	9,616		$	24,302		$	1,305		$	50,059
Charge-offs	(258		)	—		(497		)	(562		)	(220		)	(1,537		)	(757		)	—			(268		)	(677		)	(3,263		)	(4,965		)
Recoveries	374			7		197			245			23			846			761			—			219			33			3,007			4,020
Net recoveries (charge-offs)	116			7		(300		)	(317		)	(197		)	(691		)	4			—			(49		)	(644		)	(256		)	(945		)
Provision for loan losses charged to operations	1,237			16		(348		)	468			127			1,500			750			(175		)	282			381			462			1,700
Ending balance	$	9,622		$	4,778	$	9,491		$	24,643		$	1,301		$	49,835		$	10,288		$	5,127		$	9,849		$	24,039		$	1,511		$	50,814
Period-End Amount Allocated to:
Individually evaluated for impairment	$	1,181		$	58	$	127		$	842		$	5		$	2,213
Collectively evaluated for impairment	8,312			4,720		8,944			21,828			1,294			45,098
Purchased with deteriorated credit quality	129			—		420			1,973			2			2,524
Ending balance	$	9,622		$	4,778	$	9,491		$	24,643		$	1,301		$	49,835




	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Nine Months Ended September 30, 2019
Allowance for loan losses:
Beginning balance	$	8,269		$	4,755	$	10,139		$	24,492		$	1,371		$	49,026
Charge-offs	(1,709		)	—		(1,143		)	(1,406		)	(3,695		)	(7,953		)
Recoveries	1,376			7		531			644			3,083			5,641
Net (charge-offs) recoveries	(333		)	7		(612		)	(762		)	(612		)	(2,312		)
Provision for loan losses charged to operations	2,352			365		322			309			752			4,100
Ending balance	$	10,288		$	5,127	$	9,849		$	24,039		$	1,511		$	50,814
Period-End Amount Allocated to:
Individually evaluated for impairment	$	1,382		$	24	$	186		$	450		$	3		$	2,045
Collectively evaluated for impairment	8,778			5,103		9,313			21,521			1,506			46,221
Purchased with deteriorated credit quality	128			—		350			2,068			2			2,548
Ending balance	$	10,288		$	5,127	$	9,849		$	24,039		$	1,511		$	50,814


(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 September 30, 2018
Allowance for loan losses:
Beginning balance	$	7,146		$	4,702	$	11,657		$	22,450		$	1,400		$	47,355
Charge-offs	(511		)	—		(211		)	(216		)	(402		)	(1,340		)
Recoveries	24			3		119			152			47			345
Net (charge-offs) recoveries	(487		)	3		(92		)	(64		)	(355		)	(995		)
Provision for loan losses charged to operations	1,448			8		(1,497		)	2,041			250			2,250
Ending balance	$	8,107		$	4,713	$	10,068		$	24,427		$	1,295		$	48,610

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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

Three Months Ended March 31, 2018
Nine Months Ended September 30, 2018
Allowance for loan losses:
Beginning balance	$	5,542		$	3,428	$	12,009		$	23,384		$	1,848		$	46,211		$	5,542		$	3,428	$	12,009		$	23,384		$	1,848		$	46,211
Charge-offs	(659		)	—		(671		)	(613		)	(122		)	(2,065		)	(1,627		)	—		(1,861		)	(875		)	(623		)	(4,986		)
Recoveries	235			4		133			108			25			505			373			10		335			756			101			1,575
Net (charge-offs) recoveries	(424		)	4		(538		)	(505		)	(97		)	(1,560		)	(1,254		)	10		(1,526		)	(119		)	(522		)	(3,411		)
Provision for loan losses charged to operations	1,953			766		(67		)	(965		)	63			1,750			3,819			1,275		(415		)	1,162			(31		)	5,810
Ending balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401		$	8,107		$	4,713	$	10,068		$	24,427		$	1,295		$	48,610
Period-End Amount Allocated to:
Individually evaluated for impairment	$	272		$	1	$	168		$	1,026		$	5		$	1,472		$	421		$	70	$	70		$	715		$	4		$	1,280
Collectively evaluated for impairment	6,494			4,197		10,750			19,865			1,806			43,112			7,326			4,643		9,493			21,751			1,289			44,502
Purchased with deteriorated credit quality	305			—		486			1,023			3			1,817			360			—		505			1,961			2			2,828
Ending balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401		$	8,107		$	4,713	$	10,068		$	24,427		$	1,295		$	48,610


(1)	Includes lease financing receivables.

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, 2019
September 30, 2019
Individually evaluated for impairment	$	5,809	$	8,805	$	13,952	$	9,442	$	598	$	38,606	$	8,124	$	12,380	$	17,332	$	11,755	$	455	$	50,046
Collectively evaluated for impairment	1,277,801		732,268		2,711,397		3,937,908		181,467		8,840,841		1,289,326		803,710		2,742,677		3,894,838		345,073		9,075,624
Purchased with deteriorated credit quality	24,847		—		43,824		136,282		3,893		208,846		31,110		605		37,624		115,782		2,993		188,114
Ending balance	$	1,308,457	$	741,073	$	2,769,173	$	4,083,632	$	185,958	$	9,088,293	$	1,328,560	$	816,695	$	2,797,633	$	4,022,375	$	348,521	$	9,313,784
December 31, 2018
Individually evaluated for impairment	$	2,445	$	10,043	$	14,238	$	8,059	$	493	$	35,278	$	2,445	$	10,043	$	14,238	$	8,059	$	493	$	35,278
Collectively evaluated for impairment	1,264,324		730,625		2,732,862		3,903,012		194,774		8,825,597		1,264,324		730,625		2,732,862		3,903,012		194,774		8,825,597
Purchased with deteriorated credit quality	29,143		—		48,243		140,438		4,430		222,254		29,143		—		48,243		140,438		4,430		222,254
Ending balance	$	1,295,912	$	740,668	$	2,795,343	$	4,051,509	$	199,697	$	9,083,129	$	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:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Purchased OREO Non Purchased OREO
Total
OREO
March 31, 2019
Residential real estate $ 887
$ 1,764
$ 2,651
Commercial real estate 2,317
1,391
3,708
Residential land development 675
420
1,095
Commercial land development 2,053
648
2,701
Total $ 5,932
$ 4,223
$ 10,155
December 31, 2018
Residential real estate $ 423
$ 1,910
$ 2,333
Commercial real estate 2,686
1,611
4,297
Residential land development 678
421
1,099
Commercial land development 2,400
911
3,311
Total $ 6,187
$ 4,853
$ 11,040



	Purchased OREO		Non Purchased OREO		Total OREO
September 30, 2019
Residential real estate	$	907	$	97	$	1,004
Commercial real estate	3,049		908		3,957
Residential land development	530		369		899
Commercial land development	1,730		601		2,331
Total	$	6,216	$	1,975	$	8,191
December 31, 2018
Residential real estate	$	423	$	1,910	$	2,333
Commercial real estate	2,686		1,611		4,297
Residential land development	678		421		1,099
Commercial land development	2,400		911		3,311
Total	$	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
Balance at January 1, 2019	$	6,187		$	4,853		$	11,040
Transfers of loans	2,424			1,189			3,613
Impairments	(804		)	(317		)	(1,121		)
Dispositions	(1,591		)	(3,750		)	(5,341		)
Balance at September 30, 2019	$	6,216		$	1,975		$	8,191

Purchased
OREO
Non Purchased OREO
Total
OREO
Balance at January 1, 2019 $ 6,187
$ 4,853
$ 11,040
Transfers of loans 509
376
885
Impairments (523 ) (204 ) (727 )
Dispositions (241 ) (802 ) (1,043 )
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:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Repairs and maintenance	$	94		$	74		$	306		$	242
Property taxes and insurance	43			38			169			187
Impairments	253			380			1,121			1,129
Net (gains) losses on OREO sales	31			(213		)	91			(356		)
Rental income	(3		)	(1		)	(13		)	(35		)
Total	$	418		$	278		$	1,674		$	1,167

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~~Renasant Corporation and Subsidiaries~~

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

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

Note 8 – Goodwill and Other Intangible Assets

(In Thousands)

The carrying amounts of goodwill by operating segments for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 were as follows:



	Community Banks		Insurance		Total
Balance at January 1, 2019	$	930,161	$	2,767	$	932,928
Measurement period adjustment to goodwill from Brand acquisition	6,755		—		6,755
Balance at September 30, 2019	$	936,916	$	2,767	$	939,683

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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~~This addition is ~~finalizing~~primarily related to measurement period adjustments on the fair ~~values~~value of ~~certain assets, including~~ loans, ~~property~~debt and ~~equipment, taxes and certain~~ other ~~assets,~~assets. The purchase accounting related to the ~~acquisition; as such, the recorded balance of goodwill~~Brand acquisition is ~~subject to change.~~now final.

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



	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
September 30, 2019
Core deposit intangibles	$	82,492	$	(44,694	)	$	37,798
Customer relationship intangible	1,970		(1,061		)	909
Total finite-lived intangible assets	$	84,462	$	(45,755	)	$	38,707
December 31, 2018
Core deposit intangibles	$	82,492	$	(38,634	)	$	43,858
Customer relationship intangible	1,970		(963		)	1,007
Total finite-lived intangible assets	$	84,462	$	(39,597	)	$	44,865

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount
March 31, 2019
Core deposit intangibles $ 82,492
$ (40,711 ) $ 41,781
Customer relationship intangible 1,970
(996 ) 974
Total finite-lived intangible assets $ 84,462
$ (41,707 ) $ 42,755
December 31, 2018
Core deposit intangibles $ 82,492
$ (38,634 ) $ 43,858
Customer relationship intangible 1,970
(963 ) 1,007
Total finite-lived intangible assets $ 84,462
$ (39,597 ) $ 44,865

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Amortization expense for:
Core deposit intangibles	$	1,963	$	1,732	$	6,060	$	4,911
Customer relationship intangible	33		33		99		99
Total intangible amortization	$	1,996	$	1,765	$	6,159	$	5,010

Three Months Ended
March 31,
2019 2018
Amortization expense for:
Core deposit intangibles $ 2,077
$ 1,618

Customer relationship intangible 33
33

Total intangible amortization $ 2,110
$ 1,651

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~~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, 2019 and the succeeding four years is summarized as follows:



	Core Deposit Intangibles		Customer Relationship Intangible		Total

2019	$	7,965	$	131	$	8,096
2020	6,939		131		7,070
2021	5,860		131		5,991
2022	4,940		131		5,071
2023	4,044		131		4,175

Core Deposit Intangibles Customer Relationship Intangible Total

2019 $ 7,965
$ 131
$ 8,096
2020 6,939
131
7,070
2021 5,860
131
5,991
2022 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. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment ~~losses on MSRs are~~is recognized through a valuation allowance, to the extent that unamortized cost exceeds fair value. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the valuation allowance may be recorded as an increase to income. Changes in valuation allowances related to servicing rights are reported in mortgage banking income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. There were ~~no impairment losses~~$3,132 of valuation adjustments on MSRs during the nine months ended September 30, 2019, primarily arising on account

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Notes to Consolidated Financial Statements (Unaudited)

of the difference between actual prepayment speeds and the Company’s assumptions with respect to prepayment speeds, and 0 valuation adjustments recognized during the ~~three~~nine months ended ~~March 31, 2019 and~~September 30, 2018.

Changes in the Company’s MSRs were as follows:



Balance at January 1, 2019	$	48,230
Capitalization	8,183
Amortization	(4,995		)
Valuation adjustment	(3,132		)
Balance at September 30, 2019	$	48,286

Balance at January 1, 2019 $ 48,230
Capitalization 2,181
Amortization (1,438 )
Balance at March 31, 2019 $ 48,973

Data and key economic assumptions related to the Company’s MSRs are as follows as of the dates presented:



	September 30, 2019			December 31, 2018
Unpaid principal balance	$	4,761,925		$	4,635,712

Weighted-average prepayment speed (CPR)	12.12		%	7.95		%
Estimated impact of a 10% increase	$	(2,280	)	$	(1,264	)
Estimated impact of a 20% increase	(4,380		)	(2,569		)

Discount rate	9.60		%	9.45		%
Estimated impact of a 10% increase	$	(1,815	)	$	(2,657	)
Estimated impact of a 20% increase	(3,499		)	(5,103		)

Weighted-average coupon interest rate	4.07		%	4.04		%
Weighted-average servicing fee (basis points)	28.36			27.47
Weighted-average remaining maturity (in years)	6.08			8.03

March 31, 2019 December 31, 2018
Unpaid principal balance $ 4,684,587
$ 4,635,712

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

Discount rate 9.45 % 9.45 %
Estimated impact of a 10% increase $ (2,243 ) $ (2,657 )
Estimated impact of a 20% increase (4,316 ) (5,103 )

Weighted-average coupon interest rate 4.07 % 4.04 %
Weighted-average servicing fee (basis points) 27.65
27.47

Weighted-average remaining maturity (in years) 7.08 8.03

The Company recorded servicing fees of ~~$2,254~~$2,346 and ~~$2,370~~$2,154 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, which are included in “Mortgage banking income” in the Consolidated Statements of Income. The Company recorded servicing fees of $7,081 and $6,648 for the nine months ended September 30, 2019 and 2018, respectively.

Note 10 - Employee Benefit and Deferred Compensation Plans

(In Thousands, Except Share Data)

Pension and Post-retirement Medical Plans

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~~Renasant Corporation and Subsidiaries~~

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

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

The Company provides retiree medical benefits, 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 group medical plan as of December 31, 2004; and (ii) retire from the Company between ages 55 and 65 with at least 15 years of service or 70 points (points determined as the sum of age and service.) The Company periodically determines the portion of the premiums to be paid by each retiree and the portion to be paid by the Company. Coverage ceases when a retiree attains age 65 and is eligible for Medicare. The Company also provides life insurance for each retiree who receives retiree medical benefits. The face amount of the coverage is $5; coverage is provided until each retiree attains age 70. Retirees may purchase additional insurance or continue coverage beyond age 70 at their sole expense.

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

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

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



	Pension Benefits						Other Benefits
	Three Months Ended						Three Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Service cost	$	—		$	—		$	2		$	2
Interest cost	294			261			7			7
Expected return on plan assets	(362		)	(520		)	—			—
Recognized actuarial loss (gain)	110			82			(6		)	—
Net periodic benefit cost (return)	$	42		$	(177	)	$	3		$	9



	Pension Benefits						Other Benefits
	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Service cost	$	—		$	—		$	5		$	6
Interest cost	882			783			23			23
Expected return on plan assets	(1,087		)	(1,558		)	—			—
Recognized actuarial loss (gain)	331			246			(17		)	—
Net periodic benefit cost (return)	$	126		$	(529	)	$	11		$	29

Incentive Compensation Plans

The Company maintains a long-term equity compensation plan 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. Options granted under the plan permit the acquisition of shares of the Company’s common stock at 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 date of grant. Options that do not vest or expire unexercised are forfeited and canceled. There were no0 stock options granted, nor compensation expense associated with options recorded, during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 or 2018.

The following table summarizes information about options outstanding, exercised and forfeited as of and for the ~~three~~nine months ended ~~March 31,~~September 30, 2019:



	Shares		Weighted Average Exercise Price
Options outstanding at beginning of period	43,750		$	15.84
Granted	—		—
Exercised	(11,000	)	16.29
Forfeited	—		—
Options outstanding at end of period	32,750		$	15.69

Shares Weighted Average Exercise Price
Options outstanding at beginning of period 43,750
$ 15.84
Granted —
—
Exercised (2,500 ) 16.91
Forfeited —
—
Options outstanding at end of period 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. Performance-based awards are subject to the attainment of designated performance criteria during a fixed performance cycle. Performance criteria may relate to the Company’s performance 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,~~threshold, target, and superior levels of performance. ~~Minimum~~

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~~Renasant Corporation and Subsidiaries~~

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

Threshold performance must be attained for the vesting of any shares; superior performance must be attained for maximum payouts. Time-based restricted stock awards relate to a fixed number of shares that vest at the end of a designated service period.

