UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________

FORM 10-Q

________________________________________________________

(Mark One)



ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2018



o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number: 001-13253

________________________________________________________

RENASANT CORPORATION

(Exact name of registrant as specified in its charter)

________________________________________________________



Mississippi		64-0676974
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

209 Troy Street, Tupelo, Mississippi		38804-4827
(Address of principal executive offices)		(Zip Code)

(662) 680-1001

(Registrant’s telephone number, including area code)

________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of ~~October 31, 2017, 49,320,225~~April 30, 2018, 49,409,304 shares of the registrant’s common stock, $5.00 par value per share, were outstanding.

Renasant Corporation and Subsidiaries

Form 10-Q

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2018

CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Renasant Corporation and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Data)


	(Unaudited)						(Unaudited)
	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Assets
Cash and due from banks	$	194,985		$	160,570		$	163,768		$	187,838
Interest-bearing balances with banks	137,215			145,654			87,210			93,615
Cash and cash equivalents	332,200			306,224			250,978			281,453
Securities held to maturity (fair value of as of December 31, 2016 - $362,893)	—			356,282
Securities available for sale, at fair value	1,150,459			674,248			948,365			671,488
Mortgage loans held for sale, at fair value	207,288			177,866			204,472			108,316
Loans, net of unearned income:
Non purchased loans and leases	5,293,467			4,713,572			5,830,122			5,588,556
Purchased loans	2,155,141			1,489,137			1,867,948			2,031,766
Total loans, net of unearned income	7,448,608			6,202,709			7,698,070			7,620,322
Allowance for loan losses	(44,531		)	(42,737		)	(46,401		)	(46,211		)
Loans, net	7,404,077			6,159,972			7,651,669			7,574,111
Premises and equipment, net	186,730			179,223			184,209			183,254
Other real estate owned:
Non purchased	4,524			5,929			4,801			4,410
Purchased	13,296			17,370			9,754			11,524
Total other real estate owned, net	17,820			23,299			14,555			15,934
Goodwill	611,046			470,534			611,046			611,046
Other intangible assets, net	26,218			24,074			22,859			24,510
Bank-owned life insurance	174,739			152,305			176,978			175,863
Mortgage servicing rights	35,930			26,302			40,216			39,339
Other assets	177,180			149,522			132,966			144,667
Total assets	$	10,323,687		$	8,699,851		$	10,238,313		$	9,829,981
Liabilities and shareholders’ equity
Liabilities
Deposits
Noninterest-bearing	$	1,835,300		$	1,561,357		$	1,861,136		$	1,840,424
Interest-bearing	6,283,218			5,497,780			6,496,633			6,080,651
Total deposits	8,118,518			7,059,137			8,357,769			7,921,075
Short-term borrowings	384,230			109,676			57,753			89,814
Long-term debt	207,703			202,459			207,438			207,546
Other liabilities	101,410			95,696			82,588			96,563
Total liabilities	8,811,861			7,466,968			8,705,548			8,314,998
Shareholders’ equity
Preferred stock, $.01 par value – 5,000,000 shares authorized; no shares issued and outstanding	—			—			—			—
Common stock, $5.00 par value – 150,000,000 shares authorized; 49,990,248 shares issued; 49,320,225 and 44,332,273 shares outstanding, respectively	249,951			225,535
Common stock, $5.00 par value – 150,000,000 shares authorized; 49,990,248 shares issued; 49,392,978 and 49,321,231 shares outstanding, respectively							249,951			249,951
Treasury stock, at cost	(19,919		)	(21,692		)	(18,296		)	(19,906		)
Additional paid-in capital	896,551			707,408			896,881			898,095
Retained earnings	388,209			337,536			421,725			397,354
Accumulated other comprehensive loss, net of taxes	(2,966		)	(15,904		)	(17,496		)	(10,511		)
Total shareholders’ equity	1,511,826			1,232,883			1,532,765			1,514,983
Total liabilities and shareholders’ equity	$	10,323,687		$	8,699,851		$	10,238,313		$	9,829,981

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

(In Thousands, Except Share Data)


