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RENASANT CORP - Quarter Report: 2020 September (Form 10-Q)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________________________
FORM 10-Q
 ________________________________________________________
(Mark One)
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020
Or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission file number: 001-13253
 ________________________________________________________
RENASANT CORPORATION
(Exact name of registrant as specified in its charter)
 ________________________________________________________
Mississippi 64-0676974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
209 Troy Street,Tupelo,Mississippi 38804-4827
(Address of principal executive offices) (Zip Code)
(662) 680-1001
(Registrant’s telephone number, including area code)
 ________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $5.00 par value per shareRNSTThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    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  ☒

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As of October 30, 2020, 56,195,255 shares of the registrant’s common stock, $5.00 par value per share, were outstanding.

Table of Contents
Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended September 30, 2020
CONTENTS
 
  Page
PART I
Item 1.
Consolidated Balance Sheets
Item 2.
Item 3.
Item 4.
PART II
Item 1A.
Item 2.
Item 6.

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

Renasant Corporation and Subsidiaries
Consolidated Balance Sheets

(In Thousands, Except Share Data)
(Unaudited)
September 30,
2020		December 31, 2019
Assets
Cash and due from banks$207,353 $191,065 
Interest-bearing balances with banks206,752 223,865 
Cash and cash equivalents414,105 414,930 
Securities available for sale, at fair value1,293,388 1,290,613 
Loans held for sale, at fair value399,773 318,272 
Loans, net of unearned income:
Non purchased loans and leases9,424,224 7,587,974 
Purchased loans1,660,514 2,101,664 
Total loans, net of unearned income11,084,738 9,689,638 
Allowance for credit losses(168,098)(52,162)
Loans, net10,916,640 9,637,476 
Premises and equipment, net300,400 309,697 
Other real estate owned:
Non purchased3,576 2,762 
Purchased4,577 5,248 
Total other real estate owned, net8,153 8,010 
Goodwill939,683 939,683 
Other intangible assets, net31,798 37,260 
Bank-owned life insurance230,022 225,942 
Mortgage servicing rights57,600 53,208 
Other assets217,371 165,527 
Total assets$14,808,933 $13,400,618 
Liabilities and shareholders’ equity
Liabilities
Deposits
Noninterest-bearing$3,758,242 $2,551,770 
Interest-bearing8,175,898 7,661,398 
Total deposits11,934,140 10,213,168 
Short-term borrowings42,624 489,091 
Long-term debt475,082 376,507 
Other liabilities252,787 196,163 
Total liabilities12,704,633 11,274,929 
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; 56,193,705 and 56,855,002 shares outstanding, respectively
296,483 296,483 
Treasury stock, at cost – 3,103,020 and 2,441,723 shares, respectively
(101,800)(83,189)
Additional paid-in capital1,294,888 1,294,276 
Retained earnings596,779 617,355 
Accumulated other comprehensive income, net of taxes17,950 764 
Total shareholders’ equity2,104,300 2,125,689 
Total liabilities and shareholders’ equity$14,808,933 $13,400,618 
See Notes to Consolidated Financial Statements.    
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Renasant Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In Thousands, Except Share Data)
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Interest income
Loans$114,914 $124,476 $351,192 $377,788 
Securities
Taxable5,499 7,218 19,219 22,874 
Tax-exempt1,573 1,292 4,697 3,992 
Other92 1,490 1,098 4,778 
Total interest income122,078 134,476 376,206 409,432 
Interest expense
Deposits11,810 21,514 44,175 62,277 
Borrowings3,982 4,137 13,361 12,383 
Total interest expense15,792 25,651 57,536 74,660 
Net interest income106,286 108,825 318,670 334,772 
Provision for credit losses on loans23,100 1,700 76,350 4,100 
Net interest income after provision for credit losses on loans83,186 107,125 242,320 330,672 
Noninterest income
Service charges on deposit accounts7,486 8,992 23,388 26,699 
Fees and commissions3,402 3,090 9,427 16,608 
Insurance commissions2,681 2,508 6,797 6,814 
Wealth management revenue4,364 3,588 12,190 10,513 
Mortgage banking income49,714 15,710 110,739 42,731 
Net gain on sales of securities— 343 31 348 
BOLI income1,267 1,734 3,759 4,481 
Other2,014 1,988 6,337 7,604 
Total noninterest income70,928 37,953 172,668 115,798 
Noninterest expense
Salaries and employee benefits75,406 65,425 227,956 183,100 
Data processing5,259 4,980 15,312 14,584 
Net occupancy and equipment13,296 12,943 40,927 36,322 
Other real estate owned1,033 418 2,071 1,674 
Professional fees3,197 2,976 8,355 7,861 
Advertising and public relations2,240 3,318 8,560 8,833 
Intangible amortization1,733 1,996 5,462 6,159 
Communications2,319 2,310 6,698 6,553 
Extinguishment of debt28 54 118 54 
Merger and conversion related expenses— 24 — 203 
Other11,999 2,056 34,377 13,279 
Total noninterest expense116,510 96,500 349,836 278,622 
Income before income taxes37,604 48,578 65,152 167,848 
Income taxes7,612 11,132 13,022 38,667 
Net income$29,992 $37,446 $52,130 $129,181 
Basic earnings per share$0.53 $0.65 $0.93 $2.21 
Diluted earnings per share$0.53 $0.64 $0.92 $2.21 
Cash dividends per common share$0.22 $0.22 $0.66 $0.65 
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See Notes to Consolidated Financial Statements.
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Renasant Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands)
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Net income$29,992 $37,446 $52,130 $129,181 
Other comprehensive income, net of tax:
Securities available for sale:
Unrealized holding gains (losses) on securities388 (62)19,685 20,648 
Reclassification adjustment for gains (losses) realized in net income— 1,876 (23)1,872 
Total securities available for sale388 1,814 19,662 22,520 
Derivative instruments:
Unrealized holding gains (losses) on derivative instruments1,175 (708)(2,621)(3,164)
Total derivative instruments1,175 (708)(2,621)(3,164)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost48 78 145 234 
Total defined benefit pension and post-retirement benefit plans48 78 145 234 
Other comprehensive income, net of tax1,611 1,184 17,186 19,590 
Comprehensive income$31,603 $38,630 $69,316 $148,771 

See Notes to Consolidated Financial Statements.
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Renasant Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)

(In Thousands, Except Share Data)

Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive IncomeTotal
Nine Months Ended September 30, 2020SharesAmount
Balance at January 1, 202056,855,002 $296,483 $(83,189)$1,294,276 $617,355 $764 $2,125,689 
Cumulative effect adjustment due to the adoption of ASU 2016-13
— — — — (35,099)— (35,099)
Net income— — — — 2,008 — 2,008 
Other comprehensive income— — — — — 13,737 13,737 
Comprehensive income15,745 
Cash dividends ($0.22 per share)
— — — — (12,555)— (12,555)
Repurchase of shares in connection with stock repurchase program(818,886)— (24,569)— — — (24,569)
Issuance of common stock for stock-based compensation awards104,902 — 4,138 (5,587)— — (1,449)
Stock-based compensation expense— — — 2,750 — — 2,750 
Balance at March 31, 202056,141,018 $296,483 $(103,620)$1,291,439 $571,709 $14,501 $2,070,512 
Net income— — — — 20,130 — 20,130 
Other comprehensive income— — — — — 1,838 1,838 
Comprehensive income21,968 
Cash dividends ($0.22 per share)
— — — — (12,525)— (12,525)
Issuance of common stock for stock-based compensation awards40,944 — 1,397 (1,404)— — (7)
Stock-based compensation expense— — — 2,998 — — 2,998 
Balance at June 30, 202056,181,962 $296,483 $(102,223)$1,293,033 $579,314 $16,339 $2,082,946 
Net income— — — — 29,992 — 29,992 
Other comprehensive income— — — — — 1,611 1,611 
Comprehensive income31,603 
Cash dividends ($0.22 per share)
— — — — (12,527)— (12,527)
Issuance of common stock for stock-based compensation awards11,743 — 423 (550)— — (127)
Stock-based compensation expense— — — 2,405 — — 2,405 
Balance at September 30, 202056,193,705 $296,483 $(101,800)$1,294,888 $596,779 $17,950 $2,104,300 
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Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Nine Months Ended September 30, 2019SharesAmount
Balance at January 1, 201958,546,480 $296,483 $(24,245)$1,288,911 $500,660 $(17,896)$2,043,913 
Net income— — — — 45,110 — 45,110 
Other comprehensive income— — — — — 10,446 10,446 
Comprehensive income55,556 
Cash dividends ($0.21 per share)
— — — — (12,442)— (12,442)
Issuance of common stock for stock-based compensation awards87,150 — 2,655 (3,442)— — (787)
Stock-based compensation expense— — — 2,637 — — 2,637 
Balance at March 31, 201958,633,630 $296,483 $(21,590)$1,288,106 $533,328 $(7,450)$2,088,877 
Net income— — — — 46,625 — 46,625 
Other comprehensive income— — — — — 7,960 7,960 
Comprehensive income54,585 
Cash dividends ($0.22 per share)
— — — — (12,971)— (12,971)
Repurchase of shares in connection with stock repurchase program(363,704)— (12,938)— — — (12,938)
Issuance of common stock for stock-based compensation awards27,744 — 893 (832)— — 61 
Stock-based compensation expense— — — 2,082 — — 2,082 
Balance at June 30, 201958,297,670 $296,483 $(33,635)$1,289,356 $566,982 $510 $2,119,696 
Net income— — — — 37,446 — 37,446 
Other comprehensive income— — — — — 1,184 1,184 
Comprehensive income38,630 
Cash dividends ($0.22 per share)
— — — — (12,829)— (12,829)
Repurchase of shares in connection with stock repurchase program(851,421)— (28,707)— — — (28,707)
Issuance of common stock for stock-based compensation awards9,057 — 298 (431)— — (133)
Stock-based compensation expense— — — 3,002 — — 3,002 
Balance at September 30, 201957,455,306 $296,483 $(62,044)$1,291,927 $591,599 $1,694 $2,119,659 

See Notes to Consolidated Financial Statements.
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Renasant Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
 Nine Months Ended September 30,
 20202019
Operating activities
Net income$52,130 $129,181 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses on loans76,350 4,100 
Depreciation, amortization and accretion22,727 5,826 
Deferred income tax (benefit) expense(8,494)13,911 
Funding of mortgage loans held for sale(3,277,576)(1,680,729)
Proceeds from sales of mortgage loans held for sale3,310,402 1,543,544 
Gains on sales of mortgage loans held for sale(114,327)(35,416)
Valuation adjustment to mortgage servicing rights13,694 3,132 
Gains on sales of securities(31)(348)
Penalty on prepayment of debt118 54 
Loss (gains) on sales of premises and equipment35 (1,062)
Stock-based compensation expense8,153 7,721 
Net change in other loans held for sale— 59,885 
Increase in other assets(87,405)(12,397)
Increase (decrease) in other liabilities48,269 (7,520)
Net cash provided by operating activities44,045 29,882 
Investing activities
Purchases of securities available for sale(304,955)(366,265)
Proceeds from sales of securities available for sale8,773 212,485 
Proceeds from call/maturities of securities available for sale314,363 192,520 
Net increase in loans(1,383,382)(93,761)
Purchases of premises and equipment(6,824)(23,968)
Proceeds from sales of premises and equipment— 2,246 
Net change in FHLB stock10,607 6,389 
Proceeds from sales of other assets6,020 17,250 
Other, net— 917 
Net cash used in investing activities(1,355,398)(52,187)
Financing activities
Net increase in noninterest-bearing deposits1,206,472 288,350 
Net increase (decrease) in interest-bearing deposits514,646 (129,873)
Net decrease in short-term borrowings(446,467)(182,104)
Proceeds from the issuance of long-term debt, net of issuance costs98,299 — 
Repayment of long-term debt(246)(33,631)
Cash paid for dividends(37,607)(38,242)
Repurchase of shares in connection with stock repurchase program(24,569)(41,645)
Net cash provided by (used in) financing activities1,310,528 (137,145)
Net decrease in cash and cash equivalents(825)(159,450)
Cash and cash equivalents at beginning of period414,930 569,111 
Cash and cash equivalents at end of period$414,105 $409,661 
Supplemental disclosures
Cash paid for interest$61,351 $75,720 
Cash paid for income taxes$26,148 $25,892 
Noncash transactions:
Transfers of loans to other real estate owned$7,887 $3,613 
Financed sales of other real estate owned$151 $254 
Transfers of mortgage loans held for sale to loans held for investment$— $189 
Transfers of other loans held for sale to loans held for investment$— $134,335 
Recognition of operating right-of-use assets$4,151 $89,770 
Recognition of operating lease liabilities$4,151 $93,289 

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

Note 1 – Summary of Significant Accounting Policies

(In Thousands)
Nature of Operations: Renasant Corporation (referred to herein as the “Company”) owns and operates Renasant Bank (“Renasant Bank” or the “Bank”), Renasant Insurance, Inc. (“Renasant Insurance”) and Park Place Capital Corporation. The Company offers a diversified range of financial, wealth management and insurance services to its retail and commercial customers through its subsidiaries and full-service offices located throughout north and central Mississippi, Tennessee, Georgia, Alabama and north Florida.
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified to conform to the current year presentation. For further information regarding the Company’s significant accounting policies, refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on February 27, 2020.
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 June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which updated Accounting Standards Codification Topic (“ASC”) 326, Financial Instruments - Credit Losses (“ASC 326”). ASU 2016-13 significantly changed the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the asset’s remaining life. FASB describes this impairment recognition model as the current expected credit loss (“CECL”) model and believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model includes loans, held-to-maturity debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. Additionally, ASU 2016-13 amended the accounting for credit losses on available for sale securities and purchased financial assets with credit deterioration (“PCD”). In the remainder of these Notes to Consolidated Financial Statements, unless the context clearly provides otherwise, references to “CECL” or to “ASC 326” shall mean the accounting standards and principles set forth in ASC 326 after giving effect to ASU 2016-13 and the clarifications thereto discussed in the next paragraph.
Over the course of 2018 and 2019, FASB issued a number of updates clarifying various matters arising under ASU 2016-13, including the following: (1) ASU 2018-19 was issued to clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20; instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases (“ASC 842”); (2) ASU 2019-04 provides entities alternatives for measurement of accrued interest receivable, clarifies the steps entities should take when recording the transfer of loans or debt securities between measurement classifications or categories and clarifies that entities should include expected recoveries on financial assets; (3) ASU 2019-05 was issued to provide entities that have certain instruments within the scope of Subtopic 320-20 with an option to irrevocably elect the fair value option in Subtopic 825-10; and (4) ASU 2019-11 was issued to address stakeholders’ specific issues relating to expected recoveries on PCD assets and transition and disclosure relief related to troubled debt restructured loans and accrued interest, respectively.

ASU 2016-13 became effective on January 1, 2020 for publicly-traded companies like the Company, and the Company elected not to take advantage of federal legislation enacted in March 2020 allowing it to postpone the adoption of CECL. To implement CECL, entities are required to apply a one-time cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, as disclosed in the table below.
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December 31, 2019
(as reported)		Impact of ASU 2016-13 AdoptionJanuary 1, 2020
(adjusted)
Assets:
Allowance for credit losses$(52,162)$(42,484)$(94,646)
Deferred tax assets, net$27,282 $12,305 $39,587 
Remaining purchase discount on loans$(50,958)$5,469 $(45,489)
Liabilities:
Reserve for unfunded commitments$946 $10,389 $11,335 
Shareholders’ equity:
Retained earnings$617,355 $(35,099)$582,256 
The Company used the prospective transition approach for PCD loans that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”). As permitted under ASC 326, the Company did not reassess whether PCI assets meet the criteria of PCD assets as of the date of adoption. As shown in the table above, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $5,469 to the allowance for credit losses. The remaining noncredit discount will be accreted into interest income.
The prospective transition approach was also used for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2020. As a result, the amortized cost basis remained the same before and after the effective date of the adoption of CECL.
Additionally, the Company has elected to exclude accrued interest receivable from the amortized cost of loans. As of September 30, 2020, the Company has accrued interest receivable for loans of $56,382, which is recorded in other assets on the Consolidated Balance Sheets.
In January 2017, FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350)” (“ASU 2017-04”), which amends and simplifies current goodwill impairment testing by eliminating certain testing under the earlier provisions. Under the new guidance, an entity performs the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. ASU 2017-04 was adopted on January 1, 2020 and did not have a material impact on the Company’s financial statements.
In August 2018, FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which is intended to improve the disclosures on fair value measurements by eliminating, amending and adding certain disclosure requirements. These changes are intended to reduce costs for preparers while providing more useful information for financial statement users.   ASU 2018-13 was adopted on January 1, 2020 and did not have a material impact on the Company’s financial statements.
In March 2019, FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements” (“ASU 2019-01”), which is intended to clarify potential implementation questions related to ASC 842. This includes clarification on the determination of fair value of underlying assets by lessors that are not manufacturers or dealers, cash flow presentation of sales-type and direct financing leases and transition disclosures related to accounting changes and error corrections. ASU 2019-01 was adopted on January 1, 2020 and did not have a material impact on the Company’s financial statements.
In March 2020, FASB issued ASU 2020-04, “Reference Rate Reform (Topic 842): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides temporary, optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met that reference LIBOR or another reference rate expected to be discontinued. As the guidance is intended to assist stakeholders during the global market-wide reference rate transition period, it is in effect only from March 12, 2020 through December 31, 2022. The Company has established a LIBOR Transition Committee and is currently evaluating the impact of adopting ASU 2020-04 on the Company's financial statements.
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 2 – Securities
(In Thousands, Except Number of Securities)

The amortized cost, fair value and allowance for credit losses of securities available for sale were as follows as of the dates presented:
 
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Allowance for Credit LossesFair
Value
September 30, 2020
U.S. Treasury securities$7,067 $45 $— $— $7,112 
Obligations of other U.S. Government agencies and corporations1,505 10 — — 1,515 
Obligations of states and political subdivisions267,067 11,224 (651)— 277,640 
Residential mortgage backed securities:
Government agency mortgage backed securities649,383 23,601 (64)— 672,920 
Government agency collateralized mortgage obligations133,993 2,181 (29)— 136,145 
Commercial mortgage backed securities:
Government agency mortgage backed securities29,198 1,316 (1)— 30,513 
Government agency collateralized mortgage obligations90,523 3,306 (77)— 93,752 
Trust preferred securities12,042 — (3,550)— 8,492 
Other debt securities62,495 2,935 (131)— 65,299 
$1,253,273 $44,618 $(4,503)$— $1,293,388 
 
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
December 31, 2019
U.S. Treasury securities$498 $1 $— $499 
Obligations of other U.S. Government agencies and corporations2,518 16 (3)2,531 
Obligations of states and political subdivisions218,362 5,134 (365)223,131 
Residential mortgage backed securities:
Government agency mortgage backed securities708,970 8,951 (1,816)716,105 
Government agency collateralized mortgage obligations172,178 1,322 (262)173,238 
Commercial mortgage backed securities:
Government agency mortgage backed securities30,372 659 (24)31,007 
Government agency collateralized mortgage obligations76,456 1,404 (109)77,751 
Trust preferred securities12,153 — (2,167)9,986 
Other debt securities55,364 1,133 (132)56,365 
$1,276,871 $18,620 $(4,878)$1,290,613 






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

Securities sold were as follows for the periods presented:
There were no securities sold during the three months ended September 30, 2020.
Carrying ValueNet ProceedsGain/(Loss)
Nine months ended September 30, 2020
Obligations of states and political subdivisions$2,696 $2,561 $(135)
Residential mortgage backed securities:
Government agency mortgage backed securities6,046 6,212 166 
$8,742 $8,773 $31 

Carrying ValueNet ProceedsGain/(Loss)
Three months ended September 30, 2019
Obligations of states and political subdivisions$1,112 $1,111 $(1)
Residential mortgage backed securities:
Government agency mortgage backed securities70,926 70,322 (604)
Government agency collateralized mortgage obligations122,404 120,606 (1,798)
Commercial mortgage backed securities:
Government agency mortgage backed securities4,838 4,720 (118)
Other debt securities252 257 5 
Other equity securities— 2,859 2,859 
$199,532 $199,875 $343 
Nine months ended September 30, 2019
Obligations of states and political subdivisions$11,799 $11,813 $14 
Residential mortgage backed securities:
Government agency mortgage backed securities72,556 71,944 (612)
Government agency collateralized mortgage obligations122,692 120,892 (1,800)
Commercial mortgage backed securities:
Government agency mortgage backed securities4,838 4,720 (118)
Other debt securities252 257 5 
Other equity securities— 2,859 2,859 
$212,137 $212,485 $348 

The sale of other equity securities represents the Company's sale of all of its shares of Visa Class B common stock during the third quarter of 2019.
Gross realized gains and losses on sales of securities available for sale for the three and nine months ended September 30, 2020 and 2019 were as follows:
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Gross gains on sales of securities available for sale$— $2,933 $166 $2,979 
Gross losses on sales of securities available for sale— (2,590)(135)(2,631)
Gains on sales of securities available for sale, net$— $343 $31 $348 

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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
At September 30, 2020 and December 31, 2019, securities with a carrying value of $534,408 and $416,849, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $36,964 and $27,754 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2020 and December 31, 2019, respectively.
The amortized cost and fair value of securities at September 30, 2020 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
 
 Available for Sale
 Amortized
Cost		Fair
Value
Due within one year$9,258 $9,316 
Due after one year through five years38,526 40,210 
Due after five years through ten years71,434 75,283 
Due after ten years194,270 196,052 
Residential mortgage backed securities:
Government agency mortgage backed securities649,383 672,920 
Government agency collateralized mortgage obligations133,993 136,145 
Commercial mortgage backed securities:
Government agency mortgage backed securities29,198 30,513 
Government agency collateralized mortgage obligations90,523 93,752 
Other debt securities36,688 39,197 
$1,253,273 $1,293,388 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)


The following table presents the age of gross unrealized losses and fair value by investment category for which an allowance for credit losses has not been recorded as of the dates presented:
 
 Less than 12 Months12 Months or MoreTotal
 #Fair
Value		Unrealized
Losses		#Fair
Value		Unrealized
Losses		#Fair
Value		Unrealized
Losses
Available for Sale:
September 30, 2020
Obligations of states and political subdivisions28$45,111 $(651)0$— $— 28$45,111 $(651)
Residential mortgage backed securities:
Government agency mortgage backed securities321,244 (64)0— — 321,244 (64)
Government agency collateralized mortgage obligations618,206 (29)0— — 618,206 (29)
Commercial mortgage backed securities:
Government agency mortgage backed securities11,546 (1)1465 — 22,011 (1)
Government agency collateralized mortgage obligations312,846 (77)0— — 312,846 (77)
Trust preferred securities0— — 28,492 (3,550)28,492 (3,550)
Other debt securities1214,833 (128)1575 (3)1315,408 (131)
Total53$113,786 $(950)4$9,532 $(3,553)57$123,318 $(4,503)
December 31, 2019
Obligations of other U.S. Government agencies and corporations0$— $— 1$1,008 $(3)1$1,008 $(3)
Obligations of states and political subdivisions2633,902 (365)0— — 2633,902 (365)
Residential mortgage backed securities:
Government agency mortgage backed securities37233,179 (1,504)1620,775 (312)53253,954 (1,816)
Government agency collateralized mortgage obligations1145,319 (262)0— — 1145,319 (262)
Commercial mortgage backed securities:
Government agency mortgage backed securities14,976 (23)21,190 (1)36,166 (24)
Government agency collateralized mortgage obligations14,910 (109)0— — 14,910 (109)
Trust preferred securities0— — 29,986 (2,167)29,986 (2,167)
Other debt securities38,737 (131)1741 (1)49,478 (132)
Total79$331,023 $(2,394)22$33,700 $(2,484)101$364,723 $(4,878)
 
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 it is written down to fair value with all losses recognized in earnings.