The following table summarizes the changes in restricted stock as of and for the ~~three~~nine months ended ~~March 31,~~September 30, 2019:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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 41,300
$ 40.89
304,955
$ 41.82
Awarded 154,250
30.18
189,346
30.18
Vested —
—
(58,979 ) 36.75
Cancelled —
—
(6,230 ) 41.11
Nonvested at end of period 195,550
$ 32.44
429,092
$ 37.39



	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	41,300	$	40.89	304,955		$	41.82
Awarded	154,250	30.18		307,854		32.11
Vested	—	—		(90,108	)	39.83
Cancelled	—	—		(13,483	)	41.10
Nonvested at end of period	195,550	$	32.44	509,218		$	36.32

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the Company reissued ~~87,150~~116,252 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 ~~$2,637~~$3,002 and ~~$1,792~~$1,844 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, and $7,721 and $5,556 for the nine months ended September 30, 2019 and 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,~~September 30, 2019, the Company had notional amounts of $~~204,403~~204,590 on interest rate contracts with corporate customers and $~~204,403~~204,590 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~~2 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~~the Bank ~~will pay~~pays a fixed interest rate and ~~will receive~~receives 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~~2 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 $~~206,394~~316,330 and $159,464 at ~~March 31,~~September 30, 2019 and December 31, 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 $~~326,743~~593,000 and $281,343 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively.

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~~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:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Fair Value

Balance Sheet
Location
March 31,
2019 December 31, 2018
Derivative assets:
Not designated as hedging instruments:
Interest rate contracts Other Assets $ 2,391
$ 2,779
Interest rate lock commitments Other Assets 4,964
3,740
Forward commitments Other Assets 31
—
Totals $ 7,386
$ 6,519
Derivative liabilities:
Designated as hedging instruments:
Interest rate swaps Other Liabilities $ 3,274
$ 2,046
Totals $ 3,274
$ 2,046
Not designated as hedging instruments:
Interest rate contracts Other Liabilities $ 2,391
$ 2,779
Interest rate lock commitments Other Liabilities 1
—
Forward commitments Other Liabilities 2,692
3,563
Totals $ 5,084
$ 6,342



		Fair Value
	Balance Sheet Location	September 30, 2019		December 31, 2018
Derivative assets:
Not designated as hedging instruments:
Interest rate contracts	Other Assets	$	5,055	$	2,779
Interest rate lock commitments	Other Assets	6,694		3,740
Forward commitments	Other Assets	580		—
Totals		$	12,329	$	6,519
Derivative liabilities:
Designated as hedging instruments:
Interest rate swaps	Other Liabilities	$	6,290	$	2,046
Totals		$	6,290	$	2,046
Not designated as hedging instruments:
Interest rate contracts	Other Liabilities	$	5,055	$	2,779
Interest rate lock commitments	Other Liabilities	14		—
Forward commitments	Other Liabilities	1,136		3,563
Totals		$	6,205	$	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						Nine Months Ended
	March 31,				September 30,						September 30,
	2019		2018		2019			2018			2019		2018
Derivatives not designated as hedging instruments:
Interest rate contracts:
Included in interest income on loans	$	1,046	$	986	$	950		$	1,042		$	2,985	$	3,066
Interest rate lock commitments:
Included in mortgage banking income	1,222		2,184		(444		)	(1,737		)	2,954		209
Forward commitments
Included in mortgage banking income	901		88		3,526			2,839			3,006		1,915
Total	$	3,169	$	3,258	$	4,032		$	2,144		$	8,945	$	5,190

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~~nine months ended ~~March 31,~~September 30, 2019 or 2018. The impact on other comprehensive income for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively, can be seen at Note 15, “Other Comprehensive 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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~~Renasant Corporation and Subsidiaries~~

~~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
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Gross amounts recognized	$	589	$	1,620	$	12,471	$	6,768
Gross amounts offset in the Consolidated Balance Sheets	—		—		—		—
Net amounts presented in the Consolidated Balance Sheets	589		1,620		12,471		6,768
Gross amounts not offset in the Consolidated Balance Sheets
Financial instruments	589		1,620		589		1,620
Financial collateral pledged	—		—		11,061		2,745
Net amounts	$	—	$	—	$	821	$	2,403

Offsetting Derivative Assets Offsetting Derivative Liabilities
March 31,
2019 December 31, 2018 March 31,
2019 December 31, 2018
Gross amounts recognized $ 659
$ 1,620
$ 7,719
$ 6,768
Gross amounts offset in the Consolidated Balance Sheets —
—
—
—
Net amounts presented in the Consolidated Balance Sheets 659
1,620
7,719
6,768
Gross amounts not offset in the Consolidated Balance Sheets
Financial instruments 659
1,620
659
1,620
Financial collateral pledged —
—
4,418
2,745
Net amounts $ —
$ —
$ 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.



	September 30,		December 31,
	2019		2018
Deferred tax assets
Allowance for loan losses	$	15,276	$	14,097
Loans	14,260		18,655
Deferred compensation	10,941		10,001
Securities	—		6,180
Impairment of assets	1,150		1,280
Federal and State net operating loss carryforwards	12,357		19,065
Leases	23,485		—
Other	6,074		9,800
Total deferred tax assets	83,543		79,078
Deferred tax liabilities
Securities	507		—
Investment in partnerships	1,265		1,572
Fixed assets	3,864		3,865
Mortgage servicing rights	13,179		12,350
Junior subordinated debt	2,372		1,607
Intangibles	5,255		6,190
Right of use assets	22,498		—
Other	1,369		1,792
Total deferred tax liabilities	50,309		27,376
Net deferred tax assets	$	33,234	$	51,702

March 31, December 31,
2019 2018
Deferred tax assets
Allowance for loan losses $ 14,292
$ 14,097
Loans 16,864
18,655
Deferred compensation 8,554
10,001
Securities 2,614
6,180
Impairment of assets 1,748
1,280
Federal and State net operating loss carryforwards 16,938
19,065
Other 16,624
3,610
Total deferred tax assets 77,634
72,888
Deferred tax liabilities
Investment in partnerships 1,469
1,572
Fixed assets 3,865
3,865
Mortgage servicing rights 12,542
12,350
Junior subordinated debt 1,652
1,607
Other 15,903
1,792
Total deferred tax liabilities 35,431
21,186
Net deferred tax assets $ 42,203
$ 51,702

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, the Company recorded a provision for income taxes totaling ~~$13,590~~$38,667 and ~~$9,673,~~$28,629, respectively. The provision for income taxes includes both federal and state income taxes and differs from the statutory ~~rate due to favorable permanent differences. The effective tax rate was 23.15% and 22.24% for the three months ending March 31, 2019 and 2018, respectively.~~

3339

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Notes to Consolidated Financial Statements (Unaudited)

rate due to favorable permanent differences. The effective tax rate was 23.04% and 21.83% for the nine months ended September 30, 2019 and 2018, respectively.

The Company and its subsidiary file a consolidated U.S. federal income tax return. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the ~~Department~~state departments of ~~Revenue~~revenue for the years ending December 31, 2015 through December 31, 2018.

The Company acquired both federal and state net operating losses 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, as of the September 1, 2018 acquisition date, 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 Company’s acquisition of Heritage ~~acquisition~~Financial Group, Inc. (“Heritage”) in 2015 were $18,321 and $16,877, respectively, of which $4,956 and $2,365 remain to be utilized as of December 31, ~~2018.These~~2018. The net operating losses related to the Heritage acquisition 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 period ending ~~March 31,~~September 30, 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,~~September 30, 2019 and December 31, 2018, the ~~Company’s~~ carrying value of the Company’s QAHPs was ~~$5,626~~$4,841 and $6,037, respectively. The Company has no0 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						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Tax credit amortization	$	394		$	394		$	1,181		$	1,198
Tax credits and other benefits	(529		)	(572		)	(1,674		)	(1,717		)
Total	$	(135	)	$	(178	)	$	(493	)	$	(519	)

Three Months Ended
March 31,
2019 2018
Tax credit amortization $ 394
$ 394
Tax credits and other benefits (572 ) (572 )
Total $ (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”).

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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 and trust preferred ~~securities,~~

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~~Renasant Corporation and Subsidiaries~~

~~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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Notes to Consolidated Financial Statements (Unaudited)


	Level 1		Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
March 31, 2019
September 30, 2019
Financial assets:
Securities available for sale:
U.S. Treasury securities									$	—	$	498	$	—	$	498
Obligations of other U.S. Government agencies and corporations	$	—	$	2,525	$	—	$	2,525	—		2,537		—		2,537
Obligations of states and political subdivisions	—		183,762		—		183,762		—		216,988		—		216,988
Residential mortgage-backed securities:
Residential mortgage backed securities:
Government agency mortgage backed securities	—		622,066		—		622,066		—		666,167		—		666,167
Government agency collateralized mortgage obligations	—		319,447		—		319,447		—		191,187		—		191,187
Commercial mortgage-backed securities:
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		21,998		—		21,998		—		27,666		—		27,666
Government agency collateralized mortgage obligations	—		46,330		—		46,330		—		75,423		—		75,423
Trust preferred securities	—		—		10,246		10,246		—		—		9,862		9,862
Other debt securities	—		48,979		—		48,979		—		48,249		—		48,249
Total securities available for sale	—		1,245,107		10,246		1,255,353		—		1,228,715		9,862		1,238,577
Derivative instruments:
Interest rate contracts	—		2,391		—		2,391		—		5,055		—		5,055
Interest rate lock commitments	—		4,964		—		4,964		—		6,694		—		6,694
Forward commitments	—		31		—		31		—		580		—		580
Total derivative instruments	—		7,386		—		7,386		—		12,329		—		12,329
Mortgage loans held for sale in loans held for sale	—		195,807		—		195,807		—		392,448		—		392,448
Total financial assets	$	—	$	1,448,300	$	10,246	$	1,458,546	$	—	$	1,633,492	$	9,862	$	1,643,354
Financial liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	3,274	$	—	$	3,274	$	—	$	6,290	$	—	$	6,290
Interest rate contracts	—		2,391		—		2,391		—		5,055		—		5,055
Interest rate lock commitments	—		1		—		1		—		14		—		14
Forward commitments	—		2,692		—		2,692		—		1,136		—		1,136
Total derivative instruments	—		8,358		—		8,358		—		12,495		—		12,495
Total financial liabilities	$	—	$	8,358	$	—	$	8,358	$	—	$	12,495	$	—	$	12,495

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Notes to Consolidated Financial Statements (Unaudited)



	Level 1		Level 2		Level 3		Totals
December 31, 2018
Financial assets:
Securities available for sale:
Obligations of other U.S. Government agencies and corporations	$	—	$	2,511	$	—	$	2,511
Obligations of states and political subdivisions	—		203,269		—		203,269
Residential mortgage backed securities:
Government agency mortgage backed securities	—		613,283		—		613,283
Government agency collateralized mortgage obligations	—		326,989		—		326,989
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		21,830		—		21,830
Government agency collateralized mortgage obligations	—		28,335		—		28,335
Trust preferred securities	—		—		10,633		10,633
Other debt securities	—		43,927		—		43,927
Total securities available for sale	—		1,240,144		10,633		1,250,777
Derivative instruments:
Interest rate contracts	—		2,779		—		2,779
Interest rate lock commitments	—		3,740		—		3,740
Total derivative instruments	—		6,519		—		6,519
Mortgage loans held for sale	—		219,848		—		219,848
Total financial assets	$	—	$	1,466,511	$	10,633	$	1,477,144
Financial liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	2,046	$	—	$	2,046
Interest rate contracts	—		2,779		—		2,779
Forward commitments	—		3,563		—		3,563
Total derivative instruments	—		8,388		—		8,388
Total financial liabilities	$	—	$	8,388	$	—	$	8,388

Level 1 Level 2 Level 3 Totals
December 31, 2018
Financial assets:
Securities available for sale:
Obligations of other U.S. Government agencies and corporations $ —
$ 2,511
$ —
$ 2,511
Obligations of states and political subdivisions —
203,269
—
203,269
Residential mortgage-backed securities:
Government agency mortgage backed securities —
613,283
—
613,283
Government agency collateralized mortgage obligations —
326,989
—
326,989
Commercial mortgage-backed securities:
Government agency mortgage backed securities —
21,830
—
21,830
Government agency collateralized mortgage obligations —
28,335
—
28,335
Trust preferred securities —
—
10,633
10,633
Other debt securities —
43,927
—
43,927
Total securities available for sale —
1,240,144
10,633
1,250,777
Derivative instruments:
Interest rate contracts —
2,779
—
2,779
Interest rate lock commitments —
3,740
—
3,740
Total derivative instruments —
6,519
—
6,519
Mortgage loans held for sale —
219,848
—
219,848
Total financial assets $ —
$ 1,466,511
$ 10,633
$ 1,477,144
Financial liabilities:
Derivative instruments:
Interest rate swaps $ —
$ 2,046
$ —
$ 2,046
Interest rate contracts —
2,779
—
2,779
Forward commitments —
3,563
—
3,563
Total derivative instruments —
8,388
—
8,388
Total financial liabilities $ —
$ 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~~nine months ended~~March 31,~~September 30, 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, as of the dates presented:


Three Months Ended March 31, 2019	Trust preferred securities
Balance at January 1, 2019	$	10,633
Three Months Ended September 30, 2019				Trust preferred securities
Balance at July 1, 2019				$	10,386
Accretion included in net income	9			9
Unrealized losses included in other comprehensive income	(287		)	(439		)
Purchases	—			—
Sales	—			—
Issues	—			—
Settlements	(109		)	(94		)
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Balance at March 31, 2019	$	10,246
Balance at September 30, 2019				$	9,862

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Notes to Consolidated Financial Statements (Unaudited)


Three Months Ended March 31, 2018	Trust preferred securities
Balance at January 1, 2018	$	9,388
Three Months Ended September 30, 2018				Trust preferred securities
Balance at July 1, 2018				$	10,401
Accretion included in net income	9			8
Unrealized gains included in other comprehensive income	669
Unrealized losses included in other comprehensive income				(45		)
Purchases	—			—
Sales	—			—
Issues	—			—
Settlements	(21		)	(60		)
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Balance at March 31, 2018	$	10,045
Balance at September 30, 2018				$	10,304



Nine Months Ended September 30, 2019	Trust preferred securities
Balance at January 1, 2019	$	10,633
Accretion included in net income	26
Unrealized losses included in other comprehensive income	(572		)
Purchases	—
Sales	—
Issues	—
Settlements	(225		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at September 30, 2019	$	9,862



Nine Months Ended September 30, 2018	Trust preferred securities
Balance at January 1, 2018	$	9,388
Accretion included in net income	25
Unrealized gains included in other comprehensive income	1,007
Reclassification adjustment	—
Purchases	—
Sales	—
Issues	—
Settlements	(116		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at September 30, 2018	$	10,304

For each of the three and the nine months ended~~March 31,~~September 30, 2019 and 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.

