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 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
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). Yes☒ No ☐
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
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities held to maturity (net of allowance for credit losses of $32 at each of September 30, 2023 and December 31, 2022) (fair value of $1,079,123 and $1,206,540, respectively)
1,245,595
1,324,040
Securities available for sale, at fair value
909,108
1,533,942
Loans held for sale, at fair value
241,613
110,105
Loans held for investment, net of unearned income
12,168,023
11,578,304
Allowance for credit losses on loans
(197,773)
(192,090)
Loans, net
11,970,250
11,386,214
Premises and equipment, net
284,368
283,595
Other real estate owned, net
9,258
1,763
Goodwill
991,665
991,708
Other intangible assets, net
20,070
24,176
Bank-owned life insurance
379,945
373,808
Mortgage servicing rights
90,241
84,448
Other assets
298,352
298,385
Total assets
$
17,181,621
$
16,988,176
Liabilities and shareholders’ equity
Liabilities
Deposits
Noninterest-bearing
$
3,734,197
$
4,558,756
Interest-bearing
10,422,913
8,928,210
Total deposits
14,157,110
13,486,966
Short-term borrowings
107,662
712,232
Long-term debt
427,399
428,133
Other liabilities
256,127
224,829
Total liabilities
14,948,298
14,852,160
Shareholders’ equity
Preferred stock, $0.01 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; 56,140,713 and 55,953,104 shares outstanding, respectively
296,483
296,483
Treasury stock, at cost – 3,156,012 and 3,343,621 shares, respectively
(105,300)
(111,577)
Additional paid-in capital
1,304,891
1,302,422
Retained earnings
936,573
857,725
Accumulated other comprehensive loss, net of taxes
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”), Renasant Insurance, Inc., Park Place Capital Corporation and Continental Republic Capital, LLC (doing business as “Republic Business Credit”). Through its subsidiaries, the Company offers a diversified range of financial, wealth management, fiduciary and insurance services to its retail and commercial customers from offices located throughout the Southeast and offers factoring and asset-based lending on a nationwide basis.
The Bank acquired Southeastern Commercial Finance, LLC (“SCF”), an asset-based lending company headquartered in Birmingham, Alabama, effective March 1, 2022. Prior to the end of the third quarter of 2022, all of SCF’s assets were distributed to the Bank in connection with the conversion and integration of SCF into the Bank.
In September 2022, the Bank formed Renasant Capital Funding Corporation (the “REIT”), which is intended to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended. The REIT purchases from the Bank, either by assignment or participation, eligible loans collateralized by real estate located in Georgia and Florida, which allows for more effective monitoring of the loans and better managing liquidity related to such real estate assets. The arrangement provides tax benefits in certain states in which the Company operates.
The Bank acquired Republic Business Credit, a factoring and asset-based lending company headquartered in New Orleans, Louisiana (“RBC”), effective December 30, 2022.
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. 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, 2022 filed with the Securities and Exchange Commission on February 24, 2023.
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 March 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-02, “Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”), which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 will be effective on January 1, 2024. Early adoption is permitted, including in an interim period. The adoption of this accounting pronouncement will have no impact on the Company’s historical financial statements but could influence the Company’s decisions with respect to investments in certain tax credits prospectively.
Notes to Consolidated Financial Statements (Unaudited)
Note 2 – 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 in the tables below.
There was no allowance for credit losses allocated to any of the Company’s available for sale securities as of September 30, 2023 or December 31, 2022.
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
September 30, 2023
Obligations of states and political subdivisions
$
38,200
$
71
$
(4,732)
$
33,539
Residential mortgage backed securities:
Government agency mortgage backed securities
321,245
2
(49,799)
271,448
Government agency collateralized mortgage obligations
501,793
—
(108,896)
392,897
Commercial mortgage backed securities:
Government agency mortgage backed securities
6,036
—
(908)
5,128
Government agency collateralized mortgage obligations
165,812
—
(27,071)
138,741
Other debt securities
72,386
207
(5,238)
67,355
$
1,105,472
$
280
$
(196,644)
$
909,108
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
December 31, 2022
Obligations of other U.S. Government agencies and corporations
$
170,000
$
—
$
(5,340)
$
164,660
Obligations of states and political subdivisions
154,066
204
(9,368)
144,902
Residential mortgage backed securities:
Government agency mortgage backed securities
508,415
37
(52,036)
456,416
Government agency collateralized mortgage obligations
605,033
—
(103,864)
501,169
Commercial mortgage backed securities:
Government agency mortgage backed securities
11,166
—
(1,053)
10,113
Government agency collateralized mortgage obligations
Notes to Consolidated Financial Statements (Unaudited)
The amortized cost and fair value of securities held to maturity were as follows as of the dates presented:
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
September 30, 2023
Obligations of states and political subdivisions
$
289,053
$
—
$
(57,660)
$
231,393
Residential mortgage backed securities
Government agency mortgage backed securities
440,227
—
(41,350)
398,877
Government agency collateralized mortgage obligations
395,441
—
(49,030)
346,411
Commercial mortgage backed securities:
Government agency mortgage backed securities
16,989
—
(3,800)
13,189
Government agency collateralized mortgage obligations
44,725
—
(8,235)
36,490
Other debt securities
59,192
—
(6,429)
52,763
$
1,245,627
$
—
$
(166,504)
$
1,079,123
Allowance for credit losses - held to maturity securities
(32)
Held to maturity securities, net of allowance for credit losses
$
1,245,595
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
December 31, 2022
Obligations of states and political subdivisions
$
291,886
$
17
$
(48,325)
$
243,578
Residential mortgage backed securities
Government agency mortgage backed securities
483,560
—
(24,432)
459,128
Government agency collateralized mortgage obligations
423,315
—
(30,706)
392,609
Commercial mortgage backed securities:
Government agency mortgage backed securities
17,006
—
(3,261)
13,745
Government agency collateralized mortgage obligations
45,430
—
(6,559)
38,871
Other debt securities
62,875
—
(4,266)
58,609
$
1,324,072
$
17
$
(117,549)
$
1,206,540
Allowance for credit losses - held to maturity securities
(32)
Held to maturity securities, net of allowance for credit losses
$
1,324,040
Securities sold were as follows for the nine months ended September 30, 2023. There were no securities sold during the third quarter of 2023 nor the three and nine months ended September 30, 2022.
Carrying Value
Net Proceeds
(Loss)
Nine months ended September 30, 2023
Obligations of other U.S. Government agencies and corporations
$
170,000
$
164,915
$
(5,085)
Obligations of states and political subdivisions
104,950
99,439
(5,511)
Residential mortgage backed securities:
Government agency mortgage backed securities
137,196
130,602
(6,594)
Government agency collateralized mortgage obligations
54,028
51,101
(2,927)
Commercial mortgage backed securities:
Government agency mortgage backed securities
5,048
4,825
(223)
Government agency collateralized mortgage obligations
Notes to Consolidated Financial Statements (Unaudited)
At September 30, 2023 and December 31, 2022, securities with a carrying value of $783,250 and $824,417, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $24,034 and $18,184 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2023 and December 31, 2022, respectively.
The amortized cost and fair value of securities at September 30, 2023 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
Held to Maturity
Available for Sale
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Due within one year
$
—
$
—
$
6,482
$
6,402
Due after one year through five years
3,265
3,044
36,332
36,386
Due after five years through ten years
75,045
62,072
42,481
36,784
Due after ten years
210,743
166,277
16,688
13,887
Residential mortgage backed securities:
Government agency mortgage backed securities
440,227
398,877
321,245
271,448
Government agency collateralized mortgage obligations
395,441
346,411
501,793
392,897
Commercial mortgage backed securities:
Government agency mortgage backed securities
16,989
13,189
6,036
5,128
Government agency collateralized mortgage obligations
Notes to Consolidated Financial Statements (Unaudited)
The following tables present the age of gross unrealized losses and fair value by investment category for which an allowance for credit losses has not been recorded 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, 2023
Obligations of states and political subdivisions
6
5,196
(27)
16
23,814
(4,705)
22
29,010
(4,732)
Residential mortgage backed securities:
Government agency mortgage backed securities
—
—
—
53
267,412
(49,799)
53
267,412
(49,799)
Government agency collateralized mortgage obligations
—
—
—
41
392,897
(108,896)
41
392,897
(108,896)
Commercial mortgage backed securities:
Government agency mortgage backed securities
—
—
—
2
5,128
(908)
2
5,128
(908)
Government agency collateralized mortgage obligations
—
—
—
28
138,742
(27,071)
28
138,742
(27,071)
Other debt securities
1
957
(53)
20
36,456
(5,185)
21
37,413
(5,238)
Total
7
$
6,153
$
(80)
160
$
864,449
$
(196,564)
167
$
870,602
$
(196,644)
December 31, 2022
Obligations of other U.S. Government agencies and corporations
5
$
164,660
$
(5,340)
—
$
—
$
—
5
$
164,660
$
(5,340)
Obligations of states and political subdivisions
84
$
96,939
$
(4,869)
11
$
33,038
$
(4,499)
95
$
129,977
$
(9,368)
Residential mortgage backed securities:
Government agency mortgage backed securities
97
214,516
(15,115)
29
237,970
(36,921)
126
452,486
(52,036)
Government agency collateralized mortgage obligations
16
109,753
(8,552)
36
391,416
(95,312)
52
501,169
(103,864)
Commercial mortgage backed securities:
Government agency mortgage backed securities
4
10,114
(1,053)
—
—
—
4
10,114
(1,053)
Government agency collateralized mortgage obligations
Notes to Consolidated Financial Statements (Unaudited)
Less than 12 Months
12 Months or More
Total
#
Fair Value
Unrealized Losses
#
Fair Value
Unrealized Losses
#
Fair Value
Unrealized Losses
Held to Maturity:
September 30, 2023
Obligations of states and political subdivisions
—
$
—
$
—
129
$
231,393
$
(57,660)
129
$
231,393
$
(57,660)
Residential mortgage backed securities:
Government agency mortgage backed securities
—
—
—
70
398,876
(41,350)
70
398,876
(41,350)
Government agency collateralized mortgage obligations
—
—
—
18
346,411
(49,030)
18
346,411
(49,030)
Commercial mortgage backed securities:
Government agency mortgage backed securities
—
—
—
1
13,189
(3,800)
1
13,189
(3,800)
Government agency collateralized mortgage obligations
—
—
—
9
36,490
(8,235)
9
36,490
(8,235)
Other debt securities
—
—
—
10
52,761
(6,429)
10
52,761
(6,429)
Total
—
$
—
$
—
237
$
1,079,120
$
(166,504)
237
$
1,079,120
$
(166,504)
December 31, 2022
Obligations of states and political subdivisions
105
$
191,442
$
(35,871)
24
$
49,697
$
(12,454)
129
$
241,139
$
(48,325)
Residential mortgage backed securities:
Government agency mortgage backed securities
8
94,258
(4,186)
62
364,870
(20,246)
70
459,128
(24,432)
Government agency collateralized mortgage obligations
4
98,912
(5,479)
14
293,698
(25,227)
18
392,610
(30,706)
Commercial mortgage backed securities:
Government agency mortgage backed securities
1
13,745
(3,261)
—
—
—
1
13,745
(3,261)
Government agency collateralized mortgage obligations
2
7,651
(626)
7
31,220
(5,933)
9
38,871
(6,559)
Other debt securities
2
42,567
(2,013)
8
16,042
(2,253)
10
58,609
(4,266)
Total
122
$
448,575
$
(51,436)
115
$
755,527
$
(66,113)
237
$
1,204,102
$
(117,549)
The Company evaluates its investment portfolio for impairment related to credit losses 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. 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 security is impaired and written down to fair value with all losses recognized in earnings.
As of September 30, 2023, the Company does not intend to sell any securities in an unrealized loss position, and it is not more likely than not that the Company will be required to sell any such security prior to the recovery of its amortized cost basis, which may be at maturity. Furthermore, even though a number of these securities have been in a continuous unrealized loss position for a period longer than twelve months, the Company is collecting principal and interest payments from the respective issuers as scheduled. Based upon its review of securities with unrealized losses as of September 30, 2023, the Company determined that all such losses resulted from factors not deemed credit related. As such, the Company did not record any impairment for the first nine months of 2023.
The allowance for credit losses on held to maturity securities was $32 at September 30, 2023 and December 31, 2022. The Company monitors the credit quality of debt securities held to maturity using bond investment grades assigned by third party ratings agencies. Updated investment grades are obtained as they become available from agencies. As of September 30, 2023, all of the amortized cost of debt securities held to maturity were rated A or higher by the ratings agencies.
Notes to Consolidated Financial Statements (Unaudited)
Note 3 – Loans
(In Thousands, Except Number of Loans)
For purposes of this Note 3, all references to “loans” mean loans excluding loans held for sale.
The following is a summary of loans and leases as of the dates presented:
September 30, 2023
December 31, 2022
Commercial, financial, agricultural
$
1,819,891
$
1,673,883
Lease financing
127,935
122,167
Real estate – construction:
Residential
300,238
355,500
Commercial
1,107,126
974,837
Total real estate – construction
1,407,364
1,330,337
Real estate – 1-4 family mortgage:
Primary
2,405,703
2,222,856
Home equity
509,394
501,906
Rental/investment
353,613
334,382
Land development
130,166
157,119
Total real estate – 1-4 family mortgage
3,398,876
3,216,263
Real estate – commercial mortgage:
Owner-occupied
1,588,174
1,539,296
Non-owner occupied
3,610,578
3,452,910
Land development
114,414
125,857
Total real estate – commercial mortgage
5,313,166
5,118,063
Installment loans to individuals
108,002
124,745
Gross loans
12,175,234
11,585,458
Unearned income
(7,211)
(7,154)
Loans, net of unearned income
$
12,168,023
$
11,578,304
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 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. For loans that are placed on nonaccrual status or charged-off, all interest accrued for the current year but not collected 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.