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2017		2016		2017		2016		2018		2017
Interest income
Loans	$	92,536	$	76,759	$	247,076	$	222,781	$	94,118	$	74,407
Securities
Taxable	5,061		3,717		14,040		12,832		3,994		4,352
Tax-exempt	2,400		2,425		7,284		7,378		1,685		2,574
Other	698		131		1,763		308		583		556
Total interest income	100,695		83,032		270,163		243,299		100,380		81,889
Interest expense
Deposits	6,834		4,638		17,297		13,018		8,059		5,149
Borrowings	3,844		2,663		9,231		7,339		3,081		2,725
Total interest expense	10,678		7,301		26,528		20,357		11,140		7,874
Net interest income	90,017		75,731		243,635		222,942		89,240		74,015
Provision for loan losses	2,150		2,650		5,400		5,880		1,750		1,500
Net interest income after provision for loan losses	87,867		73,081		238,235		217,062		87,490		72,515
Noninterest income
Service charges on deposit accounts	8,676		8,200		24,565		23,712		8,473		7,931
Fees and commissions	5,618		4,921		16,287		14,042		5,685		5,199
Insurance commissions	2,365		2,420		6,406		6,557		2,005		1,860
Wealth management revenue	2,963		3,040		8,884		8,803		3,262		2,884
Mortgage banking income	10,616		15,846		33,544		41,181		10,960		10,504
Net gain on sales of securities	57		—		57		1,186
BOLI income	1,136		979		3,234		2,929		945		1,113
Other	1,982		2,866		6,722		8,750		2,623		2,530
Total noninterest income	33,413		38,272		99,699		107,160		33,953		32,021
Noninterest expense
Salaries and employee benefits	48,530		44,702		135,753		132,482		48,784		42,209
Data processing	4,179		4,560		12,248		13,220		4,244		4,234
Net occupancy and equipment	9,470		8,830		27,603		25,585		9,822		9,319
Other real estate owned	603		1,540		1,916		4,111		657		532
Professional fees	1,552		1,824		5,501		5,459		2,138		2,067
Advertising and public relations	1,802		1,661		5,824		5,040		2,203		1,592
Intangible amortization	1,766		1,684		4,822		5,123		1,651		1,563
Communications	1,927		2,097		5,698		6,308		1,969		1,863
Extinguishment of debt	—		2,210		205		2,539		—		205
Merger and conversion related expenses	6,266		268		9,655		4,023		900		345
Other	4,565		7,092		15,585		19,651		5,576		5,380
Total noninterest expense	80,660		76,468		224,810		223,541		77,944		69,309
Income before income taxes	40,620		34,885		113,124		100,681		43,499		35,227
Income taxes	14,199		11,706		37,447		33,386		9,673		11,255
Net income	$	26,421	$	23,179	$	75,677	$	67,295	$	33,826	$	23,972
Basic earnings per share	$	0.54	$	0.55	$	1.64	$	1.62	$	0.69	$	0.54
Diluted earnings per share	$	0.53	$	0.55	$	1.64	$	1.61	$	0.68	$	0.54
Cash dividends per common share	$	0.18	$	0.18	$	0.54	$	0.53	$	0.19	$	0.18

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

(In Thousands, Except Share Data)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2018			2017
Net income	$	26,421		$	23,179		$	75,677		$	67,295		$	33,826		$	23,972
Other comprehensive income, net of tax:
Other comprehensive (loss) income, net of tax:
Securities available for sale:
Unrealized holding gains on securities	(764		)	1,385			4,712			5,260
Reclassification adjustment for gains realized in net income	—			—			—			(728		)
Unrealized holding gains on securities transfered from held to maturity to available for sale	8,108			—			8,108			—
Unrealized holding (losses) gains on securities													(7,909		)	2,907
Amortization of unrealized holding gains on securities transferred to the held to maturity category	(4		)	(11		)	(173		)	(49		)	—			(151		)
Total securities	7,340			1,374			12,647			4,483			(7,909		)	2,756
Derivative instruments:
Unrealized holding gains (losses) on derivative instruments	100			495			104			(1,199		)
Unrealized holding gains on derivative instruments													858			169
Total derivative instruments	100			495			104			(1,199		)	858			169
Defined benefit pension and post-retirement benefit plans:
Reclassification adjustment for net settlement gain realized in net income	—			(235		)	—			(235		)
Amortization of net actuarial loss recognized in net periodic pension cost	62			76			187			228			66			69
Total defined benefit pension and post-retirement benefit plans	62			(159		)	187			(7		)	66			69
Other comprehensive income, net of tax	7,502			1,710			12,938			3,277
Other comprehensive (loss) income, net of tax													(6,985		)	2,994
Comprehensive income	$	33,923		$	24,889		$	88,615		$	70,572		$	26,841		$	26,966

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(In Thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Operating activities
Net income	$	75,677		$	67,295		$	33,826		$	23,972
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses	5,400			5,880			1,750			1,500
Depreciation, amortization and accretion	3,541			2,804			650			358
Deferred income tax expense	1,669			5,663			1,990			3,946
Funding of mortgage loans held for sale	(1,256,233		)	(1,516,650		)	(362,803		)	(318,144		)
Proceeds from sales of mortgage loans held for sale	1,245,301			1,579,476			275,445			343,945
Gains on sales of mortgage loans held for sale	(15,719		)	(26,687		)	(8,798		)	(6,554		)
Gains on sales of securities	(57		)	(1,186		)
Penalty on prepayment of debt	205			2,539			—			205
Losses on sales of premises and equipment	553			105			8			512
Stock-based compensation expense	3,771			2,563			1,858			1,174
Decrease in FDIC loss-share indemnification asset, net of accretion	—			2,442
(Increase) decrease in other assets	(2,059		)	5,591
Decrease in other assets							9,623			18,882
Decrease in other liabilities	(9,652		)	(5,097		)	(14,720		)	(14,662		)
Net cash provided by operating activities	52,397			124,738
Net cash (used in) provided by operating activities							(61,171		)	55,134
Investing activities
Purchases of securities available for sale	(191,679		)	(82,243		)	(317,922		)	(52,683		)
Proceeds from sales of securities available for sale	43,494			4,028			—			2,946
Proceeds from call/maturities of securities available for sale	132,044			117,232			29,335			30,800
Purchases of securities held to maturity	—			(10,644		)
Proceeds from sales of securities held to maturity	4,876			—
Proceeds from call/maturities of securities held to maturity	15,882			109,305			—			7,710
Net increase in loans	(272,618		)	(407,570		)	(74,344		)	(31,974		)
Purchases of premises and equipment	(11,925		)	(8,958		)	(4,384		)	(4,441		)
Proceeds from sales of premises and equipment	1,255			2,462			—			13
Proceeds from sales of other assets	11,485			11,040			2,085			5,307
Net cash received in acquisition of businesses	41,685			25,263
Net cash used in investing activities	(225,501		)	(240,085		)	(365,230		)	(42,322		)
Financing activities
Net increase in noninterest-bearing deposits	6,464			163,406			20,712			18,224
Net increase in interest-bearing deposits	112,854			85,005			416,759			154,001
Net increase (decrease) in short-term borrowings	274,554			(157,685		)
Proceeds from long-term borrowings	—			98,434
Net decrease in short-term borrowings							(32,061		)	(99,721		)
Repayment of long-term debt	(169,961		)	(46,964		)	(230		)	(10,790		)
Cash paid for dividends	(25,004		)	(22,108		)	(9,455		)	(8,030		)
Net stock-based compensation transactions	173			415			201			(1,976		)
Excess tax benefit from stock-based compensation	—			664
Net cash provided by financing activities	199,080			121,167			395,926			51,708
Net increase in cash and cash equivalents	25,976			5,820
Net (decrease) increase in cash and cash equivalents							(30,475		)	64,520
Cash and cash equivalents at beginning of period	306,224			211,571			281,453			306,224
Cash and cash equivalents at end of period	$	332,200		$	217,391		$	250,978		$	370,744
Supplemental disclosures
Cash paid for interest	$	26,974		$	19,658		$	12,656		$	9,635
Cash paid for income taxes	$	29,491		$	22,731		$	6,280		$	7,181
Noncash transactions:
Transfers of loans to other real estate owned	$	5,418		$	5,147		$	1,154		$	3,168
Financed sales of other real estate owned	$	257		$	538		$	418		$	237
Transfers of loans held for sale to loan portfolio	$	—		$	15,455
Common stock issued in acquisition of businesses	$	213,590		$	55,290
Transfers of loans held for sale to loans held for investment							$	442		$	—