The following table presents information as of ~~March 31,~~September 30, 2019 about significant unobservable inputs (Level 3) used in the valuation of assets ~~and liabilities~~ measured at fair value on a recurring basis:

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Financial instrument
Fair
Value
Valuation Technique
Significant
Unobservable Inputs
Range of Inputs
Trust preferred securities $ 10,246
Discounted cash flows Default rate 0-100%



Financial instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs
Trust preferred securities	$	9,862	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, 2019	Level 1		Level 2		Level 3		Totals
September 30, 2019									Level 1		Level 2		Level 3		Totals
Impaired loans	$	—	$	—	$	8,552	$	8,552	$	—	$	—	$	25,418	$	25,418
OREO	—		—		2,764		2,764		—		—		2,911		2,911
Mortgage servicing rights									—		—		48,286		48,286
Total	$	—	$	—	$	11,316	$	11,316	$	—	$	—	$	76,615	$	76,615



December 31, 2018	Level 1		Level 2		Level 3		Totals
Impaired loans	$	—	$	—	$	21,686	$	21,686
OREO	—		—		4,319		4,319
Total	$	—	$	—	$	26,005	$	26,005

December 31, 2018 Level 1 Level 2 Level 3 Totals
Impaired loans $ —
$ —
$ 21,686
$ 21,686
OREO —
—
4,319
4,319
Total $ —
$ —
$ 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 $~~9,521~~27,265 and $22,621 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively, and a specific reserve for these loans of $~~969~~1,847 and $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:



	September 30, 2019			December 31, 2018
Carrying amount prior to remeasurement	$	3,799		$	5,258
Impairment recognized in results of operations	(888		)	(939		)
Fair value	$	2,911		$	4,319

Mortgage servicing rights: The Company retains the right to service certain mortgage loans that it sells to secondary market investors. Mortgage servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an

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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

income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. Because these factors are not all observable and include management's assumptions, mortgage servicing rights are classified within Level 3 of the fair value hierarchy. Mortgage servicing rights were carried at amortized cost at September 30, 2019 and December 31, 2018. There were $3,132 of valuation adjustments on MSRs during the nine months ended September 30, 2019 and 0 valuation adjustments recognized during the twelve months ended December 31, 2018.



Financial instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs
Impaired loans	$	25,418	Appraised value of collateral less estimated costs to sell	Estimated costs to sell	4-10%
OREO	2,911		Appraised value of property less estimated costs to sell	Estimated costs to sell	4-10%

Financial instrument
Fair
Value
Valuation Technique
Significant
Unobservable Inputs
Range of Inputs
Impaired loans $ 8,552
Appraised value of collateral less estimated costs to sell Estimated costs to sell 4-10%
OREO 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~~$3,895 and $1,723 resulting from fair value changes of these mortgage loans were recorded in income during the ~~three~~nine months ended~~March 31,~~September 30, 2019 and 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,~~September 30, 2019:



	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	392,448	$	379,727	$	12,721
Past due loans of 90 days or more	—		—		—
Nonaccrual loans	—		—		—

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~~Renasant Corporation and Subsidiaries~~

~~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
As of March 31, 2019
Carrying
Value
Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents $ 562,066
$ 562,066
$ —
$ —
$ 562,066
Securities available for sale 1,255,353
—
1,245,107
10,246
1,255,353
Loans held for sale 318,563
—
195,807
122,756
318,563
Loans, net 9,038,458
—
—
8,801,277
8,801,277
Mortgage servicing rights 48,973
—
—
55,334
55,334
Derivative instruments 7,386
—
7,386
—
7,386
Financial liabilities
Deposits $ 10,268,912
$ 7,884,578
$ 2,366,030
$ —
$ 10,250,608
Short-term borrowings 87,590
87,590
—
—
87,590
Other long-term borrowings 35
35
—
—
35
Federal Home Loan Bank advances 6,492
—
6,622
—
6,622
Junior subordinated debentures 109,781
—
104,300
—
104,300
Subordinated notes 146,962
—
147,175
—
147,175
Derivative instruments 8,358
—
8,358
—
8,358

Fair Value
As of December 31, 2018
Carrying
Value
Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents $ 569,111
$ 569,111
$ —
$ —
$ 569,111
Securities available for sale 1,250,777
—
1,240,144
10,633
1,250,777
Loans held for sale 411,427
—
219,848
191,579
411,427
Loans, net 9,034,103
—
—
8,818,039
8,818,039
Mortgage servicing rights 48,230
—
—
61,111
61,111
Derivative instruments 6,519
—
6,519
—
6,519
Financial liabilities
Deposits $ 10,128,557
$ 7,765,773
$ 2,337,334
$ —
$ 10,103,107
Short-term borrowings 387,706
387,706
—
—
387,706
Other long-term borrowings 53
53
—
—
53
Federal Home Loan Bank advances 6,690
—
6,751
—
6,751
Junior subordinated debentures 109,636
—
109,766
—
109,766
Subordinated notes 147,239
—
148,875
—
148,875
Derivative instruments 8,388
—
8,388
—
8,388

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Notes to Consolidated Financial Statements (Unaudited)



			Fair Value
As of September 30, 2019	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	409,661	$	409,661	$	—	$	—	$	409,661
Securities available for sale	1,238,577		—		1,228,715		9,862		1,238,577
Loans held for sale	392,448		—		392,448		—		392,448
Loans, net	9,262,970		—		—		9,040,016		9,040,016
Mortgage servicing rights	48,286		—		—		48,286		48,286
Derivative instruments	12,329		—		12,329		—		12,329
Financial liabilities
Deposits	$	10,286,036	$	8,011,246	$	2,273,658	$	—	$	10,284,904
Short-term borrowings	205,602		205,602		—		—		205,602
Other long-term borrowings	10		10		—		—		10
Federal Home Loan Bank advances	4,055		—		4,252		—		4,252
Junior subordinated debentures	110,070		—		104,330		—		104,330
Subordinated notes	113,969		—		117,525		—		117,525
Derivative instruments	12,495		—		12,495		—		12,495



			Fair Value
As of December 31, 2018	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	569,111	$	569,111	$	—	$	—	$	569,111
Securities available for sale	1,250,777		—		1,240,144		10,633		1,250,777
Loans held for sale	411,427		—		219,848		191,579		411,427
Loans, net	9,034,103		—		—		8,818,039		8,818,039
Mortgage servicing rights	48,230		—		—		61,111		61,111
Derivative instruments	6,519		—		6,519		—		6,519
Financial liabilities
Deposits	$	10,128,557	$	7,765,773	$	2,337,334	$	—	$	10,103,107
Short-term borrowings	387,706		387,706		—		—		387,706
Other long-term borrowings	53		53		—		—		53
Federal Home Loan Bank advances	6,690		—		6,751		—		6,751
Junior subordinated debentures	109,636		—		109,766		—		109,766
Subordinated notes	147,239		—		148,875		—		148,875
Derivative instruments	8,388		—		8,388		—		8,388

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Renasant Corporation and Subsidiaries

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
Three months ended September 30, 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		)
Unrealized holding losses on securities										$	(84	)	$	(22	)	$	(62	)
Reclassification adjustment for losses realized in net income										2,516			640			1,876
Total securities available for sale	15,166			3,859			11,307			2,432			618			1,814
Derivative instruments:
Unrealized holding losses on derivative instruments	(1,228		)	(313		)	(915		)	(949		)	(241		)	(708		)
Total derivative instruments	(1,228		)	(313		)	(915		)	(949		)	(241		)	(708		)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	72			18			54			104			26			78
Total defined benefit pension and post-retirement benefit plans	72			18			54			104			26			78
Total other comprehensive income	$	14,010		$	3,564		$	10,446		$	1,587		$	403		$	1,184
Three months ended March 31, 2018
Three months ended September 30, 2018
Securities available for sale:
Unrealized holding losses on securities	$	(10,609	)	$	(2,700	)	$	(7,909	)	$	(6,548	)	$	(1,666	)	$	(4,882	)
Reclassification adjustment for losses realized in net income										15			4			11
Total securities available for sale	(10,609		)	(2,700		)	(7,909		)	(6,533		)	(1,662		)	(4,871		)
Derivative instruments:
Unrealized holding gains on derivative instruments	1,151			293			858			857			218			639
Total derivative instruments	1,151			293			858			857			218			639
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	87			21			66			82			21			61
Total defined benefit pension and post-retirement benefit plans	87			21			66			82			21			61
Total other comprehensive loss	$	(9,371	)	$	(2,386	)	$	(6,985	)	$	(5,594	)	$	(1,423	)	$	(4,171	)

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



	Pre-Tax			Tax Expense (Benefit)			Net of Tax
Nine months ended September 30, 2019
Securities available for sale:
Unrealized holding gains on securities	$	27,695		$	7,047		$	20,648
Reclassification adjustment for losses realized in net income	2,511			639			1,872
Total securities available for sale	30,206			7,686			22,520
Derivative instruments:
Unrealized holding losses on derivative instruments	(4,244		)	(1,080		)	(3,164		)
Total derivative instruments	(4,244		)	(1,080		)	(3,164		)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	314			80			234
Total defined benefit pension and post-retirement benefit plans	314			80			234
Total other comprehensive income	$	26,276		$	6,686		$	19,590

Nine months ended September 30, 2018
Securities available for sale:
Unrealized holding losses on securities	$	(21,182	)	$	(5,391	)	$	(15,791	)
Reclassification adjustment for losses realized in net income	15			4			11
Total securities available for sale	(21,167		)	(5,387		)	(15,780		)
Derivative instruments:
Unrealized holding gains on derivative instruments	2,527			643			1,884
Total derivative instruments	2,527			643			1,884
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	246			62			184
Total defined benefit pension and post-retirement benefit plans	246			62			184
Total other comprehensive loss	$	(18,394	)	$	(4,682	)	$	(13,712	)

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



	September 30, 2019			December 31, 2018
Unrealized gains on securities	$	23,586		$	1,066
Non-credit related portion of other-than-temporary impairment on securities	(11,319		)	(11,319		)
Unrealized losses on derivative instruments	(3,794		)	(630		)
Unrecognized losses on defined benefit pension and post-retirement benefit plans obligations	(6,779		)	(7,013		)
Total accumulated other comprehensive income (loss)	$	1,694		$	(17,896	)

March 31,
2019 December 31, 2018
Unrealized gains on securities $ 12,373
$ 1,066
Non-credit related portion of other-than-temporary impairment on securities (11,319 ) (11,319 )
Unrealized losses on derivative instruments (1,545 ) (630 )
Unrecognized losses on defined benefit pension and post-retirement benefit plans obligations (6,959 ) (7,013 )
Total accumulated other comprehensive loss $ (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,				September 30,
	2019		2018		2019		2018
Basic
Net income applicable to common stock	$	45,110	$	33,826	$	37,446	$	31,964
Average common shares outstanding	58,585,517		49,356,417		58,003,215		52,472,971
Net income per common share - basic	$	0.77	$	0.69	$	0.65	$	0.61
Diluted
Net income applicable to common stock	$	45,110	$	33,826	$	37,446	$	31,964
Average common shares outstanding	58,585,517		49,356,417		58,003,215		52,472,971
Effect of dilutive stock-based compensation	145,018		146,533		189,204		136,931
Average common shares outstanding - diluted	58,730,535		49,502,950		58,192,419		52,609,902
Net income per common share - diluted	$	0.77	$	0.68	$	0.64	$	0.61



	Nine Months Ended
	September 30,
	2019		2018
Basic
Net income applicable to common stock	$	129,181	$	102,500
Average common shares outstanding	58,347,840		50,425,797
Net income per common share - basic	$	2.21	$	2.03
Diluted
Net income applicable to common stock	$	129,181	$	102,500
Average common shares outstanding	58,347,840		50,425,797
Effect of dilutive stock-based compensation	160,742		127,395
Average common shares outstanding - diluted	58,508,582		50,553,192
Net income per common share - diluted	$	2.21	$	2.03

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:


	Three Months Ended		Three Months Ended
	March 31,		September 30,
	2019	2018	2019	2018
Number of shares	27,740	—	691	43,779
Exercise prices (for stock option awards)	—	—	—	—



	Nine Months Ended
	September 30,
	2019	2018
Number of shares	1,334	73,507
Exercise prices (for stock option awards)	—	—

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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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~~Renasant Corporation and Subsidiaries~~

~~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~~the Bank as of the dates presented:



	September 30, 2019				December 31, 2018
	Amount		Ratio		Amount		Ratio
Renasant Corporation
Tier 1 Capital to Average Assets (Leverage)	$	1,252,116	10.56	%	$	1,188,412	10.11	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	1,147,024		11.36	%	1,085,751		11.05	%
Tier 1 Capital to Risk-Weighted Assets	1,252,116		12.40	%	1,188,412		12.10	%
Total Capital to Risk-Weighted Assets	1,421,600		14.07	%	1,386,507		14.12	%
Renasant Bank
Tier 1 Capital to Average Assets (Leverage)	$	1,326,065	11.20	%	$	1,276,976	10.88	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	1,326,065		13.15	%	1,276,976		13.02	%
Tier 1 Capital to Risk-Weighted Assets	1,326,065		13.15	%	1,276,976		13.02	%
Total Capital to Risk-Weighted Assets	1,381,973		13.70	%	1,331,619		13.58	%

March 31, 2019 December 31, 2018
Amount Ratio Amount Ratio
Renasant Corporation
Tier 1 Capital to Average Assets (Leverage) $ 1,228,640
10.44 % $ 1,188,412
10.11 %
Common Equity Tier 1 Capital to Risk-Weighted Assets 1,124,981
11.49 % 1,085,751
11.05 %
Tier 1 Capital to Risk-Weighted Assets 1,228,640
12.55 % 1,188,412
12.10 %
Total Capital to Risk-Weighted Assets 1,426,332
14.57 % 1,386,507
14.12 %
Renasant Bank
Tier 1 Capital to Average Assets (Leverage) $ 1,316,336
11.20 % $ 1,276,976
10.88 %
Common Equity Tier 1 Capital to Risk-Weighted Assets 1,316,336
13.45 % 1,276,976
13.02 %
Tier 1 Capital to Risk-Weighted Assets 1,316,336
13.45 % 1,276,976
13.02 %
Total Capital to Risk-Weighted Assets 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. The required capital conservation buffer is 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. As shown in the tables above, as of ~~March 31,~~September 30, 2019, the Company’s CET1 capital was in excess of the capital conservation buffer.

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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~~the 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.