The Company does not intend to sell any securities in an unrealized loss position that it holds, and it is not more likely than not that the Company will be required to sell any such security prior to the recovery of its amortized cost basis, which may be at maturity. Furthermore, even though a number of these securities have been in a continuous unrealized loss position for a period
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
longer than twelve months, the Company is collecting principal and interest payments from the respective issuers as scheduled. As a result, no allowance for credit losses for securities was needed at September 30, 2020. There was no other-than-temporary impairment recorded during the nine months ended September 30, 2019 (determined in accordance with the accounting standards in effect prior to the Company's adoption of CECL).

Note 3 – Non Purchased Loans
(In Thousands, Except Number of Loans)

For purposes of this Note 3, all references to “loans” mean non purchased loans excluding loans held for sale.

The following is a summary of non purchased loans and leases as of the dates presented:
 
September 30,
2020		December 31, 2019
Commercial, financial, agricultural$2,445,294 $1,052,353 
Lease financing87,257 85,700 
Real estate – construction:
Residential261,432 272,643 
Commercial477,441 502,258 
Total real estate – construction738,873 774,901 
Real estate – 1-4 family mortgage:
Primary1,517,528 1,449,219 
Home equity442,380 456,265 
Rental/investment272,811 291,931 
Land development136,573 152,711 
Total real estate – 1-4 family mortgage2,369,292 2,350,126 
Real estate – commercial mortgage:
Owner-occupied1,316,408 1,209,204 
Non-owner occupied2,176,562 1,803,587 
Land development117,672 116,085 
Total real estate – commercial mortgage3,610,642 3,128,876 
Installment loans to individuals177,195 199,843 
Gross loans9,428,553 7,591,799 
Unearned income(4,329)(3,825)
Loans, net of unearned income$9,424,224 $7,587,974 

Past Due and Nonaccrual Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, the recognition of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer and other retail loans are typically charged-off no later than the time the loan is 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. All interest accrued for the current year, but not collected, for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company recognized $189 in interest income on nonaccrual loans during the first nine months of 2020.
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
The following table provides an aging of past due accruing and nonaccruing loans, segregated by class, as of the dates presented:
 Accruing LoansNonaccruing Loans 
 30-89 Days
Past Due		90 Days
or More
Past Due		Current
Loans		Total
Loans		30-89 Days
Past Due		90 Days
or More
Past Due		Current
Loans		Total
Loans		Total
Loans
September 30, 2020
Commercial, financial, agricultural$876 $288 $2,439,040 $2,440,204 $650 $2,666 $1,774 $5,090 $2,445,294 
Lease financing— — 87,257 87,257 — — — — 87,257 
Real estate – construction:
Residential988 — 260,444 261,432 — — — — 261,432 
Commercial— — 477,441 477,441 — — — — 477,441 
Total real estate – construction988 — 737,885 738,873 — — — — 738,873 
Real estate – 1-4 family mortgage:
Primary1,795 1,098 1,505,737 1,508,630 347 3,031 5,520 8,898 1,517,528 
Home equity1,001 16 440,820 441,837 — 92 451 543 442,380 
Rental/investment1,334 207 270,995 272,536 7 178 90 275 272,811 
Land development60 — 136,468 136,528 — 12 33 45 136,573 
Total real estate – 1-4 family mortgage4,190 1,321 2,354,020 2,359,531 354 3,313 6,094 9,761 2,369,292 
Real estate – commercial mortgage:
Owner-occupied1,034 1 1,312,024 1,313,059 178 2,895 276 3,349 1,316,408 
Non-owner occupied1,986 — 2,174,154 2,176,140 58 309 55 422 2,176,562 
Land development257 43 117,287 117,587 — 39 46 85 117,672 
Total real estate – commercial mortgage3,277 44 3,603,465 3,606,786 236 3,243 377 3,856 3,610,642 
Installment loans to individuals923 173 175,975 177,071 6 84 34 124 177,195 
Unearned income— — (4,329)(4,329)— — — — (4,329)
Loans, net of unearned income$10,254 $1,826 $9,393,313 $9,405,393 $1,246 $9,306 $8,279 $18,831 $9,424,224 
 
 Accruing LoansNonaccruing 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, 2019
Commercial, financial, agricultural$605 $476 $1,045,802 $1,046,883 $387 $5,023 $60 $5,470 $1,052,353 
Lease financing— — 85,474 85,474 — 226 — 226 85,700 
Real estate – construction794 — 774,107 774,901 — — — — 774,901 
Real estate – 1-4 family mortgage18,020 2,502 2,320,328 2,340,850 623 6,571 2,082 9,276 2,350,126 
Real estate – commercial mortgage2,362 276 3,119,785 3,122,423 372 4,655 1,426 6,453 3,128,876 
Installment loans to individuals1,000 204 198,555 199,759 — 17 67 84 199,843 
Unearned income— — (3,825)(3,825)— — — — (3,825)
Total loans, net$22,781 $3,458 $7,540,226 $7,566,465 $1,382 $16,492 $3,635 $21,509 $7,587,974 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Restructured Loans
Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrower’s financial condition and which are performing in accordance with the new terms. Such concessions may include reduction in interest rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest.
The tables below illustrate the impact of modifications classified as restructured loans which were made during the periods presented and held on the Consolidated Balance Sheets at the respective period end.
Number of
Loans		Pre-
Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment
Three months ended September 30, 2020
Commercial, financial, agricultural1 $31 $31 
Real estate – 1-4 family mortgage:
Primary2 201 200 
Rental/investment1 33 32 
Total real estate – 1-4 family mortgage3 234 232 
Real estate – commercial mortgage:
Owner-occupied2 357 357 
Non-owner occupied2 210 210 
Total real estate – commercial mortgage4 567 567 
Total8 $832 $830 
Three months ended September 30, 2019
Real estate – 1-4 family mortgage1 $16 $16 
Total1 $16 $16 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Number of
Loans		Pre-
Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment
Nine months ended September 30, 2020
Commercial, financial, agricultural7 $1,862 $1,859 
Real estate – 1-4 family mortgage:
Primary17 2,356 2,363 
Rental/investment2 142 142 
Total real estate – 1-4 family mortgage19 2,498 2,505 
Real estate – commercial mortgage:
Owner-occupied3 3,019 2,970 
Non-owner occupied2 210 210 
Land development1 189 189 
Total real estate – commercial mortgage6 3,418 3,369 
Installment loans to individuals2 24 21 
Total34 $7,802 $7,754 
Nine months ended September 30, 2019
Commercial, financial, agricultural2 $187 $185 
Real estate – 1-4 family mortgage4 321 320 
Total6 $508 $505 

With respect to loans that were restructured during the nine months ended September 30, 2020, $420 have subsequently defaulted as of the date of this report. With respect to loans that were restructured during the nine months ended September 30, 2019, $61 subsequently defaulted within twelve months of restructuring.

Restructured loans not performing in accordance with their restructured terms that are either contractually 90 days or more past due or placed on nonaccrual status are reported as nonperforming loans. There was one restructured loan in the amount of $92 contractually 90 days past due or more and still accruing at September 30, 2020 and one restructured loan in the amount of $40 contractually 90 days past due or more and still accruing at September 30, 2019. The outstanding balance of restructured loans on nonaccrual status was $3,703 and $3,101 at September 30, 2020 and September 30, 2019, respectively.

Changes in the Company’s restructured loans are set forth in the table below:
 
Number of
Loans		Recorded
Investment
Totals at January 1, 202046 $4,679 
Additional advances or loans with concessions34 7,787 
Reclassified as performing restructured loan3 354 
Reductions due to:
Reclassified as nonperforming(2)(510)
Paid in full(4)(938)
Principal paydowns— (200)
Totals at September 30, 202077 $11,172 

The allowance for credit losses attributable to restructured loans was $279 and $30 at September 30, 2020 and September 30, 2019, respectively. The Company had no remaining availability under commitments to lend additional funds on these restructured loans at September 30, 2020 and $1 at September 30, 2019.

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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
In response to the current economic environment caused by the COVID-19 pandemic, the Company implemented a loan deferral program in the first quarter of 2020 to provide temporary payment relief to both consumer and commercial customers. Any customer current on loan payments, taxes and insurance can qualify for an initial 90-day deferral of principal and interest payments. A second 90-day deferral has been made available to borrowers that remained current on taxes and insurance through the first deferral period and also satisfy underwriting standards established by the Company that analyze the ability of the borrower to service its loan in accordance with its existing terms in light of the impact of the COVID-19 pandemic on the borrower, its industry and the markets in which it operates. The Company’s loan deferral program complies with the guidance set forth in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and related guidance from the FDIC and other banking regulators. As of September 30, 2020, the Company had 804 loans with total balances of approximately $373,000 on deferral. In accordance with the applicable guidance, none of these loans were considered “restructured loans.”
Credit Quality
For commercial and commercial real estate loans, 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 these loans. Loan grades range between 1 and 9, with 1 rated loans having the least credit risk. Loans within the “Pass” grade generally have a lower risk of loss and therefore a lower risk factor applied to the loan balances. The “Pass” grade is reserved for loans with a risk rating between 1 and 4A, and the “Pass-Watch” grade (those with a risk rating of 4B and 4E) is utilized on a temporary basis for “Pass” grade loans where a significant adverse risk-modifying action is anticipated in the near term. Loans that migrate toward the “Substandard” grade (those with a risk rating between 5 and 9) generally have a higher risk of loss and therefore a higher risk factor applied to the related loan balances. During the first quarter of 2020, the Company proactively downgraded to “Pass-Watch” certain “Pass” rated loans greater than $1,000 in industries the Company believed posed a greater risk in the current pandemic environment (at the time of the downgrade, borrowers in the hotel/motel, restaurant and entertainment industries). Note 5, “Allowance for Credit Losses,” provides additional information about the Company's heightened monitoring efforts.
The following table presents the Company’s loan portfolio by year of origination and internal risk-rating grades as of the dates presented:
 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
September 30, 2020
Commercial, Financial, Agricultural$1,496,869 $208,462 $82,029 $55,271 $21,981 $25,284 $249,974 $12,539 $2,152,409 
Pass1,490,637 184,292 77,209 47,560 17,411 23,379 234,139 10,846 2,085,473 
Pass-Watch5,841 23,483 3,318 6,056 4,177 178 11,352 796 55,201 
Substandard391 687 1,502 1,655 393 1,727 4,483 897 11,735 
Real Estate - Construction$292,840 $277,380 $60,321 $27,528 $— $— $14,687 $145 $672,901 
Residential$144,193 $37,303 $2,805 $— $— $— $14,175 $145 $198,621 
Pass143,398 37,239 2,805 — — — 14,175 145 197,762 
Pass-Watch795 — — — — — — — 795 
Substandard— 64 — — — — — — 64 
Commercial$148,647 $240,077 $57,516 $27,528 $— $— $512 $— $474,280 
Pass143,920 222,291 57,516 27,528 — — 512 — 451,767 
Pass-Watch4,727 17,786 — — — — — — 22,513 
Substandard— — — — — — — — — 
Real Estate - 1-4 Family Mortgage$93,050 $90,316 $54,193 $35,024 $15,897 $11,028 $16,565 $2,411 $318,484 
Primary$7,847 $7,610 $7,659 $5,548 $427 $2,099 $416 $— $31,606 
Pass7,847 7,328 7,659 5,548 427 2,083 416 — 31,308 
Pass-Watch— 162 — — — — — — 162 
Substandard— 120 — — — 16 — — 136 
Home Equity$97 $565 $— $— $— $— $10,563 $— $11,225 
Pass97 565 — — — — 10,438 — 11,100 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
Pass-Watch— — — — — — 125 — 125 
Substandard— — — — — — — — — 
Rental/Investment$37,906 $38,376 $32,752 $29,097 $15,247 $8,516 $1,260 $570 $163,724 
Pass35,900 36,978 31,584 27,640 15,142 7,714 1,169 570 156,697 
Pass-Watch1,816 456 434 1,390 — 603 91 — 4,790 
Substandard190 942 734 67 105 199 — — 2,237 
Land Development$47,200 $43,765 $13,782 $379 $223 $413 $4,326 $1,841 $111,929 
Pass47,200 43,125 13,782 379 217 375 4,322 1,841 111,241 
Pass-Watch— — — — — 38 4 — 42 
Substandard— 640 — — 6 — — — 646 
Real Estate - Commercial Mortgage$674,040 $853,569 $495,652 $448,059 $387,416 $329,400 $79,338 $18,350 $3,285,824 
Owner-Occupied$187,846 $272,468 $208,303 $186,479 $125,496 $101,549 $23,588 $5,804 $1,111,533 
Pass174,500 261,499 175,671 159,656 99,871 86,635 18,854 5,804 982,490 
Pass-Watch13,311 10,202 27,468 22,250 22,470 13,178 3,126 — 112,005 
Substandard35 767 5,164 4,573 3,155 1,736 1,608 — 17,038 
Non-Owner Occupied$462,691 $555,163 $273,430 $256,342 $256,794 $223,031 $52,887 $12,546 $2,092,884 
Pass428,272 502,778 235,155 171,441 190,683 164,334 46,252 12,427 1,751,342 
Pass-Watch32,584 50,069 38,275 83,315 52,461 57,785 6,635 119 321,243 
Substandard1,835 2,316 — 1,586 13,650 912 — — 20,299 
Land Development$23,503 $25,938 $13,919 $5,238 $5,126 $4,820 $2,863 $— $81,407 
Pass21,084 25,070 12,617 5,165 3,539 4,820 2,863 — 75,158 
Pass-Watch263 868 1,302 73 — — — — 2,506 
Substandard2,156 — — — 1,587 — — — 3,743 
Installment loans to individuals$25 $5 $— $— $— $— $— $20 $50 
Pass25 5 — — — — — 20 50 
Pass-Watch— — — — — — — — — 
Substandard— — — — — — — — — 
Total loans subject to risk rating$2,556,824 $1,429,732 $692,195 $565,882 $425,294 $365,712 $360,564 $33,465 $6,429,668 
Pass2,492,880 1,321,170 613,998 444,917 327,290 289,340 333,140 31,653 5,854,388 
Pass-Watch59,337 103,026 70,797 113,084 79,108 71,782 21,333 915 519,382 
Substandard4,607 5,536 7,400 7,881 18,896 4,590 6,091 897 55,898 

The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the dates presented:
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
September 30, 2020
Commercial, Financial, Agricultural$26,726 $19,164 $12,105 $7,487 $3,440 $12,258 $211,383 $322 $292,885 
Performing Loans26,726 19,052 12,049 7,107 3,291 12,235 210,916 322 291,698 
Non-Performing Loans— 112 56 380 149 23 467 — 1,187 
Lease Financing Receivables$27,278 $27,274 $18,993 $5,056 $1,836 $2,491 $— $— $82,928 
Performing Loans27,278 27,274 18,993 5,056 1,836 2,491 — — 82,928 
Non-Performing Loans— — — — — — — — — 
Real Estate - Construction$37,614 $27,562 $295 $155 $— $— $346 $— $65,972 
Residential$36,288 $25,727 $295 $155 $— $— $346 $— $62,811 
Performing Loans36,288 25,727 295 155 — — 346 — 62,811 
Non-Performing Loans— — — — — — — — — 
Commercial$1,326 $1,835 $— $— $— $— $— $— $3,161 
Performing Loans1,326 1,835 — — — — — — 3,161 
Non-Performing Loans— — — — — — — — — 
Real Estate - 1-4 Family Mortgage$378,741 $381,768 $298,572 $223,228 $116,088 $218,792 $430,273 $3,346 $2,050,808 
Primary$342,912 $353,445 $274,097 $200,836 $101,959 $211,184 $1,443 $46 $1,485,922 
Performing Loans342,912 351,059 271,076 199,061 101,238 209,090 1,443 46 1,475,925 
Non-Performing Loans— 2,386 3,021 1,775 721 2,094 — — 9,997 
Home Equity$— $205 $377 $179 $45 $965 $426,583 $2,801 $431,155 
Performing Loans— 205 377 179 45 848 426,434 2,507 430,595 
Non-Performing Loans— — — — — 117 149 294 560 
Rental/Investment$24,840 $22,936 $20,378 $19,980 $12,950 $6,007 $1,497 $499 $109,087 
Performing Loans24,840 22,830 20,378 19,859 12,943 5,759 1,497 499 108,605 
Non-Performing Loans— 106 — 121 7 248 — — 482 
Land Development$10,989 $5,182 $3,720 $2,233 $1,134 $636 $750 $— $24,644 
Performing Loans10,989 5,182 3,708 2,200 1,134 636 750 — 24,599 
Non-Performing Loans— — 12 33 — — — — 45 
Real Estate - Commercial Mortgage$62,694 $76,274 $61,617 $50,869 $39,150 $22,001 $11,674 $539 $324,818 
Owner-Occupied$36,389 $47,042 $39,417 $33,561 $26,849 $15,425 $5,876 $316 $204,875 
Performing Loans36,389 47,042 39,203 33,382 26,758 14,956 5,876 316 203,922 
Non-Performing Loans— — 214 179 91 469 — — 953 
Non-Owner Occupied$16,848 $19,873 $16,290 $14,117 $8,288 $5,011 $3,103 $148 $83,678 
Performing Loans16,848 19,873 16,232 14,117 8,288 4,956 3,103 148 83,565 
Non-Performing Loans— — 58 — — 55 — — 113 
Land Development$9,457 $9,359 $5,910 $3,191 $4,013 $1,565 $2,695 $75 $36,265 
Performing Loans9,457 9,359 5,910 3,181 4,013 1,522 2,695 75 36,212 
Non-Performing Loans— — — 10 — 43 — — 53 
Installment loans to individuals$59,631 $81,611 $15,836 $4,842 $2,856 $1,915 $10,363 $91 $177,145 
Performing Loans59,621 81,507 15,730 4,821 2,804 1,914 10,360 91 176,848 
Non-Performing Loans10 104 106 21 52 1 3 — 297 
Total loans not subject to risk rating$592,684 $613,653 $407,418 $291,637 $163,370 $257,457 $664,039 $4,298 $2,994,556 
Performing Loans592,674 610,945 403,951 289,118 162,350 254,407 663,420 4,004 2,980,869 
Non-Performing Loans10 2,708 3,467 2,519 1,020 3,050 619 294 13,687 
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Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
The following disclosures are presented under GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to address the applicable prior period.

A discussion of the Company’s policies regarding internal risk-rating of loans is discussed above and is applicable to these tables. The following table presents the Company’s loan portfolio by internal risk-rating grades as of the date presented:

PassPass-WatchSubstandardTotal
December 31, 2019
Commercial, financial, agricultural$779,798 $11,949 $11,715 $803,462 
Real estate – construction698,950 501 9,209 708,660 
Real estate – 1-4 family mortgage339,079 3,856 3,572 346,507 
Real estate – commercial mortgage2,737,629 31,867 26,711 2,796,207 
Installment loans to individuals6 — — 6 
Total$4,555,462 $48,173 $51,207 $4,654,842 

The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the date presented:
PerformingNon-
Performing		Total
December 31, 2019
Commercial, financial, agricultural$247,575 $1,316 $248,891 
Lease financing81,649 226 81,875 
Real estate – construction66,241 — 66,241 
Real estate – 1-4 family mortgage1,992,331 11,288 2,003,619 
Real estate – commercial mortgage330,714 1,955 332,669 
Installment loans to individuals199,549 288 199,837 
Total$2,918,059 $15,073 $2,933,132 

The following disclosures are presented under GAAP in effect prior to the adoption of CECL that are no longer applicable or required. The Company has included these disclosures to address the applicable prior periods.
Impaired Loans
Loans formerly accounted for under FASB ASC 310-20, “Nonrefundable Fees and Other Cost” (“ASC 310-20”), and which are impaired loans recognized in conformity with ASC 310, “Receivables” (“ASC 310”), segregated by class, were as follows as of the date presented:

Unpaid
Contractual
Principal
Balance		Recorded
Investment
With
Allowance		Recorded
Investment
With No
Allowance		Total
Recorded
Investment		Related
Allowance
December 31, 2019
Commercial, financial, agricultural$6,623 $5,722 $— $5,722 $1,222 
Lease financing226 226 — 226 3 
Real estate – construction9,145 — 9,145 9,145 — 
Real estate – 1-4 family mortgage14,018 13,689 — 13,689 143 
Real estate – commercial mortgage11,067 7,361 1,080 8,441 390 
Installment loans to individuals91 84 — 84 1 
Totals$41,170 $27,082 $10,225 $37,307 $1,759 

22
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the average recorded investment and interest income recognized on loans formerly accounted for under ASC 310-20 and which are impaired loans for the periods presented:
Three Months EndedNine Months Ended
 September 30, 2019September 30, 2019
 Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
Commercial, financial, agricultural$5,705 $5 $5,656 $23 
Lease financing— — — — 
Real estate – construction12,128 111 11,756 321 
Real estate – 1-4 family mortgage12,203 50 12,323 153 
Real estate – commercial mortgage10,692 41 10,652 122 
Installment loans to individuals130 — 130 1 
Total$40,858 $207 $40,517 $620 

23
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 4 – Purchased Loans
(In Thousands, Except Number of Loans)

For purposes of this Note 4, all references to “loans” mean purchased loans excluding loans held for sale.