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
December 31, 2022
Commercial, financial, agricultural
$
1,303
$
69
$
1,660,037
$
1,661,409
$
18
$
2,373
$
10,083
$
12,474
$
1,673,883
Lease financing
—
—
122,167
122,167
—
—
—
—
122,167
Real estate – construction:
Residential
49
—
355,374
355,423
—
—
77
77
355,500
Commercial
8,525
—
966,312
974,837
—
—
—
—
974,837
Total real estate – construction
8,574
—
1,321,686
1,330,260
—
—
77
77
1,330,337
Real estate – 1-4 family mortgage:
Primary
28,198
—
2,164,582
2,192,780
6,015
12,503
11,558
30,076
2,222,856
Home equity
5,376
—
494,621
499,997
450
754
705
1,909
501,906
Rental/investment
720
38
332,648
333,406
20
331
625
976
334,382
Land development
174
—
156,863
157,037
46
36
—
82
157,119
Total real estate – 1-4 family mortgage
34,468
38
3,148,714
3,183,220
6,531
13,624
12,888
33,043
3,216,263
Real estate – commercial mortgage:
Owner-occupied
8,557
219
1,525,240
1,534,016
1,495
2,244
1,541
5,280
1,539,296
Non-owner occupied
3,521
—
3,444,047
3,447,568
5,304
—
38
5,342
3,452,910
Land development
279
—
125,507
125,786
—
40
31
71
125,857
Total real estate – commercial mortgage
12,357
219
5,094,794
5,107,370
6,799
2,284
1,610
10,693
5,118,063
Installment loans to individuals
2,001
5
122,481
124,487
38
100
120
258
124,745
Unearned income
—
—
(7,154)
(7,154)
—
—
—
—
(7,154)
Loans, net of unearned income
$
58,703
$
331
$
11,462,725
$
11,521,759
$
13,386
$
18,381
$
24,778
$
56,545
$
11,578,304
Certain Modifications to Borrowers Experiencing Financial Difficulty
Certain modifications of loans made to borrowers experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, are required to be disclosed in accordance with ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”). At September 30, 2023, modifications meeting the disclosure criteria in ASU 2022-02 were performing in accordance with their modified terms, and unused commitments totaled $721. Upon the Company’s determination that a modification has been subsequently deemed uncollectible, the loan, or portion of the loan, is charged off, the amortized cost basis of the loan is reduced by the uncollectible amount, and the allowance for credit losses is adjusted accordingly. See Note 4, “Allowance for Credit Losses,” for more information on the allowance for credit losses.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the amortized cost basis of loans that were experiencing financial difficulty, modified during the nine months ended September 30, 2023 and required to be disclosed under ASU 2022-02, by class and by type of modification. There were no modifications requiring disclosure for the three months ended September 30, 2023. The percentage of the amortized cost basis for each class of disclosed modifications as compared to the amortized cost basis of each class of loans is also presented below.
Nine Months Ended September 30, 2023
Interest Rate Reduction
Term Extension
Payment Delay
Total
% Total Loans by Class
Commercial, financial, agricultural
$
—
$
1,209
$
—
$
1,209
0.07
%
Real estate – construction:
Residential
—
3,751
—
3,751
1.25
Total real estate – construction
—
3,751
—
3,751
0.27
Real estate – 1-4 family mortgage:
Home equity
7
—
—
7
—
Total real estate – 1-4 family mortgage
7
—
—
7
—
Real estate – commercial mortgage:
Owner-occupied
149
96
277
522
0.03
Non-owner occupied
1,008
—
—
1,008
0.03
Total real estate – commercial mortgage
1,157
96
277
1,530
0.03
Loans, net of unearned income
$
1,164
$
5,056
$
277
$
6,497
0.05
%
The following table presents the weighted average financial effect of loan modifications requiring disclosure under ASU 2022-02 by class of financing receivable for the nine months ended September 30, 2023.
Nine Months Ended
Interest Rate Reduction (in basis points)
Term Extension (in months)
Payment Delay (in months)
Commercial, financial, agricultural
—
2.1
—
Real estate – construction:
Residential
—
4.7
—
Real estate – 1-4 family mortgage:
Home equity
300
—
—
Real estate – commercial mortgage:
Owner-occupied
68
8.4
3.0
Non-owner occupied
12
—
—
Credit Quality
For loans with a commercial purpose, internal risk-rating grades are assigned by lending, credit administration and 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 commercial and commercial real estate secured loans. Loan grades range between 10 and 95, with 10 being loans with the least credit risk. Loans within the “Pass” grade (those with a risk rating between 10 and 60) generally have a lower risk of loss and therefore a lower risk factor applied to the loan balances. The “Special Mention” grade (those with a risk rating of 70) represents a loan where a significant adverse risk-modifying action is anticipated in the near term and, if left uncorrected, could result in deterioration of the credit quality of the loan. Loans that migrate toward the “Substandard” grade (those with a risk rating between 80 and 95) generally have a higher risk of loss and therefore a higher risk factor applied to those related loan balances.
The following tables present the Company’s loan portfolio by year of origination and internal risk-rating grades as of the dates presented:
Notes to Consolidated Financial Statements (Unaudited)
Note 4 – Allowance for Credit Losses
(In Thousands)
Allowance for Credit Losses on Loans
The allowance for credit losses is an estimate of expected losses inherent within the Company’s loans held for investment portfolio and is maintained at a level believed adequate by management to absorb credit losses inherent in the entire loan portfolio. Management evaluates the adequacy of the allowance for credit losses on a quarterly basis. Expected credit loss inherent in non-cancellable off-balance-sheet credit exposures is accounted for as a separate liability in the Consolidated Balance Sheets. The allowance for credit losses on loans held for investment, as reported in the Company’s Consolidated Balance Sheets, is adjusted by a provision for credit losses, which is reported in earnings, and reduced by net charge-offs. Loan losses are charged against the allowance for credit losses when management believes the uncollectability of a loan balance is confirmed and such losses are reasonably quantified. Subsequent recoveries, if any, are credited to the allowance. For more information about the Company’s policies and procedures for determining the amount of the allowance for credit losses, please refer to the discussion in Note 1, “Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The Company has made an accounting policy election to exclude accrued interest from the measurement of the allowance for credit losses in the Company’s loan portfolio. As of September 30, 2023 and December 31, 2022, the Company had accrued interest receivable for loans of $53,565 and $49,850, respectively, which is recorded in the “Other assets” line item on the Consolidated Balance Sheets. Although the Company made the election to exclude accrued interest from the measurement of the allowance for credit losses, the Company did have an allowance for credit losses on interest deferred as part of the loan deferral program established in 2020 in response to the COVID-19 pandemic of $1,245 and $1,248 as of September 30, 2023 and December 31, 2022, respectively.
Notes to Consolidated Financial Statements (Unaudited)
The following tables provide a roll-forward of the allowance for credit losses by loan category and a breakdown of the ending balance of the allowance based on the Company’s credit loss methodology for the periods presented:
Commercial
Real Estate - Construction
Real Estate - 1-4 Family Mortgage
Real Estate - Commercial Mortgage
Lease Financing
Installment Loans to Individuals
Total
Three Months Ended September 30, 2023
Allowance for credit losses:
Beginning balance
$
41,310
$
19,125
$
46,434
$
75,667
$
2,480
$
9,375
$
194,391
Charge-offs
(2,252)
—
(130)
—
(641)
(607)
(3,630)
Recoveries
690
48
181
208
2
568
1,697
Net (charge-offs) recoveries
(1,562)
48
51
208
(639)
(39)
(1,933)
Provision for (recovery of) credit losses on loans
4,696
483
(686)
(642)
1,514
(50)
5,315
Ending balance
$
44,444
$
19,656
$
45,799
$
75,233
$
3,355
$
9,286
$
197,773
Nine Months Ended September 30, 2023
Allowance for credit losses:
Beginning balance
$
44,255
$
19,114
$
44,727
$
71,798
$
2,463
$
9,733
$
192,090
Initial impact of purchased credit deteriorated loans acquired during the period
(26)
—
—
—
—
—
(26)
Charge-offs
(7,720)
(57)
(345)
(5,512)
(641)
(1,997)
(16,272)
Recoveries
2,689
48
375
697
13
1,884
5,706
Net (charge-offs) recoveries
(5,031)
(9)
30
(4,815)
(628)
(113)
(10,566)
Provision for (recovery of) credit losses on loans
5,246
551
1,042
8,250
1,520
(334)
16,275
Ending balance
$
44,444
$
19,656
$
45,799
$
75,233
$
3,355
$
9,286
$
197,773
Period-End Amount Allocated to:
Individually evaluated
$
11,194
$
—
$
77
$
1,260
$
856
$
270
$
13,657
Collectively evaluated
33,250
19,656
45,722
73,973
2,499
9,016
184,116
Ending balance
$
44,444
$
19,656
$
45,799
$
75,233
$
3,355
$
9,286
$
197,773
Loans:
Individually evaluated
$
20,996
$
—
$
13,007
$
18,403
$
1,047
$
270
$
53,723
Collectively evaluated
1,798,895
1,407,364
3,385,869
5,294,763
119,677
107,732
12,114,300
Ending balance
$
1,819,891
$
1,407,364
$
3,398,876
$
5,313,166
$
120,724
$
108,002
$
12,168,023
Nonaccruing loans with no allowance for credit losses
Notes to Consolidated Financial Statements (Unaudited)
Commercial
Real Estate - Construction
Real Estate - 1-4 Family Mortgage
Real Estate - Commercial Mortgage
Lease Financing
Installment Loans to Individuals
Total
Three Months Ended September 30, 2022
Allowance for credit losses:
Beginning balance
$
30,193
$
17,290
$
41,910
$
64,373
$
1,802
$
10,563
$
166,131
Charge-offs
(373)
—
(208)
(1,956)
—
(722)
(3,259)
Recoveries
415
—
378
50
113
728
1,684
Net (charge-offs) recoveries
42
—
170
(1,906)
113
6
(1,575)
Provision for (recovery of) credit losses on loans
268
1,454
1,452
6,800
399
(573)
9,800
Ending balance
$
30,503
$
18,744
$
43,532
$
69,267
$
2,314
$
9,996
$
174,356
Nine Months Ended September 30, 2022
Allowance for credit losses:
Beginning balance
$
33,922
$
16,419
$
32,356
$
68,940
$
1,486
$
11,048
$
164,171
Initial impact of purchased credit deteriorated loans acquired during the period
1,648
—
—
—
—
—
1,648
Charge-offs
(4,714)
—
(532)
(2,670)
(7)
(2,351)
(10,274)
Recoveries
1,982
—
725
397
136
2,271
5,511
Net (charge-offs) recoveries
(2,732)
—
193
(2,273)
129
(80)
(4,763)
Provision for (recovery of) credit losses on loans
(2,335)
2,325
10,983
2,600
699
(972)
13,300
Ending balance
$
30,503
$
18,744
$
43,532
$
69,267
$
2,314
$
9,996
$
174,356
Period-End Amount Allocated to:
Individually evaluated
$
4,064
$
—
$
—
$
2,649
$
—
$
370
$
7,083
Collectively evaluated
26,439
18,744
43,532
66,618
2,314
9,626
167,273
Ending balance
$
30,503
$
18,744
$
43,532
$
69,267
$
2,314
$
9,996
$
174,356
Loans:
Individually evaluated
$
9,088
$
153
$
5,965
$
19,043
$
—
$
370
$
34,619
Collectively evaluated
1,504,003
1,214,903
3,121,924
4,997,622
103,357
128,576
11,070,385
Ending balance
$
1,513,091
$
1,215,056
$
3,127,889
$
5,016,665
$
103,357
$
128,946
$
11,105,004
Nonaccruing loans with no allowance for credit losses
$
429
$
153
$
5,809
$
4,633
$
—
$
2
$
11,026
The Company recorded a provision for credit losses of $5,315 during the third quarter of 2023, as compared to a provision for credit losses $9,800 recorded in the third quarter of 2022. The Company’s allowance for credit losses model considers economic projections, primarily the national unemployment rate and GDP, over a reasonable and supportable period of two years. The provision for credit losses on loans of $5,315 in the third quarter of 2023 was primarily driven by loan growth.
Allowance for Credit Losses on Unfunded Loan Commitments
The Company maintains a separate allowance for credit losses on unfunded loan commitments, which is included in the “Other liabilities” line item on the Consolidated Balance Sheets. For more information about the Company’s policies and procedures for determining the amount of the allowance for credit losses on unfunded loan commitments, please refer to the discussion in Note 1, “Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Notes to Consolidated Financial Statements (Unaudited)
The following tables provide a roll-forward of the allowance for credit losses on unfunded loan commitments for the periods presented.