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

Three months ended March 31, 2018
Net interest income (loss) $ 91,427
$ 106
$ 313
$ (2,606 ) $ 89,240
Provision for loan losses 1,750
—
—
—
1,750
Noninterest income 27,918
2,772
3,527
(264 ) 33,953
Noninterest expense 72,633
1,731
3,392
188
77,944
Income (loss) before income taxes 44,962
1,147
448
(3,058 ) 43,499
Income tax expense (benefit) 10,167
297
—
(791 ) 9,673
Net income (loss) $ 34,795
$ 850
$ 448
$ (2,267 ) $ 33,826

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

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Notes to Consolidated Financial Statements (Unaudited)



	Community Banks		Insurance		Wealth Management		Other			Consolidated
Three months ended September 30, 2019
Net interest income (loss)	$	111,696	$	177	$	485	$	(3,533	)	$	108,825
Provision for loan losses	1,700		—		—		—			1,700
Noninterest income	31,911		2,533		3,859		(350		)	37,953
Noninterest expense	90,996		1,948		3,287		269			96,500
Income (loss) before income taxes	50,911		762		1,057		(4,152		)	48,578
Income tax expense (benefit)	12,009		200		—		(1,077		)	11,132
Net income (loss)	$	38,902	$	562	$	1,057	$	(3,075	)	$	37,446

Total assets	$	12,922,205	$	27,448	$	70,973	$	19,048		$	13,039,674
Goodwill	$	936,916	$	2,767	—		—			$	939,683

Three months ended September 30, 2018
Net interest income (loss)	$	101,970	$	124	$	324	$	(2,979	)	$	99,439
Provision for loan losses	2,250		—		—		—			2,250
Noninterest income	32,140		2,488		3,641		(216		)	38,053
Noninterest expense	89,370		1,899		3,284		193			94,746
Income (loss) before income taxes	42,490		713		681		(3,388		)	40,496
Income tax expense (benefit)	9,226		186		—		(880		)	8,532
Net income (loss)	$	33,264	$	527	$	681	$	(2,508	)	$	31,964

Total assets	$	12,634,614	$	25,236	$	62,502	$	24,587		$	12,746,939
Goodwill	$	924,494	$	2,767	—		—			$	927,261



	Community Banks		Insurance		Wealth Management		Other			Consolidated
Nine months ended September 30, 2019
Net interest income (loss)	$	343,418	$	516	$	1,244	$	(10,406	)	$	334,772
Provision for loan losses	4,100		—		—		—			4,100
Noninterest income (loss)	97,789		7,634		11,408		(1,033		)	115,798
Noninterest expense	261,905		5,661		10,199		857			278,622
Income (loss) before income taxes	175,202		2,489		2,453		(12,296		)	167,848
Income tax expense (benefit)	41,205		648		—		(3,186		)	38,667
Net income (loss)	$	133,997	$	1,841	$	2,453	$	(9,110	)	$	129,181

Total assets	$	12,922,205	$	27,448	$	70,973	$	19,048		$	13,039,674
Goodwill	$	936,916	$	2,767	—		—			$	939,683

Nine months ended September 30, 2018
Net interest income (loss)	$	288,073	$	348	$	952	$	(8,305	)	$	281,068
Provision for loan losses	5,810		—		—		—			5,810
Noninterest income	90,007		7,408		10,882		(710		)	107,587
Noninterest expense	235,631		5,449		9,889		747			251,716
Income (loss) before income taxes	136,639		2,307		1,945		(9,762		)	131,129
Income tax expense (benefit)	30,558		599		—		(2,528		)	28,629
Net income (loss)	$	106,081	$	1,708	$	1,945	$	(7,234	)	$	102,500

Total assets	$	12,634,614	$	25,236	$	62,502	$	24,587		$	12,746,939
Goodwill	$	924,494	$	2,767	—		—			$	927,261

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 19 - Leases

(In Thousands)

The Company adopted ASC 842 in the first quarter of 2019. The Company enters into leases in both lessor and lessee capacities.

ASC 842 provided for a number of optional practical expedients, of which the Company has elected several including (i) the option not to separate the lease and non-lease components; (ii) the ~~‘package~~“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) whether 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~~lease’s inception.

The practical expedient pertaining to land easements is not applicable to the Company.

Lessor Arrangements

The Company 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 is accreted into interest income over the 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 purchase options.

As of ~~March 31,~~September 30, 2019, the net investment in these leases was ~~$8,967,~~$8,979, comprised of ~~$7,164~~$7,167 in lease receivables, ~~$2,408~~$2,415 in residual balances and ~~$605~~$603 in deferred income. In order to mitigate potential exposure to residual asset risk, the Company utilizes first amendment or terminal rental adjustment clause leases.

For the three and nine months ended ~~March 31,~~September 30, 2019, the Company generated ~~$81~~$78 and $237, respectively, in income, which is included in interest income on loans on the Consolidated Statements of Income from these leases.

The maturities of the lessor arrangements outstanding at ~~March 31,~~September 30, 2019 is presented in the table below.



Remainder of 2019	$	197
2020	1,263
2021	1,435
2022	2,168
2023	2,403
Thereafter	1,513
Total lease receivables	$	8,979

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 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 corresponding lease liabilities, each of which is based on the present value of the remaining lease payments and are discounted at the Company’s incremental borrowing rate. Right-of-use assets are reported in premises and equipment on the Consolidated Balance ~~Sheet~~Sheets and the related lease liabilities are reported in other liabilities. All leases are recorded on the Consolidated Balance ~~Sheet~~Sheets 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 a straight-line basis over the lease term and is recorded in occupancy and equipment expense in the Consolidated ~~Statement~~Statements 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,~~September 30, 2019, right-of-use assets totaled ~~$52,478~~$86,654 and lease liabilities totaled ~~$56,049.~~$90,455. Lease terms may contain renewal and extension options and early termination features. Many leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of lease renewal options is at the Company’s sole discretion.

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Notes to Consolidated Financial Statements (Unaudited)

Renewal options which are reasonably certain to be exercised in the future were included in the measurement of right-of-use assets and lease liabilities.

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



	Three months ended September 30, 2019			Nine months ended September 30, 2019
Operating lease cost (cost resulting from lease payments)	$	2,601		$	7,449
Short-term lease cost	9			29
Variable lease cost (cost excluded from lease payments)	434			1,231
Sublease income	(178		)	(474		)
Net lease cost	$	2,866		$	8,235
Operating lease - operating cash flows (fixed payments)	2,445			7,125
Operating lease - operating cash flows (liability reduction)	1,724			5,212
Weighted average lease term - operating leases (in years) (at period end)				17.46
Weighted average discount rate - operating leases (at period end)				3.41		%

Right-of-use assets obtained in exchange for new lease liabilities - operating leases	$	14,728		$	37,471

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 ~~March 31,~~September 30, 2019 are presented in the table below.



Remainder of 2019	$	2,557
2020	9,632
2021	8,835
2022	8,460
2023	8,191
Thereafter	86,369
Total undiscounted cash flows	124,044
Discount on cash flows	33,589
Total operating lease liabilities	$	90,455

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 ~~March 31,~~September 30, 2019, the Company had leases with related parties that were obtained in the Brand acquisition. The related party leases have right-of-use assets of ~~$13,773~~$13,074 and lease liabilities of ~~$16,012,~~$15,317, with total lease cost of $492 and $1,476 for the ~~first quarter~~three and nine months ended September 30, 2019, respectively.

As required, the following disclosure is provided for periods prior to the adoption of ~~2019.~~ASC 842. The following is a summary of future minimum lease payments for years following December 31, 2018:



2019	$	9,389
2020	8,199
2021	6,339
2022	4,929
2023	3,711
Thereafter	12,592
Total	$	45,159

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

For more information on lease accounting, see Note 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; (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.

Financial Condition

The following discussion provides details regarding the changes in significant balance sheet accounts at ~~March 31,~~September 30, 2019 compared to December 31, 2018.

Assets

Total assets were ~~$12,862,395~~$13,039,674 at ~~March 31,~~September 30, 2019 compared to $12,934,878 at December 31, 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, 2019				December 31, 2018				September 30, 2019				December 31, 2018
	Balance		Percentage of Portfolio		Balance		Percentage of Portfolio		Balance		Percentage of Portfolio		Balance		Percentage of Portfolio
U.S. Treasury securities									$	498	0.04	%	$	—	—	%
Obligations of other U.S. Government agencies and corporations	$	2,525	0.20	%	$	2,511	0.20	%	2,537		0.20		2,511		0.20
Obligations of states and political subdivisions	183,762		14.64		203,269		16.25		216,988		17.52		203,269		16.25
Mortgage-backed securities	1,009,841		80.44		990,437		79.19		960,443		77.54		990,437		79.19
Trust preferred securities	10,246		0.82		10,633		0.85		9,862		0.80		10,633		0.85
Other debt securities	48,979		3.90		43,927		3.51		48,249		3.90		43,927		3.51
	$	1,255,353	100.00	%	$	1,250,777	100.00	%	$	1,238,577	100.00	%	$	1,250,777	100.00	%

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019, we purchased ~~$49,577~~$366,265 in investment securities. Mortgage-backed securities and collateralized mortgage obligations (“CMOs”), in the aggregate, comprised approximately ~~87%~~80% 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. Obligations of state and political subdivisions comprised approximately 19% of purchases made during the first nine months of 2019.

Proceeds from maturities, calls and principal payments on securities during the first ~~three~~nine months of 2019 totaled ~~$48,509.~~$192,520. During the first ~~quarter~~nine months of 2019, the Company sold securities with a carrying value of $212,137 at the time of sale for net proceeds of $212,485, resulting in a net gain on sale of $348. Mortgage-backed securities and CMOs, in the aggregate, comprised approximately 90% of these sales. Proceeds from the maturities, calls and principal payments on securities during the first nine months of 2018 totaled $113,511. During the first nine months of 2018, the Company sold municipal securities and residential mortgage backed securities with a carrying value of ~~$10,598~~$2,403 at the time of sale for net proceeds of ~~$10,611,~~$2,387, resulting in a net ~~gain~~loss 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.~~$16.

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, 2019 were $9,088,293 and $9,083,129 at December 31, 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, 2019 December 31, 2018
Balance
Percentage of
Total Loans
Balance
Percentage of
Total Loans
Commercial, financial, agricultural $ 1,308,457
14.40 % $ 1,295,912
14.27 %
Lease financing 58,651
0.65
61,865
0.68
Real estate – construction 741,073
8.15
740,668
8.15
Real estate – 1-4 family mortgage 2,769,173
30.47
2,795,343
30.78
Real estate – commercial mortgage 4,083,632
44.93
4,051,509
44.60
Installment loans to individuals 127,307
1.40
137,832
1.52
Total loans, net of unearned income $ 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, 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 $6,565,599 at March 31, 2019 compared to $6,389,712 at December 31, 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 $2,698 of the total increase in non purchased loans from December 31, 2018.

Looking at the change in loans geographically, non purchased loans in our Western Region (which includes Mississippi), Eastern Region (which includes Georgia and east Florida), Northern Region (which includes Tennessee) and Central Region (which includes Alabama and the Florida panhandle) markets increased $39,705, $97,066, $33,849 and $12,087, respectively, when compared to December 31, 2018.

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

March 31, 2019
Non Purchased Purchased Total
Loans
Commercial, financial, agricultural $ 921,081
$ 387,376
$ 1,308,457
Lease financing, net of unearned income 58,651
—
58,651
Real estate – construction:
Residential 239,333
41,708
281,041
Commercial 411,595
48,246
459,841
Condominiums 191
—
191
Total real estate – construction 651,119
89,954
741,073
Real estate – 1-4 family mortgage:
Primary 1,246,840
428,966
1,675,806
Home equity 456,398
144,590
600,988
Rental/investment 300,840
53,797
354,637
Land development 110,830
26,912
137,742
Total real estate – 1-4 family mortgage 2,114,908
654,265
2,769,173
Real estate – commercial mortgage:
Owner-occupied 1,055,347
531,687
1,587,034
Non-owner occupied 1,528,164
772,383
2,300,547
Land development 142,675
53,376
196,051
Total real estate – commercial mortgage 2,726,186
1,357,446
4,083,632
Installment loans to individuals 93,654
33,653
127,307
Total loans, net of unearned income $ 6,565,599
$ 2,522,694
$ 9,088,293

December 31, 2018
Non Purchased Purchased Total
Loans
Commercial, financial, agricultural $ 875,649
$ 420,263
$ 1,295,912
Lease financing, net of unearned income 61,865
—
61,865
Real estate – construction:
Residential 214,452
55,096
269,548
Commercial 421,067
50,053
471,120
Condominiums —
—
—
Total real estate – construction 635,519
105,149
740,668
Real estate – 1-4 family mortgage:
Primary 1,221,908
458,035
1,679,943
Home equity 452,248
157,245
609,493
Rental/investment 304,309
57,878
362,187
Land development 109,425
34,295
143,720
Total real estate – 1-4 family mortgage 2,087,890
707,453
2,795,343
Real estate – commercial mortgage:
Owner-occupied 1,052,521
547,741
1,600,262
Non-owner occupied 1,446,353
826,506
2,272,859
Land development 129,491
48,897
178,388
Total real estate – commercial mortgage 2,628,365
1,423,144
4,051,509
Installment loans to individuals 100,424
37,408
137,832
Total loans, net of unearned income $ 6,389,712
$ 2,693,417
$ 9,083,129

~~Loans~~ Held for Sale

Loans held for sale were ~~$318,563~~$392,448 at ~~March 31,~~September 30, 2019 compared to $411,427 at December 31, 2018. Included in the balance of loans held for sale at ~~March~~December 31, ~~2019~~2018 is a portfolio of non-mortgage consumer loans inwhich totaled $191,579. In the ~~amount of $122,756, as compared to $191,578 at December 31, 2018. During the first~~third quarter of 2019, the Company ~~sold approximately $42,727 of~~reclassified this portfolio ~~at par.~~from loans held for sale to loans held for investment. At the time of the transfer, the portfolio totaled approximately $134,335.

The remainder of the balance of loans held for sale is comprised of mortgage loans held for sale. 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.

Loans

Total loans, excluding loans held for sale, were $9,313,784 at September 30, 2019 and $9,083,129 at December 31, 2018. Included in the balance at September 30, 2019 are the non-mortgage consumer loans transferred from loans held for sale in the third quarter of 2019, as discussed above. At September 30, 2019, the balance of all non-mortgage consumer loans, including these transferred loans, included in total loans was $158,038.



	September 30, 2019				December 31, 2018
	Balance		Percentage of Total Loans		Balance		Percentage of Total Loans
Commercial, financial, agricultural	$	1,328,560	14.26	%	$	1,295,912	14.27	%
Lease financing	69,953		0.75		61,865		0.68
Real estate – construction	816,695		8.77		740,668		8.15
Real estate – 1-4 family mortgage	2,797,633		30.04		2,795,343		30.78
Real estate – commercial mortgage	4,022,375		43.19		4,051,509		44.60
Installment loans to individuals	278,568		2.99		137,832		1.52
Total loans, net of unearned income	$	9,313,784	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 September 30, 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.

The Company experienced loan growth across all categories of loans, with loans from our corporate banking group and 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 $39,546 of the total increase in loans from December 31, 2018.

Looking at the change in loans geographically, loans in our Western Region (which includes Mississippi), Eastern Region (which includes Georgia and east Florida), and Central Region (which includes Alabama and the Florida panhandle) markets increased $92,930, $126,145, and $69,408, respectively, while loans in our Northern Region (which includes Tennessee) decreased $57,828 when compared to December 31, 2018.

Non purchased loans totaled $7,031,818 at September 30, 2019 compared to $6,389,712 at December 31, 2018. Loans purchased in previous acquisitions totaled $2,281,966 and $2,693,417 at September 30, 2019 and December 31, 2018, respectively. The

following tables provide a breakdown of non purchased loans and purchased loans as of the dates presented:



	September 30, 2019
	Non Purchased		Purchased		Total Loans
Commercial, financial, agricultural	$	988,867	$	339,693	$	1,328,560
Lease financing, net of unearned income	69,953		—		69,953
Real estate – construction:
Residential	271,542		18,710		290,252
Commercial	486,155		33,396		519,551
Condominiums	6,892		—		6,892
Total real estate – construction	764,589		52,106		816,695
Real estate – 1-4 family mortgage:
Primary	1,362,156		363,092		1,725,248
Home equity	453,369		129,796		583,165
Rental/investment	289,469		44,784		334,253
Land development	130,914		24,053		154,967
Total real estate – 1-4 family mortgage	2,235,908		561,725		2,797,633
Real estate – commercial mortgage:
Owner-occupied	1,111,816		481,971		1,593,787
Non-owner occupied	1,568,427		688,180		2,256,607
Land development	129,227		42,754		171,981
Total real estate – commercial mortgage	2,809,470		1,212,905		4,022,375
Installment loans to individuals	163,031		115,537		278,568
Total loans, net of unearned income	$	7,031,818	$	2,281,966	$	9,313,784



	December 31, 2018
	Non Purchased		Purchased		Total Loans
Commercial, financial, agricultural	$	875,649	$	420,263	$	1,295,912
Lease financing, net of unearned income	61,865		—		61,865
Real estate – construction:
Residential	214,452		55,096		269,548
Commercial	421,067		50,053		471,120
Condominiums	—		—		—
Total real estate – construction	635,519		105,149		740,668
Real estate – 1-4 family mortgage:
Primary	1,221,908		458,035		1,679,943
Home equity	452,248		157,245		609,493
Rental/investment	304,309		57,878		362,187
Land development	109,425		34,295		143,720
Total real estate – 1-4 family mortgage	2,087,890		707,453		2,795,343
Real estate – commercial mortgage:
Owner-occupied	1,052,521		547,741		1,600,262
Non-owner occupied	1,446,353		826,506		2,272,859
Land development	129,491		48,897		178,388
Total real estate – commercial mortgage	2,628,365		1,423,144		4,051,509
Installment loans to individuals	100,424		37,408		137,832
Total loans, net of unearned income	$	6,389,712	$	2,693,417	$	9,083,129

Deposits

The Company relies on deposits as its major source of funds. Total deposits were ~~$10,268,912~~$10,286,036 and $10,128,557 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively. Noninterest-bearing deposits were ~~$2,366,223~~$2,607,056 and $2,318,706 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively, while interest-bearing deposits were ~~$7,902,689~~$7,678,980 and $7,809,851 at ~~March 31,~~September 30, 2019 and December 31, 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.