The following is a summary of purchased loans as of the dates presented:
 
September 30,
2020		December 31, 2019
Commercial, financial, agricultural$202,768 $315,619 
Real estate – construction:
Residential3,093 16,407 
Commercial31,153 35,175 
Total real estate – construction34,246 51,582 
Real estate – 1-4 family mortgage:
Primary245,369 332,729 
Home equity95,235 117,275 
Rental/investment33,567 43,169 
Land development16,931 23,314 
Total real estate – 1-4 family mortgage391,102 516,487 
Real estate – commercial mortgage:
Owner-occupied355,994 428,077 
Non-owner occupied577,679 647,308 
Land development32,694 40,004 
Total real estate – commercial mortgage966,367 1,115,389 
Installment loans to individuals66,031 102,587 
Loans$1,660,514 $2,101,664 
24
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Past Due and Nonaccrual Loans
The Company’s policies with respect to placing loans on nonaccrual status or charging off loans, and its accounting for interest on any such loans, are described above in Note 3, “Non Purchased Loans.” The Company recognized $214 in interest income on nonaccrual loans during the first nine months of 2020.
The following tables provide an aging of past due accruing and nonaccruing loans, segregated by class, as of the dates presented:
 Accruing LoansNonaccruing Loans 
 30-89 Days
Past Due		90 Days
or More
Past Due		Current
Loans		Total
Loans		30-89 Days
Past Due		90 Days
or More
Past Due		Current
Loans		Total
Loans		Total
Loans
September 30, 2020
Commercial, financial, agricultural$1,056 $36 $189,668 $190,760 $1,655 $6,233 $4,120 $12,008 $202,768 
Real estate – construction:
Residential— — 3,093 3,093 — — — — 3,093 
Commercial— — 31,153 31,153 — — — — 31,153 
Total real estate – construction— — 34,246 34,246 — — — — 34,246 
Real estate – 1-4 family mortgage:
Primary845 64 238,937 239,846 329 2,794 2,400 5,523 245,369 
Home equity839 114 93,006 93,959 — 629 647 1,276 95,235 
Rental/investment356 — 32,409 32,765 — 708 94 802 33,567 
Land development— — 16,581 16,581 — 29 321 350 16,931 
Total real estate – 1-4 family mortgage2,040 178 380,933 383,151 329 4,160 3,462 7,951 391,102 
Real estate – commercial mortgage:
Owner-occupied851 — 351,688 352,539 505 891 2,059 3,455 355,994 
Non-owner occupied438 54 576,462 576,954 144 571 10 725 577,679 
Land development161 — 32,142 32,303 — 164 227 391 32,694 
Total real estate – commercial mortgage1,450 54 960,292 961,796 649 1,626 2,296 4,571 966,367 
Installment loans to individuals1,844 50 63,846 65,740 9 123 159 291 66,031 
Loans, net of unearned income$6,390 $318 $1,628,985 $1,635,693 $2,642 $12,142 $10,037 $24,821 $1,660,514 

 Accruing LoansNonaccruing 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, 2019
Commercial, financial, agricultural$1,889 $998 $311,218 $314,105 $— $1,246 $268 $1,514 $315,619 
Real estate – construction319 — 51,263 51,582 — — — — 51,582 
Real estate – 1-4 family mortgage5,516 2,244 503,826 511,586 605 2,762 1,534 4,901 516,487 
Real estate – commercial mortgage3,454 922 1,110,570 1,114,946 — 123 320 443 1,115,389 
Installment loans to individuals3,709 153 98,545 102,407 1 51 128 180 102,587 
Total Loans, net$14,887 $4,317 $2,075,422 $2,094,626 $606 $4,182 $2,250 $7,038 $2,101,664 

25
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Restructured Loans
An explanation of what constitutes a “restructured loan,” and management’s analysis in determining whether to restructure a loan, are described above in Note 3, “Non Purchased Loans.”
The tables below illustrate the impact of modifications classified as restructured loans which were made during the periods presented and held on the Consolidated Balance Sheets at the respective period end.
Number of
Loans		Pre-
Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment
Three months ended September 30, 2020
Real estate – 1-4 family mortgage:
Primary2 44 44 
Total real estate – 1-4 family mortgage2 44 44 
Real estate – commercial mortgage:
Owner-occupied4 3,104 2,844 
Total real estate – commercial mortgage4 3,104 2,844 
Total6 $3,148 $2,888 
Three months ended September 30, 2019
Commercial, financial, agricultural1 $258 $258 
Real estate – 1-4 family mortgage1 34 34 
Total2 $292 $292 
Number of
Loans		Pre-
Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment
Nine months ended September 30, 2020
Commercial, financial, agricultural1 $1,029 $1,031 
Real estate – 1-4 family mortgage:
Primary4 334 227 
Home equity1 159 162 
Total real estate – 1-4 family mortgage5 493 389 
Real estate – commercial mortgage:
Owner-occupied5 3,173 2,913 
Non-owner occupied1 542 544 
Total real estate – commercial mortgage6 3,715 3,457 
Installment loans to individuals1 25 19 
Total13 $5,262 $4,896 
Nine months ended September 30, 2019
Commercial, financial, agricultural2 $2,778 $2,778 
Real estate – 1-4 family mortgage1 34 34 
Real estate – commercial mortgage1 80 76 
Total4 $2,892 $2,888 

With respect to loans that were restructured during the nine months ended September 30, 2020 and September 30, 2019, none have subsequently defaulted and remain outstanding as of the date of this report.

26
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
There was one restructured loan in the amount of $40 contractually 90 days past due or more and still accruing at September 30, 2020 and two restructured loans in the aggregate amount of $272 contractually 90 days past due or more and still accruing at September 30, 2019. The outstanding balance of restructured loans on nonaccrual status was $7,775 and $707 at September 30, 2020 and September 30, 2019, respectively.

Changes in the Company’s restructured loans are set forth in the table below:
 
Number of
Loans		Recorded
Investment
Totals at January 1, 202054 $7,275 
Additional advances or loans with concessions13 5,159 
Reclassified as performing restructured loan1 74 
Reductions due to:
Reclassified to nonperforming loans(13)(2,489)
Paid in full(2)(422)
Charge-offs(1)(3)
Principal paydowns— (444)
Totals at September 30, 202052 $9,150 

The allowance for credit losses attributable to restructured loans was $491 and $91 at September 30, 2020 and September 30, 2019, respectively. The Company had $539 and $5 in remaining availability under commitments to lend additional funds on these restructured loans at September 30, 2020 and September 30, 2019, respectively.

As discussed in Note 3, “Non Purchased Loans,” the Company implemented a loan deferral program in response to the COVID-19 pandemic. As of September 30, 2020, the Company had 465 loans with total balances of approximately $124,000 on deferral. Under the applicable guidance, none of these loans were considered “restructured loans.”
27
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Credit Quality
A discussion of the Company’s policies regarding internal risk-rating of loans is discussed above in Note 3, “Non Purchased Loans.” The following table presents the Company’s loan portfolio by year of origination and internal risk-rating grades as of the dates presented:

 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
September 30, 2020
Commercial, Financial, Agricultural$— $727 $36,120 $33,922 $29,041 $25,136 $65,214 $1,712 $191,872 
Pass— 727 23,006 25,516 22,081 20,778 55,670 628 148,406 
Pass-Watch— — 10 1,270 1,499 584 676 — 4,039 
Substandard— — 13,104 7,136 5,461 3,774 8,868 1,084 39,427 
Real Estate - Construction$— $— $10,887 $9,268 $14,091 $— $— $— $34,246 
Residential$— $— $2,203 $207 $683 $— $— $— $3,093 
Pass— — 2,203 207 683 — — — 3,093 
Pass-Watch— — — — — — — — — 
Substandard— — — — — — — — — 
Commercial$— $— $8,684 $9,061 $13,408 $— $— $— $31,153 
Pass— — 8,684 9,061 13,408 — — — 31,153 
Pass-Watch— — — — — — — — — 
Substandard— — — — — — — — — 
Real Estate - 1-4 Family Mortgage$— $— $14,029 $9,639 $2,012 $40,034 $2,653 $253 $68,620 
Primary$— $— $7,734 $5,163 $611 $17,809 $249 $— $31,566 
Pass— — 6,438 5,163 604 12,904 249 — 25,358 
Pass-Watch— — — — — 314 — — 314 
Substandard— — 1,296 — 7 4,591 — — 5,894 
Home Equity$— $— $— $— $— $— $943 $253 $1,196 
Pass— — — — — — 221 — 221 
Pass-Watch— — — — — — — — — 
Substandard— — — — — — 722 253 975 
Rental/Investment$— $— $— $1,904 $316 $19,013 $— $— $21,233 
Pass— — — 1,904 316 16,511 — — 18,731 
Pass-Watch— — — — — 201 — — 201 
Substandard— — — — — 2,301 — — 2,301 
Land Development$— $— $6,295 $2,572 $1,085 $3,212 $1,461 $— $14,625 
Pass— — 6,295 2,549 1,085 1,842 1,461 — 13,232 
Pass-Watch— — — — — — — — — 
Substandard— — — 23 — 1,370 — — 1,393 
28
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
Real Estate - Commercial Mortgage$— $— $77,627 $158,074 $180,313 $482,175 $21,918 $4,684 $924,791 
Owner-Occupied$— $— $14,819 $34,515 $63,851 $204,177 $15,144 $2 $332,508 
Pass— — 12,732 31,558 44,681 157,159 4,987 — 251,117 
Pass-Watch— — 2,087 1,615 11,202 24,427 — — 39,331 
Substandard— — — 1,342 7,968 22,591 10,157 2 42,060 
Non-Owner Occupied$— $— $56,269 $119,256 $113,496 $264,440 $6,596 $4,682 $564,739 
Pass— — 31,398 87,363 69,930 219,100 6,596 — 414,387 
Pass-Watch— — 8,504 24,215 30,691 33,749 — 4,682 101,841 
Substandard— — 16,367 7,678 12,875 11,591 — — 48,511 
Land Development$— $— $6,539 $4,303 $2,966 $13,558 $178 $— $27,544 
Pass— — 5,665 4,249 2,785 6,000 66 — 18,765 
Pass-Watch— — 874 54 44 6,141 112 — 7,225 
Substandard— — — — 137 1,417 — — 1,554 
Total loans subject to risk rating$— $727 $138,663 $210,903 $225,457 $547,346 $89,785 $6,649 $1,219,530 
Pass— 727 96,421 167,570 155,573 434,295 69,250 628 924,464 
Pass-Watch— — 11,475 27,154 43,436 65,416 788 4,682 152,951 
Substandard— — 30,767 16,179 26,448 47,635 19,747 1,339 142,115 

The following table presents the performing status of the Company’s loan portfolio not subject to risk rating by origination date:
 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
September 30, 2020
Commercial, Financial, Agricultural$— $— $491 $355 $330 $2,846 $6,825 $49 $10,896 
Performing Loans— — 491 355 330 2,846 6,825 49 10,896 
Non-Performing Loans— — — — — — — — — 
Real Estate - Construction$— $— $— $— $— $— $— $— $— 
Residential$— $— $— $— $— $— $— $— $— 
Performing Loans— — — — — — — — — 
Non-Performing Loans— — — — — — — — — 
Real Estate - 1-4 Family Mortgage$— $375 $3,264 $43,061 $32,608 $156,497 $84,500 $2,177 $322,482 
Primary$— $250 $2,029 $38,366 $30,249 $142,336 $461 $112 $213,803 
Performing Loans— 250 1,918 37,605 30,227 137,837 461 26 208,324 
Non-Performing Loans— — 111 761 22 4,499 — 86 5,479 
Home Equity$— $— $744 $4,472 $1,799 $1,040 $83,919 $2,065 $94,039 
Performing Loans— — 744 4,472 1,799 973 83,274 1,640 92,902 
Non-Performing Loans— — — — — 67 645 425 1,137 
Rental/Investment$— $125 $— $150 $203 $11,736 $120 $— $12,334 
Performing Loans— 125 — 150 203 11,632 120 — 12,230 
Non-Performing Loans— — — — — 104 — — 104 
Land Development$— $— $491 $73 $357 $1,385 $— $— $2,306 
Performing Loans— — 491 30 118 1,385 — — 2,024 
29
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 Term Loans Amortized Cost Basis by Origination Year
 20202019201820172016PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
Non-Performing Loans— — — 43 239 — — — 282 
Real Estate - Commercial Mortgage$— $339 $620 $1,339 $998 $36,416 $1,864 $— $41,576 
Owner-Occupied$— $— $— $955 $670 $20,457 $1,404 $— $23,486 
Performing Loans— — — 955 670 20,175 1,404 — 23,204 
Non-Performing Loans— — — — — 282 — — 282 
Non-Owner Occupied$— $339 $463 $50 $67 $11,854 $167 $— $12,940 
Performing Loans— 339 463 50 67 11,656 167 — 12,742 
Non-Performing Loans— — — — — 198 — — 198 
Land Development$— $— $157 $334 $261 $4,105 $293 $— $5,150 
Performing Loans— — 157 334 261 4,044 293 — 5,089 
Non-Performing Loans— — — — — 61 — — 61 
Installment loans to individuals$— $— $39,966 $17,061 $1,265 $4,497 $3,206 $35 $66,030 
Performing Loans— — 39,901 16,985 1,187 4,375 3,206 35 65,689 
Non-Performing Loans— — 65 76 78 122 — — 341 
Total loans not subject to risk rating$— $714 $44,341 $61,816 $35,201 $200,256 $96,395 $2,261 $440,984 
Performing Loans— 714 44,165 60,936 34,862 194,923 95,750 1,750 433,100 
Non-Performing Loans— — 176 880 339 5,333 645 511 7,884 

The following disclosures are presented under GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to address the applicable prior period.

A discussion of the Company’s policies regarding internal risk-rating of loans is discussed above in Note 3, “Non Purchased Loans,” and is applicable to these tables. The following table presents the Company’s loan portfolio by internal risk-rating grades as of the date presented:

PassPass-WatchSubstandardTotal
December 31, 2019
Commercial, financial, agricultural$259,760 $7,166 $5,220 $272,146 
Real estate – construction48,994 — — 48,994 
Real estate – 1-4 family mortgage78,105 791 3,935 82,831 
Real estate – commercial mortgage909,513 56,334 15,835 981,682 
Installment loans to individuals— — — — 
Total$1,296,372 $64,291 $24,990 $1,385,653 

The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the date presented:
 
30
Table of Contents
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
PerformingNon-
Performing		Total
December 31, 2019
Commercial, financial, agricultural$13,935 $— $13,935 
Real estate – construction1,725 — 1,725 
Real estate – 1-4 family mortgage394,476 3,638 398,114 
Real estate – commercial mortgage30,472 101 30,573 
Installment loans to individuals99,139 261 99,400 
Total$539,747 $4,000 $543,747 

The following disclosures are presented under GAAP in effect prior to the adoption of CECL that are no longer applicable or required. The Company has included these disclosures to address the applicable prior periods.
Impaired Loans
The Company’s former policies with respect to the determination of whether a loan is impaired and the treatment of such loans are described above in Note 3, “Non Purchased Loans.”
Loans formerly accounted for under ASC 310-20, and which are impaired loans recognized in conformity with ASC 310, segregated by class, were as follows as of the date presented:
 
Unpaid
Contractual
Principal
Balance		Recorded
Investment
With
Allowance		Recorded
Investment
With No
Allowance		Total
Recorded
Investment		Related
Allowance
December 31, 2019
Commercial, financial, agricultural$2,979 $1,837 $901 $2,738 $212 
Real estate – construction3,269 2,499 772 3,271 16 
Real estate – 1-4 family mortgage7,464 2,801 3,772 6,573 17 
Real estate – commercial mortgage1,148 981 128 1,109 6 
Installment loans to individuals202 110 71 181 2 
Totals$15,062 $8,228 $5,644 $13,872 $253 

The following table presents the average recorded investment and interest income recognized on loans formerly accounted for under ASC 310-20 and which are impaired loans for the periods presented:
Three Months EndedNine Months Ended
 September 30, 2019September 30, 2019
 Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
Commercial, financial, agricultural$2,533 $2 $2,312 $6 
Real estate – construction256 — 256 3 
Real estate – 1-4 family mortgage5,364 30 5,468 96 
Real estate – commercial mortgage1,150 11 1,185 36 
Installment loans to individuals333 — 340 — 
Total$9,636 $43 $9,561 $141 

Loans formerly accounted for under ASC 310-30, and which are impaired loans recognized in conformity with ASC 310, segregated by class, were as follows as of the date presented:
 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Unpaid
Contractual
Principal
Balance		Recorded
Investment
With
Allowance		Recorded
Investment
With No
Allowance		Total
Recorded
Investment		Related
Allowance
December 31, 2019
Commercial, financial, agricultural$49,162 $3,695 $25,843 $29,538 $292 
Real estate – construction882 — 863 863 — 
Real estate – 1-4 family mortgage42,969 10,061 25,482 35,543 291 
Real estate – commercial mortgage119,929 52,501 50,632 103,133 1,386 
Installment loans to individuals5,411 640 2,547 3,187 2 
Totals$218,353 $66,897 $105,367 $172,264 $1,971 

The following table presents the average recorded investment and interest income recognized on loans formerly accounted for under ASC 310-30 and which are impaired loans for the period presented:
Three Months EndedNine Months Ended
 September 30, 2019September 30, 2019
 Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
Commercial, financial, agricultural$32,150 $283 $35,304 $1,145 
Real estate – construction558 8 560 8 
Real estate – 1-4 family mortgage38,031 538 38,682 1,699 
Real estate – commercial mortgage117,179 1,541 119,327 5,015 
Installment loans to individuals3,192 86 3,576 287 
Total$191,110 $2,456 $197,449 $8,154 

Loans Purchased with Deteriorated Credit Quality
Loans purchased in business combinations that exhibited, at the date of acquisition, evidence of deterioration of the credit quality since origination, such that it was probable that all contractually required payments would not be collected, were as follows as of the date presented:
 
Total Purchased Credit Deteriorated Loans
December 31, 2019
Commercial, financial, agricultural$29,538 
Real estate – construction863 
Real estate – 1-4 family mortgage35,543 
Real estate – commercial mortgage103,133 
Installment loans to individuals3,187 
Total$172,264 


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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note 5 – Allowance for Credit Losses
(In Thousands)
The following is a summary of total non purchased and purchased loans as of the dates presented:
 
September 30,
2020		December 31, 2019
Commercial, financial, agricultural$2,648,062 $1,367,972 
Lease financing87,257 85,700 
Real estate – construction:
Residential264,525 289,050 
Commercial508,594 537,433 
Total real estate – construction773,119 826,483 
Real estate – 1-4 family mortgage:
Primary1,762,897 1,781,948 
Home equity537,615 573,540 
Rental/investment306,378 335,100 
Land development153,504 176,025 
Total real estate – 1-4 family mortgage2,760,394 2,866,613 
Real estate – commercial mortgage:
Owner-occupied1,672,402 1,637,281 
Non-owner occupied2,754,241 2,450,895 
Land development150,366 156,089 
Total real estate – commercial mortgage4,577,009 4,244,265 
Installment loans to individuals243,226 302,430 
Gross loans11,089,067 9,693,463 
Unearned income(4,329)(3,825)
Loans, net of unearned income11,084,738 9,689,638 
Allowance for credit losses on loans(168,098)(52,162)
Net loans$10,916,640 $9,637,476 

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 for 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. Subsequent recoveries, if any, are credited to the allowance.
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 the Company’s risk rating system, regulatory guidance and economic conditions, such as the unemployment rate and GDP growth in the markets in which the Company operates, 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
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit losses 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 estimating 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.
Loans Evaluated on a Collective (Pool) Basis
The allowance for credit losses for loans that share similar risk characteristics with other loans is calculated on a collective or pool basis, where such loans are segregated into loan portfolio segments based upon similarity of credit risk. The Company’s primary loan portfolio segments are as follows:
Commercial, Financial, and Agricultural (“Commercial”) - Commercial loans are customarily granted to established local business customers in the Company’s market area on a collateralized basis to meet their credit needs. Maturities are typically short term in nature and are commensurate with the secondary source of repayment that serves as the Company’s collateral. Although commercial loans may be collateralized by equipment or other business assets, the repayment of this type of loan depends primarily on the creditworthiness and projected cash flow of the borrower (and any guarantors). Thus, the chief considerations when assessing the risk of a commercial loan are the local business borrower’s ability to sell its products/services, thereby generating sufficient operating revenue to repay the Company under the agreed upon terms and conditions, and the general business conditions of the local economy or other market that the business serves.
Real Estate - Construction - The Company’s construction loan portfolio consists of loans for the construction of single family residential properties, multi-family properties and commercial projects. Maturities for construction loans generally range from 9 to 12 months for residential properties and from 24 to 36 months for non-residential and multi-family properties. The source of repayment of a construction loan comes from the sale or lease of newly-constructed property, although often construction loans are repaid with the proceeds of a commercial real estate loan that the Company makes to the owner or lessor of the newly-constructed property.
Real Estate - 1-4 Family Mortgage - This segment of the Company’s loan portfolio includes loans secured by first or second liens on residential real estate in which the property is the principal residence of the borrower, as well as loans secured by residential real estate in which the property is rented to tenants or is not the principal residence of the borrower; loans for the preparation of residential real property prior to construction are also included in this segment. Finally, this segment includes home equity loans or lines of credit and term loans secured by first and second mortgages on the residences of borrowers who elect to use the accumulated equity in their homes for purchases, refinances, home improvements, education and other personal expenditures. The Company attempts to minimize the risk associated with residential real estate loans by scrutinizing the financial condition of the borrower; typically, the maximum loan-to-value ratio is also limited.
Real Estate - Commercial Mortgage - Included in this portfolio segment (referred to collectively as “commercial real estate loans”) are “owner-occupied” loans in which the owner develops a property with the intention of locating its business there. Payments on these loans are dependent on the successful development and management of the business as well as the borrower’s ability to generate sufficient operating revenue to repay the loan. In some instances, in addition to the mortgage on the underlying real estate of the business, the commercial real estate loans are secured by other non-real estate collateral, such as equipment or other assets used in the business. In addition to owner-occupied commercial real estate loans, the Company offers loans in which the owner develops a property where the source of repayment of the loan will come from the sale or lease of the developed property, for example, retail shopping centers, hotels, storage facilities, etc. These loans are referred to as “non-owner occupied” commercial real estate loans. The Company also offers commercial real estate loans to developers of commercial properties for purposes of site acquisition and preparation and other development prior to actual construction (referred to as “commercial land development loans”). Non-owner occupied commercial real estate loans and commercial land development loans are dependent on the successful completion of the project and may be affected by adverse conditions in the real estate market or the economy as a whole.
Lease Financing - This segment of the Company’s loan portfolio includes loans granted to provide capital to businesses for commercial equipment needs. These loans are generally granted for periods ranging between two and five years at fixed rates of interest. Loss or decline of income by the borrower due to unplanned occurrences represents the primary risk of default to the Company. In the event of default, a shortfall in the value of the collateral may pose a loss in this loan category. The Company obtains a lien against the collateral securing the loan and holds title (if applicable) until the loan is repaid in full. Transportation, manufacturing, healthcare, material handling, printing and construction are the industries that typically obtain lease financing.
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Installment Loans to Individuals - Installment loans to individuals (or “consumer loans”) are granted to individuals for the purchase of personal goods. Loss or decline of income by the borrower due to unplanned occurrences represents the primary risk of default to the Company. In the event of default, a shortfall in the value of the collateral may pose a loss in this loan category. Before granting a consumer loan, the Company assesses the applicant’s credit history and ability to meet existing and proposed debt obligations. Although the applicant’s creditworthiness is the primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount. The Company obtains a lien against the collateral securing the loan and holds title until the loan is repaid in full.
In determining the allowance for credit losses on loans evaluated on a collective basis, the Company categorizes loan pools based on loan type and/or risk rating. The Company uses two CECL models: (1) a loss rate model, based on average historical life-of-loan loss rates, is used for the Real Estate - 1-4 Family Mortgage, Real Estate - Construction and the Installment Loans to Individuals portfolio segments, 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, the nature and volume of the respective loan portfolio segments, and changes in lending or loan review staffing. External factors include current and reasonable and supportable forecasted economic conditions, the competitive environment 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 back to the historical loss rates adjusted for qualitative factors related to current conditions.
Loans Evaluated on an Individual Basis
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 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 when the loan is 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.
The Company considers the loans in the Real Estate - Construction, Real Estate - 1-4 Family Mortgage and Real Estate - Commercial Mortgage loan segments disclosed as individually evaluated in the table below as collateral dependent with the type of collateral being real estate.
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
The following table provides 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:
CommercialReal Estate -
Construction		Real Estate -
1-4 Family
Mortgage		Real Estate  -
Commercial
Mortgage		Lease FinancingInstallment
Loans to Individuals		Total
Three Months Ended September 30, 2020
Allowance for credit losses:
Beginning balance$30,685 $12,538 $29,401 $60,061 $1,812 $10,890 $145,387 
Charge-offs(420)(136)(720)(553)(168)(1,579)(3,576)
Recoveries698 31 152 711 1 1,594 3,187 
Net (charge-offs) recoveries278 (105)(568)158 (167)15 (389)
Provision for credit losses on loans7,232 1,386 3,872 10,363 187 60 23,100 
Ending balance$38,195 $13,819 $32,705 $70,582 $1,832 $10,965 $168,098 
Nine Months Ended September 30, 2020
Allowance for credit losses:
Beginning balance$10,658 $5,029 $9,814 $24,990 $910 $761 $52,162 
Impact of the adoption of ASC 326
11,351 3,505 14,314 4,293 521 8,500 42,484 
Charge-offs(1,969)(668)(1,083)(2,600)(168)(6,003)(12,491)
Recoveries996 31 288 2,451 11 5,816 9,593 
Net (charge-offs) recoveries(973)(637)(795)(149)(157)(187)(2,898)
Provision for credit losses on loans17,159 5,922 9,372 41,448 558 1,891 76,350 
Ending balance$38,195 $13,819 $32,705 $70,582 $1,832 $10,965 $168,098 
Period-End Amount Allocated to:
Individually evaluated$10,211 $— $275 $380 $— $270 $11,136 
Collectively evaluated 27,984 13,819 32,430 70,202 1,832 10,695 156,962 
Ending balance$38,195 $13,819 $32,705 $70,582 $1,832 $10,965 $168,098 
Loans:
Individually evaluated$17,670 $— $4,718 $6,596 $— $618 $29,602 
Collectively evaluated 2,630,392 773,119 2,755,676 4,570,413 82,928 242,608 11,055,136 
Ending balance$2,648,062 $773,119 $2,760,394 $4,577,009 $82,928 $243,226 $11,084,738 
Nonaccruing loans with no allowance for credit losses$589 $— $4,147 $3,644 $— $— $8,380 