See Notes to Consolidated Financial Statements.

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Summary of Significant Accounting Policies

(In Thousands)

Nature of Operations: Renasant Corporation (referred to herein as the “Company”) owns and operates Renasant Bank (“Renasant Bank” or the “Bank”) and Renasant Insurance, Inc. The Company offers a diversified range of financial, wealth management and insurance services to its retail and commercial customers through its subsidiaries and full service offices located throughout north and central Mississippi, Tennessee, Georgia, Alabama and north Florida.

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified to conform to the current year presentation. For further information regarding the Company’s significant accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2016~~2017 filed with the Securities and Exchange Commission on February 28, ~~2017.~~2018.

Business Combinations: The Company completed its ~~acquisitions~~acquisition of ~~KeyWorth Bank (“KeyWorth”) and~~ Metropolitan BancGroup, Inc. (“Metropolitan”) on ~~April 1, 2016 and~~ July 1, ~~2017, respectively. The acquired institutions'~~2017. Metropolitan’s financial condition and results of operations are included in the ~~Company's~~Company’s financial condition and results of operations as of the ~~respective~~ acquisition ~~dates.~~date.

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.~~estimates, and such differences may be material.

Subsequent Events: The Company has evaluated, for consideration of recognition or disclosure, subsequent events that have occurred through the date of issuance of its financial statements. The Company has determined that no significant events occurred after ~~September 30, 2017~~March 31, 2018 but prior to the issuance of these financial statements that would have a material impact on its Consolidated Financial Statements.

Impact of Recently-Issued Accounting Standards and Pronouncements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which is an update to FASB Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of this standard to annual and interim periods beginning after December 15, 2017. While the Company is currently evaluating the impact ASU 2014-09 will have on its financial position and results of operations, and its financial statement disclosures, the recognition of revenue forFor a majority of the Company’s income streams, including interest income earned on loans and leases, the recognition of revenue is governed by other accounting standards and is specifically excluded from the coverage of ~~FASB Accounting Standards Codification (“~~ASC ~~606”), “Revenue from Contracts with Customers~~”~~(“ASC 606”). The sources of~~606. In addition, the ~~Company's~~Company’s revenue that is covered by ASC 606, the most significant of which is service charges on deposit accounts, ~~are~~is generally based on day-to-day contracts with Company ~~customers; therefore,~~customers and, as a result, is not impacted by the ~~Company does not expect significant changes in the timing of the recognition of revenue.~~new guidance. The Company ~~is continuing to evaluate the impact of the new standard on each line of revenue as well as prepare for the new disclosures required by the standard. The Company intends to adopt the standard~~adopted ASU 2014-09 in the first quarter of 2018, and ~~use~~there was no impact to the ~~modified retrospective transition method.~~financial statements at the time of adoption. The Company has included newly applicable revenue disclosures in this filing, in Note 19, “Revenue Recognition.”

In January 2016, FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 revises the accounting for the classification and measurement of investments in equity securities and revises the presentation of certain fair value changes for financial liabilities measured at fair value. For equity securities, the guidance in ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income. For financial liabilities that are measured at fair value in accordance with the fair value option, the guidance requires presenting, in other comprehensive income, the change in fair value that relates to a change in instrument-specific credit risk. ASU 2016-01 also eliminates the disclosure assumptions used to estimate fair value for financial instruments measured at amortized cost and requires disclosure of an exit price notion in determining the fair value of financial instruments measured at amortized cost. ~~ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017.~~ The Company ~~is evaluating~~used an entry price notion in determining the fair value of certain financial instruments prior to its changing to the exit price notion upon adoption of this standard in the first quarter of 2018. This ASU did not have any other impact ~~if any, that ASU 2016-01 will have~~ on ~~its financial position and results~~the Company at the time of ~~operations, and its financial statement disclosures.~~adoption.