Three Months Ended September 30,
2023
2022
Allowance for credit losses on unfunded loan commitments:
Beginning balance
$
17,618
$
19,935
Recovery of credit losses on unfunded loan commitments (included in other noninterest expense)
(700)
—
Ending balance
$
16,918
$
19,935
Nine Months Ended September 30,
2023
2022
Allowance for credit losses on unfunded loan commitments:
Beginning balance
$
20,118
$
20,035
Recovery of credit losses on unfunded loan commitments (included in other noninterest expense)
(3,200)
(100)
Ending balance
$
16,918
$
19,935
Note 5 – Other Real Estate Owned
(In Thousands)
The following table provides details of the Company’s other real estate owned (“OREO”), net of valuation allowances and direct write-downs, as of the dates presented:
September 30, 2023
December 31, 2022
Residential real estate
$
1,045
$
699
Commercial real estate
8,182
62
Residential land development
4
246
Commercial land development
27
756
Total
$
9,258
$
1,763
Changes in the Company’s OREO were as follows:
Total OREO
Balance at January 1, 2023
$
1,763
Transfers of loans
10,073
Impairments
(18)
Dispositions
(2,544)
Other
(16)
Balance at September 30, 2023
$
9,258
At September 30, 2023 and December 31, 2022, the amortized cost of loans secured by Real Estate - 1-4 Family Mortgage in the process of foreclosure was $489 and $375, respectively.
Components of the line item “Other real estate owned” in the Consolidated Statements of Income were as follows for the periods presented:
Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Repairs and maintenance
$
51
$
24
$
95
$
44
Property taxes and insurance
20
7
142
69
Impairments
10
59
18
110
Net gains on OREO sales
(200)
(54)
(289)
(611)
Rental income
(1)
(2)
(5)
(6)
Total
$
(120)
$
34
$
(39)
$
(394)
Note 6 – Goodwill and Other Intangible Assets
(In Thousands)
The carrying amounts of goodwill by operating segments for the nine months ended September 30, 2023 are set forth in the table below. The deduction from goodwill resulted from measurement period adjustments following the RBC acquisition and is primarily related to adjustments on the fair value of other liabilities.
Community Banks
Insurance
Total
Balance at January 1, 2023
$
988,941
$
2,767
$
991,708
Deductions to goodwill and other adjustments
(43)
—
(43)
Balance at September 30, 2023
$
988,898
$
2,767
$
991,665
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, 2023
Core deposit intangibles
$
82,492
$
(67,443)
$
15,049
Customer relationship intangible
7,670
(2,649)
5,021
Total finite-lived intangible assets
$
90,162
$
(70,092)
$
20,070
December 31, 2022
Core deposit intangibles
$
82,492
$
(64,339)
$
18,153
Customer relationship intangible
7,670
(1,647)
6,023
Total finite-lived intangible assets
$
90,162
$
(65,986)
$
24,176
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,
2023
2022
2023
2022
Amortization expense for:
Core deposit intangibles
$
977
$
1,206
$
3,103
$
3,791
Customer relationship intangible
334
45
1,003
136
Total intangible amortization
$
1,311
$
1,251
$
4,106
$
3,927
The estimated amortization expense of finite-lived intangible assets for the year ending December 31, 2023 and the succeeding four years is summarized as follows:
Notes to Consolidated Financial Statements (Unaudited)
Core Deposit Intangibles
Customer Relationship Intangible
Total
2023
$
4,043
$
1,337
$
5,380
2024
3,498
1,192
4,690
2025
3,102
1,048
4,150
2026
2,899
860
3,759
2027
2,774
628
3,402
Note 7 – 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, and is subject to significant fluctuation as a result of actual prepayment speeds, default rates and losses differing from estimates thereof. For example, an increase in mortgage interest rates or a decrease in actual prepayment speeds may cause positive adjustments to the valuation of the Company’s MSRs.
MSRs are evaluated for impairment (or reversals of prior impairments) quarterly based upon the fair value of the rights as compared to the carrying amount. Impairment is recognized through a valuation allowance in the amount 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 Consolidated Statements of Income.
There was no valuation adjustment on MSRs during the nine months ended September 30, 2023 or 2022.
Changes in the Company’s MSRs were as follows:
Balance at January 1, 2023
$
84,448
Capitalization
13,001
Amortization
(7,208)
Balance at September 30, 2023
$
90,241
Data and key economic assumptions related to the Company’s MSRs are as follows as of the dates presented:
Notes to Consolidated Financial Statements (Unaudited)
The Company recorded servicing fees of $4,335 and $4,445 for the three months ended September 30, 2023 and 2022, respectively, and servicing fees of $13,275 and $13,868 for the nine months ended September 30, 2023 and 2022, respectively, all of which are included in “Mortgage banking income” in the Consolidated Statements of Income.
Note 8 - Employee Benefit and Deferred Compensation Plans
(In Thousands, Except Share Data)
Pension and Post-retirement Medical Plans
The Company sponsors a noncontributory defined benefit pension plan, under which participation and benefit accruals ceased as of December 31, 1996, and it provides retiree medical benefits, consisting of the opportunity to purchase coverage at subsidized rates under the Company’s group medical plan.
Information related to the defined benefit pension plan maintained by Renasant Bank (“Pension Benefits”) and to the post-retirement health and life plan (“Other Benefits”) as of the dates presented is as follows:
Pension Benefits
Other Benefits
Three Months Ended
Three Months Ended
September 30,
September 30,
2023
2022
2023
2022
Service cost
$
—
$
—
$
—
$
1
Interest cost
249
185
6
3
Expected return on plan assets
(309)
(421)
—
—
Recognized actuarial loss (gain)
131
60
(15)
(19)
Net periodic benefit cost (return)
$
71
$
(176)
$
(9)
$
(15)
Pension Benefits
Other Benefits
Nine Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Service cost
$
—
$
—
$
—
$
3
Interest cost
746
554
17
9
Expected return on plan assets
(927)
(1,263)
—
—
Recognized actuarial loss (gain)
393
182
(46)
(57)
Net periodic benefit cost (return)
$
212
$
(527)
$
(29)
$
(45)
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. There were no stock options granted or outstanding, nor compensation expense associated with options recorded, during the nine months ended September 30, 2023 or 2022.
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.
The following table summarizes the changes in restricted stock as of and for the nine months ended September 30, 2023:
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
155,838
$
36.23
680,403
$
36.23
Awarded
81,867
35.57
335,917
35.49
Vested
—
—
(212,574)
34.78
Cancelled
—
—
(31,504)
35.67
Nonvested at end of period
237,705
$
36.01
772,242
$
36.33
During the nine months ended September 30, 2023, the Company reissued 150,247 shares from treasury in connection with awards of restricted stock. The Company recorded total stock-based compensation expense of $3,424 and $2,268 for the three months ended September 30, 2023 and 2022, respectively, and $10,264 and $8,558 for the nine months ended September 30, 2023 and 2022, respectively.
Note 9 – Derivative Instruments
(In Thousands)
The Company uses certain derivative instruments to meet the needs of customers as well as to manage the interest rate risk associated with certain transactions.
Non-hedge derivatives
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. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures.
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 Company also enters into forward commitments to sell residential mortgage loans to secondary market investors.
The following table provides a summary of the Company’s derivatives not designated as hedging instruments as of the dates presented:
Balance Sheet
September 30, 2023
December 31, 2022
Location
Notional Amount
Fair Value
Notional Amount
Fair Value
Derivative assets:
Interest rate contracts
Other Assets
$
404,646
$
15,484
$
258,646
$
11,354
Interest rate lock commitments
Other Assets
76,576
1,534
92,901
1,231
Forward commitments
Other Assets
248,000
2,651
84,000
484
Totals
$
729,222
$
19,669
$
435,547
$
13,069
Derivative liabilities:
Interest rate contracts
Other Liabilities
$
401,910
$
15,484
$
258,646
$
11,354
Interest rate lock commitments
Other Liabilities
20,327
95
19,488
98
Forward commitments
Other Liabilities
25,000
23
73,000
1,198
Totals
$
447,237
$
15,602
$
351,134
$
12,650
Gains and losses included in the Consolidated Statements of Income related to the Company’s derivative financial instruments were as follows as of the dates presented:
Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Interest rate contracts:
Included in interest income on loans
$
1,327
$
811
$
4,873
$
1,255
Interest rate lock commitments:
Included in mortgage banking income
(247)
(4,046)
304
(6,466)
Forward commitments
Included in mortgage banking income
918
9,381
3,342
8,962
Total
$
1,998
$
6,146
$
8,519
$
3,751
Derivatives designated as cash flow hedges
Cash flow hedge relationships mitigate exposure to the variability of future cash flow or other forecasted transactions. The Company uses both interest rate swap contracts and interest rate collars in an effort to manage future interest rate exposure on borrowings. The swap hedging strategy converts the variable interest rate on the forecasted borrowings to a fixed interest rate. The collar hedging strategy stabilizes interest rate fluctuation by setting both a floor and a cap. The Company entered into an interest rate collar in June 2022 with a 2.25% floor and 4.57% cap. The Company entered into a second interest rate collar in October 2022 with a 2.75% floor and 4.75% cap. As of September 30, 2023, the Company is hedging its exposure to the variability of future cash flows through 2032, and a portion of these hedges are forward starting.
The following table provides a summary of the Company’s derivatives designated as cash flow hedges as of the dates presented:
Balance Sheet
September 30, 2023
December 31, 2022
Location
Notional Amount
Fair Value
Notional Amount
Fair Value
Derivative assets:
Interest rate swaps
Other Assets
$
130,000
$
28,050
$
130,000
$
24,514
Interest rate collars
Other Assets
—
—
200,000
464
Total
$
130,000
$
28,050
$
330,000
$
24,978
Derivative liabilities:
Interest rate collars
Other Liabilities
450,000
5,971
250,000
746
Totals
$
450,000
$
5,971
$
250,000
$
746
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 nine months ended September 30, 2023 or 2022. The impact on other comprehensive income for the nine months ended September 30, 2023 and 2022 is discussed in Note 12, “Other Comprehensive Income (Loss).”
Derivatives designated as fair value hedges
Fair value hedges protect against changes in the fair value of an asset, liability, or firm commitment. The Company enters into interest rate swap agreements to manage interest rate exposure on certain of the Company’s fixed-rate subordinated notes. The agreements convert the fixed interest rates to variable interest rates.
The following table provides a summary of the Company's derivatives designated as fair value hedges as of the dates presented:
Notes to Consolidated Financial Statements (Unaudited)
Balance Sheet
September 30, 2023
December 31, 2022
Location
Notional Amount
Fair Value
Notional Amount
Fair Value
Derivative liabilities:
Interest rate swaps
Other Liabilities
$
100,000
$
21,896
$
100,000
$
19,789
The following table presents the effects of the Company’s fair value hedge relationships on the Consolidated Statements of Income for the periods presented:
Amount of Gain (Loss) Recognized in Income
Income Statement
Three Months Ended September 30,
Nine Months Ended September 30,
Location
2023
2022
2023
2022
Derivative liabilities:
Interest rate swaps - subordinated notes
Interest Expense
$
(2,688)
$
(10,495)
$
(2,106)
$
(15,232)
Derivative liabilities - hedged items:
Interest rate swaps - subordinated notes
Interest Expense
$
2,688
$
10,495
$
2,106
$
15,232
The following table presents the amounts that were recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges as of the dates presented:
Carrying Amount of the Hedged Liability
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Liability
Balance Sheet Location
September 30, 2023
December 31, 2022
September 30, 2023
December 31, 2022
Long-term debt
$
76,905
$
78,881
$
21,896
$
19,789
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 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 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, 2023
December 31, 2022
September 30, 2023
December 31, 2022
Gross amounts recognized
$
45,807
$
36,493
$
28,081
$
22,056
Gross amounts offset in the Consolidated Balance Sheets
—
—
—
—
Net amounts presented in the Consolidated Balance Sheets
45,807
36,493
28,081
22,056
Gross amounts not offset in the Consolidated Balance Sheets
Notes to Consolidated Financial Statements (Unaudited)
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,
2023
2022
Deferred tax assets
Allowance for credit losses
$
53,078
$
52,551
Loans
1,932
2,518
Deferred compensation
14,381
14,447
Net unrealized losses on securities
66,442
70,999
Impairment of assets
135
316
Net operating loss carryforwards
—
497
Investment in partnerships
1,481
1,164
Lease liabilities under operating leases
13,505
14,641
Other
5,703
3,523
Total deferred tax assets
156,657
160,656
Deferred tax liabilities
Fixed assets
10,340
10,342
Mortgage servicing rights
21,103
19,624
Junior subordinated debt
1,767
1,948
Intangibles
2,483
2,702
Lease right-of-use asset
12,889
14,018
Other
993
1,614
Total deferred tax liabilities
49,575
50,248
Net deferred tax assets
$
107,082
$
110,408
For the nine months ended September 30, 2023 and 2022, the Company recorded a provision for income taxes totaling $28,722 and $32,355, 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 Company and its subsidiaries 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 state departments of revenue for the years ending December 31, 2020 through December 31, 2022.
Note 11 – Fair Value Measurements
(In Thousands)
Fair Value Measurements and the Fair Level Hierarchy
Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” provides guidance for using fair value to measure assets and liabilities and 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
Notes to Consolidated Financial Statements (Unaudited)
carried at fair value on a recurring basis include securities available for sale and derivative instruments. The Company has elected to carry mortgage loans held for sale at fair value on a recurring basis as permitted under the guidance in ASC 825, “Financial Instruments” (“ASC 825”).