Upon adoption of ASC 326 on January 1, 2020, the allowance for credit losses on loans was increased by $42,484. The Company recorded a third quarter provision for credit losses on loans of $23,100 and has recorded $76,350 in total provision for credit losses on loans during the nine months ending September 30, 2020. The provision recorded during the current quarter and year-to-date period is primarily driven by the current and future economic uncertainty caused by the COVID-19 pandemic, including the current projections of a continued elevated national unemployment rate throughout 2020 and into 2021 and 2022 and forecasted negative to minimal GDP growth relative to pre-pandemic levels, and the increased likelihood of a more prolonged economic recovery period than previously expected. The Company also factored into its estimate the potential benefit and risk of the government programs implemented through the CARES Act and the internal loan deferral program
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
offered to qualified customers. The Company utilized a two year reasonable and supportable forecast range during the current period. The Company continues its heightened monitoring efforts with respect to loans in certain industries the Company currently believes pose a greater risk in the current environment (i.e., hospitality and healthcare). In addition, the Company will continue to monitor the performance of all portfolios, the severity and duration of the pandemic and potential subsequent recovery of the economic environment.
The following table provides 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 prior to the adoption of ASC 326 for the period presented:
CommercialReal Estate -
Construction		Real Estate -
1-4 Family
Mortgage		Real Estate  -
Commercial
Mortgage
Installment
and Other(1)
Total
Three Months Ended September 30, 2019
Allowance for credit losses:
Beginning balance$9,534 $5,302 $9,616 $24,302 $1,305 $50,059 
Charge-offs(757)— (268)(677)(3,263)(4,965)
Recoveries761 — 219 33 3,007 4,020 
Net (charge-offs) recoveries4 — (49)(644)(256)(945)
Provision for credit losses on loans750 (175)282 381 462 1,700 
Ending balance$10,288 $5,127 $9,849 $24,039 $1,511 $50,814 
Nine Months Ended September 30, 2019
Allowance for credit losses:
Beginning balance$8,269 $4,755 $10,139 $24,492 $1,371 $49,026 
Charge-offs(1,709)— (1,143)(1,406)(3,695)(7,953)
Recoveries1,376 7 531 644 3,083 5,641 
Net (charge-offs) recoveries(333)7 (612)(762)(612)(2,312)
Provision for credit losses on loans2,352 365 322 309 752 4,100 
Ending balance$10,288 $5,127 $9,849 $24,039 $1,511 $50,814 
Period-End Amount Allocated to:
Individually evaluated for impairment$1,382 $24 $186 $450 $3 $2,045 
Collectively evaluated for impairment8,778 5,103 9,313 21,521 1,506 46,221 
Purchased with deteriorated credit quality128 — 350 2,068 2 2,548 
Ending balance$10,288 $5,127 $9,849 $24,039 $1,511 $50,814 
(1)Includes lease financing receivables.

The following table provides the recorded investment in loans, net of unearned income, based on the Company’s former impairment methodology prior to the adoption of ASC 326.
CommercialReal Estate  -
Construction		Real Estate -
1-4 Family
Mortgage		Real Estate  -
Commercial
Mortgage
Installment
and Other(1)
Total
December 31, 2019
Individually evaluated for impairment$8,460 $12,416 $20,262 $9,550 $491 $51,179 
Collectively evaluated for impairment1,329,974 813,204 2,810,808 4,131,582 380,627 9,466,195 
Purchased with deteriorated credit quality29,538 863 35,543 103,133 3,187 172,264 
Ending balance$1,367,972 $826,483 $2,866,613 $4,244,265 $384,305 $9,689,638 
 
(1)Includes lease financing receivables.
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

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. 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. 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, 2020
Allowance for credit losses on unfunded loan commitments:
Beginning balance$17,335 
Provision for credit losses on unfunded loan commitments (included in other noninterest expense) 2,700 
Ending balance$20,035 
Nine Months Ended September 30, 2020
Allowance for credit losses on unfunded loan commitments:
Beginning balance$946 
Impact of the adoption of ASC 326
10,389 
Provision for credit losses on unfunded loan commitments (included in other noninterest expense)8,700 
Ending balance$20,035 

Note 6 – Other Real Estate Owned
(In Thousands)

The following table provides details of the Company’s other real estate owned (“OREO”) purchased and non purchased, net of
valuation allowances and direct write-downs, as of the dates presented:
 
Purchased OREONon Purchased OREOTotal
OREO
September 30, 2020
Residential real estate$754 $1,116 $1,870 
Commercial real estate1,605 798 2,403 
Residential land development345 1,324 1,669 
Commercial land development1,873 338 2,211 
Total$4,577 $3,576 $8,153 
December 31, 2019
Residential real estate$890 $415 $1,305 
Commercial real estate2,106 1,548 3,654 
Residential land development530 369 899 
Commercial land development1,722 430 2,152 
Total$5,248 $2,762 $8,010 

Changes in the Company’s purchased and non purchased OREO were as follows:
 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Purchased
OREO		Non Purchased OREOTotal
OREO
Balance at January 1, 2020$5,248 $2,762 $8,010 
Transfers of loans3,486 4,401 7,887 
Impairments(1,232)(415)(1,647)
Dispositions(2,875)(3,172)(6,047)
Other(50)— (50)
Balance at September 30, 2020$4,577 $3,576 $8,153 

Components of the line item “Other real estate owned” in the Consolidated Statements of Income were as follows for the periods presented:
 
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Repairs and maintenance$64 $94 $234 $306 
Property taxes and insurance35 43 186 169 
Impairments820 253 1,647 1,121 
Net losses on OREO sales117 31 27 91 
Rental income(3)(3)(23)(13)
Total$1,033 $418 $2,071 $1,674 


Note 7 – Goodwill and Other Intangible Assets
(In Thousands)
The carrying amounts of goodwill by operating segments for the nine months ended September 30, 2020 were as follows:
 Community BanksInsuranceTotal
Balance at January 1, 2020$936,916 $2,767 $939,683 
Addition to goodwill from acquisition— — — 
Balance at September 30, 2020$936,916 $2,767 $939,683 

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, 2020
Core deposit intangibles$82,492 $(51,925)$30,567 
Customer relationship intangible2,470 (1,239)1,231 
Total finite-lived intangible assets$84,962 $(53,164)$31,798 
December 31, 2019
Core deposit intangibles$82,492 $(46,599)$35,893 
Customer relationship intangible2,470 (1,103)1,367 
Total finite-lived intangible assets$84,962 $(47,702)$37,260 

Current year amortization expense for finite-lived intangible assets is presented in the table below.
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Amortization expense for:
  Core deposit intangibles$1,688 $1,963 $5,326 $6,060 
  Customer relationship intangible45 33 136 99 
Total intangible amortization$1,733 $1,996 $5,462 $6,159 

The estimated amortization expense of finite-lived intangible assets for the year ending December 31, 2020 and the succeeding four years is summarized as follows:
Core Deposit IntangiblesCustomer Relationship IntangibleTotal
2020$6,939 $181 $7,120 
20215,860 181 6,041 
20224,940 181 5,121 
20234,044 181 4,225 
20243,498 181 3,679 

Note 8 – 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. Servicing rights are evaluated for impairment 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 were $13,694 and $3,132 of valuation adjustments on MSRs during the nine months ended September 30, 2020 and 2019, respectively, primarily arising from the difference between actual prepayment speeds and the Company's assumptions with respect to prepayment speeds. A continued decline in mortgage interest rates and an increase in actual prepayment speeds may cause additional negative adjustments to the valuation of the Company's MSRs.
Changes in the Company’s MSRs were as follows: 
Balance at January 1, 2020$53,208 
Capitalization30,589 
Amortization(12,503)
Valuation adjustment(13,694)
Balance at September 30, 2020$57,600 

Data and key economic assumptions related to the Company’s MSRs are as follows as of the dates presented:
 
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Notes to Consolidated Financial Statements (Unaudited)
September 30, 2020December 31, 2019
Unpaid principal balance$6,680,256 $4,871,155 
Weighted-average prepayment speed (CPR)15.09 %11.48 %
Estimated impact of a 10% increase$(3,606)$(2,469)
Estimated impact of a 20% increase(6,921)(4,774)
Discount rate9.88 %9.69 %
Estimated impact of a 10% increase$(1,957)$(2,027)
Estimated impact of a 20% increase(3,784)(3,908)
Weighted-average coupon interest rate3.71 %4.04 %
Weighted-average servicing fee (basis points)29.94 29.20 
Weighted-average remaining maturity (in years)5.166.35
The Company recorded servicing fees of $3,400 and $2,346 for the three months ended September 30, 2020 and 2019, respectively, which are included in “Mortgage banking income” in the Consolidated Statements of Income. The Company recorded servicing fees of $9,012 and $7,081 for the nine months ended September 30, 2020 and 2019, respectively.

Note 9 - 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 BenefitsOther Benefits
Three Months EndedThree Months Ended
 September 30,September 30,
 2020201920202019
Service cost $— $— $2 $2 
Interest cost246 294 3 7 
Expected return on plan assets(412)(362)— — 
Recognized actuarial loss (gain)87 110 (23)(6)
Net periodic (return) benefit cost $(79)$42 $(18)$3 
 
Pension BenefitsOther Benefits
Nine Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Service cost$— $— $5 $5 
Interest cost738 882 10 23 
Expected return on plan assets(1,238)(1,087)— — 
Recognized actuarial loss (gain)262 331 (68)(17)
Net periodic (return) benefit cost$(238)$126 $(53)$11 

Incentive Compensation Plans
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Notes to Consolidated Financial Statements (Unaudited)
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, nor compensation expense associated with options recorded, during the nine months ended September 30, 2020 or 2019.
The following table summarizes information about options outstanding, exercised and forfeited as of and for the nine months ended September 30, 2020:
SharesWeighted Average Exercise Price
Options outstanding at beginning of period29,250 $15.86 
Granted— — 
Exercised— — 
Forfeited— — 
Options outstanding at end of period29,250 $15.86 

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, 2020:

Performance-Based Restricted StockWeighted Average Grant-Date Fair ValueTime-Based Restricted StockWeighted Average Grant-Date Fair Value
Nonvested at beginning of period115,725 $34.00 500,932 $36.34 
Awarded81,423 35.42 270,579 32.90 
Vested— — (140,853)38.67 
Cancelled(15,076)33.29 (47,488)35.73 
Nonvested at end of period182,072 $34.70 583,170 $34.23 
During the nine months ended September 30, 2020, the Company reissued 150,387 shares from treasury in connection with awards of restricted stock. The Company recorded total stock-based compensation expense of $2,405 and $3,002 for the three months ended September 30, 2020 and 2019, respectively and $8,153 and $7,721 for the nine months ended September 30, 2020 and 2019, respectively.

Note 10 – Derivative Instruments
(In Thousands)
The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, as part of its ongoing efforts to mitigate its interest rate risk exposure and to facilitate the needs of its customers. The Company also from time to time enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At September 30, 2020, the Company had notional amounts of $272,136 on interest rate contracts with corporate customers and $272,136 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed-rate loans.

In June 2014, the Company entered into two forward interest rate swap contracts on floating rate liabilities at the Bank level with notional amounts of $15,000 each. The interest rate swap contracts are each accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future Federal Home Loan Bank (“FHLB”) borrowings for a four-year and five-year period beginning June 1, 2018 and December 3, 2018 and ending June 2022 and June 2023, respectively. Under these contracts, the Bank pays a fixed interest rate and receives a variable interest rate based on the three-month LIBOR plus a pre-determined spread, with quarterly net settlements.
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Notes to Consolidated Financial Statements (Unaudited)
In March and April 2012, the Company entered into two interest rate swap agreements effective March 30, 2014 and March 17, 2014, respectively. Under these swap agreements, the Company receives a variable rate of interest based on the three-month LIBOR plus a pre-determined spread and pays a fixed rate of interest. The agreements, which both terminate in March 2022, are accounted for as cash flow hedges to reduce the variability in cash flows resulting from changes in interest rates on $32,000 of the Company’s junior subordinated debentures.
In April 2018, the Company entered into an interest rate swap agreement effective June 15, 2018. Under this swap agreement, the Company receives a variable rate of interest based on the three-month LIBOR plus a pre-determined spread and pays a fixed rate of interest. The agreement, which terminates in June 2028, is accounted for as a cash flow hedge to reduce the variability in cash flows resulting from changes in interest rates on $30,000 of the Company’s junior subordinated debentures.
In March 2020, the Company entered into a forward interest rate swap contract on floating rate liabilities with a notional amount of $100,000. The interest rate swap contract is accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future FHLB borrowings for a ten-year period beginning March 23, 2022 and ending March 23, 2032. Under this contract, the Company pays a fixed interest rate and receives a variable interest rate based on one-month LIBOR with monthly net settlements.
In May 2020, the Company entered into a forward interest rate swap contract on floating rate liabilities with a notional amount of $25,000. The interest rate swap contract is accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future FHLB borrowings for a three-year period beginning on May 1, 2022 and ending on May 1, 2025. Under this contract, the Company pays a fixed interest rate and receives a variable interest rate based on one-month LIBOR with monthly net settlements.
In July 2020, the Company entered into two forward interest rate swap contracts on floating rate liabilities with a notional amount of $25,000 each. Both interest rate swap contracts are accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future FHLB borrowings, one contract for a seven-year period beginning on July 14, 2022 and ending on July 14, 2029, the other contract for a five-year period beginning on July 31, 2022 and ending on July 31, 2027. Under both contracts, the Company pays a fixed interest rate and receives a variable interest rate based on one-month LIBOR with monthly net settlements.
In August 2020, the Company entered into a forward interest rate swap contract on floating rate liabilities with a notional amount of $25,000. The interest rate swap contract is accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future FHLB borrowings for a seven-year period beginning on August 14, 2022 and ending on August 14, 2029. Under this contract, the Company pays a fixed interest rate and receives a variable interest rate based on one-month LIBOR with monthly net settlements.
The Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate and adjustable-rate residential mortgage loans. The notional amount of commitments to fund fixed-rate and adjustable-rate mortgage loans was $755,721 and $215,751 at September 30, 2020 and December 31, 2019, respectively. The Company also enters into forward commitments to sell residential mortgage loans to secondary market investors. The notional amount of commitments to sell residential mortgage loans to secondary market investors was $760,000 and $414,000 at September 30, 2020 and December 31, 2019, respectively.
The following table provides details on the Company’s derivative financial instruments as of the dates presented:
 
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Notes to Consolidated Financial Statements (Unaudited)
  Fair Value
 Balance Sheet
Location		September 30,
2020		December 31, 2019
Derivative assets:
Designated as hedging instruments:
Interest rate swapOther Assets$468 $— 
Totals$468 $— 
Not designated as hedging instruments:
Interest rate contractsOther Assets$11,566 $3,880 
Interest rate lock commitmentsOther Assets28,185 4,579 
Forward commitmentsOther Assets59 39 
Totals$39,810 $8,498 
Derivative liabilities:
Designated as hedging instruments:
Interest rate swapsOther Liabilities$9,004 $5,021 
Totals$9,004 $5,021 
Not designated as hedging instruments:
Interest rate contractsOther Liabilities$11,566 $3,880 
Interest rate lock commitmentsOther Liabilities— 3 
Forward commitmentsOther Liabilities2,511 1,096 
Totals$14,077 $4,979 

Gains (losses) included in the Consolidated Statements of Income related to the Company’s derivative financial instruments were as follows as of the periods presented:
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Derivatives not designated as hedging instruments:
Interest rate contracts:
Included in interest income on loans$451 $950 $1,710 $2,985 
Interest rate lock commitments:
Included in mortgage banking income(1,135)(444)23,610 2,954 
Forward commitments
Included in mortgage banking income2,754 3,526 (1,395)3,006 
Total$2,070 $4,032 $23,925 $8,945 

For the Company’s derivatives designated as cash flow hedges, changes in fair value of the cash flow hedges are, to the extent that the hedging relationship is effective, recorded as other comprehensive income and are subsequently recognized in earnings at the same time that the hedged item is recognized in earnings. The ineffective portions of the changes in fair value of the hedging instruments are immediately recognized in earnings. The assessment of the effectiveness of the hedging relationship is evaluated under the hypothetical derivative method. There were no ineffective portions for the nine months ended September 30, 2020 or 2019. The impact on other comprehensive income for the nine months ended September 30, 2020 and 2019, respectively, can be seen at Note 13, “Other Comprehensive Income.”

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
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Notes to Consolidated Financial Statements (Unaudited)
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 AssetsOffsetting Derivative Liabilities
September 30,
2020		December 31, 2019September 30,
2020		December 31, 2019
Gross amounts recognized$527 $61 $23,198 $9,974 
Gross amounts offset in the Consolidated Balance Sheets— — — — 
Net amounts presented in the Consolidated Balance Sheets527 61 23,198 9,974 
Gross amounts not offset in the Consolidated Balance Sheets
Financial instruments527 61 527 61 
Financial collateral pledged— — 18,400 8,698 
Net amounts$— $— $4,271 $1,215 

Note 11 – Income Taxes

(In Thousands)

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

September 30,December 31,
20202019
Deferred tax assets
Allowance for credit losses$45,891 $14,304 
Loans11,579 10,284 
Deferred compensation11,605 12,050 
Impairment of assets1,631 1,108 
Net operating loss carryforwards2,607 9,387 
Lease liabilities under operating leases22,271 22,686 
Other208 934 
Total deferred tax assets95,792 70,753 
Deferred tax liabilities
Net unrealized gains on securities6,057 190 
Investment in partnerships982 967 
Fixed assets7,688 2,952 
Mortgage servicing rights14,121 13,472 
Junior subordinated debt2,237 2,304 
Lease right-of-use asset21,203 21,727 
Other1,457 1,859 
Total deferred tax liabilities53,745 43,471 
Net deferred tax assets$42,047 $27,282 
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Notes to Consolidated Financial Statements (Unaudited)

For the nine months ended September 30, 2020 and 2019, the Company recorded a provision for income taxes totaling $13,022 and $38,667, respectively. The provision for income taxes includes both federal and state income taxes and differs from the statutory rate due to favorable permanent differences. The effective tax rate was 20.28% and 23.04% for the nine months ended September 30, 2020 and 2019, respectively.
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 the state departments of revenue for the years ending December 31, 2015 through December 31, 2019.
The Company acquired both federal and state net operating losses as part of its previous acquisitions with varying expiration periods. The federal and state net operating losses acquired in its acquisition of Brand Group Holdings, Inc. (“Brand”) were $81,288 and $55,067, respectively, as of the September 1, 2018 acquisition date, all created in 2018. As part of The Tax Cuts and Jobs Act and corresponding state tax laws, the federal net operating losses and the majority of the state net operating losses created by Brand have an indefinite carryforward period. As of September 30, 2020, there are federal and state net operating losses acquired in the Brand acquisition without expiration periods of $2,248 and $28,495, respectively. The federal and state net operating losses acquired in the Company’s acquisition of Heritage Financial Group, Inc. (“Heritage”) in 2015 were $18,321 and $16,849, respectively, of which $3,269 and $2,446 remain to be utilized as of September 30, 2020. The net operating losses related to the Heritage acquisition begin to expire in 2029 and are expected to be utilized. Because the benefits are expected to be fully realized, the Company recorded no valuation allowance against the net operating losses for the period ending September 30, 2020.