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~~Because public fund deposits are obtained through a bid process, these deposit balances may fluctuate as competitive and market forces change. Although the Company has focused on growing stable sources of deposits to reduce reliance on public fund deposits, it participates in the bidding process for public fund deposits when pricing and other terms make it reasonable given market conditions ~~and~~or when management perceives that other ~~factors.~~factors make such participation advisable. Our public fund transaction accounts are principally obtained from municipalities including school boards and utilities. Public fund deposits were ~~$1,356,208~~$1,313,202 and $1,271,139 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively.

Looking at the change in deposits geographically, deposits in our Western Region, Eastern Region and Northern Region markets increased ~~$213,770, $38,657~~$80,534, $115,330 and ~~$194,~~$32,347, respectively, from December 31, 2018, while deposits in our Central Region markets decreased ~~$64,070~~$70,732 from December 31, 2018 primarily due to a decrease in public fund deposits.

Borrowed Funds

Total borrowings include securities sold under agreements to repurchase, 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,~~September 30, 2019, short-term borrowings consisted of ~~$7,590~~$9,131 in security repurchase agreements and short-term borrowings from the FHLB of ~~$80,000,~~$196,471, compared to security repurchase agreements of $7,706 and short-term borrowings from the FHLB of $380,000 at December 31, 2018.

At ~~March 31,~~September 30, 2019, long-term debt, consisting of long-term FHLB advances, our junior subordinated debentures and our subordinated notes, totaled ~~$263,269~~$228,104 compared to $263,618 at December 31, ~~2018.~~2018, with the decrease primarily driven by the redemption of subordinated notes discussed below. 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 ~~$6,492~~$4,055 and $6,690 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively. At ~~March 31,~~September 30, 2019, there were ~~$1,731~~$1,681 in long-term FHLB advances outstanding scheduled to mature within twelve months or less. The Company had ~~$3,548,225~~$3,621,677 of availability on unused lines of credit with the FHLB at ~~March 31,~~September 30, 2019 compared to $3,301,543 at December 31, 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 ~~$109,781~~$110,070 at ~~March 31,~~September 30, 2019, compared to $109,636 at December 31, 2018.

~~During 2016, the Company completed an underwritten public offering and sale of $60,000 of its 5.00% fixed-to-floating rate~~The Company's 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 ~~$146,962~~$113,969 at ~~March 31,~~September 30, 2019 compared to $147,239 at December 31, 2018. In the third quarter of 2019, the Company redeemed its $30,000 principal amount 8.50% fixed rate subordinated notes that were assumed as part of the Brand acquisition. The Company ~~has used,~~redeemed the subordinated notes because the notes bore a fixed 8.50% interest rate, and ~~intends~~preferential capital treatment of the notes began to ~~continue to use,~~phase out at the ~~net proceeds from~~end of the ~~Notes offerings~~second quarter of 2019. The Company incurred a debt prepayment penalty of $900 in connection with the redemption, which was accounted 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~~purchase accounting fair value adjustment on the ~~current regulatory guidelines.~~subordinated notes.

Results of Operations

Net Income

Net income for the ~~first~~third quarter of 2019 was ~~$45,110~~$37,446 compared to net income of ~~$33,826~~$31,964 for the ~~first~~third quarter of 2018. Basic and diluted earnings per share (“EPS”) for the ~~first~~third quarter of 2019 were ~~$0.77,~~$0.65 and $0.64, respectively, as compared to basic and diluted EPS of ~~$0.69~~$0.61 for the third quarter of 2018. Net income for the nine months ended September 30, 2019 was $129,181 compared to net income of $102,500 for the nine months ended September 30, 2018. Basic and ~~$0.68,~~diluted EPS for the nine months ended September 30, 2019 were $2.21, as compared to basic and diluted EPS of $2.03 for the nine months ended September 30, 2018.

The Company continues to capitalize on market disruption across its footprint by hiring new production team members. The Company's net income for the third quarter and first nine months of 2019 includes approximately $2,600 and $3,700, respectively, in after-tax expense related to production team members that have joined the Company in the first nine months of 2019. The expense related to these strategic hires decreased diluted EPS by $0.05 and $0.07, respectively, for the ~~first~~ quarter ~~of 2018.~~and the nine months ended September 30, 2019.

~~The~~From time to time, the Company ~~incurred~~incurs 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, 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



	Three Months Ended
	September 30, 2019						September 30, 2018
	Pre-tax		After-tax		Impact to Diluted EPS		Pre-tax		After-tax		Impact to Diluted EPS
Merger and conversion expenses	$	24	$	19	$	—	$	11,221	$	8,857	$	0.17
Debt prepayment penalty	54		41		—		—		—		—
MSR valuation adjustment	3,132		2,414		0.04		—		—		—

	Nine Months Ended
	September 30, 2019						September 30, 2018
	Pre-tax		After-tax		Impact to Diluted EPS		Pre-tax		After-tax		Impact to Diluted EPS
Merger and conversion expenses	$	203	$	157	$	—	$	12,621	$	9,866	$	0.20
Debt prepayment penalties	54		41		—		—		—		—
MSR valuation adjustment	3,132		2,410		0.04		—		—		—

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 ~~76.16%~~74.40% of total revenue (i.e., net interest income on a fully taxable equivalent basis and noninterest income) for the third quarter of 2019 and 74.55% of total net revenue for the first ~~quarter~~nine months of 2019. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.

Net interest income was ~~$113,147~~$108,825 and $334,772 for the three and nine months ended ~~March 31,~~September 30, 2019, respectively, as compared to ~~$89,240~~$99,439 and $281,068 for the same ~~period~~respective periods in 2018. On a tax equivalent basis, net interest income was ~~$114,631~~$110,276 and $339,130 for the three and nine months ended ~~March 31,~~September 30, 2019, respectively, as compared to ~~$90,807~~$100,880 and $285,517 for the same respective time periods in 2018.

The following tables set 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,
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 September 30,
	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	$	6,792,021	$	85,084	4.97	%	$	6,140,386	$	73,662	4.76	%
Purchased	2,317,231		36,330		6.22		2,087,667		32,060		6.09
Total loans held for investment	9,109,252		121,414		5.29		8,228,053		105,722		5.10
Loans held for sale	385,437		3,977		4.09		297,692		3,663		4.88
Securities:
Taxable⁽¹⁾	1,040,302		7,200		2.75		914,380		6,574		2.85
Tax-exempt	187,376		1,846		3.91		214,630		2,283		4.22
Interest-bearing balances with banks	271,278		1,490		2.18		189,115		994		2.09
Total interest-earning assets	10,993,645		135,927		4.91		9,843,870		119,236		4.81
Cash and due from banks	173,156						154,171
Intangible assets	975,306						743,567
Other assets	704,024						534,979
Total assets	$	12,846,131					$	11,276,587
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽²⁾	$	4,740,426	$	10,769	0.90	%	$	4,261,946	$	6,629	0.62	%
Savings deposits	652,121		355		0.22		597,343		233		0.15
Time deposits	2,326,963		10,390		1.77		2,057,410		6,694		1.29
Total interest-bearing deposits	7,719,510		21,514		1.11		6,916,699		13,556		0.78
Borrowed funds	308,931		4,137		5.31		499,054		4,800		3.82
Total interest-bearing liabilities	8,028,441		25,651		1.27		7,415,753		18,356		0.98
Noninterest-bearing deposits	2,500,810						2,052,226
Other liabilities	185,343						95,851
Shareholders’ equity	2,131,537						1,712,757
Total liabilities and shareholders’ equity	$	12,846,131					$	11,276,587
Net interest income/net interest margin			$	110,276	3.98	%			$	100,880	4.07	%



			��
	Nine Months Ended September 30,
	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	$	6,624,266	$	250,190	5.05	%	$	5,918,328	$	208,035	4.70	%
Purchased	2,446,863		115,298		6.30		1,943,555		88,129		6.06
Total loans held for investment	9,071,129		365,488		5.39		7,861,883		296,164		5.04
Loans held for sale	361,415		15,004		5.55		220,413		7,714		4.68
Securities:
Taxable⁽¹⁾	1,062,261		22,792		2.87		781,136		16,127		2.76
Tax-exempt	185,370		5,728		4.13		220,626		7,047		4.27
Interest-bearing balances with banks	263,967		4,778		2.42		143,764		2,146		2.00
Total interest-earning assets	10,944,142		413,790		5.06		9,227,822		329,198		4.77
Cash and due from banks	181,140						158,462
Intangible assets	975,579						670,938
Other assets	680,140						505,318
Total assets	$	12,781,001					$	10,562,540
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽²⁾	$	4,755,948	$	31,338	0.88	%	$	4,077,502	$	15,477	0.51	%
Savings deposits	642,523		976		0.20		590,647		612		0.14
Time deposits	2,358,031		29,963		1.70		1,918,037		16,445		1.15
Total interest-bearing deposits	7,756,502		62,277		1.07		6,586,186		32,534		0.66
Borrowed funds	341,903		12,383		4.84		381,533		11,147		3.91
Total interest-bearing liabilities	8,098,405		74,660		1.23		6,967,719		43,681		0.84
Noninterest-bearing deposits	2,413,619						1,913,525
Other liabilities	169,068						87,704
Shareholders’ equity	2,099,909						1,593,592
Total liabilities and shareholders’ equity	$	12,781,001					$	10,562,540
Net interest income/net interest margin			$	339,130	4.14	%			$	285,517	4.14	%

(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. As discussed in more detail below, for both the three and nine months ended ~~March 31,~~September 30, 2019, as compared to the ~~corresponding period~~same respective periods in 2018, growth in the Company’s loan portfolio was the largest contributing factor to the increase in net interest income over these periods. ~~Also,~~The Company capitalized on the ~~Company’s continued efforts to replace~~rising rate environment over the last two years, ending in July 2019, by replacing maturing loans with new or renewed loans at similar or higher ~~rates, bolstered by~~rates. These efforts helped offset the ~~rate environment resulting from the Federal Reserve Board’s increases~~negative impact 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~~net interest income and net interest margin ~~expansion (after excluding~~from rising costs of our deposits and borrowings as competition increased in response to the ~~impact from purchase accounting adjustments).~~aforementioned rate environment.

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 both the three and nine months ended ~~March 31,~~September 30, 2019 compared to the same ~~period~~respective periods in 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									Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018
	Volume			Rate			Net			Volume			Rate			Net
Interest income:
Loans held for investment:
Non purchased	$	9,215		$	7,358		$	16,573		$	8,061		$	3,361		$	11,422
Purchased	9,920			1,503			11,423			3,587			683			4,270
Loans held for sale	4,078			88			4,166			844			(530		)	314
Securities:
Taxable	3,309			669			3,978			879			(253		)	626
Tax-exempt	(372		)	(12		)	(384		)	(276		)	(161		)	(437		)
Interest-bearing balances with banks	617			258			875			450			46			496
Total interest-earning assets	26,767			9,864			36,631			13,545			3,146			16,691
Interest expense:
Interest-bearing demand deposits	913			5,754			6,667			812			3,328			4,140
Savings deposits	14			127			141			23			99			122
Time deposits	1,659			3,246			4,905			962			2,734			3,696
Borrowed funds	519			575			1,094			(1,442		)	779			(663		)
Total interest-bearing liabilities	3,105			9,702			12,807			355			6,940			7,295
Change in net interest income	$	23,662		$	162		$	23,824		$	13,190		$	(3,794	)	$	9,396

										Nine months ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018
										Volume			Rate			Net
Interest income:
Loans held for investment:
Non purchased										$	25,955		$	16,200		$	42,155
Purchased										23,599			3,570			27,169
Loans held for sale										7,131			159			7,290
Securities:
Taxable										6,009			656			6,665
Tax-exempt										(1,095		)	(224		)	(1,319		)
Interest-bearing balances with banks										2,099			533			2,632
Total interest-earning assets										63,698			20,894			84,592
Interest expense:
Interest-bearing demand deposits										2,925			12,936			15,861
Savings deposits										57			307			364
Time deposits										4,359			9,159			13,518
Borrowed funds										248			988			1,236
Total interest-bearing liabilities										7,589			23,390			30,979
Change in net interest income										$	56,109		$	(2,496	)	$	53,613

Interest income, on a tax equivalent basis, was ~~$138,578~~$135,927 and $413,790, respectively, for the three and nine months ended ~~March 31,~~September 30, 2019 compared to ~~$101,947~~$119,236 and $329,198, respectively, for the same ~~period~~periods in 2018. This increase in interest income, on a tax equivalent basis, is due primarily to the additional earning assets from the Brand acquisition which was completed on September 1, 2018, as well as loan growth in the Company’s non purchased loan portfolio. 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 tables presents the percentage of total average earning assets, by type and yield, for the periods presented:


	Percentage of Total Average Earning Assets				Yield				Percentage of Total Average Earning Assets				Yield
	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	March 31,				March 31,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Loans held for investment	83.15	%	87.29	%	5.43	%	4.95	%	82.86	%	83.59	%	5.29	%	5.10	%
Loans held for sale	3.18		1.74		6.86		4.45		3.51		3.02		4.09		4.88
Securities	11.50		9.51		3.21		3.08		11.17		11.47		2.92		3.11
Other	2.17		1.46		2.50		1.84		2.46		1.92		2.18		2.09
Total earning assets	100.00	%	100.00	%	5.16	%	4.72	%	100.00	%	100.00	%	4.91	%	4.81	%




	Percentage of Total Average Earning Assets				Yield
	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Loans held for investment	82.89	%	85.20	%	5.39	%	5.04	%
Loans held for sale	3.30		2.39		5.55		4.68
Securities	11.40		10.86		3.06		3.09
Interest-bearing balances with banks	2.41		1.55		2.42		2.00
Total earning assets	100.00	%	100.00	%	5.06	%	4.77	%

For the ~~first~~third quarter of 2019, interest income on loans held for investment, on a tax equivalent basis, increased ~~$27,996~~$15,692 to ~~$121,369~~$121,414 from ~~$93,373 compared~~$105,722 in the same period in 2018. For the nine months ending September 30, 2019, interest income on loans held for investment, on a tax equivalent basis, increased $69,324 to $365,488 from $296,164 in the same period in 2018. Interest income on loans held for investment increased as a result of the increase in the average balance of loans due to the Brand ~~acquisitions~~acquisition and non purchased loan ~~growth.~~ growth, as well as an increase in yield on the loan portfolio.