In February 2016, FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 amends the accounting model and disclosure requirements for leases. The current accounting model for leases distinguishes between capital leases, which are recognized on-balance sheet, and operating leases, which are not. Under the new standard, the lease classifications are defined as finance leases, which are similar to capital leases under current GAAP, and operating leases. Further, a lessee will recognize a lease liability and a right-of-use asset for all leases with a term greater than 12 months on its balance sheet regardless of the lease’s classification, which may significantly increase reported assets and liabilities. The accounting model and disclosure requirements for lessors remains substantially unchanged from current GAAP. ASU 2016-02 is effective for annual and interim periods in fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact ASU 2016-02 will have on its financial position and results of operations, and its financial statement disclosures, and the expected results include the recognition of leased assets and related lease liabilities on the balance sheet, along with leasehold amortization and interest expense recognized in the statement of income.

In ~~March 2016, FASB issued ASU 2016-09,~~ ~~“Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”~~ (“ASU 2016-09”). ASU 2016-09 is intended to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes. The Company adopted ASU 2016-09 beginning January 1, 2017 and as a result recognized as income tax expense in the Company's consolidated statement of income for the nine months ended September 30, 2017 an excess tax benefit realized from the exercise of stock options and vesting of restricted stock. Furthermore, the presentation of certain elements of share-based payment transactions in the Company's Consolidated Statements of Cash Flows was updated to comply with the standard update.

In June 2016, FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ~~The~~This update will significantly change the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the ~~asset's~~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~~it incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model would include loans, held-to-maturity debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. For public companies, this update becomes effective for interim and annual periods beginning after December 15, 2019. The Company has formed an implementation committee comprised of both accounting and credit employees to guide Renasant Bank through the implementation of ASU 2016-13. Currently, this committee is ~~gaining an understanding of~~working with a consulting firm to develop the ~~potential impact of the~~Company’s CECL model, which includes reviewing the different model requirements and ensuring historical data integrity across all reporting systems. ~~The Company has also engaged consulting firms and software providers to assist in evaluating the varying approaches to the implementation of the CECL model.~~

~~In August 2016, FASB issued ASU 2016-15,~~ ~~“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”~~ (“ASU 2016-15”). ASU 2016-15 is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions and (8) separately identifiable cash flows and application of the predominance principle. For public companies, this amendment becomes effective for interim and annual periods beginning after December 15, 2017. ASU 2016-15 only impacts the presentation of specific items within the statement of cash flows and is not expected to have a material impact on the Company's financial statements.

~~In January 2017, FASB issued ASU 2017-01,~~ ~~“Business Combinations (Topic 805), Clarifying the Definition of a Business”~~ ~~(“ASU 2017-01”),~~that changes the definition of a business when evaluating whether transactions should be accounted for as the acquisition of assets or the acquisition of a business. ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the assets acquired is concentrated in a single asset or a group of similar identifiable assets; if so, the acquired assets or group of similar identifiable assets is not considered a business. In addition, the guidance requires that, to be considered a business, the acquired assets must include an input and a substantive process that together significantly contribute to the ability to create output. The ASU removes the evaluation of whether a market participant could replace any of the missing elements. ASU 2017-01 is effective for interim and annual periods beginning after December 15, 2017 and is not expected to have a material impact on the Company’s financial statements.

~~In January 2017, FASB issued ASU 2017-03,~~ “Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323) Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22,

~~2016 and November 17, 2016 EITF Meetings”~~ (“ASU 2017-03”), that provides guidance on additional qualitative disclosures required when the impact of the adoption of ASU 2014-09, ASU 2016-02 and ASU 2016-13 on a registrant's financial statements cannot reasonably be estimated by the registrant. ASU 2017-03 was effective when issued and the appropriate disclosures have been added where necessary.

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

In March 2017, FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”). ASU 2017-07 requires employers to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. These amendments also allow only the service cost component to be eligible for capitalization when applicable. ~~ASU 2017-07 will be~~This update became effective ~~for interim~~January 1, 2018 and ~~annual periods beginning after December 15, 2017. The Company is evaluating~~did not have a material impact on the ~~effect that ASU 2017-07 will have on its~~Company’s financial ~~position and results of operations and its financial statement disclosures.~~statements.

In March 2017, FASB issued ASU 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities” (“ASU 2017-08”). ASU 2017-08 requires the amortization period for certain callable debt securities held at a premium to be the earliest call date. ASU 2017-08 will be effective for interim and annual periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017-08 will have on its financial position and results of operations and its financial statement disclosures.

In August 2017, FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 is intended to simplify hedge accounting by eliminating the requirement to separately measure and report hedge effectiveness. ASU 2017-12 also seeks to expand the application of hedge accounting by modifying current requirements to include hedge accounting on partial-term hedges, the hedging of prepayable financial instruments and other strategies. ASU 2017-12 will be effective for interim and annual periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017-12 will have on its financial position and results of operations and its financial statement disclosures.

In February 2018, FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220)” (“ASU 2018-02”). The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings to eliminate the stranded tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act. ASU 2018-02 will be effective for interim and annual periods beginning after December 15, 2018. Early adoption was permitted, including adoption in any interim period, for public companies for reporting periods for which financial statements had not yet been issued. The Company adopted ASU 2018-02 as of December 31, 2017 and, as a result, reclassified $2,046 from accumulated other comprehensive income to retained earnings as of December 31, 2017. The reclassification impacted the Consolidated Balance Sheet and the Consolidated Statement of Changes in Shareholders’ Equity as of and for the twelve months ended December 31, 2017.