Note 12 – Fair Value Measurements
(In Thousands)
Fair Value Measurements and the Fair Level Hierarchy
ASC 820, “Fair Value Measurements and Disclosures,” provides guidance for using fair value to measure assets and liabilities and also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to a valuation based on quoted prices in active markets for identical assets and liabilities (Level 1), moderate priority to a valuation based on quoted prices in active markets for similar assets and liabilities and/or based on assumptions that are observable in the market (Level 2), and the lowest priority to a valuation based on assumptions that are not observable in the market (Level 3).
Recurring Fair Value Measurements
The Company carries certain assets and liabilities at fair value on a recurring basis in accordance with applicable standards. The Company’s recurring fair value measurements are based on the requirement to carry such assets and liabilities at fair value or the Company’s election to carry certain eligible assets and liabilities at fair value. Assets and liabilities that are required to be carried at fair value on a recurring basis include securities available for sale and derivative instruments. The Company has elected to carry mortgage loans held for sale at fair value on a recurring basis as permitted under the guidance in ASC 825, “Financial Instruments” (“ASC 825”).
The following methods and assumptions are used by the Company to estimate the fair values of the Company’s financial assets and liabilities that are measured on a recurring basis:
Securities available for sale: Securities available for sale consist primarily of debt securities, such as obligations of U.S. Government agencies and corporations, obligations of states and political subdivisions, mortgage-backed securities and trust preferred 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
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Notes to Consolidated Financial Statements (Unaudited)
rates, credit spreads, and other factors. Such instruments are categorized within Level 2 of the fair value hierarchy and include interest rate swaps and other interest rate contracts such as interest rate caps and/or floors. The Company’s interest rate lock commitments are valued using current market prices for mortgage-backed securities with similar characteristics, adjusted for certain factors including servicing and risk. The value of the Company’s forward commitments is based on current prices for securities backed by similar types of loans. Because these assumptions are observable in active markets, the Company’s interest rate lock commitments and forward commitments are categorized within Level 2 of the fair value hierarchy.
Mortgage loans held for sale in loans held for sale: Mortgage loans held for sale are primarily agency loans which trade in active secondary markets. The fair value of these instruments is derived from current market pricing for similar loans, adjusted for differences in loan characteristics, including servicing and risk. Because the valuation is based on external pricing of similar instruments, mortgage loans held for sale are classified within Level 2 of the fair value hierarchy.
The following table presents assets and liabilities that are measured at fair value on a recurring basis as of the dates presented:
 
Level 1Level 2Level 3Totals
September 30, 2020
Financial assets:
Trust preferred securities$— $— $8,492 $8,492 
Other available for sale securities— 1,284,896 — 1,284,896 
Total securities available for sale— 1,284,896 8,492 1,293,388 
Derivative instruments— 40,278 — 40,278 
Mortgage loans held for sale in loans held for sale— 399,773 — 399,773 
Total financial assets$— $1,724,947 $8,492 $1,733,439 
Financial liabilities:
Derivative instruments:$— $23,081 $— $23,081 

Level 1Level 2Level 3Totals
December 31, 2019
Financial assets:
Trust preferred securities$— $— $9,986 $9,986 
Other available for sale securities— 1,280,627 — 1,280,627 
Total securities available for sale— 1,280,627 9,986 1,290,613 
Derivative instruments— 8,498 — 8,498 
Mortgage loans held for sale in loans held for sale— 318,272 — 318,272 
Total financial assets$— $1,607,397 $9,986 $1,617,383 
Financial liabilities:
Derivative instruments$— $10,000 $— $10,000 

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, 2020.
The following tables provide a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, as of the dates presented:
 
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Notes to Consolidated Financial Statements (Unaudited)
 20202019
Three Months Ended September 30, 2020Trust preferred
securities		Trust preferred
securities
Three Months Ended September 30,
Balance at beginning of period$7,679 $10,386 
   Accretion included in net income8 9 
   Unrealized gains (losses) included in other comprehensive income840 (439)
   Settlements(35)(94)
Balance at end of period$8,492 $9,862 
Nine Months Ended September 30,
Balance at beginning of period$9,986 $10,633 
   Accretion included in net income26 26 
   Unrealized losses included in other comprehensive income(1,382)(572)
   Settlements(138)(225)
Balance at end of period$8,492 $9,862 
 
For each of the three and nine months ended September 30, 2020 and 2019, respectively, there were no gains or losses included in earnings that were attributable to the change in unrealized gains or losses related to assets or liabilities held at the end of each respective period that were measured on a recurring basis using significant unobservable inputs.
The following table presents information as of September 30, 2020 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a recurring basis:
 
Financial instrumentFair
Value		Valuation TechniqueSignificant
Unobservable Inputs		Range of Inputs
Trust preferred securities$8,492 Discounted cash flowsDefault rate
0-100%

Nonrecurring Fair Value Measurements
Certain assets and liabilities may be recorded at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically are a result of the application of the lower of cost or market accounting or a write-down occurring during the period. The following table provides the fair value measurement for assets measured at fair value on a nonrecurring basis that were still held on the Consolidated Balance Sheets as of the dates presented and the level within the fair value hierarchy each is classified:
 
September 30, 2020Level 1Level 2Level 3Totals
Impaired loans$— $— $11,050 $11,050 
OREO— — 1,788 1,788 
Mortgage servicing rights— — 57,600 57,600 
Total$— $— $70,438 $70,438 
 
December 31, 2019Level 1Level 2Level 3Totals
Impaired loans$— $— $27,348 $27,348 
OREO— — 2,820 2,820 
Mortgage servicing rights— — 53,208 53,208 
Total$— $— $83,376 $83,376 

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

Impaired loans: Loans considered impaired are reserved for at the time the loan is identified as impaired taking into account the fair value of the collateral less estimated selling costs. Collateral may be real estate and/or business assets including but not
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Notes to Consolidated Financial Statements (Unaudited)
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. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors previously identified. Impaired loans that were measured or re-measured at fair value had a carrying value of $19,775 and $29,606 at September 30, 2020 and December 31, 2019, respectively, and a specific reserve for these loans of $8,725 and $2,258 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, 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,
2020		December 31, 2019
Carrying amount prior to remeasurement$2,750 $3,726 
Impairment recognized in results of operations(962)(906)
Fair value$1,788 $2,820 

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, 2020 and December 31, 2019. There were $13,694 of valuation adjustments on MSRs during the nine months ended September 30, 2020 and $1,836 of valuation adjustments recognized during the twelve months ended December 31, 2019.
The following table presents information as of September 30, 2020 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
 
Financial instrumentFair
Value		Valuation TechniqueSignificant
Unobservable Inputs		Range of Inputs
Impaired loans$11,050 Appraised value of collateral less estimated costs to sellEstimated costs to sell
4-10%
OREO$1,788 Appraised value of property less estimated costs to sellEstimated costs to sell
4-10%

Fair Value Option
The Company elected to measure all mortgage loans originated for sale on or after July 1, 2012 at fair value under the fair value option as permitted under ASC 825. Electing to measure these assets at fair value reduces certain timing differences and better matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.
Net gains of $10,876 and $3,895 resulting from fair value changes of these mortgage loans were recorded in income during the nine months ended September 30, 2020 and 2019, 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.
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Notes to Consolidated Financial Statements (Unaudited)
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, 2020 and December 31, 2019:
 
Aggregate
Fair Value		Aggregate
Unpaid
Principal
Balance		Difference
September 30, 2020
Mortgage loans held for sale measured at fair value$399,773 $378,785 $20,988 
December 31, 2019
Mortgage loans held for sale measured at fair value$318,272 $308,160 $10,112 

Fair Value of Financial Instruments
The carrying amounts and estimated fair values of the Company’s financial instruments, including those assets and liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis, were as follows as of the dates presented:
 
  Fair Value
As of September 30, 2020Carrying
Value		Level 1Level 2Level 3Total
Financial assets
Cash and cash equivalents$414,105 $414,105 $— $— $414,105 
Securities available for sale1,293,388 — 1,284,896 8,492 1,293,388 
Loans held for sale399,773 — 399,773 — 399,773 
Loans, net10,916,640 — — 10,847,520 10,847,520 
Mortgage servicing rights57,600 — — 57,600 57,600 
Derivative instruments40,278 — 40,278 — 40,278 
Financial liabilities
Deposits$11,934,140 $10,100,060 $1,852,653 $— $11,952,713 
Short-term borrowings42,624 42,624 — — 42,624 
Federal Home Loan Bank advances152,210 — 158,952 — 158,952 
Junior subordinated debentures110,649 — 89,591 — 89,591 
Subordinated notes212,223 — 212,550 — 212,550 
Derivative instruments23,081 — 23,081 — 23,081 
 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
  Fair Value
As of December 31, 2019Carrying
Value		Level 1Level 2Level 3Total
Financial assets
Cash and cash equivalents$414,930 $414,930 $— $— $414,930 
Securities available for sale1,290,613 — 1,280,627 9,986 1,290,613 
Loans held for sale318,272 — 318,272 — 318,272 
Loans, net9,637,476 — — 9,321,039 9,321,039 
Mortgage servicing rights53,208 — — 53,208 53,208 
Derivative instruments8,498 — 8,498 — 8,498 
Financial liabilities
Deposits$10,213,168 $8,052,536 $2,158,431 $— $10,210,967 
Short-term borrowings489,091 489,091 — — 489,091 
Federal Home Loan Bank advances152,337 — 152,321 — 152,321 
Junior subordinated debentures110,215 — 104,480 — 104,480 
Subordinated notes113,955 — 117,963 — 117,963 
Derivative instruments10,000 — 10,000 — 10,000 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

Note 13 – Other Comprehensive Income
(In Thousands)
Changes in the components of other comprehensive income, net of tax, were as follows for the periods presented:
 
Pre-TaxTax Expense
(Benefit)		Net of Tax
Three months ended September 30, 2020
Securities available for sale:
Unrealized holding gains on securities$519 $131 $388 
Total securities available for sale519 131 388 
Derivative instruments:
Unrealized holding gains on derivative instruments1,576 401 1,175 
Total derivative instruments1,576 401 1,175 
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost65 17 48 
Total defined benefit pension and post-retirement benefit plans65 17 48 
Total other comprehensive income$2,160 $549 $1,611 
Three months ended September 30, 2019
Securities available for sale:
Unrealized holding losses on securities$(84)$(22)$(62)
Reclassification adjustment for losses realized in net income2,516 640 1,876 
Total securities available for sale2,432 618 1,814 
Derivative instruments:
Unrealized holding losses on derivative instruments(949)(241)(708)
Total derivative instruments(949)(241)(708)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost104 26 78 
Total defined benefit pension and post-retirement benefit plans104 26 78 
Total other comprehensive income$1,587 $403 $1,184 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Pre-TaxTax Expense
(Benefit)		Net of Tax
Nine months ended September 30, 2020
Securities available for sale:
Unrealized holding gains on securities$26,404 $6,719 $19,685 
Reclassification adjustment for gains realized in net income(31)(8)(23)
Total securities available for sale26,373 6,711 19,662 
Derivative instruments:
Unrealized holding losses on derivative instruments(3,516)(895)(2,621)
Total derivative instruments(3,516)(895)(2,621)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost195 50 145 
Total defined benefit pension and post-retirement benefit plans195 50 145 
Total other comprehensive income$23,052 $5,866 $17,186 
Nine months ended September 30, 2019
Securities available for sale:
Unrealized holding gains on securities$27,695 $7,047 $20,648 
Reclassification adjustment for losses realized in net income2,511 639 1,872 
Total securities available for sale30,206 7,686 22,520 
Derivative instruments:
Unrealized holding losses on derivative instruments(4,244)(1,080)(3,164)
Total derivative instruments(4,244)(1,080)(3,164)
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost314 80 234 
Total defined benefit pension and post-retirement benefit plans314 80 234 
Total other comprehensive income$26,276 $6,686 $19,590 

The accumulated balances for each component of other comprehensive income, net of tax, were as follows as of the dates presented:
 
September 30,
2020		December 31, 2019
Unrealized gains on securities$41,225 $21,563 
Non-credit related portion of previously recorded other-than-temporary impairment on securities(11,319)(11,319)
Unrealized losses on derivative instruments(5,468)(2,847)
Unrecognized losses on defined benefit pension and post-retirement benefit plans obligations(6,488)(6,633)
Total accumulated other comprehensive income$17,950 $764 
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

Note 14 – Net Income Per Common Share
(In Thousands, Except Share Data)
Basic net income per common share is calculated by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the pro forma dilution of shares outstanding, assuming outstanding service-based restricted stock awards fully vested and outstanding stock options were exercised into common shares, calculated in accordance with the treasury method. Basic and diluted net income per common share calculations are as follows for the periods presented:
 
Three Months Ended
 September 30,
 20202019
Basic
Net income applicable to common stock$29,992 $37,446 
Average common shares outstanding56,185,884 58,003,215 
Net income per common share - basic$0.53 $0.65 
Diluted
Net income applicable to common stock$29,992 $37,446 
Average common shares outstanding56,185,884 58,003,215 
Effect of dilutive stock-based compensation200,269 189,204 
Average common shares outstanding - diluted56,386,153 58,192,419 
Net income per common share - diluted$0.53 $0.64 
Nine Months Ended
 September 30,
 20202019
Basic
Net income applicable to common stock$52,130 $129,181 
Average common shares outstanding56,294,984 58,347,840 
Net income per common share - basic$0.93 $2.21 
Diluted
Net income applicable to common stock$52,130 $129,181 
Average common shares outstanding56,294,984 58,347,840 
Effect of dilutive stock-based compensation173,593 160,742 
Average common shares outstanding - diluted56,468,577 58,508,582 
Net income per common share - diluted$0.92 $2.21 

Stock-based compensation awards that could potentially dilute basic net income per common share in the future that were not included in the computation of diluted net income per common share due to their anti-dilutive effect were as follows for the periods presented:
Three Months Ended
 September 30,
 20202019
Number of shares237,212691
Exercise prices (for stock option awards)——
Nine Months Ended
 September 30,
 20202019
Number of shares255,4481,334
Exercise prices (for stock option awards)——
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)

Note 15 – Regulatory Matters
(In Thousands)
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Federal Reserve, the FDIC and the Office of the Comptroller of the Currency have issued guidelines governing the levels of capital that bank holding companies and banks must maintain. Those guidelines specify capital tiers, which include the following classifications:
Capital TiersTier 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, 2020December 31, 2019
 AmountRatioAmountRatio
Renasant Corporation
Tier 1 Capital to Average Assets (Leverage)$1,281,318 9.17 %$1,262,588 10.37 %
Common Equity Tier 1 Capital to Risk-Weighted Assets1,174,260 10.80 %1,156,828 11.12 %
Tier 1 Capital to Risk-Weighted Assets1,281,318 11.79 %1,262,588 12.14 %
Total Capital to Risk-Weighted Assets1,618,837 14.89 %1,432,949 13.78 %
Renasant Bank
Tier 1 Capital to Average Assets (Leverage)$1,344,938 9.64 %$1,331,809 10.95 %
Common Equity Tier 1 Capital to Risk-Weighted Assets1,344,938 12.38 %1,331,809 12.81 %
Tier 1 Capital to Risk-Weighted Assets1,344,938 12.38 %1,331,809 12.81 %
Total Capital to Risk-Weighted Assets1,470,402 13.53 %1,388,553 13.36 %

Common equity Tier 1 capital (“CET1”) generally consists of common stock, retained earnings, accumulated other comprehensive income and certain minority interests, less certain adjustments and deductions. In addition, the Company must maintain a “capital conservation buffer,” which is a specified amount of CET1 capital in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer is designed to absorb losses during periods of economic stress. If the Company’s ratio of CET1 to risk-weighted capital is below the capital conservation buffer, the Company will face restrictions on its ability to pay dividends, repurchase outstanding stock and make certain discretionary bonus payments. The required capital conservation buffer is 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. As shown in the tables above, as of September 30, 2020, the Company’s CET1 capital was in excess of the capital conservation buffer.

In addition, the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency’s rules for calculating risk-weighted assets have been revised in recent years to enhance risk sensitivity and to incorporate certain international capital standards of the Basel Committee on Banking Supervision. These revisions affect the calculation of the denominator of a
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
banking organization’s risk-based capital ratios to reflect the higher-risk nature of certain types of loans. For example, residential mortgages are risk-weighted between 35% and 200%, depending on the mortgage’s loan-to-value ratio and whether the mortgage falls into one of two categories based on eight criteria that include, among others, the term, use of negative amortization and balloon payments, certain rate increases and documented and verified borrower income, while a 150% risk weight applies to both certain high volatility commercial real estate acquisition, development and construction loans as well as non-residential mortgage loans 90 days past due or on nonaccrual status (in both cases, as opposed to the former 100% risk weight). Also, “hybrid” capital items like trust preferred securities no longer enjoy Tier 1 capital treatment, subject to various grandfathering and transition rules.
As previously disclosed, the Company adopted CECL as of January 1, 2020. The Company has elected to take advantage of transitional relief offered by the Federal Reserve and the 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.


Note 16 – Segment Reporting
(In Thousands)
The operations of the Company’s reportable segments are described as follows:
•The Community Banks segment delivers a complete range of banking and financial services to individuals and small to medium-sized businesses including checking and savings accounts, business and personal loans, asset-based lending and equipment leasing, as well as safe deposit and night depository facilities.
•The Insurance segment includes a full service insurance agency offering all major lines of commercial and personal insurance through major carriers.
•The Wealth Management segment offers a broad range of fiduciary services which include the administration and management of trust accounts including personal and corporate benefit accounts, self-directed IRAs, and custodial accounts. In addition, the Wealth Management segment offers annuities, mutual funds and other investment services through a third party broker-dealer.
In order to give the Company’s divisional management a more precise indication of the income and expenses they can control, the results of operations for the Community Banks, the Insurance and the Wealth Management segments reflect the direct revenues and expenses of each respective segment. Indirect revenues and expenses, including but not limited to income from the Company’s investment portfolio as well as certain costs associated with data processing and back office functions, primarily support the operations of the community banks and, therefore, are included in the results of the Community Banks segment. Included in “Other” are the operations of the holding company and other eliminations which are necessary for purposes of reconciling to the consolidated amounts.
The following table provides financial information for the Company’s operating segments as of and for the periods presented:
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Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Community
Banks		InsuranceWealth
Management		OtherConsolidated
Three months ended September 30, 2020
Net interest income (loss)$108,909 $126 $403 $(3,152)$106,286 
Provision for loan losses22,408 — 692 — 23,100 
Noninterest income63,918 2,694 4,714 (398)70,928 
Noninterest expense110,430 1,974 3,818 288 116,510 
Income (loss) before income taxes39,989 846 607 (3,838)37,604 
Income tax expense (benefit)8,383 217 — (988)7,612 
Net income (loss)$31,606 $629 $607 $(2,850)$29,992 
Total assets$14,694,683 $30,138 $68,261 $15,851 $14,808,933 
Goodwill$936,916 $2,767 — — $939,683 
Three months ended September 30, 2019
Net interest income (loss)$111,696 $177 $485 $(3,533)$108,825 
Provision for loan losses1,700 — — — 1,700 
Noninterest income 31,911 2,533 3,859 (350)37,953 
Noninterest expense90,996 1,948 3,287 269 96,500 
Income (loss) before income taxes50,911 762 1,057 (4,152)48,578 
Income tax expense (benefit)12,009 200 — (1,077)11,132 
Net income (loss)$38,902 $562 $1,057 $(3,075)$37,446 
Total assets$12,922,205 $27,448 $70,973 $19,048 $13,039,674 
Goodwill$936,916 $2,767 — — $939,683 
Community
Banks		InsuranceWealth
Management		OtherConsolidated
Nine months ended September 30, 2020
Net interest income (loss)$325,879 $424 $1,250 $(8,883)$318,670 
Provision for credit losses on loans75,481 — 869 — 76,350 
Noninterest income (loss)152,716 7,787 13,370 (1,205)172,668 
Noninterest expense (benefit)332,490 5,708 11,215 423 349,836 
Income (loss) before income taxes70,624 2,503 2,536 (10,511)65,152 
Income tax expense (benefit)15,088 658 — (2,724)13,022 
Net income (loss)$55,536 $1,845 $2,536 $(7,787)$52,130 
Total assets$14,694,683 $30,138 $68,261 $15,851 $14,808,933 
Goodwill$936,916 $2,767 $— $— $939,683 
Nine months ended September 30, 2019
Net interest income (loss)$343,418 $516 $1,244 $(10,406)$334,772 
Provision for credit losses on loans4,100 — — — 4,100 
Noninterest income 97,789 7,634 11,408 (1,033)115,798 
Noninterest expense261,905 5,661 10,199 857 278,622 
Income (loss) before income taxes175,202 2,489 2,453 (12,296)167,848 
Income tax expense (benefit)41,205 648 — (3,186)38,667 
Net income (loss)$133,997 $1,841 $2,453 $(9,110)$129,181 
Total assets$12,922,205 $27,448 $70,973 $19,048 $13,039,674 
Goodwill$936,916 $2,767 $— $— $939,683 
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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,” “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 for 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.
In the current environment, one of the most important factors that could cause the Company’s actual results to differ materially from those in forward-looking statements is the continued impact of the COVID-19 pandemic and related governmental measures to respond to the pandemic on the United States economy and the economies of the markets in which the Company operates. In this Form 10-Q, the Company addresses the historical impact of the pandemic on certain aspects of the Company’s operations and sets forth certain expectations regarding the COVID-19 pandemic’s future impact on the Company’s business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects. The Company believes that its statements regarding future events and conditions in light of the COVID-19 pandemic are reasonable, but these statements are based on assumptions regarding, among other things, how long the pandemic will continue, the duration, extent and effectiveness of the governmental measures implemented to contain the pandemic and ameliorate its impact on businesses and individuals throughout the United States, and the impact of the pandemic and the government’s virus containment measures on national and local economies, all of which are out of the Company’s control. If the Company’s assumptions underlying its statements about future events prove to be incorrect, the Company’s business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects may be materially and adversely affected.
Important factors other than the COVID-19 pandemic currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: (1) the Company’s ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses, grow the acquired operations and realize the cost savings expected from an acquisition to the extent and in the timeframe anticipated by management; (2) the effect of economic conditions and interest rates on a national, regional or international basis; (3) timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (4) competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, mortgage lending and auto lending industries; (5) the financial resources of, and products available from, competitors; (6) changes in laws and regulations as well as changes in accounting standards, such as the adoption of ASC 326 (or CECL) as of January 1, 2020; (7) changes in policy by regulatory agencies; (8) changes in the securities and foreign exchange markets; (9) the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (10) changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers; (11) an insufficient allowance for credit losses as a result of inaccurate assumptions; (12) general economic, market or business conditions, including the impact of inflation; (13) changes in demand for loan products and financial services; (14) concentration of credit exposure; (15) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (16) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (17) natural disasters, epidemics and other catastrophic events in the Company’s geographic area; (18) the impact, extent and timing of technological changes; and (19) other circumstances, many of which are beyond management’s control. The COVID-19 pandemic has exacerbated, and is likely to continue to exacerbate, the impact of any of these factors on the Company. 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.
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COVID-19 Response Update
The Company reopened its branch lobbies to the public on October 19, 2020, subject to capacity limitations, mask-wearing and social distancing requirements designed to promote the safety of our clients and employees. Also, the additional measures the Company implemented to minimize Company employees’ exposure to COVID-19, such as working remotely, reconfiguring work spaces to promote social distancing and adjusting staff levels, remain in place. As discussed in more detail below, in the third quarter of 2020, the Company continued to incur expenses, primarily related to employee overtime and other employee benefit costs, in its response to the COVID-19 pandemic and expects that these elevated expenses will continue in future periods even while conditions presenting significant challenges to growth persist. Readers are directed to the cautionary note regarding forward-looking statements at the beginning of this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company has been active in the Paycheck Protection Program (“PPP”) and as of September 30, 2020, the balance of such loans included in the Company’s Consolidated Balance Sheets approximated $1,307,972. The impact of these loans on the Company’s results of operations is discussed in more detail below.