For the ~~first~~third quarter of 2019, interest income on loans held for sale, on a tax equivalent basis, increased ~~$4,166~~$314 to ~~$5,837~~$3,977 from ~~$1,671 compared~~$3,663 in the same period in 2018. For the nine months ending September 30, 2019, interest income on loans held for sale, on a tax equivalent basis, increased $7,290 to $15,004 from $7,714 in the same period in 2018. This increase is primarily due to the impact from the portfolio of non-mortgage consumer loans, acquired

from Brand and supplemented by additional loans purchased in the second quarter of 2019, that iswas classified in loans held for ~~sale.~~sale until it was reclassified to loans held for investment in the third quarter of 2019. The following table presents reported taxable equivalent yield on loans for the periods presented.


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018
Taxable equivalent interest income on loans	$	127,206		$	95,044		$	125,391		$	109,385		$	380,492		$	303,878

Average loans, including loans held for sale	9,405,066			7,799,290			9,494,689			8,525,745			9,432,544			8,082,296

Loan yield	5.49		%	4.94		%	5.24		%	5.09		%	5.39		%	5.03		%

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


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018
Net interest income collected on problem loans	$	812		$	358		$	905		$	714		$	3,890		$	2,117
Accretable yield recognized on purchased loans⁽¹⁾	7,542			6,118			5,510			5,381			20,566			17,218
Total impact to interest income on loans	$	8,354		$	6,476		$	6,415		$	6,095		$	24,456		$	19,335

Impact to loan yield	0.36		%	0.34		%	0.27		%	0.28		%	0.35		%	0.32		%

Impact to net interest margin	0.31		%	0.30		%	0.23		%	0.25		%	0.30		%	0.28		%

⁽¹⁾

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of ~~$3,833~~$2,564 and ~~$3,358~~$2,690, for the ~~first~~third quarter of 2019 and 2018, respectively. This impact was $10,594 and $9,365 for the nine months ended September 30, 2019 and 2018, respectively. This additional interest income increased ~~taxable equivalent~~total loan yield by 1711 basis points and 13 basis points for ~~both~~ the ~~first~~third quarter of 2019 and 2018, respectively, while increasing net interest margin by ~~14 basis points~~9 and 1611 basis points for the ~~first quarter of~~same periods. For the nine months ended September 30, 2019 and 2018 ~~respectively.~~the additional interest income increased total loan yield by 15 basis points for the same periods, while increasing net interest margin by 13 basis points and 14 basis points in each period.

Investment income, on a tax equivalent basis, increased ~~$3,594~~$189 to ~~$9,914~~$9,046 for the ~~first~~third quarter of 2019 from ~~$6,320~~$8,857 for the ~~first~~third quarter of 2018. ~~In addition~~Investment income, on a tax equivalent basis, increased $5,346 to ~~the average balance in the investment portfolio being higher~~$28,520 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 ~~as compared to~~from $23,174 for the same period in ~~2018, the Company was able to add higher yielding securities to the portfolio, bolstering the increase in interest income.~~2018. The tax equivalent yield on the investment portfolio for the ~~first~~third quarter of 2019 was ~~3.21%~~2.92%, ~~up 13~~down 19 basis points from ~~3.08%~~3.11% in the same period in 2018. The increase in investment income due to the average balance of the investment portfolio being higher year over year was offset by an increase in premium amortization resulting from an increase in the prepayment speeds experienced in the Company's mortgage backed securities portfolio given the current interest rate environment.

Interest expense was $25,651 for the third quarter of 2019 as compared to $18,356 for the same period in 2018. Interest expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 was ~~$23,947~~$74,660 as compared to ~~$11,140~~$43,681 for the same period in 2018.

The following 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
	September 30,				September 30,
	2019		2018		2019		2018
Noninterest-bearing demand	23.75	%	21.68	%	—	%	—	%
Interest-bearing demand	45.02		45.01		0.90		0.62
Savings	6.19		6.31		0.22		0.15
Time deposits	22.10		21.73		1.77		1.29
Short term borrowings	0.56		2.89		3.50		2.42
Long-term Federal Home Loan Bank advances	0.06		0.07		3.47		6.85
Subordinated notes	1.28		1.32		6.54		5.52
Other borrowed funds	1.04		0.99		4.89		5.39
Total deposits and borrowed funds	100.00	%	100.00	%	0.97	%	0.77	%




	Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds
	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Noninterest-bearing demand	22.96	%	21.55	%	—	%	—	%
Interest-bearing demand	45.25		45.91		0.88		0.51
Savings	6.11		6.65		0.20		0.14
Time deposits	22.43		21.60		1.70		1.15
Short-term borrowings	0.79		1.89		2.76		2.00
Long-term Federal Home Loan Bank advances	0.06		0.08		3.33		4.50
Subordinated notes	1.36		1.33		6.24		5.57
Other long term borrowings	1.04		0.99		4.69		5.26
Total deposits and borrowed funds	100.00	%	100.00	%	0.95	%	0.66	%

Interest expense on deposits was ~~$19,772~~$21,514 and ~~$8,059~~$13,556 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively. The cost of total deposits was ~~0.79%~~0.84% and ~~0.40%~~0.60% for the same respective periods. Interest expense on deposits was $62,277 and $32,534 for the nine months ended September 30, 2019 and 2018, respectively. The cost of total deposits was 0.82% and 0.51% 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 Brand acquisition and organic deposit growth as well as an increase in the interest rates on interest-bearing deposits. During 2019, the Company has continued its efforts to grow non-interest bearing deposits, resulting in an increase in such deposits of $198,072 during the third quarter of 2019 and $288,530 during the first nine months of 2019. Although the Company continues to seek changes in the mix of 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 ~~$4,175~~$4,137 and ~~$3,081~~$4,800 for the ~~first~~ three months ofended September 30, 2019 and 2018, respectively. Interest expense on total borrowings was $12,383 and $11,147 for the nine months ended September 30, 2019 and 2018, respectively. The decrease in the quarter-to-date average balance of borrowings is the primary driver for the decrease in interest expense on borrowings for the three months ended September 30, 2019, when compared to the same period in 2018. Although the year-to-date average balance of borrowings also decreased, the Company assumed subordinated notes and junior subordinated debentures in its acquisition of Brand, increasing the ~~average balance~~rate and mix of the higher costing long-term borrowings ~~for the~~during first ~~three~~nine months of 2019 as compared to the same period in ~~2018. This increase in the average balance of borrowings, together with higher rates charged on short-term FHLB advances, is the primary driver for the~~2018, which led to an overall increase in interest expense ~~on borrowings.~~for nine months ended September 30, 2019, when compared to the same period in 2018. The subordinated notes assumed were redeemed early in the third quarter of 2019.

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.~~Item.

Noninterest Income

						Noninterest Income to Average Assets
Three Months Ended March 31,
Three Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
2019	2018		2018	2019	2018
1.14%	1.37%
1.17%			1.34%	1.21%	1.36%

Noninterest income was ~~$35,885~~$37,953 for the ~~three months ended March 31,~~third quarter of 2019 as compared to ~~$33,953~~$38,053 for the same period in 2018. Noninterest income was $115,798 for the nine months ended September 30, 2019 as compared to $107,587 for the same period in 2018. While the acquisition of Brand ~~improved~~boosted the growth of our noninterest income, our continued focus on diversification of our income streams also resulted in an increase in 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 ~~$9,102~~$8,992 and ~~$8,473~~$8,847 for the ~~three months ended March 31,~~third quarter of 2019 and 2018, respectively, and were $26,699 and $25,591 for the nine months ended September 30, 2019 and 2018, respectively.

Overdraft fees, the largest component of service charges on deposits, were ~~$6,139~~$5,713 for the three months ended ~~March 31,~~September 30, 2019 compared to ~~$5,908~~$6,181 for the same period in 2018. These fees were $17,140 for the nine months ended September 30, 2019 compared to $17,810 for the same period in 2018.

Fees and commissions were ~~$6,471 for~~$3,090 during the ~~first three months~~third quarter of 2019 as compared to ~~$5,685~~$5,944 for the same period in 2018, and were $16,608 for the first nine months of 2019 as compared to $17,546 for the same period in 2018. Fees and commissions include fees related to deposit services, such as ATM fees and interchange fees on debit card transactions. ~~Interchange~~For the third quarter of 2019, interchange fees were ~~$5,328 for the three months ending March 31, 2019~~$2,210 as compared to ~~$4,787~~$5,095 for the same period in 2018. ~~As a result of our total assets being above $10,000,000, beginning~~Interchange fees were $13,526 for the nine months ending September 30, 2019 as compared to $14,990 for the same period in 2018. Effective July 1, 2019, we ~~will be~~became 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, 2018). ~~We expect the Durban~~The Durbin Amendment limitations ~~to reduce~~reduced interchange fees by approximately ~~$10,000-$11,000 annually.~~$3,000 during the third quarter of 2019. Management is continuing to develop and enhance strategies to offset 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 ~~$2,116~~$2,508 and ~~$2,005~~$2,461 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, and was $6,814 and $6,576 for the nine months ended September 30, 2019 and 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 ~~$757~~$21 and ~~$762~~$22 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, and $807 and $816 for the nine months ended September 30, 2019 and 2018, respectively.

Our Wealth Management segment has two primary divisions: Trust and Financial Services. The Trust division operates on a 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 and 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. The Financial Services division 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 ~~$3,324~~$3,588 for the ~~three months ended March 31,~~third quarter of 2019 compared to ~~$3,262~~$3,386 for the same period in 2018. Wealth management revenue was $10,513 for the nine months ended September 30, 2019 compared to $10,094 for the same period in 2018. The market value of assets under management or administration was ~~$3,492,135~~$3,605,350 and ~~$3,234,775~~$3,401,519 at ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 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 totaled $741,904 in the third quarter of 2019 compared to $479,920 for the same period in 2018. Mortgage loan originations totaled ~~$384,103~~$1,680,729 in the ~~three~~nine months ended ~~March 31,~~September 30, 2019 compared to ~~$362,803~~$1,318,484 for the same period in 2018. The increase in mortgage loan originations is due to an increase in producers throughout our footprint during the current ~~year.~~year as well as the current interest rate environment. Mortgage banking income, specifically mortgage servicing income, was negatively impacted during the third quarter of 2019 by a mortgage servicing rights valuation adjustment of $3,132, as actual prepayment speeds of the mortgages the Company serviced exceeded the Company’s estimates of prepayment speeds. The table below presents the components of mortgage banking income included in noninterest income for the ~~three months ending March 31:~~periods presented.


	Three Months Ended March 31,				Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018		2019			2018		2019			2018
Mortgage servicing income, net	$	821	$	1,154
Mortgage servicing (loss) income, net					$	(2,642	)	$	888	$	(1,048	)	$	2,968
Gain on sales of loans, net	7,888		8,798		14,627			11,289		35,416			30,806
Fees, net	1,692		1,008		3,725			2,173		8,363			4,375
Mortgage banking income, net	$	10,401	$	10,960	$	15,710		$	14,350	$	42,731		$	38,149

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 was ~~$1,407~~$1,734 for the three months ended ~~March 31,~~September 30, 2019 as compared to ~~$945~~$1,186 for the same period in 2018, and was $4,481 for the first nine months of September 30, 2019 as compared to $3,326 for the same period in 2018.

Other noninterest income was ~~$3,051~~$1,988 and ~~$2,623~~$1,895 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, and was $7,604 and $6,321 for the nine months ended September 30, 2019 and 2018, respectively. Other noninterest income includes income from our SBA banking division and other miscellaneous income and can fluctuate based on 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,
Three Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
2019	2018		2018	2019	2018
2.83%	3.14%
2.98%			3.33%	2.91%	3.19%

Noninterest expense was ~~$88,832~~$96,500 and ~~$77,944~~$94,746 for the ~~three~~third quarter of 2019 and 2018, respectively, and was $278,622 and $251,716 for the nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively. The ~~Company did not record any merger and conversion related expenses for the three months ended March 31, 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 of Brand’s operations, as discussed ~~in more detail~~ in the remainder of this section.

Salaries and employee benefits increased ~~$8,566~~$10,238 to ~~$57,350~~$65,425 for the ~~three months ended March 31,~~third quarter of 2019 as compared to ~~$48,784~~$55,187 for the same period in 2018. Salaries and employee benefits increased $27,119 to $183,100 for the nine months ended September 30, 2019 as compared to $155,981 for the same period in 2018. The increase in salaries and employee benefits is primarily due to the Brand acquisition, ~~and~~ annual merit based pay ~~increases.~~increases and, particularly with respect to the nine month period, the production hires the Company made during 2019.

Data processing costs ~~were $4,906~~increased to $4,980 in the third quarter of 2019 from $4,614 for the ~~three~~same period in 2018 and were $14,584 for the nine months ended ~~March 31,~~September 30, 2019 as compared to ~~$4,244~~$13,458 for the same period in 2018. The increased costs are primarily due to the Brand acquisition.

Net occupancy and equipment expense for the third quarter of 2019 was $12,943, up from $10,668 for the same period in 2018. These expenses for the first ~~three~~nine months of 2019 ~~was $11,835,~~were $36,322, up from ~~$9,822~~$30,295 for the same period in 2018. The increase in occupancy and equipment expense is primarily attributable to the additional locations and assets added from the Brand ~~acquisitions.~~acquisition.

Expenses related to other real estate owned for the third quarter of 2019 were ~~$1,004~~$418 compared to $278 for the same period in 2018 and ~~$657,~~were $1,674 and $1,167, respectively, for the first ~~three~~nine months of 2019 and 2018. Expenses on other real estate owned included write downs of the carrying value to fair value on certain pieces of property held in other real estate owned of ~~$727~~$1,121 and ~~$352~~$1,129 for the first ~~three~~nine months of 2019 and 2018, respectively. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, other real estate owned with a cost basis of ~~$1,043~~$5,341 and ~~$2,181,~~$4,816, respectively, was sold resulting in a net loss of ~~$80~~$91 and ~~$96,~~a net gain of $356, respectively.

Professional fees include fees for legal and accounting ~~services.~~services, such as routine litigation matters, external audit services as well as assistance in complying with newly-enacted and existing banking and governmental regulation. Professional fees were ~~$2,454~~$2,976 for the ~~three months ended March 31,~~third quarter of 2019 as compared to ~~$2,138~~$2,056 for the same period in ~~2018. Professional fees remain elevated~~2018 and were $7,861 for the nine months ended September 30, 2019 as compared to $6,370 for the same period 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.~~2018.

Advertising and public relations expense was ~~$2,866~~$3,318 for the ~~three~~third quarter of 2019 as compared to $2,242 for the same period in 2018 and was $8,833 for the nine months ended ~~March 31,~~September 30, 2019 compared to ~~$2,203~~$7,092 for the same period in 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 ~~$2,110~~$1,996 and ~~$1,651~~$1,765 for the ~~three~~third quarter of 2019 and 2018, respectively, and totaled $6,159 and $5,010 for the nine months ended ~~March 31,~~September 30, 2019 and 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 1 year to approximately 109 years.

Communication expenses, those expenses incurred for communication to clients and between employees, were ~~$1,895~~$2,310 for the ~~three months ended March 31,~~third quarter of 2019 as compared to ~~$1,969~~$2,190 for the same period in 2018. Communication expenses were $6,553 for the nine months ended September 30, 2019 as compared to $6,036 for the same period in 2018.