Note 2 – Mergers and Acquisitions

(In Thousands, Except Share Data)

Merger with Brand Group Holdings, Inc.

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

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

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

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

Acquisition of Metropolitan BancGroup, Inc.

Effective July 1, 2017, the Company completed its acquisition of Metropolitan, the parent company of Metropolitan Bank, in a transaction valued at approximately $219,461. The Company issued 4,883,182 shares of common stock and paid approximately $4,764 to Metropolitan stock option holders for 100% of the voting equity interest in Metropolitan. At closing, Metropolitan merged with and into the Company, with the Company the surviving corporation in the merger; immediately thereafter, Metropolitan Bank merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger. On July 1, 2017, Metropolitan operated eight banking locations in Nashville and Memphis, Tennessee and the Jackson, Mississippi Metropolitan Statistical Area.

The Company recorded approximately $147,478 in intangible assets which consist of goodwill of $140,512 and a core deposit intangible of $6,966. Goodwill resulted from a combination of revenue enhancements from expansion in existing markets and efficiencies resulting from operational synergies. The fair value of the core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years. The goodwill is not deductible for income tax purposes.

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


Purchase Price:
Shares issued to common shareholders	4,883,182					4,883,182
Purchase price per share	$	43.74				$	43.74
Value of stock paid				$	213,590				$	213,590
Cash paid for fractional shares				5					5
Cash settlement for stock options				4,764					4,764
Deal charges, net of taxes				1,102					1,102
Total Purchase Price				$	219,461				$	219,461
Net Assets Acquired:
Stockholders’ equity at acquisition date	$	89,253				$	89,253
Increase (decrease) to net assets as a result of fair value adjustments to assets acquired and liabilities assumed:
Securities	(731		)			(731		)
Mortgage loans held for sale	30					30
Loans, net of Metropolitan's allowance for loan losses	(13,071		)
Loans, net of Metropolitan’s allowance for loan losses						(13,071		)
Premises and equipment	(4,629		)			(4,629		)
Intangible assets, net of Metropolitan's existing intangibles	2,340
Intangible assets, net of Metropolitan’s existing intangibles						2,340
Other real estate owned	(1,251		)			(1,251		)
Other assets	2,731					2,731
Deposits	(3,603		)			(3,603		)
Borrowings	(1,294		)			(1,294		)
Other liabilities	3,930					3,930
Deferred income taxes	5,244					5,244
Total Net Assets Acquired				78,949					78,949
Goodwill resulting from merger⁽¹⁾				$	140,512				$	140,512

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

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



Cash and cash equivalents	$	47,556
Securities	108,697
Loans, including mortgage loans held for sale, net of unearned income	967,804
Premises and equipment	8,576
Other real estate owned	1,203
Intangible assets	147,478
Other assets	69,567
Total assets	1,350,881

Deposits	942,084
Borrowings	174,522
Other liabilities	20,685
Total liabilities	1,137,291

The following unaudited pro forma combined condensed consolidated financial information presents the results of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 ~~and 2016~~ of the Company as though the Metropolitan merger had been completed as of January 1, ~~2016 (and that the KeyWorth merger, discussed below, was still completed on April 1, 2016).~~2016. The unaudited ~~estimated~~ pro forma information combines the historical results of Metropolitan with the ~~Company's~~Company’s historical consolidated results and

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

Nine Months Ended
September 30,
2017 2016
Net interest income - pro forma (unaudited) $ 263,525
$ 252,366

Net income - pro forma (unaudited) $ 72,915
$ 75,744

Earnings per share - pro forma (unaudited):
Basic $ 1.50
$ 1.68
Diluted $ 1.50
$ 1.67



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

Net income - pro forma	$	33,826	$	26,677

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

~~Acquisition of KeyWorth Bank~~

Effective April 1, 2016, the Company completed its acquisition of KeyWorth in a transaction valued at approximately $58,884. The Company issued 1,680,021 shares of common stock and paid approximately $3,594 to KeyWorth stock option and warrant holders for 100% of the voting equity interest in KeyWorth. At closing, KeyWorth merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger.

As a result of the KeyWorth acquisition, the Company acquired total assets with a fair value of $415,232, total loans with a fair value of $272,330 and total deposits with a fair value of $348,961, and six banking locations in the Atlanta metropolitan area.

The Company recorded approximately $22,643 in intangible assets which consist of goodwill of $20,633 and a core deposit intangible of $2,010. Goodwill resulted from a combination of revenue enhancements from expansion into new markets and efficiencies resulting from operational synergies. The fair value of the core deposit intangible is being amortized on an accelerated basis over the estimated useful life, currently expected to be approximately 10 years. The goodwill is not deductible for income tax purposes.