Financial Condition
The following discussion provides details regarding the changes in significant balance sheet accounts at September 30, 2020 compared to December 31, 2019.
Assets
Total assets were $14,808,933 at September 30, 2020 compared to $13,400,618 at December 31, 2019.
Investments
The securities portfolio is used to provide a source for meeting liquidity needs and to supply securities to be used in collateralizing certain deposits and other types of borrowings. The following table shows the carrying value of our securities portfolio, all of which are classified as available for sale, by investment type and the percentage of such investment type relative to the entire securities portfolio as of the dates presented:
September 30, 2020December 31, 2019
BalancePercentage of
Portfolio		BalancePercentage of
Portfolio
U.S. Treasury securities$7,112 0.55 %$499 0.04 %
Obligations of other U.S. Government agencies and corporations1,515 0.12 2,531 0.20 
Obligations of states and political subdivisions277,640 21.47 223,131 17.29 
Mortgage-backed securities933,330 72.15 998,101 77.33 
Trust preferred securities8,492 0.66 9,986 0.77 
Other debt securities65,299 5.05 56,365 4.37 
$1,293,388 100.00 %$1,290,613 100.00 %
During the nine months ended September 30, 2020, we purchased $304,955 in investment securities. Mortgage-backed securities and collateralized mortgage obligations (“CMOs”), in the aggregate, comprised approximately 64% of these purchases. CMOs are included in the “Mortgage-backed securities” line item in the above table. The mortgage-backed securities and CMOs held in our investment portfolio are primarily issued by government sponsored entities. Obligations of state and political subdivisions comprised approximately 29% of purchases made during the first nine months of 2020.
Proceeds from maturities, calls and principal payments on securities during the first nine months of 2020 totaled $314,363. The Company sold municipal securities and residential mortgage backed securities with a carrying value of $8,742 at the time of sale for net proceeds of $8,773, resulting in net gain on sale of $31 during the first nine months of 2020. Proceeds from the maturities, calls and principal payments on securities during the first nine months of 2019 totaled $192,520. During the first nine months of 2019, the Company sold municipal securities and commercial and residential mortgage backed securities as well as other debt and equity securities with a carrying value of $212,137 at the time of sale for net proceeds of $212,485, resulting in a net gain on sale of $348.
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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 on the secondary market, were $399,773 at September 30, 2020, as compared to $318,272 at December 31, 2019. 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 $11,084,738 at September 30, 2020 and $9,689,638 at December 31, 2019. Non purchased loans totaled $9,424,224 at September 30, 2020 compared to $7,587,974 at December 31, 2019. Loans purchased in previous acquisitions totaled $1,660,514 and $2,101,664 at September 30, 2020 and December 31, 2019, respectively.
The tables below set forth the balance of loans, net of unearned income and excluding loans held for sale, outstanding by loan type and the percentage of each loan type to total loans as of the dates presented:
 September 30, 2020
 Non PurchasedPurchasedTotal
Loans		Percentage of Total Loans
Commercial, financial, agricultural (1)
$2,445,294 $202,768 $2,648,062 23.89 %
Lease financing, net of unearned income82,928 — 82,928 0.75 
Real estate – construction:
Residential261,432 3,093 264,525 2.39 
Commercial477,441 31,153 508,594 4.59 
Total real estate – construction738,873 34,246 773,119 6.98 
Real estate – 1-4 family mortgage:
Primary1,517,528 245,369 1,762,897 15.90 
Home equity442,380 95,235 537,615 4.85 
Rental/investment272,811 33,567 306,378 2.76 
Land development136,573 16,931 153,504 1.38 
Total real estate – 1-4 family mortgage2,369,292 391,102 2,760,394 24.89 
Real estate – commercial mortgage:
Owner-occupied1,316,408 355,994 1,672,402 15.09 
Non-owner occupied2,176,562 577,679 2,754,241 24.85 
Land development117,672 32,694 150,366 1.36 
Total real estate – commercial mortgage3,610,642 966,367 4,577,009 41.30 
Installment loans to individuals177,195 66,031 243,226 2.19 
Total loans, net of unearned income$9,424,224 $1,660,514 $11,084,738 100.00 %
(1)Includes PPP loans of $1,307,972 as of September 30, 2020.
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 December 31, 2019
 Non PurchasedPurchasedTotal
Loans		Percentage of Total Loans
Commercial, financial, agricultural$1,052,353 $315,619 $1,367,972 14.12 %
Lease financing, net of unearned income81,875 — 81,875 0.84 
Real estate – construction:
Residential272,643 16,407 289,050 2.98 
Commercial502,258 35,175 537,433 5.55 
Total real estate – construction774,901 51,582 826,483 8.53 
Real estate – 1-4 family mortgage:
Primary1,449,219 332,729 1,781,948 18.39 
Home equity456,265 117,275 573,540 5.92 
Rental/investment291,931 43,169 335,100 3.46 
Land development152,711 23,314 176,025 1.82 
Total real estate – 1-4 family mortgage2,350,126 516,487 2,866,613 29.59 
Real estate – commercial mortgage:
Owner-occupied1,209,204 428,077 1,637,281 16.90 
Non-owner occupied1,803,587 647,308 2,450,895 25.29 
Land development116,085 40,004 156,089 1.61 
Total real estate – commercial mortgage3,128,876 1,115,389 4,244,265 43.80 
Installment loans to individuals199,843 102,587 302,430 3.12 
Total loans, net of unearned income$7,587,974 $2,101,664 $9,689,638 100.00 %
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, 2020, there were no concentrations of loans exceeding 10% of total loans which are not disclosed as a category of loans separate from the categories listed above.
The Company participated in the Paycheck Protection Program (“PPP”) until its closure in August 2020. As of September 30, 2020, we had $1,307,972 in PPP loans included in our commercial, financial and agricultural loan portfolio.
Deposits
The Company relies on deposits as its major source of funds. Total deposits were $11,934,140 and $10,213,168 at September 30, 2020 and December 31, 2019, respectively. Noninterest-bearing deposits were $3,758,242 and $2,551,770 at September 30, 2020 and December 31, 2019, respectively, while interest-bearing deposits were $8,175,898 and $7,661,398 at September 30, 2020 and December 31, 2019, respectively.
The growth in noninterest-bearing deposits across the Company’s footprint during the current year is driven by the Company’s PPP lending (as loan proceeds have been held as Company deposits until utilization), other government stimulus and client sentiment to maintain liquidity. Management continues to focus on growing and maintaining a stable source of funding, specifically noninterest-bearing deposits. Noninterest bearing deposits represented 31.49% of total deposits at September 30, 2020, as compared to 24.99% of total deposits at December 31, 2019. Under certain circumstances, however, management may seek to acquire public fund deposits (which are deposits of counties, municipalities or other political subdivisions). The source of funds that we select depends on the terms and how those terms assist us in mitigating interest rate risk, maintaining our liquidity position and managing our net interest margin. Accordingly, funds are acquired to meet anticipated funding needs at the rate and with other terms that, in management’s view, best address our interest rate risk, liquidity and net interest margin parameters.
Public fund deposits 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
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from municipalities, including school boards and utilities. Public fund deposits were $1,359,022 and $1,367,827 at September 30, 2020 and December 31, 2019, 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. In the first nine months of 2020, we used the proceeds of our deposit growth and other sources of liquidity to reduce our short-term borrowings. The following table presents our short-term borrowings by type as of the dates presented:
September 30, 2020December 31, 2019
BalanceBalance
Security repurchase agreements$12,624 $9,091 
Short-term borrowings from the FHLB30,000 480,000 
$42,624 $489,091 
At September 30, 2020, long-term debt 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, 2020December 31, 2019
BalanceBalance
Long-term FHLB advances$152,210 $152,337 
Junior subordinated debentures110,649 110,215 
Subordinated notes212,223 113,955 
$475,082 $376,507 
Long-term FHLB borrowings are generally used to match-fund against large, fixed rate commercial or real estate loans with long-term maturities, which helps mitigate interest rate exposure when rates rise. In the fourth quarter of 2019, however, as interest rates declined following the Federal Reserve’s interest rate cuts, we used long-term FHLB borrowings as a source of liquidity in lieu of higher-costing deposits, which had not repriced as quickly following the interest rate cuts. These borrowings were still outstanding at September 30, 2020. At September 30, 2020, there were $110 in long-term FHLB advances outstanding scheduled to mature within twelve months or less. The Company had $3,590,752 of availability on unused lines of credit with the FHLB at September 30, 2020, as compared to $3,159,942 at December 31, 2019.
On September 3, 2020, the Company completed the public offering and sale of $100,000 of its 4.50% fixed-to-floating rate subordinated notes due September 1, 2035. The subordinated notes were sold at par, resulting in net proceeds, after deducting underwriting discounts and expenses, of approximately $98,299. The Company intends to use the net proceeds from this offering for general corporate purposes, which may include providing capital to support the Company’s organic growth or growth through strategic acquisitions, repaying indebtedness, financing investments, capital expenditures or for investments in Renasant Bank as regulatory capital.
The Company owns other 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 the Bank as regulatory capital. The subordinated notes qualify as Tier 2 capital under the 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.

Results of Operations
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Net Income
Net income for the third quarter of 2020 was $29,992 compared to net income of $37,446 for the third quarter of 2019. Basic and diluted earnings per share (“EPS”) for the third quarter of 2020 were $0.53, as compared to basic EPS of $0.65 and diluted EPS of $0.64 for the third quarter of 2019. Net income for the nine months ended September 30, 2020, was $52,130 compared to net income of $129,181 for the same period in 2019. Basic and diluted EPS were $0.93 and $0.92 for the first nine months of 2020, respectively, as compared to $2.21 for the first nine months of 2019. As discussed in more detail below, our net income was significantly impacted by expenses associated with the adoption of CECL, the COVID-19 pandemic (including provision expense related thereto), and an adjustment to the valuation of our mortgage servicing rights (“MSR”).
From time to time, the Company incurs expenses and charges in connection with certain transactions with respect to which management is unable to accurately predict when these expenses or charges will be incurred or, when incurred, the amount of such expenses or charges. The following table presents the impact of these expenses and charges on reported EPS for the dates presented. The “COVID-19 related expenses” line item in the table below primarily consists of (a) employee overtime and employee benefit accruals directly related to the Company’s response to both the COVID-19 pandemic itself and federal legislation enacted to address the pandemic, such as the CARES Act, and (b) expenses associated with supplying branches with protective equipment and sanitation supplies (such as floor markings and cautionary signage for branches, face coverings and hand sanitizer) as well as more frequent and rigorous branch cleaning. The MSR valuation adjustment is discussed below under the “Noninterest Income” heading in this Item.
Three Months Ended
 September 30, 2020September 30, 2019
Pre-taxAfter-taxImpact to Diluted EPSPre-taxAfter-taxImpact to Diluted EPS
MSR valuation adjustment$(828)$(650)$(0.01)$3,132 $2,414 $0.04 
COVID-19 related expenses570 448 0.01 — — — 
Nine Months Ended
 September 30, 2020September 30, 2019
Pre-taxAfter-taxImpact to Diluted EPSPre-taxAfter-taxImpact to Diluted EPS
MSR valuation adjustment$13,694 $10,916 $0.19 $3,132 $2,410 $0.04 
COVID-19 related expenses9,730 7,758 0.14 — — — 
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 60.33% of total revenue (i.e., net interest income on a fully taxable equivalent basis and noninterest income) for the third quarter of 2020 and 65.21% of total revenue for the first nine months of 2020. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.
Net interest income was $106,286 and $318,670 for the three and nine months ended September 30, 2020, respectively, as compared to $108,825 and $334,772 for the same respective periods in 2019. On a tax equivalent basis, net interest income was $107,885 and $323,659 for the three and nine months ended September 30, 2020, respectively, as compared to $110,276 and $339,130 for the same respective time periods in 2019.
The following tables set forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or interest paid and the average yield or average rate paid on each such category for the periods presented:
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 Three Months Ended September 30,
 20202019
 Average
Balance		Interest
Income/
Expense		Yield/
Rate		Average
Balance		Interest
Income/
Expense		Yield/
Rate
Assets
Interest-earning assets:
Loans held for investment:
Non purchased$8,012,741 $81,281 4.04 %$6,792,021 $85,084 4.97 %
Purchased1,723,714 24,034 5.55 2,317,231 36,330 6.22 
Paycheck Protection Program1,305,229 7,449 2.27 — — — 
Total loans held for investment11,041,684 112,764 4.06 9,109,252 121,414 5.29 
Loans held for sale378,225 3,144 3.31 385,437 3,977 4.09 
Securities:
Taxable(1)
1,003,886 5,473 2.17 1,040,302 7,200 2.75 
Tax-exempt265,679 2,205 3.30 187,376 1,846 3.91 
Interest-bearing balances with banks344,948 91 0.10 271,278 1,490 2.18 
Total interest-earning assets13,034,422 123,677 3.77 10,993,645 135,927 4.91 
Cash and due from banks210,278 173,156 
Intangible assets972,394 975,306 
Other assets711,065 704,024 
Total assets$14,928,159 $12,846,131 
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand(2)
$5,405,085 $4,839 0.36 %$4,740,426 $10,769 0.90 %
Savings deposits796,841 167 0.08 652,121 355 0.22 
Time deposits1,907,918 6,804 1.42 2,326,963 10,390 1.77 
Total interest-bearing deposits8,109,844 11,810 0.58 7,719,510 21,514 1.11 
Borrowed funds719,800 3,982 2.20 308,931 4,137 5.31 
Total interest-bearing liabilities8,829,644 15,792 0.71 8,028,441 25,651 1.27 
Noninterest-bearing deposits3,723,059 2,500,810 
Other liabilities255,956 185,343 
Shareholders’ equity2,119,500 2,131,537 
Total liabilities and shareholders’ equity$14,928,159 $12,846,131 
Net interest income/net interest margin$107,885 3.29 %$110,276 3.98 %
(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which we operate.
(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.
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 Nine Months Ended September 30,
 20202019
 Average
Balance		Interest
Income/
Expense		Yield/
Rate		Average
Balance		Interest
Income/
Expense		Yield/
Rate
Assets
Interest-earning assets:
Loans held for investment:
Non purchased$7,847,197 $251,671 4.28 %$6,624,266 $250,190 5.05 %
Purchased1,877,449 80,226 5.71 2,446,863 115,298 6.30 
Paycheck Protection Program725,891 13,335 2.45 — — — 
Total loans held for investment10,450,537 345,232 4.41 9,071,129 365,488 5.39 
Loans held for sale351,975 9,108 3.46 361,415 15,004 5.55 
Securities:
Taxable(1)
1,034,189 19,148 2.47 1,062,261 22,792 2.87 
Tax-exempt251,744 6,609 3.51 185,370 5,728 4.13 
Interest-bearing balances with banks387,116 1,098 0.38 263,967 4,778 2.42 
Total interest-earning assets12,475,561 381,195 4.08 10,944,142 413,790 5.06 
Cash and due from banks203,582 181,140 
Intangible assets974,182 975,579 
Other assets717,628 680,140 
Total assets$14,370,953 $12,781,001 
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand(2)
$5,166,393 $19,616 0.51 %$4,755,948 $31,338 0.88 %
Savings deposits741,933 592 0.11 642,523 976 0.20 
Time deposits2,019,173 23,967 1.59 2,358,031 29,963 1.70 
Total interest-bearing deposits7,927,499 44,175 0.74 7,756,502 62,277 1.07 
Borrowed funds849,494 13,361 2.10 341,903 12,383 4.84 
Total interest-bearing liabilities8,776,993 57,536 0.88 8,098,405 74,660 1.23 
Noninterest-bearing deposits3,251,612 2,413,619 
Other liabilities233,730 169,068 
Shareholders’ equity2,108,618 2,099,909 
Total liabilities and shareholders’ equity$14,370,953 $12,781,001 
Net interest income/net interest margin$323,659 3.47 %$339,130 4.14 %
(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which we operate.
(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.
The average balances of nonaccruing assets are included in the tables above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21% and a state tax rate of 4.45%, which is net of federal tax benefit.
Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes in volume, mix and pricing decisions. External factors include changes in market interest rates, competition and the shape of the interest rate yield curve. As discussed in more detail below, for both the three and nine months ended September 30, 2020, as compared to the same respective periods in 2019, the decline in loan yields as a result of the Federal Reserve’s decision to cut interest rates as well as changes in the mix of earning assets during the quarter due to increased liquidity on the balance sheet were the largest contributing factors to the decrease in net interest income. The Company has continued to focus on lowering the cost of funding through growing noninterest-bearing deposits and aggressively lowering interest rates on interest-bearing deposits.
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The following table sets forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from changes in volume and rates for the Company for both the three and nine months ended September 30, 2020, as compared to the same respective periods in 2019 (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, 2020 Compared to the Three Months Ended September 30, 2019
VolumeRateNet
Interest income:
Loans held for investment:
Non purchased$13,736 $(17,539)$(3,803)
Purchased(8,643)(3,653)(12,296)
Paycheck Protection Program7,449 — 7,449 
Loans held for sale(185)(648)(833)
Securities:
Taxable(247)(1,480)(1,727)
Tax-exempt678 (319)359 
Interest-bearing balances with banks317 (1,716)(1,399)
Total interest-earning assets13,105 (25,355)(12,250)
Interest expense:
Interest-bearing demand deposits1,328 (7,258)(5,930)
Savings deposits66 (254)(188)
Time deposits(1,702)(1,884)(3,586)
Borrowed funds3,246 (3,401)(155)
Total interest-bearing liabilities2,938 (12,797)(9,859)
Change in net interest income$10,167 $(12,558)$(2,391)
Nine months ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019
VolumeRateNet
Interest income:
Loans held for investment:
Non purchased $42,312 $(40,831)$1,481 
Purchased(24,981)(10,091)(35,072)
Paycheck Protection Program13,335 — 13,335 
Loans held for sale(4,186)(1,710)(5,896)
Securities:
Taxable(586)(3,058)(3,644)
Tax-exempt1,837 (956)881 
Interest-bearing balances with banks1,560 (5,240)(3,680)
Total interest-earning assets29,291 (61,886)(32,595)
Interest expense:
Interest-bearing demand deposits2,514 (14,236)(11,722)
Savings deposits133 (517)(384)
Time deposits(4,095)(1,901)(5,996)
Borrowed funds10,858 (9,880)978 
Total interest-bearing liabilities9,410 (26,534)(17,124)
Change in net interest income$19,881 $(35,352)$(15,471)
Interest income, on a tax equivalent basis, was $123,677 and $381,195, respectively, for the three and nine months ended September 30, 2020, as compared to $135,927 and $413,790, respectively, for the same periods in 2019. This decrease in
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interest income, on a tax equivalent basis, is due primarily to the aforementioned interest rate cuts by the Federal Reserve and changes in the mix of earning assets during the quarter due to increased liquidity on the balance sheet, the effects of which the Company was able to partially offset by loan growth.
The following table presents the percentage of total average earning assets, by type and yield, for the periods presented:
 Percentage of Total Average Earning AssetsYield
Three Months EndedThree Months Ended
 September 30,September 30,
 2020201920202019
Loans held for investment excl. PPP74.70 %82.86 %4.30 %5.29 %
Paycheck Protection Program10.01 — 2.27 — 
Loans held for sale2.90 3.51 3.31 4.09 
Securities9.74 11.17 2.41 2.92 
Other2.65 2.46 0.10 2.18 
Total earning assets100.00 %100.00 %3.77 %4.91 %
 Percentage of Total Average Earning AssetsYield
Nine Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Loans held for investment excl. PPP77.95 %82.89 %4.56 %5.39 %
Paycheck Protection Program5.82 — 2.45 — 
Loans held for sale2.82 3.30 3.46 5.55 
Securities10.31 11.40 2.68 3.06 
Interest-bearing balances with banks3.10 2.41 0.38 2.42 
Total earning assets100.00 %100.00 %4.08 %5.06 %

For the third quarter of 2020, interest income on loans held for investment, on a tax equivalent basis, decreased $8,650 to $112,764 from $121,414 in the same period in 2019. For the nine months ended September 30, 2020, interest income on loans held for investment, on a tax equivalent basis, decreased $20,256 to $345,232 from $365,488 in the same period in 2019. Interest income attributable to PPP loans included in loan interest income for the third quarter of 2020 was $7,449, which consisted of $3,262 in interest income and $4,187 in accretion of net origination fees. For the nine months ended September 30, 2020 interest income attributable to PPP loans included in loan interest income was $13,335, which consisted of $5,587 in interest income and $7,748 in accretion of net origination fees. As of September 30, 2020, the Company received approximately $45,611 in gross origination fees from PPP loans. Such fees, net of agent fees paid and other origination costs, are being accreted into interest income over the life of the loan. If a PPP loan is forgiven in whole or in part, as provided under the CARES Act, the Company will recognize the non-accreted portion of the net origination fee attributable to the forgiven portion of such loan as of the date of the final forgiveness determination. Interest income on loans held for investment decreased primarily due to decreases in loan yields in response to the Federal Reserve’s rate cuts and the funding of PPP loans during the quarter, which by law bear a fixed interest rate of 1.0%, significantly lower than the yield on loans originated in the ordinary course of business. PPP loans reduced margin and loan yield by 12 basis points and 23 basis points, respectively, in the third quarter of 2020 and 6 basis points and 14 basis points, respectively, in the first nine months of 2020.
For the third quarter of 2020, interest income on loans held for sale (consisting of mortgage loans held for sale), on a tax equivalent basis, decreased $833 to $3,144 from $3,977 in the same period in 2019. For the nine months ended September 30, 2020, interest income on loans held for sale, on a tax equivalent basis, decreased $5,896 to $9,108 from $15,004 in the same period in 2019. The average balance of loans held for sale during the first nine months of 2019 includes a portfolio of non-mortgage consumer loans, which earned a higher yield than mortgage loans held for sale. These non-mortgage consumer loans were reclassified to loans held for investment in the third quarter of 2019. The transfer of the higher earning assets out of loans held for sale coupled with the lower rates earned on mortgage loans held for sale during 2020 accounts for the decrease in interest income on loans held for sale from 2019.
The following table presents reported taxable equivalent yield on loans, including loans held for sale, for the periods presented.
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Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Taxable equivalent interest income on loans $115,908 $125,391 $354,340 $380,492 
Average loans, including loans held for sale11,419,909 9,494,689 10,802,512 9,432,544 
Loan yield4.04 %5.24 %4.38 %5.39 %
The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans, including loans held for sale, loan yield and net interest margin is shown in the following table for the period presented.
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Net interest income collected on problem loans$282 $905 $884 $3,890 
Accretable yield recognized on purchased loans(1)
4,949 5,510 15,118 20,566 
Total impact to interest income on loans$5,231 $6,415 $16,002 $24,456 
Impact to loan yield0.18 %0.27 %0.20 %0.35 %
Impact to net interest margin0.16 %0.23 %0.17 %0.30 %
(1)Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $2,286 and $2,564, for the third quarter of 2020 and 2019, respectively. The impact was $6,205 and $10,594 for the nine months ended September 30, 2020 and 2019, respectively. This additional interest income increased total loan yield by 8 basis points and 11 basis points for the third quarter of 2020 and 2019, respectively, while increasing net interest margin by 7 and 9 basis points for the same periods. For the nine months ended September 30, 2020 and 2019, the additional interest income increased total loan yield by 8 basis points and 15 basis points, respectively, while increasing net interest margin by 7 basis points and 13 basis points, respectively.
Investment income, on a tax equivalent basis, decreased $1,368 to $7,678 for the third quarter of 2020 from $9,046 for the third quarter of 2019. Investment income, on a tax equivalent basis, decreased $2,763 to $25,757 for the nine months ended September 30, 2020 from $28,520 for the same period in 2019. The tax equivalent yield on the investment portfolio for the third quarter of 2020 was 2.41%, down 51 basis points from 2.92% in the same period in 2019. The tax equivalent yield on the investment portfolio for the nine months ended September 30, 2020 was 2.68%, down 38 basis points from 3.06% in the same period in 2019. The decrease in taxable equivalent yield on securities was a result of an increase in premium amortization caused by the increase in prepayment speeds experienced in the Company’s mortgage backed securities portfolio given the current interest rate environment.
Interest expense was $15,792 for the third quarter of 2020 as compared to $25,651 for the same period in 2019. Interest expense for the nine months ended September 30, 2020 was $57,536 as compared to $74,660 for the same period in 2019.
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:
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 Percentage of Total Average Deposits and Borrowed FundsCost of Funds
Three Months EndedThree Months Ended
 September 30,September 30,
 2020201920202019
Noninterest-bearing demand29.66 %23.75 %— %— %
Interest-bearing demand43.06 45.02 0.36 0.90 
Savings6.35 6.19 0.08 0.22 
Time deposits15.20 22.10 1.42 1.77 
Short term borrowings2.49 0.56 0.95 3.50 
Long-term Federal Home Loan Bank advances1.21 0.06 0.16 3.47 
Subordinated notes1.15 1.28 5.46 6.54 
Other borrowed funds0.88 1.04 4.32 4.89 
Total deposits and borrowed funds100.00 %100.00 %0.50 %0.97 %
 Percentage of Total Average Deposits and Borrowed FundsCost of Funds
Nine Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Noninterest-bearing demand27.03 %22.96 %— %— %
Interest-bearing demand42.95 45.25 0.51 0.88 
Savings6.17 6.11 0.11 0.20 
Time deposits16.79 22.43 1.59 1.70 
Short-term borrowings3.85 0.79 1.02 2.76 
Long-term Federal Home Loan Bank advances1.27 0.06 0.80 3.33 
Subordinated notes1.03 1.36 5.54 6.24 
Other long term borrowings0.91 1.04 4.56 4.69 
Total deposits and borrowed funds100.00 %100.00 %0.64 %0.95 %

Interest expense on deposits was $11,810 and $21,514 for the three months ended September 30, 2020 and 2019, respectively. The cost of total deposits was 0.40% and 0.84% for the same respective periods. Interest expense on deposits was $44,175 and $62,277 for the nine months ended September 30, 2020 and 2019, respectively, with the costs of total deposits being 0.53% and 0.82% for the same respective periods. The decrease in both deposit expense and cost is attributable to the Company’s efforts to reduce deposit rates in order to mitigate the effect of the Federal Reserve’s rate cuts on the Company’s loan yields. During 2020, the Company has continued its efforts to grow non-interest bearing deposits, and such deposits represent 31.49% of total deposits at September 30, 2020 compared to 24.99% of total deposits at December 31, 2019. The growth in non-interest bearing deposits during the year to date has been primarily driven by the Company’s PPP lending (as loan proceeds were held as Company deposits until utilization), other government stimulus and client sentiment. Low cost deposits continue to be the preferred choice of funding; however, the Company may rely on wholesale borrowings when rates are advantageous.