Efficiency Ratio


	Efficiency Ratio				Efficiency Ratio
	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2019		2018
Efficiency ratio (GAAP)	59.02	%	62.48	%	65.10	%	68.20	%	61.25	%	64.03	%
Impact on efficiency ratio from:
Net gains on sales of securities	(0.01	)	—
Net gains or losses on sales of securities					0.15		(0.01	)	0.05		—
MSR valuation adjustment					(1.33	)	—		(0.43	)	—
Intangible amortization	(1.39	)	(1.33	)	(1.33	)	(1.27	)	(1.35	)	(1.27	)
Merger and conversion related expenses	—		(0.72	)	(0.02	)	(8.08	)	(0.04	)	(3.21	)
Extinguishment of debt					(0.04	)	—		(0.01	)	—
Adjusted efficiency ratio (Non-GAAP)⁽¹⁾	57.62	%	60.43	%	62.53	%	58.84	%	59.47	%	59.55	%


⁽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,~~core operating activities, 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. 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,~~third quarter of 2019 and 2018 was ~~$13,590~~$11,132 and ~~$9,673,~~$8,532, respectively. The effective tax rates for those periods were ~~23.15%~~22.92% and ~~22.24%~~21.07%, respectively. Income tax expense for the nine months ended September 30, 2019 and 2018 were $38,667 and $28,629, respectively. The effective tax rates for those periods were 23.04% and 21.83%, respectively. The increase in taxable income is the primary driver in the increase in income tax expense from the ~~first~~third quarter of 2018 to the ~~first~~third quarter of 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 induring the first ~~quarter~~nine months of 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 Company’s markets, including declining unemployment levels, improved labor participation rate and improved performance of the housing market, 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. 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~~three additional State Certified General Real Estate appraisers ~~one Appraisal Intern~~ and 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. 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 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 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 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 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~~commercial, consumer and construction 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’~~Directors 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 losses are identified and reasonably quantified. Net charge-offs for the first ~~quarter~~nine months of 2019 were ~~$691,~~$2,312, or 0.03% of average loans (annualized), compared to net charge-offs of ~~$1,560,~~$3,411, or ~~0.08%~~0.06% of average loans (annualized), for the same period in 2018. The charge-offs ~~in 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 (“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 staff 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				September 30, 2019				December 31, 2018				September 30, 2018
	Balance		% of Total		Balance		% of Total		Balance		% of Total		Balance		% of Total		Balance		% of Total		Balance		% of Total
Commercial, financial, agricultural	$	9,622	19.31	%	$	8,269	16.87	%	$	7,071	15.24	%	$	10,288	20.25	%	$	8,269	16.87	%	$	8,107	16.68	%
Lease financing	662		1.33	%	709		1.44	%	596		1.28	%	783		1.54	%	709		1.44	%	622		1.28	%
Real estate – construction	4,778		9.59	%	4,755		9.70	%	4,198		9.05	%	5,127		10.09	%	4,755		9.70	%	4,713		9.70	%
Real estate – 1-4 family mortgage	9,491		19.04	%	10,139		20.68	%	11,404		24.58	%	9,849		19.38	%	10,139		20.68	%	10,068		20.71	%
Real estate – commercial mortgage	24,643		49.45	%	24,492		49.96	%	21,914		47.23	%	24,039		47.31	%	24,492		49.96	%	24,427		50.25	%
Installment loans to individuals	639		1.28	%	662		1.35	%	1,218		2.62	%	728		1.43	%	662		1.35	%	673		1.38	%
Total	$	49,835	100.00	%	$	49,026	100.00	%	$	46,401	100.00	%	$	50,814	100.00	%	$	49,026	100.00	%	$	48,610	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, 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, 2019		December 31, 2018		March 31, 2018		September 30, 2019		December 31, 2018		September 30, 2018
Specific reserves for impaired loans	$	2,213	$	1,514	$	1,472	$	2,045	$	1,514	$	1,280
Allocated reserves for remaining portfolio	45,098		44,960		43,112		46,221		44,960		44,502
Purchased with deteriorated credit quality	2,524		2,552		$	1,817	2,548		2,552		2,828
Total	$	49,835	$	49,026	$	46,401	$	50,814	$	49,026	$	48,610

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 ~~$1,500~~$1,700 and ~~$1,750~~$2,250 for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively, and $4,100 and $5,810 for the nine months ended September 30, 2019 and 2018, respectively. ~~Although the~~The Company continues to experience low levels of classified loans and nonperforming loans, 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~~which has allowed a decrease in ~~non purchased loans has dictated that we increase~~ the provision for ~~loans~~loan losses in the current year.

~~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,~~September 30, 2019, the fair value of loans accounted for in accordance with ASC 310-30 was ~~$208,846.~~$188,114. 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,~~September 30, 2019 and 2018, ~~$2,524~~$2,548 and ~~$1,817,~~$2,828, 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						Nine Months Ended
	March 31,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018
Balance at beginning of period	$	49,026		$	46,211		$	50,059		$	47,355		$	49,026		$	46,211
Charge-offs
Commercial, financial, agricultural	258			659			757			511			1,709			1,627
Lease financing	—			—			45			198			45			203
Real estate – construction	—			—			—			—			—			—
Real estate – 1-4 family mortgage	497			671			268			211			1,143			1,861
Real estate – commercial mortgage	562			613			677			216			1,406			875
Installment loans to individuals	220			122			3,218			204			3,650			420
Total charge-offs	1,537			2,065			4,965			1,340			7,953			4,986
Recoveries
Commercial, financial, agricultural	374			235			761			24			1,376			373
Lease financing	—			—			—			—			2			—
Real estate – construction	7			4			—			3			7			10
Real estate – 1-4 family mortgage	197			133			219			119			531			335
Real estate – commercial mortgage	245			108			33			152			644			756
Installment loans to individuals	23			25			3,007			47			3,081			101
Total recoveries	846			505			4,020			345			5,641			1,575
Net charge-offs	691			1,560			945			995			2,312			3,411
Provision for loan losses	1,500			1,750			1,700			2,250			4,100			5,810
Balance at end of period	$	49,835		$	46,401		$	50,814		$	48,610		$	50,814		$	48,610
Net charge-offs (annualized) to average loans	0.03		%	0.08		%	0.04		%	0.05		%	0.03		%	0.06		%
Allowance for loan losses to:
Total non purchased loans	0.76		%	0.80		%	0.72		%	0.78		%	0.72		%	0.78		%
Nonperforming non purchased loans	363.79		%	356.71		%	220.37		%	360.02		%	220.37		%	360.02		%

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						Nine Months Ended
	March 31,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018
Real estate – construction:
Residential	$	(7	)	$	(4	)	$	—		$	(3	)	$	(7	)	$	(10	)
Total real estate – construction	(7		)	(4		)	—			(3		)	(7		)	(10		)
Real estate – 1-4 family mortgage:
Primary	248			29			251			84			683			305
Home equity	129			39			—			21			98			793
Rental/investment	(2		)	63			(107		)	8			46			52
Land development	(75		)	407			(95		)	(21		)	(215		)	376
Total real estate – 1-4 family mortgage	300			538			49			92			612			1,526
Real estate – commercial mortgage:
Owner-occupied	236			546			383			52			427			175
Non-owner occupied	128			(41		)	263			12			386			(58		)
Land development	(47		)	—			(2		)	—			(51		)	2
Total real estate – commercial mortgage	317			505			644			64			762			119
Total net charge-offs of loans secured by real estate	$	610		$	1,039		$	693		$	153		$	1,367		$	1,635

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, 2019
September 30, 2019
Nonaccruing loans	$	12,507	$	7,828	$	20,335		$	15,733	$	6,123	$	21,856
Accruing loans past due 90 days or more	1,192		5,436		6,628			7,325		7,034		14,359
Total nonperforming loans	13,699		13,264		26,963			23,058		13,157		36,215
Other real estate owned	4,223		5,932		10,155			1,975		6,216		8,191
Total nonperforming assets	$	17,922	$	19,196	$	37,118		$	25,033	$	19,373	$	44,406
Nonperforming loans to total loans					0.30		%					0.39		%
Nonperforming assets to total assets					0.29		%					0.34		%

December 31, 2018
Nonaccruing loans	$	10,218	$	5,836	$	16,054		$	10,218	$	5,836	$	16,054
Accruing loans past due 90 days or more	2,685		7,232		9,917			2,685		7,232		9,917
Total nonperforming loans	12,903		13,068		25,971			12,903		13,068		25,971
Other real estate owned	4,853		6,187		11,040			4,853		6,187		11,040
Total nonperforming assets	$	17,756	$	19,255	$	37,011		$	17,756	$	19,255	$	37,011
Nonperforming loans to total loans					0.29		%					0.29		%
Nonperforming assets to total assets					0.29		%					0.30		%

The level of nonperforming loans increased ~~$992~~$10,244 from December 31, 2018 to September 30, 2019 while OREO decreased ~~$885~~$2,849 during the same period. As of ~~March 31,~~September 30, 2019, the acquisition of Brand added nonperforming loans of ~~$3,894.~~$4,655, as compared to $3,893 as of December 31, 2018. 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, 2019		December 31, 2018		March 31, 2018		September 30, 2019		December 31, 2018		September 30, 2018
Commercial, financial, agricultural	$	6,143	$	2,461	$	4,141	$	9,551	$	2,461	$	2,747
Real estate – construction:
Residential	—		68		49		128		68		264
Commercial							254		—		—
Total real estate – construction	—		68		49		382		68		264
Real estate – 1-4 family mortgage:
Primary	8,547		10,102		6,963		12,119		10,102		9,621
Home equity	2,073		2,047		2,557		2,083		2,047		1,944
Rental/investment	772		757		459		1,454		757		667
Land development	466		980		378		561		980		1,219
Total real estate – 1-4 family mortgage	11,858		13,886		10,357		16,217		13,886		13,451
Real estate – commercial mortgage:
Owner-occupied	3,901		3,779		4,118		4,140		3,779		4,286
Non-owner occupied	3,854		3,933		2,764		3,754		3,933		3,949
Land development	342		958		1,005		1,192		958		1,182
Total real estate – commercial mortgage	8,097		8,670		7,887		9,086		8,670		9,417
Installment loans to individuals	775		797		276		575		797		392
Lease financing	90		89		202		404		89		—
Total nonperforming loans	$	26,963	$	25,971	$	22,912	$	36,215	$	25,971	$	26,271

The Company continues its efforts to bring problem credits to resolution. Total nonperforming loans as a percentage of total loans were ~~0.30%~~0.39% as of ~~March 31,~~September 30, 2019 as compared to 0.29% as of both December 31, 2018 and ~~0.30% as of March 31,~~September 30, 2018. The Company’s coverage ratio, or its allowance for loan losses as a percentage of nonperforming loans, was ~~184.83%~~140.31% as of ~~March 31,~~September 30, 2019 as compared to 188.77% as of December 31, 2018 and ~~202.52%~~185.03% as of ~~March 31,~~September 30, 2018. The coverage ratio for non purchased, nonperforming loans was ~~363.79%~~220.37% as of ~~March 31,~~September 30, 2019 as compared to 379.96% as of December 31, 2018 and ~~356.71%~~360.02% as of ~~March 31,~~September 30, 2018. Although nonperforming loans have increased in the current year, all credit quality metrics continue to remain at or near historical lows. As shown below, total loans 30-89 days past due have decreased in the current year and the Company will continue to proactively manage both loans past due 30-89 days and nonperforming loans.

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,~~September 30, 2019. Management also continually monitors past due loans for potential credit quality deterioration. Total loans 30-89 days past due were ~~$44,141~~$29,271 at ~~March 31,~~September 30, 2019 as compared to $36,597 at December 31, 2018 and ~~$28,573~~$35,696 at ~~March 31,~~September 30, 2018. The acquisition of Brand added ~~$13,821~~$9,404 and $11,156 of purchased, loans 30-89 days past due at ~~March~~September 30, 2019 and December 31, ~~2019.~~2018, respectively.

Although not classified as nonperforming loans, restructured loans are another category of assets that contribute to our credit 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 ~~$12,409~~$13,429 at ~~March 31,~~September 30, 2019 compared to $12,820 at December 31, 2018 and ~~$13,823~~$11,931 at ~~March 31,~~September 30, 2018. At ~~March 31,~~September 30, 2019, loans restructured through interest rate concessions represented ~~28%~~25% 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, 2019		December 31, 2018		March 31, 2018		September 30, 2019		December 31, 2018		September 30, 2018
Commercial, financial, agricultural	$	332	$	337	$	372	$	533	$	337	$	216
Real estate – 1-4 family mortgage:
Primary	6,169		6,261		6,490		7,027		6,261		5,626
Home equity	184		186		460		379		186		42
Rental/investment	1,987		2,005		1,960		1,832		2,005		2,119
Land development	—		1		4		—		1		2
Total real estate – 1-4 family mortgage	8,340		8,453		8,914		9,238		8,453		7,789
Real estate – commercial mortgage:
Owner-occupied	3,076		3,189		3,296		3,098		3,189		3,047
Non-owner occupied	548		722		747		519		722		736
Land development	50		56		428		41		56		80
Total real estate – commercial mortgage	3,674		3,967		4,471		3,658		3,967		3,863
Installment loans to individuals	63		63		66		—		63		63

Total restructured loans in compliance with modified terms	$	12,409	$	12,820	$	13,823	$	13,429	$	12,820	$	11,931

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


	2019			2018			2019			2018
Balance at January 1,	$	12,820		$	14,553		$	12,820		$	14,553
Additional loans with concessions	176			743
Additional advances or loans with concessions							3,650			929
Reclassified as performing restructured loan	252			3			1,866			329
Reductions due to:
Reclassified as nonperforming	(269		)	(192		)	(1,251		)	(1,286		)
Paid in full	(264		)	(849		)	(786		)	(1,859		)
Measurement period adjustment on recently acquired loans							(2,376		)	—
Paydowns	(306		)	(435		)	(494		)	(735		)
Balance at March 31,	$	12,409		$	13,823
Balance at September 30,							$	13,429		$	11,931

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, 2019		December 31, 2018		March 31, 2018		September 30, 2019		December 31, 2018		September 30, 2018
Nonaccruing loans	$	20,335	$	16,054	$	14,743	$	21,856	$	16,054	$	14,505
Accruing loans past due 90 days or more	6,628		9,917		8,169		14,359		9,917		11,766
Total nonperforming loans	26,963		25,971		22,912		36,215		25,971		26,271
Restructured loans in compliance with modified terms	12,409		12,820		13,823		13,429		12,820		11,931
Total nonperforming and restructured loans	$	39,372	$	38,791	$	36,735	$	49,644	$	38,791	$	38,202

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


	March 31, 2019		December 31, 2018		March 31, 2018		September 30, 2019		December 31, 2018		September 30, 2018
Residential real estate	$	2,651	$	2,333	$	2,148	$	1,004	$	2,333	$	1,986
Commercial real estate	3,708		4,297		5,165		3,957		4,297		4,634
Residential land development	1,095		1,099		1,743		899		1,099		1,281
Commercial land development	2,701		3,311		5,499		2,331		3,311		4,696
Total other real estate owned	$	10,155	$	11,040	$	14,555	$	8,191	$	11,040	$	12,597

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


	2019			2018			2019			2018
Balance at January 1,	$	11,040		$	15,934		$	11,040		$	15,934
Transfers of loans	885			1,154			3,613			2,657
Impairments	(727		)	(352		)	(1,121		)	(1,130		)
Dispositions	(1,043		)	(2,181		)	(5,341		)	(4,816		)
Balance at March 31,	$	10,155		$	14,555
Other							—			(48		)
Balance at September 30,							$	8,191		$	12,597

Other real estate owned with a cost basis of ~~$1,043~~$5,341 was sold during the ~~three~~nine months ended ~~March 31,~~September 30, 2019, resulting in a net loss of ~~$80,~~$91, while other real estate owned with a cost basis of ~~$2,181~~$4,816 was sold during the ~~three~~nine months ended ~~March 31,~~September 30, 2018, resulting in a net ~~loss~~gain of ~~$96.~~$356.

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”) 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.~~scenarios, which could impact the results presented in the table below.