The following methods and assumptions are used by the Company to estimate the fair values of the Company’s financial assets and liabilities that are measured on a recurring basis:
Securities available for sale: Securities available for sale consist primarily of debt securities, such as obligations of U.S. Government agencies and corporations, obligations of states and political subdivisions and mortgage-backed 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: 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, interest rate collars 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 tables present assets and liabilities that are measured at fair value on a recurring basis as of the dates presented:
Level 1
Level 2
Level 3
Totals
September 30, 2023
Financial assets:
Securities available for sale
$
—
$
909,108
$
—
$
909,108
Derivative instruments
—
47,719
—
47,719
Mortgage loans held for sale in loans held for sale
Notes to Consolidated Financial Statements (Unaudited)
Level 1
Level 2
Level 3
Totals
December 31, 2022
Financial assets:
Securities available for sale
$
—
$
1,533,942
$
—
$
1,533,942
Derivative instruments
—
38,047
—
38,047
Mortgage loans held for sale in loans held for sale
—
110,105
—
110,105
Total financial assets
$
—
$
1,682,094
$
—
$
1,682,094
Financial liabilities:
Derivative instruments
$
—
$
33,185
$
—
$
33,185
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 nine months ended September 30, 2023.
For the nine months ended September 30, 2023 and 2022, 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.
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 tables provide 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:
September 30, 2023
Level 1
Level 2
Level 3
Totals
Individually evaluated loans, net of allowance for credit losses
$
—
$
—
$
30,842
$
30,842
OREO
—
—
27
27
Total
$
—
$
—
$
30,869
$
30,869
December 31, 2022
Level 1
Level 2
Level 3
Totals
Individually evaluated loans, net of allowance for credit losses
$
—
$
—
$
14,732
$
14,732
OREO
—
—
1,763
1,763
Total
$
—
$
—
$
16,495
$
16,495
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:
Individually evaluated loans: Individually evaluated loans are reviewed and evaluated for credit losses on at least a quarterly basis for additional impairment and adjusted accordingly, 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. 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. Individually evaluated loans that were measured or re-measured at fair value had a carrying value of $43,648 and $18,288 at September 30, 2023 and December 31, 2022, respectively, and a specific reserve for these loans of $12,806 and $3,556 was included in the allowance for credit 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,
Notes to Consolidated Financial Statements (Unaudited)
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 on the Consolidated Balance Sheets as of the dates presented:
September 30, 2023
December 31, 2022
Carrying amount prior to remeasurement
$
45
$
1,842
Impairment recognized in results of operations
(18)
(79)
Fair value
$
27
$
1,763
Mortgage servicing rights: Mortgage 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, 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, 2023 and December 31, 2022. There were no valuation adjustments on MSRs during the nine months ended September 30, 2023 or 2022.
The following table presents information as of September 30, 2023 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
Financial instrument
Fair Value
Valuation Technique
Significant Unobservable Inputs
Range of Inputs
Individually evaluated loans, net of allowance for credit losses
$
30,842
Appraised value of collateral less estimated costs to sell
Estimated costs to sell
4-10%
OREO
$
27
Appraised value of property less estimated costs to sell
Estimated costs to sell
4-10%
Fair Value Option
The Company has elected to measure all mortgage loans held for sale 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 $256 and $14,537 resulting from fair value changes of these mortgage loans were recorded in income during the nine months ended September 30, 2023 and 2022, 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 September 30, 2023 and December 31, 2022:
Notes to Consolidated Financial Statements (Unaudited)
Aggregate Fair Value
Aggregate Unpaid Principal Balance
Difference
September 30, 2023
Mortgage loans held for sale measured at fair value
$
241,613
$
239,907
$
1,706
December 31, 2022
Mortgage loans held for sale measured at fair value
$
110,105
$
108,143
$
1,962
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:
Notes to Consolidated Financial Statements (Unaudited)
Note 13 – 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, 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
September 30,
2023
2022
Basic
Net income applicable to common stock
$
41,833
$
46,567
Average common shares outstanding
56,138,618
55,947,214
Net income per common share - basic
$
0.75
$
0.83
Diluted
Net income applicable to common stock
$
41,833
$
46,567
Average common shares outstanding
56,138,618
55,947,214
Effect of dilutive stock-based compensation
385,269
301,506
Average common shares outstanding - diluted
56,523,887
56,248,720
Net income per common share - diluted
$
0.74
$
0.83
Nine Months Ended
September 30,
2023
2022
Basic
Net income applicable to common stock
$
116,554
$
119,792
Average common shares outstanding
56,085,556
55,888,226
Net income per common share - basic
$
2.08
$
2.14
Diluted
Net income applicable to common stock
$
116,554
$
119,792
Average common shares outstanding
56,085,556
55,888,226
Effect of dilutive stock-based compensation
308,401
281,660
Average common shares outstanding - diluted
56,393,957
56,169,886
Net income per common share - diluted
$
2.07
$
2.13
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:
Notes to Consolidated Financial Statements (Unaudited)
(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:
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 the Bank as of the dates presented:
September 30, 2023
December 31, 2022
Amount
Ratio
Amount
Ratio
Renasant Corporation
Tier 1 Capital to Average Assets (Leverage)
$
1,558,521
9.48
%
$
1,481,197
9.36
%
Common Equity Tier 1 Capital to Risk-Weighted Assets
1,449,367
10.46
%
1,372,747
10.21
%
Tier 1 Capital to Risk-Weighted Assets
1,558,521
11.25
%
1,481,197
11.01
%
Total Capital to Risk-Weighted Assets
2,065,992
14.91
%
1,968,001
14.63
%
Renasant Bank
Tier 1 Capital to Average Assets (Leverage)
$
1,698,680
10.33
%
$
1,630,389
10.30
%
Common Equity Tier 1 Capital to Risk-Weighted Assets
1,698,680
12.23
%
1,630,389
12.10
%
Tier 1 Capital to Risk-Weighted Assets
1,698,680
12.23
%
1,630,389
12.10
%
Total Capital to Risk-Weighted Assets
1,869,600
13.46
%
1,781,312
13.22
%
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 table above, as of September 30, 2023, the Company’s CET1 capital was in excess of the capital conservation buffer.
The Company elected to take advantage of transitional relief offered by the Federal Reserve and the FDIC to delay for two years the estimated impact of ASC Topic 326, “Financial Instruments - Credit Losses” (“ASC 326”), often referred to as CECL, on regulatory capital, followed by a three-year transitional period to phase out the capital benefit provided by the two-year delay. The three-year transitional period began on January 1, 2022.
Notes to Consolidated Financial Statements (Unaudited)
Note 15 – 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, factoring, equipment leasing and treasury management services, 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, through the Trust division, offers a broad range of fiduciary services including the administration (as trustee or in other fiduciary or representative capacities) of benefit plans, management of trust accounts, inclusive of personal and corporate benefit accounts, and custodial accounts, as well as accounting and money management for trust accounts. In addition, the Wealth Management segment, through the Financial Services division, provides specialized products and services to customers, which include fixed and variable annuities, mutual funds and other investment services through a third party broker-dealer.
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 tables provide financial information for the Company’s operating segments as of and for the periods presented:
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. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “projects,” “anticipates,” “intends,” “estimates,” “plans,” “potential,” “focus,” “possible,” “may increase,” “may fluctuate,” “will likely result,” and similar expressions, or future or conditional verbs such as “will,” “should,” “would” and “could,” are generally forward-looking in nature and not historical facts. Forward-looking statements include information about the Company’s future financial performance, business strategy, projected plans and objectives and are based on the current beliefs and expectations of management. The Company’s management believes these forward-looking statements are reasonable, but they are all inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ from those indicated or implied in the forward-looking statements, and such differences may be material. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties 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 our actual results to differ materially from those in forward-looking statements include the following: (i) 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 timeframe anticipated by management; (ii) the effect of economic conditions and interest rates on a national, regional or international basis; (iii) timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (iv) competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, factoring and mortgage lending and auto lending industries; (v) the financial resources of, and products available from, competitors; (vi) changes in laws and regulations as well as changes in accounting standards; (vii) changes in policy by regulatory agencies; (viii) changes in the securities and foreign exchange markets; (ix) the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (x) 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 or issuers of investment securities, or the impact of interest rates on the value of our investment securities portfolio; (xi) an insufficient allowance for credit losses as a result of inaccurate assumptions; (xii) changes in the sources and costs of the capital we use to make loans and otherwise fund our operations, due to deposit outflows, changes in the mix of deposits and the cost and availability of borrowings; (xiii) general economic, market or business conditions, including the impact of inflation; (xiv) changes in demand for loan and deposit products and other financial services; (xv) concentrations of credit or deposit exposure; (xvi) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (xvii) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (xviii) civil unrest, natural disasters, epidemics (including the re-emergence of the COVID-19 pandemic) and other catastrophic events in the Company’s geographic area; (xix) the impact, extent and timing of technological changes; and (xx) other circumstances, many of which are beyond management’s control. Management believes that the assumptions underlying the Company’s forward-looking statements are reasonable, but any of the assumptions could prove to be inaccurate.
The Company undertakes no obligation, and specifically disclaims any obligation, to update or revise forward-looking statements, whether as a result of new information or to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by federal securities laws.
Financial Condition
The following discussion provides details regarding the changes in significant balance sheet accounts at September 30, 2023 compared to December 31, 2022.
Assets
Total assets were $17,181,621 at September 30, 2023 compared to $16,988,176 at December 31, 2022.
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 certain types of borrowings. The securities portfolio also serves as an outlet to deploy excess liquidity and generate interest income rather than hold such excess funds as cash. The following table shows the carrying value of our securities portfolio by investment type and the percentage of such investment type relative to the entire securities portfolio as of the dates presented:
September 30, 2023
December 31, 2022
Balance
Percentage of Portfolio
Balance
Percentage of Portfolio
Obligations of other U.S. Government agencies and corporations
$
—
—
%
$
164,660
5.76
%
Obligations of states and political subdivisions
322,592
14.97
436,788
15.28
Mortgage-backed securities
1,705,596
79.16
2,122,855
74.28
Other debt securities
126,547
5.87
133,711
4.68
$
2,154,735
100.00
%
$
2,858,014
100.00
%
Allowance for credit losses - held to maturity securities
(32)
(32)
Securities, net of allowance for credit losses
$
2,154,703
$
2,857,982
During the nine months ended September 30, 2023, the Company purchased $9,646 in investment securities, with mortgage-backed securities and collateralized mortgage obligations (“CMOs”) comprising all of these purchases, which occurred in the third quarter of 2023. 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. During the nine months ended September 30, 2022, we purchased $800,260 in investment securities, with mortgage-backed securities and CMOs, in the aggregate, comprising approximately 62% of these purchases. Obligations of other U.S. Government agencies and corporations comprised approximately 21% of purchases made during the first nine months of 2022. Obligations of state and political subdivisions comprised approximately 5% of purchases made during the first nine months of 2022. Other debt securities in our investment portfolio, consisting of corporate debt securities, issuances from the Small Business Administration (“SBA”) and subordinated debt issuances, comprised the remaining 12% of purchases made during the first nine months of 2022. Our purchases of securities in the first nine months of 2023 substantially declined from the levels during the same period in 2022 as the proceeds of our securities portfolio was used to fund loan growth rather than being reinvested in the securities portfolio.
During the third quarter of 2022, the Company transferred, at fair value, $882,927 of securities from the available for sale portfolio to the held to maturity portfolio as the Company has the intent and ability to hold these securities until their maturity. The related net unrealized losses of $99,675 (after tax losses of $74,307) remained in accumulated other comprehensive income (loss) and will be amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities. At September 30, 2023, the net unrealized after tax losses remaining to be amortized in accumulated other comprehensive income (loss) was $61,086. No gains or losses were recognized at the time of transfer.
Proceeds from maturities, calls and principal payments on securities during the first nine months of 2023 totaled $208,095. The Company sold from the available for sale portfolio agency securities, municipal securities, residential mortgage backed securities and commercial mortgage backed securities with a carrying value of $511,419 at the time of sale for net proceeds of $488,981, resulting in a net loss on sale of $22,438 for the nine months ended September 30, 2023. Proceeds from the maturities, calls and principal payments on securities during the first nine months of 2022 totaled $372,484. The Company did not sell any securities during the first nine months of 2022.
For more information about the Company’s security portfolio, see Note 2, “Securities,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements, in this report.
Loans Held for Sale
Loans held for sale, which consist of residential mortgage loans being held until they are sold in the secondary market, were $241,613 at September 30, 2023, as compared to $110,105 at December 31, 2022. 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 $12,168,023 at September 30, 2023 and $11,578,304 at December 31, 2022.
The tables below set forth the balance of loans outstanding, net of unearned income and excluding loans held for sale, by loan type and the percentage of each loan type to total loans as of the dates presented:
September 30, 2023
December 31, 2022
Total Loans
Percentage of Total Loans
Total Loans
Percentage of Total Loans
Commercial, financial, agricultural
$
1,819,891
14.96
%
$
1,673,883
14.46
%
Lease financing, net of unearned income
120,724
0.99
115,013
0.99
Real estate – construction:
Residential
300,238
2.47
355,500
3.07
Commercial
1,107,126
9.10
974,837
8.42
Total real estate – construction
1,407,364
11.57
1,330,337
11.49
Real estate – 1-4 family mortgage:
Primary
2,405,703
19.77
2,222,856
19.20
Home equity
509,394
4.19
501,906
4.33
Rental/investment
353,613
2.91
334,382
2.89
Land development
130,166
1.07
157,119
1.36
Total real estate – 1-4 family mortgage
3,398,876
27.94
3,216,263
27.78
Real estate – commercial mortgage:
Owner-occupied
1,588,174
13.04
1,539,296
13.29
Non-owner occupied
3,610,578
29.67
3,452,910
29.82
Land development
114,414
0.94
125,857
1.09
Total real estate – commercial mortgage
5,313,166
43.65
5,118,063
44.20
Installment loans to individuals
108,002
0.89
124,745
1.08
Total loans, net of unearned income
$
12,168,023
100.00
%
$
11,578,304
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, 2023, 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.