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Notes to Consolidated Financial Statements (Unaudited)

Note 3 – Securities

(In Thousands, Except Number of Securities)

~~The amortized cost and fair value of securities held to maturity were as follows as of the dates presented:~~

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
September 30, 2017
Obligations of other U.S. Government agencies and corporations $ —
$ —
$ —
$ —
Obligations of states and political subdivisions —
—
—
—
$ —
$ —
$ —
$ —
December 31, 2016
Obligations of other U.S. Government agencies and corporations $ 14,101
$ 4
$ (187 ) $ 13,918
Obligations of states and political subdivisions 342,181
8,572
(1,778 ) 348,975
$ 356,282
$ 8,576
$ (1,965 ) $ 362,893

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

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

The amortized cost and fair value of securities available for sale were as follows as of the dates presented:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2017
March 31, 2018
Obligations of other U.S. Government agencies and corporations	$	14,648	$	74	$	(84	)	$	14,638	$	3,549	$	27	$	(48	)	$	3,528
Obligations of states and political subdivisions	337,725		12,787		(158		)	350,354		222,814		4,292		(764		)	226,342
Residential mortgage backed securities:
Government agency mortgage backed securities	459,336		2,876		(2,654		)	459,558		416,954		444		(7,928		)	409,470
Government agency collateralized mortgage obligations	234,224		764		(2,330		)	232,658		244,213		42		(6,589		)	237,666
Commercial mortgage backed securities:
Government agency mortgage backed securities	45,340		762		(173		)	45,929		27,636		306		(440		)	27,502
Government agency collateralized mortgage obligations	11,354		89		—			11,443		10,000		—		(128		)	9,872
Trust preferred securities	12,454		—		(3,494		)	8,960		12,429		—		(2,384		)	10,045
Other debt securities	26,546		429		(56		)	26,919		23,994		152		(206		)	23,940
	$	1,141,627	$	17,781	$	(8,949	)	$	1,150,459	$	961,589	$	5,263	$	(18,487	)	$	948,365


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2016
December 31, 2017
Obligations of other U.S. Government agencies and corporations	$	2,066	$	92	$	—		$	2,158	$	3,554	$	40	$	(30	)	$	3,564
Obligations of states and political subdivisions										228,589		6,161		(269		)	234,481
Residential mortgage backed securities:
Government agency mortgage backed securities	414,019		1,941		(6,643		)	409,317		196,121		888		(3,059		)	193,950
Government agency collateralized mortgage obligations	171,362		831		(3,367		)	168,826		180,258		133		(3,752		)	176,639
Commercial mortgage backed securities:
Government agency mortgage backed securities	50,628		696		(461		)	50,863		31,015		389		(234		)	31,170
Government agency collateralized mortgage obligations	2,528		38		(16		)	2,550		5,019		1		(14		)	5,006
Trust preferred securities	23,749		—		(5,360		)	18,389		12,442		—		(3,054		)	9,388
Other debt securities	22,053		310		(218		)	22,145		17,106		260		(76		)	17,290
	$	686,405	$	3,908	$	(16,065	)	$	674,248	$	674,104	$	7,872	$	(10,488	)	$	671,488

There were no sales of securities for the three months ended March 31, 2018. During the ~~third quarter of~~same period in 2017, the Company sold one of its pooled trust preferred securities (XXIV) with a carrying value of $9,346 at the time of sale for net proceeds of $9,403 resulting in a gain of $57 on the sale. The Company also sold certain securities acquired in connection with its acquisition of Metropolitan. These included $14,750 in mortgage backed securities and $16,395 in collateralized mortgage obligations, which were classified as available for sale, and $4,876 in obligations of states and political subdivisions, which were classified as held to maturity. These securities were sold at carrying value and did not result in a gain or loss. During the first nine months of 2017, the Company also sold residential mortgage backed securities with a carrying value of ~~$2,946~~$2,496 at the time of the sale for net proceeds of ~~$2,946~~$2,496 resulting in no gain or loss on the sale. ~~During the first nine months of 2016, the Company sold "other equity" securities with a carrying value of $2,842 at the time of sale for net proceeds of $4,028 resulting in a net gain of $1,186.~~

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Notes to Consolidated Financial Statements (Unaudited)

~~Gross realized gains and losses on sales of securities available for sale for the three and nine months ended September 30, 2017 and 2016, respectively, were as follows:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Gross gains on sales of securities available for sale $ 57
$ —
$ 57
$ 1,257
Gross losses on sales of securities available for sale —
—
—
(71 )
Gains on sales of securities available for sale, net $ 57
$ —
$ 57
$ 1,186

At ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, securities with a carrying value of ~~$459,369~~$259,688 and ~~$642,447,~~$217,867, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of ~~$27,164~~$20,644 and ~~$24,426~~$25,888 were pledged as collateral for short-term borrowings and derivative instruments at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

The amortized cost and fair value of securities at ~~September 30, 2017~~March 31, 2018 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.


	Available for Sale				Available for Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	23,491	$	23,798	$	28,692	$	29,028
Due after one year through five years	106,577		110,274		67,311		68,747
Due after five years through ten years	147,761		153,199		78,917		79,724
Due after ten years	94,150		93,983		72,703		71,335
Residential mortgage backed securities:
Government agency mortgage backed securities	459,336		459,558		416,954		409,470
Government agency collateralized mortgage obligations	234,224		232,658		244,213		237,666
Commercial mortgage backed securities:
Government agency mortgage backed securities	45,340		45,929		27,636		27,502
Government agency collateralized mortgage obligations	11,354		11,443		10,000		9,872
Other debt securities	19,394		19,617		15,163		15,021
	$	1,141,627	$	1,150,459	$	961,589	$	948,365

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Notes to Consolidated Financial Statements (Unaudited)

The following table presents the age of gross unrealized losses and fair value by investment category as of the dates presented:


	Less than 12 Months						12 Months or More						Total						Less than 12 Months						12 Months or More						Total
	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Held to Maturity:
December 31, 2016
Obligations of other U.S. Government agencies and corporations	4	$	11,915	$	(187	)	0	$	—	$	—		4	$	11,915	$	(187	)
Obligations of states and political subdivisions	102	83,362		(1,778		)	0	—		—			102	83,362		(1,778		)
Total	106	$	95,277	$	(1,965	)	0	$	—	$	—		106	$	95,277	$	(1,965	)
Available for Sale:
September 30, 2017
March 31, 2018
Obligations of other U.S. Government agencies and corporations	4	$	12,018	$	(84	)	0	$	—	$	—		4	$	12,018	$	(84	)	1	$	494	$	(6	)	2	$	1,981	$	(42	)	3	$	2,475	$	(48	)
Obligations of states and political subdivisions	16	11,248		(105		)	3	2,037		(53		)	19	13,285		(158		)	52	31,417		(392		)	12	7,554		(372		)	64	38,971		(764		)
Residential mortgage backed securities:
Government agency mortgage backed securities	97	249,318		(1,902		)	12	31,392		(752		)	109	280,710		(2,654		)	87	298,721		(3,942		)	44	84,166		(3,986		)	131	382,887		(7,928		)
Government agency collateralized mortgage obligations	34	126,612		(974		)	19	44,790		(1,356		)	53	171,402		(2,330		)	51	173,116		(3,394		)	29	58,759		(3,195		)	80	231,875		(6,589		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	4	9,906		(25		)	3	5,978		(148		)	7	15,884		(173		)	7	8,987		(122		)	3	5,732		(318		)	10	14,719		(440		)
Government agency collateralized mortgage obligations	0	—		—			0	—		—			0	—		—			2	9,872		(128		)	0	—		—			2	9,872		(128		)
Trust preferred securities	0	—		—			2	8,960		(3,494		)	2	8,960		(3,494		)	0	—		—			2	10,045		(2,384		)	2	10,045		(2,384		)
Other debt securities	5	9,105		(48		)	1	1,205		(8		)	6	10,310		(56		)	7	6,140		(25		)	2	6,187		(181		)	9	12,327		(206		)
Total	160	$	418,207	$	(3,138	)	40	$	94,362	$	(5,811	)	200	$	512,569	$	(8,949	)	207	$	528,747	$	(8,009	)	94	$	174,424	$	(10,478	)	301	$	703,171	$	(18,487	)
December 31, 2016
December 31, 2017
Obligations of other U.S. Government agencies and corporations	0	$	—	$	—		0	$	—	$	—		0	$	—	$	—		1	$	497	$	(3	)	2	$	1,999	$	(27	)	3	$	2,496	$	(30	)
Obligations of states and political subdivisions																			23	11,860		(59		)	12	7,728		(210		)	35	19,588		(269		)
Residential mortgage backed securities:
Government agency mortgage backed securities	131	298,400		(6,042		)	5	11,504		(601		)	136	309,904		(6,643		)	29	64,595		(659		)	44	89,414		(2,400		)	73	154,009		(3,059		)
Government agency collateralized mortgage obligations	40	97,356		(1,845		)	14	33,786		(1,522		)	54	131,142		(3,367		)	33	102,509		(1,470		)	29	62,406		(2,282		)	62	164,915		(3,752		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	9	21,933		(453		)	2	1,101		(8		)	11	23,034		(461		)	2	5,629		(17		)	3	5,872		(217		)	5	11,501		(234		)
Government agency collateralized mortgage obligations	1	1,729		(16		)	0	—		—			1	1,729		(16		)	1	4,986		(14		)	0	—		—			1	4,986		(14		)
Trust preferred securities	0	—		—			3	18,389		(5,360		)	3	18,389		(5,360		)	0	—		—			2	9,388		(3,054		)	2	9,388		(3,054		)
Other debt securities	3	7,946		(208		)	2	2,475		(10		)	5	10,421		(218		)	2	756		(12		)	2	6,308		(64		)	4	7,064		(76		)
Total	184	$	427,364	$	(8,564	)	26	$	67,255	$	(7,501	)	210	$	494,619	$	(16,065	)	91	$	190,832	$	(2,234	)	94	$	183,115	$	(8,254	)	185	$	373,947	$	(10,488	)

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~~Renasant Corporation and Subsidiaries~~

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

The Company evaluates its investment portfolio for other-than-temporary-impairment (“OTTI”) on a quarterly basis. Impairment is assessed at the individual security level. The Company considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. Impairment is considered to be other-than-temporary if the Company intends to sell the investment security or if the Company does not expect to recover the entire amortized cost basis of the security before the Company is required to sell the security or before the security’s maturity.

The Company does not intend to sell any securities in an unrealized loss position that it holds, and it is not more likely than not that the Company will be required to sell any such security prior to the recovery of its amortized cost basis, which may be at maturity. Furthermore, even though a number of these securities have been in a continuous unrealized loss position for a period

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

greater than twelve months, the Company ~~has experienced an overall improvement in the fair value of its investment portfolio and~~ is collecting principal and interest payments from the respective issuers as scheduled. As such, the Company did not record any OTTI for the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2018 or ~~2016.~~2017.

The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $~~12,454~~12,429 and $~~23,749~~12,442 and a fair value of $~~8,960~~10,045 and $~~18,389~~9,388 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, respectively. At ~~September 30, 2017,~~March 31, 2018, the investments in pooled trust preferred securities consisted of two securities representing interests in various tranches of trusts collateralized by debt issued by over 160 financial institutions. Management’s determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Company’s tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments before recovery of the ~~investments'~~investments’ amortized cost, and it is not more likely than not that the Company will be required to sell the investments before recovery of the investments’ amortized cost, which may be at maturity. At ~~September 30, 2017~~March 31, 2018, management did not, and does not currently, believe such securities will be settled at a price less than the amortized cost of the investment, but the Company previously concluded that it was probable that there had been an adverse change in estimated cash flows for both trust preferred securities and recognized credit related impairment losses on these securities in 2011. No additional impairment was recognized during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018.