Interest expense on total borrowings was $3,982 and $4,137 for the three months ended September 30, 2020 and 2019, respectively. Interest expense on total borrowings was $13,361 and $12,383 for the nine months ended September 30, 2020 and 2019, respectively. The increase in interest expense as a result of higher borrowings was offset slightly by lower interest rates charged on our FHLB advances as rates fell during 2020.
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
 
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Noninterest Income to Average Assets
Three Months Ended September 30,Nine Months Ended September 30,
2020 20192020 2019
1.89% 1.17%1.60% 1.21%
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 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 $70,928 for the third quarter of 2020 as compared to $37,953 for the same period in 2019. Noninterest income was $172,668 for the nine months ended September 30, 2020 as compared to $115,798 for the same period in 2019.
Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees. Service charges on deposit accounts were $7,486 and $8,992 for the third quarter of 2020 and 2019, respectively, and $23,388 and $26,699 for the nine months ended September 30, 2020 and 2019, respectively. Overdraft fees, the largest component of service charges on deposits, were $4,299 for the three months ended September 30, 2020 as compared to $5,713 for the same period in 2019. These fees were $13,935 for the nine months ended September 30, 2020 compared to $17,140 for the same period in 2019. Management believes the decrease in the third quarter of 2020 and for the first nine months of the year relative to prior periods can be attributed to excess customer liquidity driven by the various government stimulus programs initiated in response to the COVID-19 pandemic as well as an overall decrease in consumer spending as shelter-in-place and similar government restrictions were imposed across the country due to the COVID-19 pandemic.
Fees and commissions were $3,402 during the third quarter of 2020 as compared to $3,090 for the same period in 2019, and were $9,427 for the first nine months of 2020 as compared to $16,608 for the same period in 2019. Fees and commissions include fees related to deposit services, such as ATM fees and interchange fees on debit card transactions. For the third quarter of 2020, interchange fees were $2,323 as compared to $2,210 for the same period in 2019. Interchange fees were $6,534 for the nine months ended September 30, 2020 as compared to $13,526 for the same period in 2019. Effective July 1, 2019, we became subject to the limitations on interchange fees imposed pursuant to §1075 of the Dodd-Frank Act (this provision, which is commonly referred to as the “Durbin Amendment,” is discussed in more detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 which was filed with the SEC on February 27, 2020). The Durbin Amendment limitations reduced interchange fees by approximately $9,000 for the first nine months of 2020 based on the volume and dollar amount of debit card transactions processed during the respective periods.
Through Renasant Insurance, we offer a range of commercial and personal insurance products through major insurance carriers. Income earned on insurance products was $2,681 and $2,508 for the three months ended September 30, 2020 and 2019, respectively, and was $6,797 and $6,814 for the nine months ended September 30, 2020 and 2019, 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 $8 and $21 for the three months ended September 30, 2020 and 2019, respectively, and $926 and $807 for the nine months ended September 30, 2020 and 2019, respectively.
Our Wealth Management segment has two primary divisions: Trust and Financial Services. The Trust division operates on a custodial basis which includes administration of employee benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts, including personal and corporate accounts, self-directed IRAs, and custodial accounts. Fees for managing these accounts are based on changes in market values of the assets under management in the account, with the amount of the fee depending on the type of account. The Financial Services division provides specialized products and services to our customers, which include fixed and variable annuities, mutual funds and equities offered through a third party provider. Wealth Management revenue was $4,364 for the third quarter of 2020 compared to $3,588 for the same period in 2019 and was $12,190 for the nine months ended September 30, 2020 compared to $10,513 for the same period in 2019. The market value of assets under management or administration was $3,890,374 and $3,605,350 at September 30, 2020 and September 30, 2019, respectively.
Mortgage banking income is derived from the origination and sale of mortgage loans and the servicing of mortgage loans that the Company has sold but retained the right to service. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market. Originations of mortgage loans to be sold totaled $1,253,742 in the third quarter of 2020 compared to $741,904 for the same period in 2019. Mortgage loan originations totaled $3,277,576 in the nine months ended September 30, 2020 compared to $1,680,729 for the same period in 2019. The increase in mortgage loan originations is primarily due to the current interest rate environment.
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Mortgage banking income, specifically mortgage servicing income, despite a $828 recovery in the third quarter, was negatively impacted during the first nine months of 2020 by a mortgage servicing rights valuation adjustment of $13,694, as actual prepayment speeds of the mortgages the Company serviced exceeded the Company’s original estimates. 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,
2020 20192020 2019
Gain on sales of loans, net$45,985 $14,627 $114,327 $35,416 
Fees, net5,367 3,725 13,597 8,363 
Mortgage servicing (loss) income, net(2,466)490 (3,491)2,084 
MSR valuation adjustment828 (3,132)(13,694)(3,132)
Mortgage banking income, net$49,714 $15,710 $110,739 $42,731 
Bank-owned life insurance (“BOLI”) income is derived from changes in the cash surrender value of the bank-owned life insurance policies and death benefits received on covered individuals. BOLI income was $1,267 for the three months ended September 30, 2020 as compared to $1,734 for the same period in 2019, and $3,759 for the first nine months of September 30, 2020 as compared to $4,481 for the same period in 2019.
Other noninterest income was $2,014 and $1,988 for the three months ended September 30, 2020 and 2019, respectively, and $6,337 and $7,604 for the nine months ended September 30, 2020 and 2019, respectively. Other noninterest income includes income from our SBA banking division and other miscellaneous income and can fluctuate based on production in our SBA banking division and recognition of other nonseasonal income items. 
Noninterest Expense
Noninterest Expense to Average Assets
Three Months Ended September 30,Nine Months Ended September 30,
2020 20192020 2019
3.10%2.98%3.25% 2.91%
Noninterest expense was $116,510 and $96,500 for the third quarter of 2020 and 2019, respectively, and was $349,836 and $278,622 for the nine months ended September 30, 2020 and 2019, respectively.
Salaries and employee benefits increased $9,981 to $75,406 for the third quarter of 2020 as compared to $65,425 for the same period in 2019. Salaries and employee benefits increased $44,856 to $227,956 for the nine months ended September 30, 2020 as compared to $183,100 for the same period in 2019. The increase in salaries and employee benefits is primarily due to the strategic production hires the Company made throughout its footprint during the last nine months of 2019 as well as increased mortgage commissions and incentives related to the increased mortgage production during the third quarter and first nine months of 2020. Salaries and employee benefits for the first nine months of 2020 also includes approximately $8,153 in expense related to employee overtime and employee benefit accruals directly related to the Company's response to both the COVID-19 pandemic itself and federal legislation enacted to address the pandemic, such as the CARES Act.
Data processing costs increased to $5,259 in the third quarter of 2020 from $4,980 for the same period in 2019 and were $15,312 for the nine months ended September 30, 2020 as compared to $14,584 for the same period in 2019. 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 2020 was $13,296, up from $12,943 for the same period in 2019. These expenses for the first nine months of 2020 were $40,927, up from $36,322 for the same period in 2019. The increase in occupancy and equipment expense is primarily attributable to new locations added during the last nine months of 2019.
Expenses related to other real estate owned for the third quarter of 2020 were $1,033 as compared to $418 for the same period in 2019 and were $2,071 and $1,674, respectively, for the first nine months of 2020 and 2019. 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 $1,647 and $1,121 for the first nine months of 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, other real estate owned with a cost basis of $6,047 and $5,341, respectively, was sold, resulting in a net loss of $27 and $91, 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 regulation. Professional fees were
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$3,197 for the third quarter of 2020 as compared to $2,976 for the same period in 2019 and $8,355 for the nine months ended September 30, 2020 as compared to $7,861 for the same period in 2019.
Advertising and public relations expense was $2,240 for the third quarter of 2020 as compared to $3,318 for the same period in 2019, and $8,560 for the nine months ended September 30, 2020 compared to $8,833 for the same period in 2019. The decrease is primarily attributable to a reduction in sponsorship spending, as the COVID-19 pandemic has limited sporting and other public events.
Amortization of intangible assets totaled $1,733 and $1,996 for the third quarter of 2020 and 2019, respectively, and $5,462 and $6,159 for the nine months ended September 30, 2020 and 2019, 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 5 months to approximately 9 years.
Communication expenses, those expenses incurred for communication to clients and between employees, were $2,319 for the third quarter of 2020 as compared to $2,310 for the same period in 2019. Communication expenses were $6,698 for the nine months ended September 30, 2020 as compared to $6,553 for the same period in 2019.
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 $11,999 and $34,377 for the three and nine months ended September 30, 2020, respectively, as compared to $2,056 and $13,279 for the same periods in 2019, respectively. The provision for unfunded commitments was $2,700 and $8,700 for the three months and nine months ended September 30, 2020, respectively. No such provision was included in other noninterest expense for the same periods in 2019. Also included in noninterest expense for the third quarter and first nine months of 2020 were approximately $678 and $1,577, respectively, in expenses incurred to supply our branches with protective equipment and sanitation supplies (such as floor markings and cautionary signage for branches, face coverings and hand sanitizer) as well as more frequent and rigorous branch cleaning in response to the COVID-19 pandemic.
Efficiency Ratio
Efficiency Ratio
Three Months Ended September 30,Nine Months Ended September 30,
2020 20192020 2019
Efficiency ratio (GAAP)65.16 %65.10 %70.49 % 61.25 %
Adjusted efficiency ratio (Non-GAAP)(1)
62.63 %62.53 %63.89 %59.47 %
(1)A reconciliation of this financial measure from GAAP to non-GAAP can be found under the “Non-GAAP Financial Measures” heading at the end of this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The efficiency ratio is 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 which must be expended 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 table above shows the impact on the efficiency ratio of expenses that (1) the Company does not consider to be part of our core operating activities, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as expenses incurred in connection with our response to the COVID-19 pandemic, our MSR valuation adjustment and the provision for unfunded commitments. 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 2020 and 2019 was $7,612 and $11,132, respectively. The effective tax rates for those periods were 21.58% and 22.92%, respectively. Income tax expenses for the nine months ended September 30, 2020 and 2019 were $13,022 and $38,667, respectively. The effective tax rates for those periods were 20.28% and 23.04%, respectively.

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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

COVID-19 Update. At September 30, 2020, the Company’s credit quality metrics remained strong. The Company is continuing to monitor all asset categories given that any category or borrower could be negatively impacted by the pandemic, with enhanced monitoring of loans remaining on deferral as well as a focus on those industries more highly impacted by the pandemic, primarily the hospitality and healthcare industries. In addition, to provide necessary relief to the Company’s borrowers – both consumer and commercial clients – the Company established loan deferral programs allowing qualified clients to defer principal and interest payments for up to 90 days. A second 90-day deferral has been made available to borrowers that remain current on taxes and insurance and also satisfy underwriting standards established by the Company that analyze the ability of the borrower to service its loan in accordance with its existing terms in light of the impact of the COVID-19 pandemic on the borrower, its industry and the markets in which it operates.

The Company’s credit quality in future quarters may be impacted by both external and internal factors related to the pandemic in addition to those factors that traditionally affect credit quality. External factors outside the Company’s control include items such as federal, state and local government measures, the re-imposition of “shelter-in-place” orders, the economic impact of government programs and the impact of COVID-19. Internal factors that could impact credit quality include items such as the Company’s loan deferral programs, involvement in government offered programs and the related financial impact of these programs. The impact of each of these items are unknown at this time and could materially and adversely impact future credit quality.
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 a credit administration department, a problem asset resolution committee and the Board of Directors Credit Review Committee. Credit quality, adherence to policies and loss mitigation are major concerns of credit administration and these committees. The Company’s central appraisal review department reviews and approves third-party appraisals obtained by the Company on real estate collateral and monitors loan maturities to ensure updated appraisals are obtained. This department is managed by a State Certified General Real Estate Appraiser and employs four additional State Certified General Real Estate Appraisers and four real estate evaluators.
We have a number of documented loan policies and procedures that set forth the approval and monitoring process of the lending function. Adherence to these policies and procedures is monitored by management and the Board of Directors. A number of committees and an underwriting staff oversee the lending operations of the Company. These include in-house problem asset resolution committees and the Board of Directors Credit Review Committee. 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 limits are reviewed for approval by senior credit officers.
For commercial and commercial real estate secured loans, 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 1 to 9, with 1 rated loans having 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 and placed on the Company’s internal watch list due to a decline in the collateral value or cash flow of the debtor; the committees then adjust loan grades accordingly. 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.
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After all collection efforts have failed, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings initiated. The collateral is sold at public auction for fair market value (based upon recent appraisals described in the above paragraph), with fees associated with the foreclosure being deducted from the sales price. The purchase price is applied to the outstanding loan balance. If the loan balance is greater than the sales proceeds, the deficient balance is sent to the Board of Directors’ Credit Review Committee for charge-off approval. These charge-offs reduce 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 such losses are identified and reasonably quantified. Net charge-offs for the first nine months of 2020 were $2,898, or 0.04% of average loans (annualized), compared to net charge-offs of $2,312, or 0.03% of average loans (annualized), for the same period in 2019. The charge-offs were fully reserved for in the Company’s allowance for credit losses on loans.

Allowance for Credit Losses on Loans; Provision for Credit Losses on Loans. On January 1, 2020, the Company began calculating the allowance for credit losses under CECL. As of the date of adoption, the Company increased the allowance for credit losses on loans by $42,484 and the reserve for unfunded commitments by $10,389. Management evaluates the adequacy of the allowance on a quarterly basis. The allowance for credit losses is available to absorb credit losses inherent in the loans held for investment portfolio. Loan losses are charged against the allowance for credit losses when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

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 the 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 GDP growth in the markets in which we operate 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 pool) basis, where such loans are segregated into loan portfolio segments based upon similarity of credit risk. In determining the allowance for credit losses on loans evaluated on a collective basis, the Company categorizes loan pools based on loan type and/or risk rating. The Company uses two CECL models: (1) a loss rate model, based on average historical life-of-loan loss rates, is used for the Real Estate - 1-4 Family Mortgage, Real Estate - Construction and the Installment Loans to Individuals portfolio segments, 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, the nature and volume of the respective loan portfolio segments, and changes in lending or loan review staffing. External factors include current and reasonable and supportable forecasted economic conditions, the competitive environment 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
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forecast can be made, when necessary, the models immediately revert back 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.

For periods prior to January 1, 2020, the Company calculated the allowance for credit losses using the incurred loss methodology.

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, the provision for credit losses as a percentage of average loans, nonperforming loans as a percentage of total loans and the allowance coverage on nonperforming loans. Also, management reviews past due ratios by officer, community bank and the Company as a whole.

The following table presents the allocation of the allowance for 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, 2020December 31, 2019September 30, 2019
Balance% of TotalBalance% of TotalBalance% of Total
Commercial, financial, agricultural$38,195 23.89 %$10,658 14.12 %$10,288 14.26 %
Lease financing1,832 0.75 %910 0.84 %783 0.75 %
Real estate – construction13,819 6.98 %5,029 8.53 %5,127 8.77 %
Real estate – 1-4 family mortgage32,705 24.89 %9,814 29.59 %9,849 30.04 %
Real estate – commercial mortgage70,582 41.30 %24,990 43.80 %24,039 43.19 %
Installment loans to individuals10,965 2.19 %761 3.12 %728 2.99 %
Total$168,098 100.00 %$52,162 100.00 %$50,814 100.00 %

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 provision for credit losses on loans was $23,100 and $1,700 for the three months ended September 30, 2020 and 2019, respectively, and $76,350 and $4,100 for the nine months ended September 30, 2020 and 2019, respectively. The significant provision recorded during the quarter and year-to-date period is primarily driven by the current and future economic uncertainty caused by the COVID-19 pandemic, including the current projections of a continued elevated national unemployment rate throughout 2020 and into 2021 and 2022 and forecasted negative to minimal GDP growth compared to the pre-COVID period, and the increased likelihood of a more prolonged economic recovery period than previously expected. The Company also factored into its estimate the potential benefit and risk of the government programs implemented through the CARES Act and the internal loan deferral program offered to qualified customers. The table below reflects the activity in the allowance for credit losses on loans for the periods presented:
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Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Balance at beginning of period$145,387 $50,059 $52,162 $49,026 
Impact of the adoption of ASC 326— — 42,484 — 
Charge-offs
Commercial, financial, agricultural420 757 1,969 1,709 
Lease financing168 45 168 45 
Real estate – construction136 — 668 — 
Real estate – 1-4 family mortgage720 268 1,083 1,143 
Real estate – commercial mortgage553 677 2,600 1,406 
Installment loans to individuals1,579 3,218 6,003 3,650 
Total charge-offs3,576 4,965 12,491 7,953 
Recoveries
Commercial, financial, agricultural698 761 996 1,376 
Lease financing1 — 11 2 
Real estate – construction31 — 31 7 
Real estate – 1-4 family mortgage152 219 288 531 
Real estate – commercial mortgage711 33 2,451 644 
Installment loans to individuals1,594 3,007 5,816 3,081 
Total recoveries3,187 4,020 9,593 5,641 
Net charge-offs389 945 2,898 2,312 
Provision for credit losses on loans23,100 1,700 76,350 4,100 
Balance at end of period$168,098 $50,814 $168,098 $50,814 
Net charge-offs (annualized) to average loans0.01 %0.04 %0.04 %0.03 %
Allowance for credit losses on loans to:
Total loans1.52 %0.55 %
Total loans excluding PPP loans1.72 %— 
Nonperforming loans367.05 %140.31 %
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 EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Real estate – construction:
Residential$105 $— $637 $(7)
Total real estate – construction105 — 637 (7)
Real estate – 1-4 family mortgage:
Primary661 251 921 683 
Home equity(29)— (51)98 
Rental/investment(8)(107)20 46 
Land development(56)(95)(95)(215)
Total real estate – 1-4 family mortgage568 49 795 612 
Real estate – commercial mortgage:
Owner-occupied(190)383 1,224 427 
Non-owner occupied33 263 (1,097)386 
Land development(1)(2)22 (51)
Total real estate – commercial mortgage(158)644 149 762 
Total net charge-offs of loans secured by real estate$515 $693 $1,581 $1,367 
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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. Just as with the allowance for credit losses, the Company began calculating the reserve for unfunded commitments under CECL, with the impact of CECL adoption on the reserve described in the tables below. 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 loss 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.
Three Months Ended September 30, 2020
Allowance for credit losses on unfunded loan commitments:
Beginning balance$17,335 
Provision for credit losses on unfunded loan commitments (included in other noninterest expense) $2,700 
Ending balance$20,035 
Nine Months Ended September 30, 2020
Allowance for credit losses on unfunded loan commitments:
Beginning balance$946 
Impact of the adoption of ASC 32610,389 
Provision for credit losses on unfunded loan commitments (included in other noninterest expense)8,700 
Ending balance$20,035 
Nonperforming Assets. Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. Management, the 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 tables provide details of the Company’s non purchased and purchased nonperforming assets as of the dates presented.
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Non PurchasedPurchased Total
September 30, 2020
Nonaccruing loans$18,831 $24,821 $43,652 
Accruing loans past due 90 days or more1,826 318 2,144 
Total nonperforming loans20,657 25,139 45,796 
Other real estate owned3,576 4,577 8,153 
Total nonperforming assets$24,233 $29,716 $53,949 
Nonperforming loans to total loans0.41 %
Nonperforming assets to total assets0.36 %
December 31, 2019
Nonaccruing loans$21,509 $7,038 $28,547 
Accruing loans past due 90 days or more3,458 4,317 7,775 
Total nonperforming loans24,967 11,355 36,322 
Other real estate owned2,762 5,248 8,010 
Total nonperforming assets$27,729 $16,603 $44,332 
Nonperforming loans to total loans0.37 %
Nonperforming assets to total assets0.33 %

The level of nonperforming loans increased $9,474 from December 31, 2019 to September 30, 2020, while OREO increased $143 during the same period. The implementation of CECL, which requires purchased credit deteriorated loans to be classified as nonaccrual based on performance, contributed $4,728 to the increase in nonaccruing loans.
The following table presents nonperforming loans by loan category as of the dates presented:
September 30,
2020		December 31, 2019September 30,
2019
Commercial, financial, agricultural$17,422 $8,458 $9,551 
Lease financing— 226 404 
Real estate – construction:
Residential— — 128 
Commercial— — 254 
Total real estate – construction— — 382 
Real estate – 1-4 family mortgage:
Primary15,583 14,270 12,119 
Home equity1,949 2,328 2,083 
Rental/investment1,284 1,958 1,454 
Land development395 367 561 
Total real estate – 1-4 family mortgage19,211 18,923 16,217 
Real estate – commercial mortgage:
Owner-occupied6,805 4,526 4,140 
Non-owner occupied1,201 2,459 3,754 
Land development519 1,109 1,192 
Total real estate – commercial mortgage8,525 8,094 9,086 
Installment loans to individuals638 621 575 
Total nonperforming loans$45,796 $36,322 $36,215 
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Total nonperforming loans as a percentage of total loans were 0.41% as of September 30, 2020 as compared to 0.37% as of December 31, 2019 and 0.39% as of September 30, 2019. The Company’s coverage ratio, or its allowance for credit losses on loans as a percentage of nonperforming loans, was 367.05% as of September 30, 2020 as compared to 143.61% as of December 31, 2019 and 140.31% as of September 30, 2019. As discussed above, the adoption of CECL resulted in an increase of $4,728 in nonaccruing loans as of September 30, 2020. Although nonperforming loans have increased as of September 30, 2020, the coverage ratios have increased as a result of the increase in the allowance for credit losses discussed above.

Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses at September 30, 2020. Management also continually monitors past due loans for potential credit quality deterioration. Total loans 30-89 days past due were $16,644 at September 30, 2020 as compared to $37,668 at December 31, 2019 and $29,271 at September 30, 2019.

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

As shown below, restructured loans totaled $20,322 at September 30, 2020 as compared to $11,954 at December 31, 2019 and $13,429 at September 30, 2019. At September 30, 2020, loans restructured through interest rate concessions represented 37% of total restructured loans, while loans restructured by a concession in payment terms represented the remainder. The following table provides further details of the Company’s restructured loans in compliance with their modified terms as of the dates presented:

September 30,
2020		December 31, 2019September 30,
2019
Commercial, financial, agricultural$2,417 $523 $533 
Real estate – 1-4 family mortgage:
Primary8,359 6,987 7,027 
Home equity333 213 379 
Rental/investment724 596 1,832 
Total real estate – 1-4 family mortgage9,416 7,796 9,238 
Real estate – commercial mortgage:
Owner-occupied6,854 3,096 3,098 
Non-owner occupied1,355 503 519 
Land development186 36 41 
Total real estate – commercial mortgage8,395 3,635 3,658 
Installment loans to individuals94 — — 
Total restructured loans in compliance with modified terms$20,322 $11,954 $13,429 
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Changes in the Company’s restructured loans are set forth in the table below:
 
20202019
Balance at January 1,$11,954 $12,820 
Additional advances or loans with concessions12,946 3,650 
Reclassified as performing restructured loan428 1,866 
Reductions due to:
Reclassified as nonperforming(2,999)(1,251)
Paid in full(1,360)(786)
Measurement period adjustment on recently acquired loans— (2,376)
Charge-offs(3)— 
Paydowns(644)(494)
Balance at September 30,$20,322 $13,429 

In response to the current economic environment caused by the COVID-19 pandemic, the Company implemented a loan deferral program in the first quarter of 2020 to provide temporary payment relief to both consumer and commercial customers. Any customer current on loan payments, taxes and insurance can qualify for a 90-day deferral of principal and interest payments. A second 90-day deferral has been made available to customers that remained current on taxes and insurance through the first deferral period and also satisfy underwriting standards established by the Company that analyze the ability of the customer to service its loan in accordance with its existing terms in light of the impact of the COVID-19 pandemic on the customer, its industry and the markets in which it operates. The Company’s loan deferral program complies with the guidance set forth in the CARES Act and related guidance from the FDIC and other banking regulators. At September 30, 2020, the Company had 1,269 loans on deferral, or 5.1% of our loan portfolio (excluding PPP loans) by dollar value, down from 5,200 loans on deferral, or 21.5% of our loan portfolio (excluding PPP loans) by dollar value, at June 30, 2020. The aggregate balance of loans on deferral at September 30, 2020 and June 30, 2020 was approximately $497,000 and $2,094,000, respectively. In accordance with the applicable guidance, none of these loans were considered “restructured loans.”
The following table shows the principal amounts of nonperforming and restructured loans as of the dates presented. All loans where information exists about possible credit problems that would cause us to have serious doubts about the borrower’s ability to comply with the current repayment terms of the loan have been reflected in the table below.
 