Deposits
The Company relies on deposits as its primary source of funds. Total deposits were $14,157,110 and $13,486,966 at September 30, 2023 and December 31, 2022, respectively. Noninterest-bearing deposits were $3,734,197 and $4,558,756 at September 30, 2023 and December 31, 2022, respectively, while interest-bearing deposits were $10,422,913 and $8,928,210 at September 30, 2023 and December 31, 2022, respectively. Interest-bearing deposits included brokered deposits of $757,775 and $233,133 at September 30, 2023 and December 31, 2022, respectively.
Management continues to focus on growing and maintaining a stable source of funding, specifically noninterest-bearing deposits and other core deposits (that is, deposits excluding brokered deposits and time deposits greater than $250,000). Noninterest-bearing deposits represented 26.38% of total deposits at September 30, 2023, as compared to 33.80% of total deposits at December 31, 2022. The decrease in noninterest-bearing deposits as a percentage of total deposits reflects both deposit customers transferring noninterest-bearing deposits to interest-bearing deposits such as money market funds offered by the Company, other financial institutions and other financial services companies, and the impact of our increase in brokered
deposits in the first nine months of 2023 as compared to brokered deposits at December 31, 2022, as management elected to maintain a high level of on-balance sheet liquidity in light of the conditions affecting financial institutions nationwide. Under certain circumstances, management may elect to acquire non-core deposits (in the form of brokered deposits) or public fund deposits (which are deposits of counties, municipalities or other political subdivisions). The source of funds that we select depends on the terms of the deposits and how those terms assist us in mitigating interest rate risk, maintaining our liquidity position and managing our net interest margin; business factors, described in the following paragraph, may cause us to obtain public deposits. 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 may be readily obtained based on the Company’s pricing bid in comparison with competitors. 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 or when management perceives that other factors, such as the public entity’s use of our treasury management or other products and services, make such participation advisable. Our public fund transaction accounts are principally obtained from public universities and municipalities, including school boards and utilities. Public fund deposits were $1,879,215 and $1,760,460 at September 30, 2023 and December 31, 2022, respectively, and represented 13.27% and 13.05% of total deposits as of September 30, 2023 and December 31, 2022, respectively.
Borrowed Funds
Total borrowings include federal funds purchased, 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 federal funds purchased, securities sold under agreements to repurchase, and short-term FHLB advances. The following table presents our short-term borrowings by type as of the dates presented:
September 30, 2023
December 31, 2022
Security repurchase agreements
$
7,662
$
12,232
Short-term borrowings from the FHLB
100,000
700,000
$
107,662
$
712,232
Long-term debt typically consists of long-term FHLB advances, our junior subordinated debentures and our subordinated notes. The following table presents our long-term debt by type as of the dates presented:
September 30, 2023
December 31, 2022
Junior subordinated debentures
$
112,744
$
112,042
Subordinated notes
314,655
316,091
$
427,399
$
428,133
Long-term funds obtained from the FHLB are used to match-fund fixed rate loans in order to minimize interest rate risk and 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. There were no long-term advances from the FHLB outstanding at September 30, 2023 or December 31, 2022. All advances from the FHLB are collateralized by a blanket lien on the Bank’s loans. The Company had $3,111,063 of availability on unused lines of credit with the FHLB at September 30, 2023, as compared to $3,651,678 at December 31, 2022.
The Company has issued subordinated notes, the proceeds of which have been used for general corporate purposes, including 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 Renasant Bank as regulatory capital. The subordinated notes qualify as Tier 2 capital under current regulatory guidelines.
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.
Net income for the third quarter of 2023 was $41,833 compared to net income of $46,567 for the third quarter of 2022. Basic and diluted earnings per share (“EPS”) for the third quarter of 2023 were $0.75 and $0.74, respectively, as compared to basic and diluted EPS of $0.83 for the third quarter of 2022. Net income for the nine months ended September 30, 2023, was $116,554 compared to net income of $119,792 for the same period in 2022. Basic and diluted EPS were $2.08 and $2.07, respectively, for the first nine months of 2023 as compared to $2.14 and $2.13, respectively, for the first nine months of 2022.
From time to time, the Company incurs expenses and charges or recognizes valuation adjustments in connection with certain transactions with respect to which management is unable to accurately predict when these items will be incurred or, when incurred, the amount of such items. The following table presents the impact of these items on reported EPS for the dates presented.
Three Months Ended
September 30, 2023
September 30, 2022
Pre-tax
After-tax
Impact to Diluted EPS
Pre-tax
After-tax
Impact to Diluted EPS
Gain on sale of MSR
$
—
$
—
$
—
$
(2,960)
$
(2,292)
$
(0.04)
Nine Months Ended
September 30, 2023
September 30, 2022
Pre-tax
After-tax
Impact to Diluted EPS
Pre-tax
After-tax
Impact to Diluted EPS
Merger and conversion expenses
$
—
$
—
$
—
$
687
$
541
$
0.01
Gain on sale of MSR
—
—
—
(2,960)
(2,330)
(0.04)
Restructuring charges
—
—
—
732
576
0.01
Loss on sale of securities
22,438
17,859
0.31
—
—
—
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 77.31% of total revenue (i.e., net interest income on a fully taxable equivalent basis and noninterest income) for the third quarter of 2023. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.
Net interest income was $127,383 and $393,374 for the three and nine months ended September 30, 2023, as compared to $130,318 and $343,462 for the same periods in 2022. On a tax equivalent basis, net interest income was $130,131 and $401,745 for the three and nine months ended September 30, 2023, as compared to $132,435 and $349,139 for the same periods in 2022.
The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or interest paid and the average yield or average rate paid on each such category on a tax-equivalent basis for the periods presented:
(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which the Company operates.
(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 and mix and pricing decisions. External factors include changes in market interest rates, competition and other factors affecting the banking industry in general, and the shape of the interest rate yield curve. The largest contributing factor to the increase in net interest income for the nine months ended September 30, 2023, as compared to the same period in 2022, was the rising rate environment throughout 2022 and thus far in 2023. The higher interest rates benefited yields on earning assets, which, coupled with steady loan growth, resulted in an increase in interest income year over year. This increase was offset to some degree by an increase in interest expense. The rising interest rates negatively impacted both the cost and mix of our funding sources, and the Company’s decision to increase on-balance sheet liquidity following the bank failures in March 2023 has also resulted in higher cost of funds and interest expense. The Company has continued its efforts to mitigate increases in the cost of funding through maintaining noninterest-bearing deposits, staying disciplined yet competitive in pricing on interest-bearing deposits in the current rising rate environment and accessing alternative sources of liquidity, such as brokered
deposits. In the first nine months of 2023, however, ensuring the safe and sound operation of the Bank in light of industry-wide conditions was management’s paramount concern, which led to the Company significantly increasing its brokered deposits and borrowed funds in the first nine months of 2023 as compared to the same period in 2022 in order to maintain robust on-balance sheet liquidity.
The following tables set forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from changes in volume and rates for the Company for the three and nine months ended September 30, 2023, as compared to the same period in 2022 (the changes attributable to the combined impact of yield/rate and volume have been allocated on a pro-rata basis using the absolute value of amounts calculated):
Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022
Volume
Rate
Net
Interest income:
Loans held for investment
$
14,993
$
43,914
$
58,907
Loans held for sale
1,351
325
1,676
Securities:
Taxable
(3,336)
115
(3,221)
Tax-exempt
(670)
(187)
(857)
Interest-bearing balances with banks
376
6,294
6,670
Total interest-earning assets
12,714
50,461
63,175
Interest expense:
Interest-bearing demand deposits
54
35,349
35,403
Savings deposits
(31)
669
638
Brokered deposits
12,490
—
12,490
Time deposits
990
14,144
15,134
Borrowed funds
(281)
2,095
1,814
Total interest-bearing liabilities
13,222
52,257
65,479
Change in net interest income
$
(508)
$
(1,796)
$
(2,304)
Nine months ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022
Interest income, on a tax equivalent basis, was $208,425 and $595,259 for the three and nine months ended September 30, 2023, as compared to $145,250 and $382,421 for the same periods in 2022. The increase in interest income, on a tax equivalent basis, for the three and nine months ended September 30, 2023, as compared to the same time periods in 2022 is due primarily to additional interest rate increases by the Federal Reserve since March 2022, coupled with an improved mix of earning assets as excess cash was deployed into higher yielding assets since March 2022.
The following table presents the percentage of total average earning assets, by type and yield, for the periods presented:
Percentage of Total Average Earning Assets
Yield
Three Months Ended
Three Months Ended
September 30,
September 30,
2023
2022
2023
2022
Loans held for investment
78.27
%
72.87
%
6.06
%
4.57
%
Loans held for sale
1.48
0.97
6.58
5.77
Securities
15.50
21.69
1.85
1.87
Other
4.75
4.47
5.51
2.07
Total earning assets
100.00
%
100.00
%
5.39
%
3.89
%
Percentage of Total Average Earning Assets
Yield
Nine Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Loans held for investment
77.22
%
70.54
%
5.89
%
4.20
%
Loans held for sale
1.14
1.57
6.46
4.30
Securities
17.91
20.88
2.00
1.70
Interest-bearing balances with banks
3.73
7.01
5.25
0.78
Total earning assets
100.00
%
100.00
%
5.18
%
3.44
%
For the third quarter of 2023, interest income on loans held for investment, on a tax equivalent basis, increased $58,907 to $183,521 from $124,614 for the same period in 2022. For the nine months ended September 30, 2023, interest income on loans held for investment, on a tax equivalent basis, increased $193,813 to $523,040 from $329,227 in the same period in 2022. The Federal Reserve began to raise interest rates in March 2022, which positively impacted the Company’s loan pricing, and the year-to-date average balance of loans held for investment increased $1,392,357 from September 2022, thereby resulting in the increase in interest income on loans held for investment for the three and nine months ended September 30, 2023, as compared to the same periods in 2022.
The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans held for investment, loan yield and net interest margin is shown in the following table for the periods presented.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net interest income collected on problem loans
$
(820)
$
78
$
(64)
$
2,788
Accretable yield recognized on purchased loans(1)
1,290
1,317
3,049
4,573
Total impact to interest income on loans
$
470
$
1,395
$
2,985
$
7,361
Impact to loan yield
0.02
%
0.05
%
0.03
%
0.09
%
Impact to net interest margin
0.01
%
0.04
%
0.02
%
0.07
%
(1)Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $821 and $713 for the third quarter of 2023 and 2022, respectively. The impact was $1,371 and $2,269
for the nine months ended September 30, 2023 and 2022, respectively. This additional interest income increased total loan yield by three basis points for both the third quarter of 2023 and 2022, while increasing net interest margin by two basis points for the same respective periods. For the nine months ended September 30, 2023 and 2022, the additional interest income increased total loan yields by two and three basis points, respectively, while increasing net interest margin by one and two basis points, respectively.
For the third quarter of 2023, interest income on loans held for sale (consisting of mortgage loans held for sale) increased $1,676 to $3,751 from $2,075 for the same period in 2022. For the nine months ended September 30, 2023, interest income on loans held for sale (consisting of mortgage loans held for sale), increased $954 to $8,478 from $7,524 for the same period in 2022.
Investment income, on a tax equivalent basis, decreased $4,078 to $11,025 for the third quarter of 2023 from $15,103 for the third quarter of 2022. Investment income, on a tax equivalent basis, increased $1,611 to $41,205 for the nine months ended September 30, 2023 from $39,594 for the same period in 2022. The tax equivalent yield on the investment portfolio for the third quarter of 2023 was 1.85%, down 2 basis points from 1.87% for the same period in 2022. The tax equivalent yield on the investment portfolio for the nine months ended September 30, 2023 was 2.00%, up 30 basis points from 1.70% in the same period in 2022. The decrease in taxable equivalent yield on securities for the three months ended September 30, 2023 as compared to the same period in 2022 was due to the aforementioned sale of securities during the first nine months of 2023. The increase in taxable equivalent yield on securities for the nine months ended September 30, 2023 as compared to the same period in 2022 was due to purchases of higher yielding securities during 2022. The increase in yield led to the growth in investment income, on a tax equivalent basis.
Interest expense was $78,294 for the third quarter of 2023 as compared to $12,815 for the same period in 2022. Interest expense for the nine months ended September 30, 2023 was $193,514 as compared to $33,282 for the same period in 2022.
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
Percentage of Total Average Deposits and Borrowed Funds
Cost of Funds
Nine Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Noninterest-bearing demand
27.51
%
33.27
%
—
%
—
%
Interest-bearing demand
42.12
45.96
1.95
0.27
Savings
6.75
7.88
0.33
0.05
Brokered deposits
4.86
—
4.99
—
Time deposits
11.95
9.15
2.64
0.42
Short-term borrowings
3.90
0.66
4.24
0.98
Long-term Federal Home Loan Bank advances
—
—
—
1.88
Subordinated notes
2.15
2.30
5.61
4.39
Other long term borrowings
0.76
0.78
7.93
4.66
Total deposits and borrowed funds
100.00
%
100.00
%
1.75
%
0.31
%
Interest expense on deposits was $70,906 and $7,241 for the three months ended September 30, 2023 and 2022, respectively. The cost of total deposits was 1.98% and 0.21% for the same respective periods. Interest expense on deposits was $155,163 and $17,896 for the nine months ended September 30, 2023 and 2022, respectively, and the cost of total deposits was 1.50% and 0.17% for the same respective periods. The increase in both deposit expense and cost is attributable to the Company’s efforts to offer competitive deposit rates in the rising interest rate environment and its decision to maintain additional on-balance sheet liquidity following the bank failures and broader industry concerns about bank liquidity that arose in March 2023. The Company has continued its efforts to maintain non-interest bearing deposits. Low cost deposits continue to be the preferred choice of funding; however, the Company may rely on brokered deposits or wholesale borrowings when advantageous or otherwise deemed advisable due to market conditions.