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 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~~October 1, 2019, in each case as compared to the result under rates present in the market on ~~March 31,~~September 30, 2019. The changes in interest rates assume an instantaneous and parallel shift in the yield curve and 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 (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	17.28%	7.00%	10.95%	14.24%	5.00%	11.33%
+300	16.54%	5.44%	8.58%	12.44%	3.93%	8.67%
+200	12.74%	3.73%	5.87%	8.78%	2.85%	6.08%
+100	7.23%	1.96%	3.08%	5.37%	1.60%	3.36%
-100	(9.63)%	(2.69)%	(3.57)%	(5.35)%	(2.73)%	(4.49)%

The rate shock results for the net interest income simulations for the next twenty-four months produce an asset sensitive position at ~~March 31, 2019.~~September 30, 2019 and are all within the parameters set by the Board of Directors. The preceding measures assume no change in the size or asset/liability compositions of the balance ~~sheet. The measures~~sheet, and they 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~~including asset prepayment speeds, the impact of ~~new business~~competitive factors on our pricing of loans and deposits, how responsive our deposit repricing is to the change in market rates and the ~~behavior~~expected life of ~~existing positions.~~non-maturity deposits. These business assumptions are based upon our experience, business plans and published industry experience. ~~Key~~Such assumptions ~~employed~~may not necessarily reflect the manner or timing in ~~the model include~~which cash flows, asset ~~prepayment speeds, competitive factors, the relative price sensitivity of certain assets~~yields and ~~liabilities and the expected life of non-maturity deposits.~~liability costs respond to changes in market rates. 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 the major source of funds used by ~~Renasant~~the 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~~the 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 ~~19.57%~~21.69% 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,~~September 30, 2019,, securities with a carrying value of ~~$573,080~~$410,719 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 $637,607 similarly pledged at December 31, 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 ~~$80,000~~$196,471 at ~~March 31,~~September 30, 2019 compared to ~~$380,000~~$380,000 atDecember 31, 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,~~September 30, 2019,, the balance of our outstanding long-term advances with the FHLB was ~~$6,492~~$4,055 compared to $6,690 at December 31, 2018. The total amount of the remaining credit available to us from the FHLB at ~~March 31,~~September 30, 2019 was ~~$3,548,225.~~$3,621,677. We also maintain lines of credit with other commercial banks totaling $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,~~September 30, 2019 or December 31, 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. In connection with the acquisition of Brand, the Company assumed $30,000 aggregate principal amount of 8.50% subordinated notes due June 27, 2024. The notes assumed in the Brand acquisiton were redeemed during the third quarter of 2019. The carrying value of the subordinated notes, net of unamortized debt issuance costs, was ~~$146,962~~$113,969 at ~~March 31,~~September 30, 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				Nine Months Ended				Nine Months Ended
	March 31,				March 31,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Noninterest-bearing demand	22.30	%	21.52	%	—	%	—	%	22.96	%	21.55	%	—	%	—	%
Interest-bearing demand	45.60		46.31		0.85		0.35		45.25		45.91		0.88		0.51
Savings	6.00		6.88		0.19		0.11		6.11		6.65		0.20		0.14
Time deposits	22.65		21.56		1.60		1.00		22.43		21.60		1.70		1.15
Short-term borrowings	0.95		1.27		2.66		1.45		0.79		1.89		2.76		2.00
Long-term Federal Home Loan Bank advances	0.06		0.09		3.28		3.41		0.06		0.08		3.33		4.50
Subordinated notes	1.40		1.35		6.13		5.63		1.36		1.33		6.24		5.57
Other borrowed funds	1.04		1.02		4.60		4.97		1.04		0.99		4.69		5.26
Total deposits and borrowed funds	100.00	%	100.00	%	0.92	%	0.53	%	100.00	%	100.00	%	0.95	%	0.66	%

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~~$409,661 at ~~March 31,~~September 30, 2019 compared to ~~$250,978~~$369,596 at ~~March 31, 2018~~.September 30, 2018. Cash ~~provided by~~used in investing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 was ~~$24,930~~$52,187 compared to ~~cash used in investing activities of $365,230~~$472,662 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018. Proceeds from the sale, maturity or call of securities within our investment portfolio were ~~$59,120~~$405,005 for the ~~three~~nine months ended ~~March 31,~~ September 30, 2019 compared to ~~$29,335~~$115,898 for the same period in 2018. These proceeds were reinvested into the investment portfolio or used to fund loan growth. Purchases of investment securities were ~~$49,577~~$366,265 for the first ~~three~~nine months of 2019 compared to ~~$317,922~~$576,579 for the same period in 2018. The ~~large increase in~~ purchases of investment securities in 2018 ~~is related~~were elevated due to the releveraging of the ~~Company's~~Company’s balance sheet.

Cash used in financing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 ~~and 2018~~ was ~~$172,082,~~$137,145, compared to cash provided by financing activities for the same period in 2018 ~~was $395,926.~~of $558,837. Deposits increased ~~$140,692~~$158,477 and ~~$437,471~~$538,915 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively. A portion of the increase in deposits during the first ~~three~~nine months of 2018 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 deleveraging strategy. Cash provided through deposit growth was primarily used to 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~~the 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, could include the payment of dividends. Accordingly, the approval of the DBCF is required prior to ~~Renasant~~the 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~~the Bank may loan to the Company unless such loans are collateralized by specific obligations. At ~~March 31,~~September 30, 2019,, the maximum amount available for transfer from ~~Renasant~~the Bank to the Company in the form of loans was ~~$137,053.~~$138,197. The Company maintains a line of credit collateralized by cash with ~~Renasant~~the Bank totaling ~~$3,052.~~$3,061. There were no amounts outstanding under this line of credit at ~~March 31, 2019~~.September 30, 2019.

These restrictions did not have any impact on the Company’s ability to meet its cash obligations in the ~~three~~nine months ended ~~March 31,~~September 30, 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, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Loan commitments	$	2,165,063	$	2,068,749	$	2,345,890	$	2,068,749
Standby letters of credit	88,660		104,664		92,703		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,~~September 30, 2019, the Company had notional amounts of ~~$204,403~~$204,590 on interest rate contracts with corporate customers and ~~$204,403~~$204,590 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.

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 $~~2,088,877~~2,119,659 at ~~March 31,~~September 30, 2019 compared to $2,043,913 at December 31, 2018. Book value per share was ~~$35.63~~$36.89 and $34.91 at ~~March 31,~~September 30, 2019 and December 31, 2018, respectively. The growth in shareholders’ equity was attributable to the acquisition of Brand as well as earnings retention ~~offset by~~and changes in accumulated other comprehensive ~~loss~~income offset by dividends declared and ~~dividends declared.~~common stock repurchased through the stock repurchase program.

The Company maintains a shelf registration statement with the Securities and Exchange Commission (“SEC”). The shelf registration statement, which was 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 ~~$109,781~~$110,070 at ~~March 31,~~September 30, 2019,, of which ~~$106,190~~$106,479 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,~~September 30, 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 ~~$146,962~~$113,969 at ~~March 31,~~September 30, 2019,, of which ~~$143,493~~$113,576 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 Capital Conservation Buffer)
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2019
September 30, 2019
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	1,124,981	11.49	%	$	636,422	6.50	%	$	685,377	7.00	%	$	1,147,024	11.36	%	$	656,594	6.50	%	$	707,102	7.00	%
Tier 1 risk-based capital ratio	1,228,640		12.55	%	783,289		8.00	%	832,244		8.50	%	1,252,116		12.40	%	808,116		8.00	%	858,623		8.50	%
Total risk-based capital ratio	1,426,332		14.57	%	979,111		10.00	%	1,028,066		10.50	%	1,421,600		14.07	%	1,010,145		10.00	%	1,060,652		10.50	%
Leverage capital ratios:
Tier 1 leverage ratio	1,228,640		10.44	%	588,346		5.00	%	470,677		4.00	%	1,252,116		10.56	%	592,809		5.00	%	474,248		4.00	%

Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	1,316,336	13.45	%	$	635,970	6.50	%	$	684,891	7.00	%	$	1,326,065	13.15	%	$	655,693	6.50	%	$	706,131	7.00	%
Tier 1 risk-based capital ratio	1,316,336		13.45	%	782,733		8.00	%	831,654		8.50	%	1,326,065		13.15	%	807,006		8.00	%	857,444		8.50	%
Total risk-based capital ratio	1,370,536		14.01	%	978,416		10.00	%	1,027,337		10.50	%	1,381,973		13.70	%	1,008,758		10.00	%	1,059,196		10.50	%
Leverage capital ratios:
Tier 1 leverage ratio	1,316,336		11.20	%	587,764		5.00	%	470,211		4.00	%	1,326,065		11.20	%	592,138		5.00	%	473,710		4.00	%

December 31, 2018
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	1,085,751	11.05	%	$	638,468	6.50	%	$	626,189	6.375	%	$	1,085,751	11.05	%	$	638,468	6.50	%	$	626,189	6.375	%
Tier 1 risk-based capital ratio	1,188,412		12.10	%	785,806		8.00	%	773,528		7.875	%	1,188,412		12.10	%	785,806		8.00	%	773,528		7.875	%
Total risk-based capital ratio	1,386,507		14.12	%	982,258		10.00	%	969,979		9.875	%	1,386,507		14.12	%	982,258		10.00	%	969,979		9.875	%
Leverage capital ratios:
Tier 1 leverage ratio	1,188,412		10.11	%	587,939		5.00	%	470,352		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	$	1,276,976	13.02	%	$	637,552	6.50	%	$	625,291	6.375	%	$	1,276,976	13.02	%	$	637,552	6.50	%	$	625,291	6.375	%
Tier 1 risk-based capital ratio	1,276,976		13.02	%	784,679		8.00	%	772,418		7.875	%	1,276,976		13.02	%	784,679		8.00	%	772,418		7.875	%
Total risk-based capital ratio	1,331,619		13.58	%	980,849		10.00	%	968,588		9.875	%	1,331,619		13.58	%	980,849		10.00	%	968,588		9.875	%
Leverage capital ratios:
Tier 1 leverage ratio	1,276,976		10.88	%	587,090		5.00	%	469,672		4.00	%	1,276,976		10.88	%	587,090		5.00	%	469,672		4.00	%

The Company completed its previously announced $50,000 stock repurchase program during the first week of October 2019. The weighted average price of all shares of common stock repurchased over the entire repurchase program was $34.45.

On October ~~24, 2018,~~15, 2019, the ~~Company’s~~Company's Board of Directors ~~authorized~~approved a new stock repurchase program, authorizing the Company to repurchase of up to $50,000 ~~million~~ of ~~the Company’s~~its outstanding common stock, either in open market purchases or privately-negotiated transactions. The new 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~~Board of ~~common stock during the first quarter of 2019.~~Directors.

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~~income. The adjusted efficiency ratio excludes expenses that (1) the Company does not consider to be part of our ~~normal operations,~~core operating activities, 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, when applicable, merger and conversion related expenses, ~~and~~ debt prepayment ~~penalties.~~penalties and asset valuation adjustments. 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	Efficiency Ratio						Efficiency Ratio
	Three months ended March 31,						Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018			2019			2018
Interest income (fully tax equivalent basis)	$	138,578		$	101,947		$	135,927		$	119,236		$	413,790		$	329,198
Interest expense	23,947			11,140			25,651			18,356			74,660			43,681
Net interest income (fully tax equivalent basis)	114,631			90,807			110,276			100,880			339,130			285,517

Total noninterest income	35,885			33,953			37,953			38,053			115,798			107,587
Net gains on sales of securities	13			—
Net gains (losses) on sales of securities							343			(16		)	348			(16		)
MSR valuation adjustment							(3,132		)	—			(3,132		)	—
Adjusted noninterest income	35,872			33,953			40,742			38,069			118,582			107,603

Total noninterest expense	88,832			77,944			96,500			94,746			278,622			251,716
Intangible amortization	2,110			1,651			1,996			1,765			6,159			5,010
Merger and conversion related expenses	—			900			24			11,221			203			12,621
Extinguishment of debt							54			—			54			—
Adjusted noninterest expense	86,722			75,393			94,426			81,760			272,206			234,085

Efficiency Ratio (GAAP)	59.02		%	62.48		%	65.10		%	68.20		%	61.25		%	64.03		%
Adjusted Efficiency Ratio (non-GAAP)	57.62		%	60.43		%	62.53		%	58.84		%	59.47		%	59.55		%

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, 2018. For additional information regarding our market risk, see our Annual Report on Form 10-K for the year ended December 31, 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, 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,~~September 30, 2019, the Company repurchased shares of its common stock as indicated in the following table:

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
—



	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs⁽²⁾
July 1, 2019 to July 31, 2019	22,653	$	34.02	22,653	$	29,229
August 1, 2019 to August 31, 2019	452,200	32.99		452,200	14,313
September 1, 2019 to September 30, 2019	379,492	34.57		376,568	1,293
Total	854,345	$	33.72	851,421

(1)

~~Represents~~The Company announced a $50.0 million stock repurchase program on October 24, 2018, under which the Company was authorized to repurchase outstanding shares of its common stock either in open market purchases or privately-negotiated transactions. The stock repurchase program was completed during the first week of October 2019. Under the program, 851,421 shares were repurchased in the third quarter of 2019. Share amounts in this column also include shares of Renasant common stock withheld to satisfy federal and state tax liabilities related to the vesting of time-based and performance-based restricted stock awards during the three month period ended ~~March 31,~~September 30, 2019. A total of 2,924 shares were withheld for such purpose in September 2019; no shares were withheld for tax purposes in July or August 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, Brand Group Holdings, Inc. and The Brand Banking Company dated as of March 28, 2018(1)

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

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

~~(4)~~(10)(i)		~~Articles of Incorporation of~~Amendment No. 2 to Executive Employment Agreement dated August 19, 2019 by and between E. Robinson McGraw and Renasant Corporation ~~as amended (2)~~

~~(4)(ii)~~		~~Amended and Restated Bylaws of Renasant Corporation, as amended (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,~~September 30, 2019 were formatted in Inline 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).

(104)		The cover page of Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL (included in Exhibit 101).


(1)	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.


(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.


(3)	Filed as exhibit 3(ii) to the Form 8-K of the Company filed with the Commission on 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 8,~~November 7, 2019	/s/ C. Mitchell Waycaster
		C. Mitchell Waycaster
		President and
		Chief Executive Officer
		(Principal Executive Officer)

Date:	~~May 8,~~November 7, 2019	/s/ Kevin D. Chapman
		Kevin D. Chapman
		Executive Vice President and
		Chief Financial and Operating Officer
		(Principal Financial Officer)

7588



		Page
PART I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Changes in Shareholders’ Equity	4
	Consolidated Statements of Cash Flows	56
	Notes to Consolidated Financial Statements	68

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4656

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7184

Item 4.	Controls and Procedures	7184

PART II	Other Information
Item 1A.	Risk Factors	7386

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7386

Item 6.	Exhibits	7487

SIGNATURES		7588



	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



			Fair Value
As of March 31, 2019	Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	562,066	$	562,066	$	—	$	—	$	562,066
Securities available for sale	1,255,353		—		1,245,107		10,246		1,255,353
Loans held for sale	318,563		—		195,807		122,756		318,563
Loans, net	9,038,458		—		—		8,801,277		8,801,277
Mortgage servicing rights	48,973		—		—		55,334		55,334
Derivative instruments	7,386		—		7,386		—		7,386
Financial liabilities
Deposits	$	10,268,912	$	7,884,578	$	2,366,030	$	—	$	10,250,608
Short-term borrowings	87,590		87,590		—		—		87,590
Other long-term borrowings	35		35		—		—		35
Federal Home Loan Bank advances	6,492		—		6,622		—		6,622
Junior subordinated debentures	109,781		—		104,300		—		104,300
Subordinated notes	146,962		—		147,175		—		147,175
Derivative instruments	8,358		—		8,358		—		8,358



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



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		%



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