September 30,
2020		December 31, 2019September 30,
2019
Nonaccruing loans$43,652 $28,547 $21,856 
Accruing loans past due 90 days or more2,144 7,775 14,359 
Total nonperforming loans45,796 36,322 36,215 
Restructured loans in compliance with modified terms20,322 11,954 13,429 
Total nonperforming and restructured loans$66,118 $48,276 $49,644 
The following table provides details of the Company’s other real estate owned as of the dates presented:
 
September 30,
2020		December 31, 2019September 30,
2019
Residential real estate$1,870 $1,305 $1,004 
Commercial real estate2,403 3,654 3,957 
Residential land development1,669 899 899 
Commercial land development2,211 2,152 2,331 
Total other real estate owned$8,153 $8,010 $8,191 

Changes in the Company’s other real estate owned were as follows:
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20202019
Balance at January 1,$8,010 $11,040 
Transfers of loans7,887 3,613 
Impairments(1,647)(1,121)
Dispositions(6,047)(5,341)
Other(50)— 
Balance at September 30,$8,153 $8,191 
Other real estate owned with a cost basis of $6,047 was sold during the nine months ended September 30, 2020, resulting in a net loss of $27, while other real estate owned with a cost basis of $5,341 was sold during the nine months ended September 30, 2019, resulting in a net loss of $91.

Interest Rate Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets and inventories. Our market risk arises primarily from interest rate risk inherent in lending and deposit-taking activities. Management believes a significant impact on the Company’s financial results stems from our ability to react to changes in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.
Because of the impact of interest rate fluctuations on our profitability, the Board of Directors and management actively monitor and manage our interest rate risk exposure. We have an Asset/Liability Committee (“ALCO”) that is authorized by the Board of Directors to monitor our interest rate sensitivity and to make decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital. The ALCO uses an asset/liability model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model is used to perform both net interest income forecast simulations for multiple year horizons and economic value of equity (“EVE”) analyses, each under various interest rate scenarios, which could impact the results presented in the table below.
Net interest income simulations measure the short and medium-term earnings exposure from changes in market interest rates in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet.
The following table presents the projected impact of a change in interest rates on (1) static EVE and (2) earnings at risk (that is, net interest income) for the 1-12 and 13-24 month periods commencing October 1, 2020, in each case as compared to the result under rates present in the market on September 30, 2020. 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.
 Percentage Change In:
Immediate Change in Rates of (in basis points):Economic Value Equity (EVE)                          Earning at Risk (Net Interest Income)
Static1-12 Months13-24 Months
+20018.87%9.10%16.19%
+10010.68%4.56%8.44%

The rate shock results for the net interest income simulations for the next twenty-four months produce an asset sensitive position at September 30, 2020 and are all within the parameters set by the Board of Directors. The preceding measures assume no change in the size or asset/liability compositions of the balance sheet, 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 of plus 100 and 200. 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
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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, 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, caps and/or floors, forward commitments, and interest rate lock commitments, as part of its ongoing efforts to mitigate its interest rate risk exposure. For more information about the Company’s derivative financial instruments, see the “Off-Balance Sheet Transactions” section below and Note 10, “Derivative Instruments,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.

Liquidity and Capital Resources

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

Core deposits, which are deposits excluding time deposits 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. Management continually monitors the Bank’s liquidity and non-core dependency ratios to ensure compliance with targets established by the Asset/Liability Management Committee.

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Within the next twelve months the securities portfolio is forecasted to generate cash flow through principal payments and maturities equal to approximately 28.29% of the carrying value of the total securities portfolio. Securities within our investment portfolio are also used to secure certain deposit types and short-term borrowings. At September 30, 2020, securities with a carrying value of $571,372 were pledged to secure public fund deposits and as collateral for short-term borrowings and derivative instruments as compared to securities with a carrying value of $444,603 similarly pledged at December 31, 2019.

Other sources available for meeting liquidity needs include federal funds purchased and short-term and long-term advances from the FHLB. Interest is charged at the prevailing market rate on federal funds purchased and FHLB advances. There were short-term borrowings from the FHLB in the amount of $30,000 at September 30, 2020 compared to $480,000 at December 31, 2019. Long-term funds obtained from the FHLB are used primarily to match-fund fixed rate loans in order to minimize interest rate risk and also are used to meet day-to-day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. At September 30, 2020, the balance of our outstanding long-term advances with the FHLB was $152,210 compared to $152,337 at December 31, 2019. The total amount of the remaining credit available to us from the FHLB at September 30, 2020 was $3,590,752. 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, 2020 or December 31, 2019.

In 2016 and 2020, we accessed the capital markets to generate liquidity in the form of subordinated notes. As part of the Metropolitan acquisition, the Company assumed $15,000 aggregate principal amount of 6.50% fixed-to-floating rate subordinated notes due July 1, 2026. The carrying value of the subordinated notes, net of unamortized debt issuance costs, was $212,223 at September 30, 2020.



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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 FundsCost of Funds
Nine Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Noninterest-bearing demand27.03 %22.96 %— %— %
Interest-bearing demand42.95 45.25 0.51 0.88 
Savings6.17 6.11 0.11 0.20 
Time deposits16.79 22.43 1.59 1.70 
Short-term borrowings3.85 0.79 1.02 2.76 
Long-term Federal Home Loan Bank advances1.27 0.06 0.80 3.33 
Subordinated notes1.03 1.36 5.54 6.24 
Other borrowed funds0.91 1.04 4.56 4.69 
Total deposits and borrowed funds100.00 %100.00 %0.64 %0.95 %

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

Cash and cash equivalents were $414,105 at September 30, 2020, as compared to $409,661 at September 30, 2019. Cash used in investing activities for the nine months ended September 30, 2020 was $1,355,398, as compared to $52,187 for the nine months ended September 30, 2019. Proceeds from the sale, maturity or call of securities within our investment portfolio were $323,136 for the nine months ended September 30, 2020, as compared to $405,005 for the same period in 2019. These proceeds were reinvested into the investment portfolio or used to fund loan growth. Purchases of investment securities were $304,955 for the first nine months of 2020, as compared to $366,265 for the same period in 2019.

Cash provided by financing activities for the nine months ended September 30, 2020 was $1,310,528, as compared to cash used in financing activities for the same period in 2019 of $137,145. Deposits increased $1,721,118 and $158,477 for the nine months ended September 30, 2020 and 2019, 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 the Bank to transfer funds to the Company in the form of dividends, loans and advances. Under Mississippi law, a Mississippi bank may not pay dividends unless its earned surplus is in excess of three times capital stock. A Mississippi bank with earned surplus in excess of three times capital stock may pay a dividend, subject to the approval of the Mississippi Department of Banking and Consumer Finance (the “DBCF”). In addition, the FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the bank, could include the payment of dividends. Accordingly, the approval of the DBCF is required prior to the Bank paying dividends to the Company, and under certain circumstances the approval of the FDIC may be required.
In addition to the FDIC and DBCF restrictions on dividends payable by the Bank to the Company, in July 2020 the Federal Reserve provided guidance regarding the criteria that it will use to evaluate the request by a bank holding company to pay dividends in an aggregate amount that will exceed the company’s earnings for the period in which the dividends will be paid. For purposes of this analysis, “dividend” includes not only dividends on preferred and common equity but also dividends on debt underlying trust preferred securities and other Tier 1 capital instruments. The Federal Reserve’s criteria evaluates whether the holding company (1) has net income over the past four quarters sufficient to fully fund the proposed dividend (taking into account prior dividends paid during this period), (2) is considering stock repurchases or redemptions in the quarter, (3) does not have a concentration in commercial real estate and (4) is in good supervisory condition, based on its overall condition and its asset quality risk. A holding company not meeting these criteria will require more in-depth consultations with the Federal Reserve. The Company’s dividends for the third quarter of 2020 did not exceed the Company’s earnings for such quarter.

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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, 2020, the maximum amount available for transfer from the Bank to the Company in the form of loans was $147,040. The Company maintains a line of credit collateralized by cash with the Bank totaling $3,070. There were no amounts outstanding under this line of credit at September 30, 2020.

These restrictions did not have any impact on the Company’s ability to meet its cash obligations in the nine months ended September 30, 2020, nor does management expect such restrictions to materially impact the Company’s ability to meet its currently-anticipated cash obligations.
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Off-Balance Sheet Transactions
The Company enters into loan commitments and standby letters of credit in the normal course of its business. Loan commitments are made to accommodate the financial needs of the Company’s customers. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to customers and are subject to the Company’s normal credit policies, 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, 2020December 31, 2019
Loan commitments$2,650,843 $2,324,262 
Standby letters of credit93,103 94,824 

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 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, 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, 2020, the Company had notional amounts of $272,136 on interest rate contracts with corporate customers and $272,136 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed rate loans.
Additionally, the Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate and adjustable rate residential mortgage loans and also enters into forward commitments to sell residential mortgage loans to secondary market investors.
The Company has also entered into forward interest rate swap contracts on FHLB borrowings, as well as interest rate swap agreements on junior subordinated debentures, all of which are accounted for as cash flow hedges. Under each of these contracts, the Company will pay a fixed rate of interest and will receive a variable rate of interest based on the one-month or three-month LIBOR plus a predetermined spread.
For more information about the Company’s off-balance sheet transactions, see Note 10, “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 $2,104,300 at September 30, 2020 compared to $2,125,689 at December 31, 2019. Book value per share was $37.45 and $37.39 at September 30, 2020 and December 31, 2019, respectively. The decrease in shareholders’ equity was attributable to the day one impact of our adoption of CECL, an increased provision for credit losses during the first nine months of 2020 offsetting a portion of our earnings in 2020 while maintaining the quarterly dividends, and common stock repurchased in the first quarter of 2020.

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
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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.

On October 20, 2020, the Company’s Board of Directors approved a new stock repurchase program (the previous program having just expired), authorizing the Company to repurchase up to $50,000 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 currently has no plans to initiate stock repurchases under the new stock purchase plan.

The Company has junior subordinated debentures with a carrying value of $110,649 at September 30, 2020, of which $107,058 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 amount of debentures we include in Tier 1 capital at September 30, 2020. Although our existing junior subordinated debentures are currently unaffected by these Federal Reserve guidelines, on account of changes enacted as part of the Dodd-Frank Act, any new trust preferred securities are not includable in Tier 1 capital. Further, if as a result of an acquisition we exceed $15,000,000 in assets, or if we make any acquisition after we have exceeded $15,000,000 in assets, we will lose Tier 1 treatment of our junior subordinated debentures.

The Company has subordinated notes with a carrying value of $212,223 at September 30, 2020, of which $212,054 is included in the Company’s Tier 2 capital. As previously discussed in the “Financial Condition” section above, in September 2020, the Company issued $100,000 of its 4.50% fixed-to-floating rate subordinated notes due September 1, 2035.

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 TiersTier 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 capitalized5% or above6.5% or above 8% or above 10% or above
Adequately capitalized4% or above4.5% or above 6% or above 8% or above
UndercapitalizedLess than 4%Less than 4.5% Less than 6% Less than 8%
Significantly undercapitalizedLess than 3%Less than 3% Less than 4% Less than 6%
Critically undercapitalized Tangible Equity / Total Assets less than 2%

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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:
 ActualMinimum Capital
Requirement to be
Well Capitalized		Minimum Capital
Requirement to be
Adequately
Capitalized (including the Capital Conservation Buffer)
 AmountRatioAmountRatioAmountRatio
September 30, 2020
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio$1,174,260 10.80 %$706,678 6.50 %$761,037 7.00 %
Tier 1 risk-based capital ratio1,281,318 11.79 %869,757 8.00 %924,117 8.50 %
Total risk-based capital ratio1,618,837 14.89 %1,087,196 10.00 %1,141,556 10.50 %
Leverage capital ratios:
Tier 1 leverage ratio1,281,318 9.17 %698,723 5.00 %558,979 4.00 %
Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio$1,344,938 12.38 %$706,155 6.50 %$760,474 7.00 %
Tier 1 risk-based capital ratio1,344,938 12.38 %869,113 8.00 %923,433 8.50 %
Total risk-based capital ratio1,470,402 13.53 %1,086,392 10.00 %1,140,711 10.50 %
Leverage capital ratios:
Tier 1 leverage ratio1,344,938 9.64 %697,927 5.00 %558,341 4.00 %
December 31, 2019
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio$1,156,828 11.12 %$676,106 6.50 %$728,114 7.00 %
Tier 1 risk-based capital ratio1,262,588 12.14 %832,131 8.00 %884,139 8.50 %
Total risk-based capital ratio1,432,949 13.78 %1,040,163 10.00 %1,092,171 10.50 %
Leverage capital ratios:
Tier 1 leverage ratio1,262,588 10.37 %608,668 5.00 %486,934 4.00 %
Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio$1,331,809 12.81 %$675,581 6.50 %$727,548 7.00 %
Tier 1 risk-based capital ratio1,331,809 12.81 %831,484 8.00 %883,452 8.50 %
Total risk-based capital ratio1,388,553 13.36 %1,039,355 10.00 %1,091,323 10.50 %
Leverage capital ratios:
Tier 1 leverage ratio1,331,809 10.95 %607,907 5.00 %486,326 4.00 %

As previously disclosed, the Company adopted CECL as of January 1, 2020. The Company has 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.

For more information regarding the capital adequacy guidelines applicable to the Company and Renasant Bank, please refer to Note 15, “Regulatory Matters,” in the Notes to the Consolidated Financial Statements of the Company in Item 1, Financial Statements.
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Non-GAAP Financial Measures

This report presents the Company’s efficiency ratio in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Additionally, this report presents an adjusted efficiency ratio, which is a non-GAAP financial measure. We calculate the efficiency ratio by dividing noninterest expense by the sum of net interest income on a fully tax equivalent basis and noninterest income. The adjusted efficiency ratio excludes expenses that (1) the Company does not consider to be part of our core operating activities, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as, when applicable, COVID-19 related expenses, merger and conversion related expenses, debt prepayment penalties, asset valuation adjustments and provision for unfunded commitments. Management uses the adjusted efficiency ratio to evaluate ongoing operating results and efficiency of the Company’s operations. The reconciliation from GAAP to non-GAAP for this financial measure is below.

Efficiency Ratio
Three months ended September 30,Nine months ended September 30,
2020201920202019
Interest income (fully tax equivalent basis)$123,677 $135,927 $381,195 $413,790 
Interest expense15,792 25,651 57,536 74,660 
Net interest income (fully tax equivalent basis)107,885 110,276 323,659 339,130 
Total noninterest income70,928 37,953 172,668 115,798 
Net gains (losses) on sales of securities— 343 31 348 
MSR valuation adjustment828 (3,132)(13,694)(3,132)
Adjusted noninterest income70,100 40,742 186,331 118,582 
Total noninterest expense116,510 96,500 349,836 278,622 
Intangible amortization1,733 1,996 5,462 6,159 
Merger and conversion related expenses— 24 — 203 
Extinguishment of debt28 54 118 54 
COVID-19 related expenses570 — 9,730 — 
Provision for unfunded commitments2,700 — 8,700 — 
Adjusted noninterest expense111,479 94,426 325,826 272,206 
Efficiency Ratio (GAAP)65.16 %65.10 %70.49 %61.25 %
Adjusted Efficiency Ratio (non-GAAP)62.63 %62.53 %63.89 %59.47 %

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


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk since December 31, 2019. For additional information regarding our market risk, see our Annual Report on Form 10-K for the year ended December 31, 2019.

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
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13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Principal Executive and Principal Financial Officers, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company’s internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II. OTHER INFORMATION

Item 1A. RISK FACTORS

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, 2019. 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.
The ongoing COVID-19 pandemic and measures intended to arrest the virus’s spread have adversely affected, and are expected to continue to adversely affect, the Company.
The spread of the COVID-19 virus has created a global public health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally. In an effort to prevent the further spread of the virus, federal and state governments, including state and local governments in the markets in which we operate, have imposed various levels of restrictions on all businesses and the activities of individuals outside their residences, ranging from the required closure of “non-essential” businesses and restrictions on the number of customers that a business may allow inside its premises to orders mandating that all individuals wear protective face coverings and observe social distancing in all instances. In addition, most businesses, including the Company, have taken steps to protect the health and well-being of their customers and employees and to promote efforts to limit the transmission of the disease, and these steps, to varying degrees, have limited (if not entirely halted) the normal operations of these businesses. These actions (including those that remain in place and those that have lapsed as of the date hereof) by federal and state governments, businesses and individuals have had, and continue to have, a severe negative impact on the global and United States economies as well as the local economies across our footprint. Although these negative impacts lessened to some extent during the third quarter of 2020, as compared to conditions prior to the onset of the COVID-19 pandemic, both the United States economy and the Company's markets in particular continue to experience a significant decrease in commercial and consumer activity and changes in the manner of conducting permitted activities, a decrease in the demand for the Company’s services and products, elevated levels of unemployment, disrupted U.S. and global supply chains, increased volatility as well as other disruptions in the financial markets, and credit deterioration and defaults in many industries. The markets in which we operate have been significantly and adversely affected by the pandemic, which may in turn have a material and adverse effect on our business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects. Furthermore, additional measures taken in the future to address the pandemic by government, businesses in general and the Company, especially in light of rapid increases in positive COVID-19 diagnoses since October 2020, may exacerbate the economic impact of the pandemic on us, especially if the current level of restrictions on business activity fails to arrest the ongoing spread of the COVID-19 virus.
Federal and state governments have taken unprecedented actions to assist businesses and individuals impacted by the COVID-19 virus and to stabilize the financial markets and otherwise limit the impact of the pandemic on the economy as a whole, and additional legislation and other actions are currently being contemplated. The Company has itself implemented measures to assist its qualified commercial and consumer clients, including allowing principal and interest payments on loans to be deferred for a period of up to three months (with qualifying customers having the ability to defer for a second three-month period). It is unclear at this time how successful, if at all, these past, present and future governmental actions as well as the Company’s own efforts will be in supporting businesses and individuals, the markets and the broader economy over the long term and generally ameliorating the impact of the COVID-19 virus on the United States as a whole and the particular markets in which we operate. In the meantime, these governmental actions, along with the steps the Company has taken, may have a material adverse effect on our business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects. In addition, the Company faces an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.
The extent to which the pandemic impacts our business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects ultimately depends on the duration of the pandemic, the effectiveness of the measures implemented and to be implemented by governments and businesses, including the Company, to address it and the time it will take the global, national and local economies to recover to their pre-pandemic levels once they reopen, all of which are highly uncertain and cannot be predicted at this time. Further, there can be no assurance that any of these efforts will be effective. In the meantime, until the effects of the pandemic subside, we expect continued draws on lines of credit, reduced revenues in our business, and increased customer defaults. As described above in the “Risk Management” section in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-Q, the Company significantly increased its allowance for credit losses in the first nine months of 2020, and the impact of the pandemic may result in further increases to our allowance for credit losses. Even after the pandemic has subsided, we may continue to experience adverse impacts to our business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects, which could be material, as a result of the economic impact and any recession that has occurred or may occur in the future.
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The COVID-19 virus has also resulted in heightened operational risks. A significant portion of our workforce is currently working remotely, and increased levels of remote access create additional cybersecurity risk and opportunities for cybercriminals to exploit vulnerabilities. Cybercriminals may increase their attempts to compromise business emails, including an increase in phishing attempts, and fraudulent vendors or other parties may view the pandemic as an opportunity to prey upon consumers and businesses during this time. This could result in increased fraud losses to us or our customers. The increase in online and remote banking activities may also increase the risk of fraud in certain instances. In addition, state and local orders and regulations limiting the conduct of in-person business operations may impact our ability to operate at normal levels and to restore operations to their pre-pandemic level for an unknown period of time. Separately, our third-party service providers have also been impacted by the pandemic, and we have experienced some disruption to certain services performed by vendors. To date, these disruptions have not been material and we have developed solutions to work around these disruptions, but we may experience additional disruption in the future, which could adversely impact our business.
Finally, our Annual Report on Form 10-K for the year ended December 31, 2019 lists numerous risk factors relating to the Company in particular as well as the financial services industry and public companies in general. These risk factors can be found in Item 1A, “Risk Factors,” of such Annual Report. The impact of the COVID-19 virus may also have the effect of exacerbating the adverse impact of these other risk factors on our business, financial condition, results of operations, liquidity, asset quality, capital, cash flows and prospects.


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, 2020, the Company repurchased shares of its common stock as indicated in the following table:
Total Number of Shares Purchased(1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs(2)
July 1, 2020 to July 31, 2020158 $23.75 — $5,464 
August 1, 2020 to August 31, 2020106 23.53 — 5,464 
September 1, 2020 to September 30, 20204,752 25.35 — 5,464 
Total5,016 $25.27 — 
(1)The Company announced a $50.0 million stock repurchase program in October 2019, under which the Company was authorized to repurchase outstanding shares of its common stock either in open market purchases or privately-negotiated transactions. The Company suspended stock repurchases under this program in March 2020, and accordingly no shares were repurchased during the third quarter of 2020. The program expired in October 2020. The Company announced a new $50.0 million stock repurchase program on October 20, 2020 which 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 currently has no plans to initiate stock repurchases under the new stock purchase plan.
For the three months ended September 30, 2020, share amounts in this column represent shares of Renasant Corporation common stock withheld to satisfy federal and state tax liabilities related to the vesting of time-based restricted stock awards during the period.
(2)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.
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Item 6. EXHIBITS
 
Exhibit
Number		 Description
(3)(i) 
(3)(ii) 
(4)(i)
(4)(ii)
(4)(iii)
(10)(i)
(31)(i) 
(31)(ii) 
(32)(i) 
(32)(ii) 
(101) The following materials from Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 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 and (v) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements (Unaudited).
(104)The cover page of Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, 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 4.1 to the Form 8-K of the Company filed with the Commission on August 22, 2016 and incorporated herein by reference.
(4)Filed as exhibit 4.2 to the Form 8-K of the Company filed with the Commission on September 3, 2020 and incorporated herein by reference.
(5)Filed as exhibit 10.1 to the Form 8-K of the Company filed with the Commission on July 31, 2020 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 RENASANT CORPORATION
 (Registrant)
Date:November 9, 2020/s/ C. Mitchell Waycaster
 C. Mitchell Waycaster
 President and
 Chief Executive Officer
 (Principal Executive Officer)
Date:November 9, 2020/s/ James C. Mabry IV
 James C. Mabry IV
 Executive Vice President and
 Chief Financial Officer
 (Principal Financial Officer)
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