Interest expense on total borrowings was $7,388 and $5,574 for the three months ended September 30, 2023 and 2022, respectively. Interest expense on total borrowings was $38,351 and $15,386 for the nine months ended September 30, 2023 and 2022, respectively. The increase in interest expense is a result of higher average borrowings and interest rates primarily due to an increase in short-term FHLB borrowings during the first nine months of 2023. The repayment of FHLB borrowings during the second and third quarters of 2023 had a nominal impact to interest expense for the three and nine months ended September 30, 2023.
A more detailed discussion of the cost of our funding sources is set forth below under the heading “Liquidity and Capital Resources” in this Item.
Noninterest Income
Noninterest Income to Average Assets
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
0.88%
0.98%
0.72%
0.93%
Total noninterest income includes fees generated from deposit services and other fees and commissions, income from our insurance, wealth management and mortgage banking operations, realized gains and losses on the sale of securities and all other noninterest income. Our focus is to develop and enhance our products that generate noninterest income in order to diversify revenue sources. Noninterest income was $38,200 for the third quarter of 2023 as compared to $41,186 for the same period in 2022. Noninterest income was $92,719 for the nine months ended September 30, 2023 as compared to $115,858 for the same period in 2022. The decrease over the three and nine month periods is primarily due to the decrease in mortgage banking income during the three and nine month periods and, with respect to the nine month period, the $22,438 loss on the sale of securities during June 2023.
Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees (which encompasses traditional overdraft fees as well as non-sufficient funds fees). Service charges on deposit accounts were $9,743 and $10,216 for the third quarter of 2023 and 2022, respectively, and $28,596 and $29,512 for the nine months ended September 30, 2023 and 2022, respectively. Overdraft fees, the largest component of service charges on deposits, were $5,065 for the three months ended September 30, 2023, as compared to $5,540
for the same period in 2022. These fees were $14,734 for the nine months ended September 30, 2023 compared to $15,967 for the same period in 2022. The Company eliminated consumer non-sufficient funds fees as well as transfer fees to linked customer accounts effective January 1, 2023. The fees eliminated totaled approximately $1,500 for the third quarter of 2022 and $4,100 for the first nine months of 2022.
Fees and commissions were $4,108 during the third quarter of 2023 as compared to $4,148 for the same period in 2022, and were $13,771 for the first nine months of 2023 as compared to $12,798 for the same period in 2022. Fees and commissions include fees related to deposit services, such as ATM fees and interchange fees on debit card transactions, and lending services, such as collateral management fees and unused commitment fees. For the third quarter of 2023, interchange fees were $2,337 as compared to $2,341 for the same period in 2022. Interchange fees were $7,130 for the nine months ended September 30, 2023 as compared to $7,419 for the same period in 2022.
Through Renasant Insurance, we offer a range of commercial and personal insurance products through major insurance carriers. Income earned on insurance products was $3,264 and $3,108 for the three months ended September 30, 2023 and 2022, respectively, and was $8,519 and $8,253 for the nine months ended September 30, 2023 and 2022, 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 number of claims paid by insurance carriers. Contingency income, which is included in “Other noninterest income” in the Consolidated Statements of Income, was $7 and $10 for the three months ended September 30, 2023 and 2022, respectively, and $963 and $559 for the nine months ended September 30, 2023 and 2022, respectively.
Our Wealth Management segment has two divisions: Trust and Financial Services. The Trust division operates on a custodial basis, which includes administration of benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal and corporate benefit accounts, 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 $5,986 for the third quarter of 2023 compared to $5,467 for the same period in 2022, and was $16,464 for the nine months ended September 30, 2023 compared to $17,102 for the same period in 2022. The market value of assets under management or administration was $4,999,504 and $4,842,723 at September 30, 2023 and September 30, 2022, 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. Interest rate lock commitments and originations of mortgage loans to be sold totaled $494,442 and $397,355, respectively, in the third quarter of 2023 compared to $636,987 and $359,444, respectively for the same period in 2022. Interest rate lock commitments and originations of mortgage loans to be sold totaled $1,734,035 and $1,057,277 in the nine months ended September 30, 2023 compared to $2,677,181 and $1,436,158 for the same period in 2022. The decrease in both interest rate lock commitments and, for the nine month comparative period, mortgage loan originations was due to material increases in mortgage interest rates from historically low rates, significantly dampening demand for mortgages nationwide. In the third quarter of 2022, the Company sold a portion of its mortgage servicing rights portfolio with a carrying value of $15,565 for a pre-tax gain of $2,960. The table below presents the components of mortgage banking income included in noninterest income for the periods presented.
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Gain on sales of loans, net (1)
$
3,297
$
5,263
$
12,713
$
14,800
Fees, net
2,376
2,405
7,041
8,522
Mortgage servicing income, net
1,860
5,007
6,067
7,302
Mortgage banking income, net
$
7,533
$
12,675
$
25,821
$
30,624
(1)Gain on sales of loans, net includes pipeline fair value adjustments
Bank-owned life insurance (“BOLI”) income is derived from changes in the cash surrender value of the bank-owned life insurance policies and proceeds received upon the death of covered individuals. BOLI income was $2,469 for the three months ended September 30, 2023 as compared to $2,296 for the same period in 2022, and $7,874 for the nine months ended September 30, 2023 as compared to $6,780 for the same period in 2022. The Company purchased an additional $80,000 in BOLI policies during the first quarter of 2022. No such purchases were made in the first nine months of 2023.
Other noninterest income was $5,097 and $3,276 for the three months ended September 30, 2023 and 2022, respectively, and was $14,112 and $10,789 for the nine months ended September 30, 2023 and 2022, respectively. Other noninterest income includes income from our SBA banking division, our capital markets division and other miscellaneous income and can fluctuate based on production in our SBA banking and capital markets divisions and recognition of other seasonal income items.
Noninterest Expense
Noninterest Expense to Average Assets
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
2.48%
2.42%
2.52%
2.36%
Noninterest expense was $107,669 and $101,574 for the third quarter of 2023 and 2022, respectively, and was $324,542 and $293,873 for the nine months ended September 30, 2023 and 2022, respectively.
Salaries and employee benefits increased $2,995 to $69,458 for the third quarter of 2023 as compared to $66,463 for the same period in 2022. Salaries and employee benefits increased $15,645 to $209,927 for the nine months ended September 30, 2023 as compared to $194,282 for the same period in 2022. The increase in salaries and employee benefits is primarily due to increases in the minimum wage we pay our employees that were implemented in May 2022 along with annual merit increases implemented in April 2023. The acquisition of RBC added $4,682 to salaries and employee benefits expense in the first nine months of 2023.
Data processing costs were $3,907 in the third quarter of 2023 as compared to $3,526 for the same period in 2022 and were $11,224 for the nine months ended September 30, 2023 as compared to $11,379 for the same period in 2022. The Company continues to examine new and existing contracts to negotiate favorable terms to offset the increased variable cost components of our data processing costs, such as new accounts and increased transaction volume.
Net occupancy and equipment expense for the third quarter of 2023 was $11,548, as compared to $11,266 for the same period in 2022. These expenses for the first nine months of 2023 were $34,818, as compared to $33,697 for the same period in 2022.
For the third quarter of 2023 the Company experienced a net gain of $120 related to other real estate owned as compared to expenses of $34 for the same period in 2022. The Company experienced a net gain of $39 for the nine months ended September 30, 2023 as compared to a net gain of $394 for the same period in 2022. 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 $18 and $110 for the first nine months of 2023 and 2022, respectively. For the nine months ended September 30, 2023 and 2022, other real estate owned with a cost basis of $2,544 and $1,847, respectively, was sold, resulting in a net gain of $289 and $611, respectively.
Professional fees include fees for legal and accounting services, such as routine litigation matters, external audit services as well as assistance in complying with newly-enacted and existing banking and governmental regulations. Professional fees were $3,338 for the third quarter of 2023 as compared to $3,087 for the same period in 2022, and $10,817 for the nine months ended September 30, 2023 as compared to $9,016 for the same period in 2022.
Advertising and public relations expense was $3,474 for the third quarter of 2023 as compared to $3,229 for the same period in 2022, and $11,642 for the nine months ended September 30, 2023 as compared to $10,694 for the same period in 2022. During the nine months ended September 30, 2023 and 2022, the Company contributed approximately $1,292 and $1,350, respectively, to charitable organizations throughout Mississippi, Alabama and Georgia, which contributions are included in our advertising and public relations expense, for which it received a dollar-for-dollar tax credit.
Amortization of intangible assets totaled $1,311 and $1,251 for the third quarter of 2023 and 2022, respectively, and $4,106 and $3,927 for the nine months ended September 30, 2023 and 2022, 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 8 years.
Communication expenses, those expenses incurred for communication to clients and between employees, were $2,006 for the third quarter of 2023 as compared to $1,999 for the same period in 2022. Communication expenses were $6,212 for the nine months ended September 30, 2023 as compared to $5,930 for the same period in 2022.
Other noninterest expense includes the provision for unfunded commitments, business development and travel expenses, other discretionary expenses, loan fees expense and other miscellaneous fees and operating expenses. Other noninterest expense was $12,747 and $35,835 for the three and nine months ended September 30, 2023 as compared to $10,719 and $23,923 for the same periods in 2022. The increase in other noninterest expense is primarily attributable to lower deferred loan origination
expense in the first nine months of 2023 compared to the same period in 2022. The amount of loan origination expense deferred is directly correlated to the volume and mix of our loan production during the period. A negative provision (recovery) for unfunded commitments of $700 and $3,200 was recorded for the three and nine months ended September 30, 2023. There was no provision for unfunded commitments recorded for the third quarter of 2022 and a recovery of provision for unfunded commitments of $100 for the nine months ended September 30, 2022.
Efficiency Ratio
Efficiency Ratio
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Efficiency ratio
63.96
%
58.50
%
65.64
%
63.20
%
The efficiency ratio is a measure of productivity in the banking industry. (This ratio is a measure of our ability to turn expenses into revenue. That is, the ratio is designed to reflect the percentage of one dollar that we must expend to generate a 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 loss on the sale of securities reduced the efficiency ratio by 2.84 basis points for the nine months ended September 30, 2023. We remain committed to aggressively managing our costs within the framework of our business model. Our goal is to improve the efficiency ratio over time 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 third quarter of 2023 and 2022 was $10,766 and $13,563, respectively, and $28,722 and $32,355 for the nine months ended September 30, 2023 and 2022, respectively. The Company recognized tax credits of approximately $1,292 in the first nine months of 2023 (as mentioned above in the advertising and public relations discussion) as compared to approximately $1,350 in the first nine months of 2022.
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 Credit Losses on Loans and Unfunded Commitments
Management of Credit Risk. Inherent in any lending activity is credit risk, that is, the risk of loss should a borrower default. Credit risk is monitored and managed on an ongoing basis by our credit administration department, our problem asset resolution committee and the Board of Directors Credit Review Committee.Oversight of the Company’s lending operations (including adherence to our policies and procedures governing the loan approval and monitoring process), credit quality 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 three additional State Certified General Real Estate Appraisers and four real estate evaluators. In addition, we maintain a loan review staff 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 limit are reviewed for approval by senior credit officers.
For loans with a commercial purpose, internal risk-rating grades are assigned by lending, credit administration and loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Loan grades range from 10 to 95, with 10 being loans with the least credit risk.
Management’s problem asset resolution committee and the Board of Directors’ Credit Review Committee monitor loans that are past due or those that have been downgraded to criticized due to a decline in the collateral value or cash flow of the borrower. This information is used to assist management in monitoring credit quality. 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 or private sale for fair market value (based upon recent appraisals as described above), with fees associated with the foreclosure being deducted from the sales price. The purchase price is applied to the outstanding loan balance. Any remaining balance is charged-off, which reduces the allowance for credit losses on loans. Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for credit losses on loans.
The Company’s practice is to charge off estimated losses as soon as management believes the uncollectability of a loan balance is confirmed and such losses are reasonably quantified. Net charge-offs for the first nine months of 2023 were $10,566, or 0.12% of average loans (annualized), compared to net charge-offs of $4,763, or 0.06% of average loans (annualized), for the same period in 2022. The charge-offs were fully reserved for in the Company’s allowance for credit losses on loans. Subsequent recoveries, if any, are credited to the allowance for credit losses on loans.
Allowance for Credit Losses on Loans; Provision for Credit Losses on Loans. The allowance for credit losses is available to absorb credit losses inherent in the loans held for investment portfolio. Management evaluates the adequacy of the allowance on a quarterly basis.
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 loans evaluated on a collective (pooled) basis and those evaluated on an individual basis as set forth in ASC 326. The credit loss estimation process involves procedures to appropriately consider the unique characteristics of the Company’s loan portfolio segments. Credit quality is assessed and monitored by evaluating various attributes, and the results of those evaluations are utilized in underwriting new loans and in the Company’s process for the estimation of expected credit losses. Credit quality monitoring procedures and indicators can include an 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 our risk rating system, regulatory guidance and economic conditions, such as the unemployment rate and change in GDP in the national and local economies as well as trends in the market values of underlying collateral securing loans, all as determined based on input from management, loan review staff and other sources. This evaluation is complex and inherently subjective, as it requires estimates by management that are inherently uncertain and therefore susceptible to significant revision as more information becomes available. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit loss in those future periods.
The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, a collective or pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics; and second, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans.
•The allowance for credit losses for loans that share similar risk characteristics with other loans is calculated on a collective (or pooled) basis, where such loans are segregated into loan portfolio segments. In determining the allowance for credit losses on loans evaluated on a collective basis, the Company further categorizes the loan segments based on risk rating. The Company uses two CECL models: (1) for the Real Estate - 1-4 Family Mortgage, Real Estate - Construction and the Installment Loans to Individuals portfolio segments, the Company uses a loss rate model, based on average historical life-of-loan loss rates, and (2) for the Commercial, Real Estate - Commercial Mortgage and Lease Financing portfolio segments, the Company uses a probability of default/loss given default model, which calculates an expected loss percentage for each loan pool by considering (a) the probability of default, based on the migration of loans from performing (using risk ratings) to default using life-of-loan analysis periods, and (b) the historical severity of loss, based on the aggregate net lifetime losses incurred per loan pool.
The historical loss rates calculated as described above are adjusted, as necessary, for both internal and external qualitative factors where there are differences in the historical loss data of the Company and current or projected future conditions. Internal factors include loss history, changes in credit quality (including movement between risk ratings) and/or credit concentration and the nature and volume of the respective loan portfolio segments. External factors include current and reasonable and supportable forecasted economic conditions and changes in collateral values. These factors are used to adjust the historical loss rates (as described above) to ensure that they reflect management’s expectation of future conditions based on a reasonable and supportable forecast period. To the extent the lives of the loans in the portfolio extend
beyond the period for which a reasonable and supportable forecast can be made, when necessary, the models immediately revert to the historical loss rates adjusted for qualitative factors related to current conditions.
•For loans that do not share similar risk characteristics with other loans, an individual analysis is performed to determine the expected credit loss. If the respective loan is collateral dependent (that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral), the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of collateral is initially based on external appraisals. Generally, collateral values for loans for which measurement of expected losses is dependent on the fair value of such collateral are updated every twelve months, either from external third parties or in-house certified appraisers. Third-party appraisals are obtained from a pre-approved list of independent, third-party, local appraisal firms. The fair value of the collateral derived from the external appraisal is then adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. Other acceptable methods for determining the expected credit losses for individually evaluated loans (typically used for loans that are not collateral dependent) is a discounted cash flow approach or, if applicable, an observable market price. Once the expected credit loss amount is determined, an allowance equal to such expected credit loss is included in the allowance for credit losses.
In addition to its quarterly analysis of the allowance for credit losses, on a regular basis management and the Board of Directors review loan ratios. These ratios include the allowance for credit losses as a percentage of total loans, net charge-offs as a percentage of average loans, nonperforming loans as a percentage of total loans and the allowance coverage on nonperforming loans, among others. 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 credit losses on loans by loan category and the percentage of loans in each category to total loans as of the dates presented:
September 30, 2023
December 31, 2022
September 30, 2022
Balance
% of Total
Balance
% of Total
Balance
% of Total
Commercial, financial, agricultural
$
44,444
14.96
%
$
44,255
14.46
%
$
30,503
13.63
%
Lease financing
3,355
0.99
%
2,463
0.99
%
2,314
0.93
%
Real estate – construction
19,656
11.57
%
19,114
11.49
%
18,744
10.94
%
Real estate – 1-4 family mortgage
45,799
27.94
%
44,727
27.78
%
43,532
28.17
%
Real estate – commercial mortgage
75,233
43.65
%
71,798
44.20
%
69,267
45.17
%
Installment loans to individuals
9,286
0.89
%
9,733
1.08
%
9,996
1.16
%
Total
$
197,773
100.00
%
$
192,090
100.00
%
$
174,356
100.00
%
The provision for credit losses on loans charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses on loans at a level that is believed to be adequate to meet the inherent risks of losses in our loan portfolio. The Company recorded a provision for credit losses of $5,315 in the third quarter of 2023 and $16,275 in the first nine months of 2023, as compared to $9,800 in the third quarter of 2022 and $13,300 in the first nine months of 2022. The Company’s allowance for credit losses model considers economic projections, primarily the national unemployment rate and GDP, over a reasonable and supportable period of two years. The provision activity during the first nine months months of 2023 as compared to the same period in 2022 was primarily driven by loan growth coupled with a slight deterioration in our economic forecast.
The table below reflects the activity in the allowance for credit losses on loans for the periods presented:
The table below reflects annualized net charge-offs (recoveries) to daily average loans outstanding, by loan category, during the periods presented:
Nine Months Ended
September 30, 2023
September 30, 2022
Net Charge-offs (Recoveries)
Average Loans
Annualized Net Charge-offs to Average Loans
Net Charge-offs (Recoveries)
Average Loans
Annualized Net Charge-offs to Average Loans
Commercial, financial, agricultural
$
5,031
$
1,740,424
0.39%
$
2,732
$
1,474,633
0.25%
Lease financing
628
119,564
0.70
(129)
93,838
(0.18)%
Real estate – construction
9
1,336,385
—
—
1,124,713
—%
Real estate – 1-4 family mortgage
(30)
3,373,754
—
(193)
2,976,081
(0.01)%
Real estate – commercial mortgage
4,815
5,183,733
0.12
2,273
4,670,508
0.07%
Installment loans to individuals
113
112,802
0.13
80
134,532
0.08%
Total
$
10,566
$
11,866,662
0.12%
$
4,763
$
10,474,305
0.06%
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Real estate – construction:
Residential
$
(48)
$
—
$
9
$
—
Total real estate – construction
(48)
—
9
—
Real estate – 1-4 family mortgage:
Primary
(91)
(59)
(156)
98
Home equity
(20)
(44)
79
(92)
Rental/investment
66
(19)
65
(40)
Land development
(6)
(48)
(18)
(159)
Total real estate – 1-4 family mortgage
(51)
(170)
(30)
(193)
Real estate – commercial mortgage:
Owner-occupied
(205)
(36)
113
490
Non-owner occupied
(3)
1,951
4,702
1,949
Land development
—
(9)
—
(166)
Total real estate – commercial mortgage
(208)
1,906
4,815
2,273
Total net charge-offs (recoveries) of loans secured by real estate
$
(307)
$
1,736
$
4,794
$
2,080
Allowance for Credit Losses on Unfunded Commitments; Provision for Credit Losses on Unfunded Commitments. The Company maintains a separate allowance for credit losses on unfunded loan commitments, which is included in the “Other liabilities” line item on the Consolidated Balance Sheets. Management estimates the amount of expected losses on unfunded loan commitments by calculating a likelihood of funding over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit losses on loans methodology described above to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company. A roll-forward of the allowance for credit losses on unfunded commitments is shown in the tables below.
Allowance for credit losses on unfunded loan commitments:
Beginning balance
$
17,618
$
19,935
Recovery of provision for credit losses on unfunded loan commitments (included in other noninterest expense)
(700)
—
Ending balance
$
16,918
$
19,935
Nine Months Ended September 30,
2023
2022
Allowance for credit losses on unfunded loan commitments:
Beginning balance
$
20,118
$
20,035
Recovery of provision for credit losses on unfunded loan commitments (included in other noninterest expense)
(3,200)
(100)
Ending balance
$
16,918
$
19,935
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, but loans may also be placed on nonaccrual status at an earlier date if collection of principal or interest is considered doubtful. Management, the problem asset resolution 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 credit losses on loans. 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 nonperforming assets as of the dates presented.
September 30, 2023
December 31, 2022
Nonaccruing loans
$
69,541
$
56,545
Accruing loans past due 90 days or more
532
331
Total nonperforming loans
70,073
56,876
Other real estate owned
9,258
1,763
Total nonperforming assets
$
79,331
$
58,639
Nonperforming loans to total loans
0.58
%
0.49
%
Nonaccruing loans to total loans
0.57
%
0.49
%
Nonperforming assets to total assets
0.46
%
0.35
%
The following table presents nonperforming loans by loan category as of the dates presented:
Total nonperforming loans as a percentage of total loans were 0.58% as of September 30, 2023 as compared to 0.49% and 0.50% as of December 31, 2022 and September 30, 2022, respectively. The Company’s coverage ratio, or its allowance for credit losses on loans as a percentage of nonperforming loans, was 282.24% as of September 30, 2023 as compared to 337.73% as of December 31, 2022 and 312.10% as of September 30, 2022.
Management has evaluated loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses at September 30, 2023. Management also continually monitors past due loans for potential credit quality deterioration. Total loans 30-89 days past due but still accruing interest were $13,641, or 0.11% of total loans, at September 30, 2023 as compared to $58,703, or 0.51% of total loans, at December 31, 2022 and $26,103, or 0.25% of total loans, at September 30, 2022.
Certain modifications of loans made to borrowers experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, excluding covenant waivers and modification of contingent acceleration clauses are required to be disclosed in accordance with ASU 2022-02. At September 30, 2023, these loan modifications were performing in accordance with their modified terms and unused commitments totaled $721. Upon the Company’s determination that a modified loan has been subsequently deemed uncollectible, the loan, or portion of the loan, is charged off, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted accordingly. See Note 4, “Allowance for Credit Losses,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements for more information on the allowance for credit losses.
The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the nine months ended September 30, 2023, which are required to be disclosed under ASU 2022-02, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of loans is also presented below.
The following table presents the weighted average financial effect of the loan modifications requiring disclosure under ASU 2022-02 by class of financing receivable for the nine months ended September 30, 2023.
Nine Months Ended
Interest Rate Reduction (in basis points)
Term Extension (in months)
Payment Delay (in months)
Commercial, financial, agricultural
—
2.1
—
Real estate – construction:
Residential
—
4.7
—
Real estate – 1-4 family mortgage:
Home equity
300
—
—
Real estate – commercial mortgage:
Owner-occupied
68
8.4
3.0
Non-owner occupied
12
—
—
The following table provides details of the Company’s other real estate owned, net of valuation allowance and direct write-downs, as of the dates presented:
September 30, 2023
December 31, 2022
September 30, 2022
Residential real estate
$
1,045
$
699
$
913
Commercial real estate
8,182
62
62
Residential land development
4
246
246
Commercial land development
27
756
1,191
Total other real estate owned
$
9,258
$
1,763
$
2,412
Changes in the Company’s other real estate owned were as follows:
Other real estate owned with a cost basis of $2,544 was sold during the nine months ended September 30, 2023, resulting in a net gain of $289, while other real estate owned with a cost basis of $1,847 was sold during the nine months ended September 30, 2022, resulting in a net gain of $611.
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, investing 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. Changes in rates may also limit our liquidity, making it more costly for the Company to generate funds to make loans and to satisfy customers wishing to withdraw deposits.
Because of the impact of interest rate fluctuations on our profitability and liquidity, we actively monitor and manage our interest rate risk exposure. We have an Asset/Liability Committee (“ALCO”), which is comprised of various members of senior management and is authorized by the Board of Directors to monitor interest rate sensitivity and liquidity risk, over the short-, medium-, and long-term, and to make decisions relating to these processes. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk and preserving adequate liquidity so as to minimize the adverse impact of changes in interest rates on net interest income, liquidity and capital. We regularly monitor liquidity and stress our liquidity position in various simulated scenarios, which are incorporated in our contingency funding plan outlining different potential liquidity environments. 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, which could impact the results presented in the table below.
Net interest income forecast 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 future 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 October 1, 2023, in each case as compared to the result under rates present in the market on September 30, 2023. The changes in interest rates assume an instantaneous and parallel shift in the yield curve and do not account for changes in the slope of the yield curve.
The rate shock results for the net interest income simulations for the next 24 months produce an asset sensitive position at September 30, 2023. The preceding measures assume no change in the size or asset/liability compositions of the balance sheet, and they do not reflect future actions the ALCO may undertake in response to such changes in interest rates.
The scenarios assume instantaneous movements in interest rates in increments described in the table above. 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, including asset prepayment speeds, the impact of competitive factors on our pricing of loans and deposits, the impact of market conditions on the securities yields and interest rates of our borrowings, how responsive our deposit repricing is to the change in market rates and the expected life of non-maturity deposits. These business assumptions are based upon our experience, business plans and published industry experience; however, such assumptions may not necessarily reflect the manner or timing in which cash flows, asset yields and 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, collars, 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 derivatives, see the information under the heading “Loan Commitments and Other Off-Balance Sheet Arrangements” in the Liquidity and Capital Resources section below and Note 9, “Derivative Instruments,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements. The Liquidity and Capital Resources section also details our available sources of liquidity, both on and off-balance sheet.
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 brokered deposits and time deposits greater than $250,000, are the major source of funds used by 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 the Bank’s liquidity. We may also access the brokered deposit market where rates are favorable to other sources of liquidity (especially in light of collateral requirements for certain borrowings) and core deposits are not sufficient for meeting our current and anticipated liquidity needs. During the first nine months of 2023, brokered deposits increased by $524,642 as compared to the balance at December 31, 2022. The Bank obtained brokered deposits in the amount of $1,206,856 during the first nine months of 2023 and paid down $682,214. Management continually monitors the Bank’s liquidity and non-core dependency ratios to ensure compliance with targets established by the ALCO.
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 10.40% of the carrying value of the total securities portfolio. Securities within our investment portfolio are also used to secure certain deposit types, short-term borrowings and derivative instruments. At September 30, 2023, securities with a carrying value of $807,284 were pledged to secure government, public fund and trust deposits and as collateral for short-term borrowings and derivative instruments as compared to securities with a carrying value of $842,601 similarly pledged at December 31, 2022.
Other sources available for meeting liquidity needs include federal funds purchased, short-term and long-term advances from the FHLB and borrowings from the Federal Reserve Discount Window. Interest is charged at the prevailing market rate on federal funds purchased and FHLB advances. There were $100,000 in short-term borrowings from the FHLB at September 30, 2023, as compared to $700,000 at December 31, 2022, as we used the proceeds of our sale of securities in the third quarter to pay down our short-term FHLB advances. Long-term funds obtained from the FHLB are used 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. There were no outstanding long-term advances with the FHLB at September 30, 2023 or December 31, 2022. The total amount of the remaining credit available to us from the FHLB at September 30, 2023 was $3,111,063. The credit available at the Federal Reserve Discount Window at September 30, 2023 was $585,406, with no borrowings currently outstanding. We also maintain lines of credit with other commercial banks totaling $180,000. 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 September 30, 2023 or December 31, 2022.
Finally, we can access the capital markets to meet liquidity needs. 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. In previous years, we have accessed the capital markets to generate liquidity in the form of common stock and subordinated notes. We have also assumed subordinated notes as part of acquisitions. The carrying value of subordinated notes, net of unamortized debt issuance costs, was $314,655 at September 30, 2023.
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
Nine Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Noninterest-bearing demand
27.51
%
33.27
%
—
%
—
%
Interest-bearing demand
42.12
45.96
1.95
0.27
Savings
6.75
7.88
0.33
0.05
Brokered deposits
4.86
—
4.99
—
Time deposits
11.95
9.15
2.64
0.42
Short-term borrowings
3.90
0.66
4.24
0.98
Long-term Federal Home Loan Bank advances
—
—
—
1.88
Subordinated notes
2.15
2.30
5.61
4.39
Other borrowed funds
0.76
0.78
7.93
4.66
Total deposits and borrowed funds
100.00
%
100.00
%
1.75
%
0.31
%
The estimated amount of uninsured and uncollateralized deposits at September 30, 2023 was $4,204,524. Collateralized public funds over the FDIC insurance limits were $1,451,674 at September 30, 2023.
Our strategy in choosing funds is focused on minimizing cost in the context of our balance sheet composition, interest rate risk position and liquidity forecast. Accordingly, management targets growth of core deposits, focusing on 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 $741,156 at September 30, 2023, as compared to $479,500 at September 30, 2022. Cash provided by investing activities for the nine months ended September 30, 2023 was $89,172, as compared to cash used in investing activities of $1,587,457 for the nine months ended September 30, 2022. Proceeds from the sale, maturity or call of securities within our investment portfolio were $697,076 for the nine months ended September 30, 2023, as compared to $372,484 for the same period in 2022. A portion of the securities portfolio was sold during the second quarter, resulting in proceeds of $488,981 which were used to pay off short-term FHLB borrowings. Other proceeds were primarily used to fund loan growth in 2023, while they were primarily reinvested into the investment portfolio in 2022. Purchases of investment securities were $9,646 during the first nine months of 2023, as compared to $800,260 for the same period in 2022.
Cash provided by financing activities for the nine months ended September 30, 2023 was $27,868, as compared to cash used in financing activities of $274,115 for the same period in 2022. Deposits increased $670,144 and decreased $473,600 for the nine months ended September 30, 2023 and 2022, respectively.
Restrictions on Bank Dividends, Loans and Advances
The Company’s liquidity and capital resources, as well as its ability to pay dividends to its shareholders, are substantially dependent on the ability of Renasant Bank to transfer funds to the Company in the form of dividends, loans and advances. Under Mississippi law, a Mississippi bank may not pay dividends unless its earned surplus is in excess of three times capital stock. A Mississippi bank with earned surplus in excess of three times capital stock may pay a dividend, subject to the approval of the Mississippi Department of Banking and Consumer Finance (the “DBCF”). In addition, the FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on
the financial condition of the bank, could include the payment of dividends. Accordingly, the approval of the DBCF is required prior to 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 the Bank may loan to the Company unless such loans are collateralized by specific obligations. At September 30, 2023, the maximum amount available for transfer from the Bank to the Company in the form of loans was $186,960. The Company maintains a $3,000 line of credit collateralized by cash with the Bank. There were no amounts outstanding under this line of credit at September 30, 2023.
These restrictions did not have any impact on the Company’s ability to meet its cash obligations in the nine months ended September 30, 2023, nor does management expect such restrictions to materially impact the Company’s ability to meet its currently-anticipated cash obligations.
Loan Commitments and Other Off-Balance Sheet Arrangements
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, including establishing a provision for credit losses on unfunded commitments. 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:
September 30, 2023
December 31, 2022
Loan commitments
$
3,138,292
$
3,577,614
Standby letters of credit
114,173
98,357
The Company closely monitors the amount of remaining future commitments to borrowers in light of prevailing economic conditions and adjusts these commitments and the provision related thereto as necessary; the Company also reviews these commitments as part of its analysis of loan concentrations within the loan portfolio. The Company will continue this process as new commitments are entered into or existing commitments are renewed. For a more detailed discussion related to the allowance and provision for credit losses on unfunded loan commitments, refer to the “Risk Management” section above.
The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, collars, 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 September 30, 2023, the Company had notional amounts of $404,646 on interest rate contracts with corporate customers and $401,910 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 also enters into interest rate swap contracts and interest rate collars on its FHLB borrowings and its junior subordinated debentures that are accounted for as cash flow hedges. Under interest rate swap contracts, the Company pays a fixed rate of interest and receives a variable rate of interest, while the collar hedging strategy stabilizes interest rate fluctuation by setting both a floor and a cap. The Company entered into an interest rate collar on forecasted borrowings in June 2022 with a 2.25% floor and 4.57% cap, which is accounted for as a cash flow hedge. The Company entered into a second interest rate collar in October 2022 with a 2.75% floor and 4.75% cap. Additionally, the Company entered into an interest rate swap contract on its subordinated notes that is accounted for as a fair value hedge. Under this contract, the Company pays a variable rate of interest and receives a fixed rate of interest.
For more information about the Company’s derivatives, see Note 9, “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 $2,233,323 at September 30, 2023 compared to $2,136,016 at December 31, 2022. Book value per share was $39.78 and $38.18 at September 30, 2023 and December 31, 2022, respectively. The growth in shareholders’ equity was attributable to reductions in accumulated other comprehensive loss and current period earnings, offset by dividends declared.
In October 2022, the Company’s Board of Directors approved a stock repurchase program, authorizing the Company to repurchase up to $100,000 of its outstanding common stock, which expired in October 2023 and was replaced with a new stock repurchase program, authorizing the Company to repurchase up to $100,000 of its outstanding common stock, either in open market purchases or privately-negotiated transactions. The new 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. The Company did not repurchase any of its common stock under the stock repurchase plan in the first nine months of 2023.
The Company has junior subordinated debentures with a carrying value of $112,744 at September 30, 2023, of which $109,153 is 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 debentures we include in Tier 1 capital at September 30, 2023. 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 we make any acquisition of a financial institution now that 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 par value of $340,000 at September 30, 2023, of which $336,551 is included in the Company’s Tier 2 capital.
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:
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 Capital Conservation Buffer)
Amount
Ratio
Amount
Ratio
Amount
Ratio
September 30, 2023
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio
$
1,449,367
10.46
%
$
900,405
6.50
%
$
969,667
7.00
%
Tier 1 risk-based capital ratio
1,558,521
11.25
1,108,191
8.00
1,177,453
8.50
Total risk-based capital ratio
2,065,992
14.91
1,385,238
10.00
1,454,500
10.50
Leverage capital ratios:
Tier 1 leverage ratio
1,558,521
9.48
821,665
5.00
657,332
4.00
Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio
$
1,698,680
12.23
%
$
902,615
6.50
%
$
972,047
7.00
%
Tier 1 risk-based capital ratio
1,698,680
12.23
1,110,911
8.00
1,180,343
8.50
Total risk-based capital ratio
1,869,600
13.46
1,388,639
10.00
1,458,071
10.50
Leverage capital ratios:
Tier 1 leverage ratio
1,698,680
10.33
821,813
5.00
657,450
4.00
December 31, 2022
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio
$
1,372,747
10.21
%
$
874,093
6.50
%
$
941,331
7.00
%
Tier 1 risk-based capital ratio
1,481,197
11.01
1,075,807
8.00
1,143,045
8.50
Total risk-based capital ratio
1,968,001
14.63
1,344,758
10.00
1,411,996
10.50
Leverage capital ratios:
Tier 1 leverage ratio
1,481,197
9.36
790,853
5.00
632,683
4.00
Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio
$
1,630,389
12.10
%
$
876,066
6.50
%
$
943,455
7.00
%
Tier 1 risk-based capital ratio
1,630,389
12.10
1,078,235
8.00
1,145,624
8.50
Total risk-based capital ratio
1,781,312
13.22
1,347,794
10.00
1,415,183
10.50
Leverage capital ratios:
Tier 1 leverage ratio
1,630,389
10.30
791,299
5.00
633,040
4.00
The Company elected to take advantage of transitional relief offered by the Federal Reserve and FDIC to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transitional period to phase out the capital benefit provided by the two-year delay. The three-year transitional period began on January 1, 2022.
For more information regarding the capital adequacy guidelines applicable to the Company and Renasant Bank, please refer to Note 14, “Regulatory Matters,” in the Notes to the Consolidated Financial Statements of the Company in Item 1, Financial Statements.
Critical Accounting Estimates
We have identified certain accounting estimates that involve significant judgment and estimates which can have a material impact on our financial condition or results of operations. Our accounting policies are more fully described in Note 1,
“Significant Accounting Policies,” in the Notes to Consolidated Financial Statements of the Company in Item 8, Financial Statements and Supplementary Data, in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 24, 2023. Actual amounts and values as of the balance sheet dates may be materially different than the amounts and values reported due to the inherent uncertainty in the estimation process. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.
The critical accounting estimates that we believe to be the most critical in preparing our consolidated financial statements relate to the allowance for credit losses and acquisition accounting, which are described under “Critical Accounting Policies and Estimates” in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2022. Since December 31, 2022, there have been no material changes in these critical accounting estimates.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk since December 31, 2022. For additional information regarding our market risk, see our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 24, 2023.
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 was no change in the Company’s internal control over financial reporting during the fiscal quarter covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
When evaluating the risk of an investment in the Company’s common stock, potential investors should carefully consider the risk factors appearing in Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Except as set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K.
Our business, financial condition and results of operations could be materially affected by adverse developments impacting the financial services industry, such as recent bank failures or concerns involving liquidity.
Recent bank failures have created general uncertainty and generated concerns regarding the adequacy of liquidity of the banking sector generally, resulting in significant volatility in stock prices of publicly-traded bank holding companies. These developments appear to have negatively impacted some customers’ confidence in banks, prompting these customers to maintain their deposits with larger financial institutions, and additional bank failures or sales of distressed banks in anticipation of their failure could prolong customer concerns. In addition, competition for deposits has increased in recent periods, and the cost of funding, both for deposits and other sources of liquidity, has increased. If the concerns surrounding the banking sector persist, our businesses, financial condition and results of operations could be materially adversely impacted.
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 September 30, 2023, 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 Share Repurchase Plans
Maximum Number of Shares or Approximate Dollar Value of Shares That May Yet Be Purchased Under Share Repurchase Plans(2)(3)
July 1, 2023 to July 31, 2023
1,115
$
27.95
—
$
100,000
August 1, 2023 to August 31, 2023
3,107
30.93
—
100,000
September 1, 2023 to September 30, 2023
—
—
—
100,000
Total
4,222
$
30.15
—
(1)All shares in this column represent shares of Renasant Corporation stock withheld to satisfy the federal and state tax liabilities related to the vesting of time-based restricted stock awards.
(2)The Company announced a $100.0 million stock repurchase program in October 2022 under which the Company was authorized to repurchase outstanding shares of its common stock either in open market purchases or privately-negotiated transactions. No shares were repurchased during the third quarter of 2023 under this plan, which expired in October 2023 and was replaced with a $100.0 million stock repurchase program approved in October 2023. This new plan will remain in effect for one year or, if earlier, the repurchase of the entire amount of common stock authorized to be repurchased.
(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.
During the quarter ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated any “Rule 10b5-1 trading arrangements” or “non-Rule 10b5-1 trading arrangements” (each as defined in Item 408(a) of Regulation S-K).
The following materials from Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 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) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) 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, 2023, formatted in Inline XBRL (included in Exhibit 101).
(1)Filed as exhibit 3.1 to the Form 10-Q of the Company filed with the Securities and Exchange Commission (the “Commission”) on May 10, 2016 and incorporated herein by reference.
(2)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.
(3)Filed as exhibit 3(ii) to the Form 8-K of the Company filed with the Commission on April 30, 2021 and incorporated herein by reference.
(4)Filed as exhibit 3(ii) to the Form 8-K of the Company filed with the Commission on January 28, 2022 and incorporated herein by reference.
(5)Filed as exhibit 3(ii) to the Form 8-K of the Company filed with the Commission on October 27, 2023 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.
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.