The following table provides information regarding the Company’s investments in pooled trust preferred securities at ~~September 30, 2017~~March 31, 2018:

Name
Single/
Pooled

Class/
Tranche

Amortized
Cost

Fair
Value

Unrealized
Loss

Lowest
Credit
Rating

Issuers
Currently in
Deferral or
Default
XXIII Pooled B-2 $ 8,302
$ 5,813
$ (2,489 ) A1 15 %
XXVI Pooled B-2 4,152
3,147
(1,005 ) Ba3 19 %
$ 12,454
$ 8,960
$ (3,494 )

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~~Renasant Corporation and Subsidiaries~~

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



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

The following table provides a summary of the cumulative credit related losses recognized in earnings for which a portion of OTTI has been recognized in other comprehensive income:


	2017			2016			2018			2017
Balance at January 1	$	(3,337	)	$	(3,337	)	$	(261	)	$	(3,337	)
Additions related to credit losses for which OTTI was not previously recognized	—			—			—			—
Increases in credit loss for which OTTI was previously recognized	—			—			—			—
Reductions for securities sold during the period	$	3,076		$	—		—			3,076
Balance at September 30	$	(261	)	$	(3,337	)
Balance at March 31							$	(261	)	$	(261	)

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 4 – Non Purchased Loans

(In Thousands, Except Number of Loans)

For purposes of this Note 4, all references to “loans” mean non purchased loans.

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


	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Commercial, financial, agricultural	$	707,835		$	589,290		$	803,146		$	763,823
Lease financing	54,688			49,250			55,898			57,354
Real estate – construction	477,638			483,926			582,430			547,658
Real estate – 1-4 family mortgage	1,644,060			1,425,730			1,785,271			1,729,534
Real estate – commercial mortgage	2,311,340			2,075,137			2,503,680			2,390,076
Installment loans to individuals	100,692			92,648			103,059			103,452
Gross loans	5,296,253			4,715,981			5,833,484			5,591,897
Unearned income	(2,786		)	(2,409		)	(3,362		)	(3,341		)
Loans, net of unearned income	5,293,467			4,713,572			$	5,830,122		$	5,588,556

Past Due and Nonaccrual Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, the recognition of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer and other retail loans are typically charged-off no later than the time the loan is 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. All interest accrued for the current year, but not collected, for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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Notes to Consolidated Financial Statements (Unaudited)

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


	Accruing Loans										Nonaccruing Loans											Accruing Loans										Nonaccruing Loans
	30-89 Days Past Due		90 Days or More Past Due		Current Loans			Total Loans			30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		Total Loans			30-89 Days Past Due		90 Days or More Past Due		Current Loans			Total Loans			30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		Total Loans
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	1,808	$	774	$	703,574		$	706,156		$	538	$	863	$	278	$	1,679	$	707,835		$	3,078	$	1,006	$	796,898		$	800,982		$	508	$	1,555	$	101	$	2,164	$	803,146
Lease financing	476		—		54,047			54,523			—		165		—		165		54,688			481		43		55,215			55,739			—		159		—		159		55,898
Real estate – construction	403		—		477,235			477,638			—		—		—		—		477,638			3,564		50		578,816			582,430			—		—		—		—		582,430
Real estate – 1-4 family mortgage	6,307		984		1,632,983			1,640,274			210		1,342		2,234		3,786		1,644,060			8,812		2,176		1,771,834			1,782,822			54		1,581		814		2,449		1,785,271
Real estate – commercial mortgage	3,140		1,505		2,302,423			2,307,068			—		1,303		2,969		4,272		2,311,340			3,016		289		2,495,780			2,499,085			564		2,253		1,778		4,595		2,503,680
Installment loans to individuals	258		32		100,334			100,624			—		45		23		68		100,692			477		41		102,505			103,023			—		17		19		36		103,059
Unearned income	—		—		(2,786		)	(2,786		)	—		—		—		—		(2,786		)	—		—		(3,362		)	(3,362		)	—		—		—		—		(3,362		)
Total	$	12,392	$	3,295	$	5,267,810		$	5,283,497		$	748	$	3,718	$	5,504	$	9,970	$	5,293,467		$	19,428	$	3,605	$	5,797,686		$	5,820,719		$	1,126	$	5,565	$	2,712	$	9,403	$	5,830,122
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	811	$	720	$	586,730		$	588,261		$	—	$	932	$	97	$	1,029	$	589,290		$	2,722	$	22	$	759,143		$	761,887		$	205	$	1,033	$	698	$	1,936	$	763,823
Lease financing	193		—		48,919			49,112			—		138		—		138		49,250			47		—		57,148			57,195			—		159		—		159		57,354
Real estate – construction	995		—		482,931			483,926			—		—		—		—		483,926			50		—		547,608			547,658			—		—		—		—		547,658
Real estate – 1-4 family mortgage	6,189		1,136		1,414,254			1,421,579			161		1,222		2,768		4,151		1,425,730			11,810		2,194		1,712,982			1,726,986			—		1,818		730		2,548		1,729,534
Real estate – commercial mortgage	2,283		99		2,066,821			2,069,203			580		2,778		2,576		5,934		2,075,137			1,921		727		2,381,871			2,384,519			—		2,877		2,680		5,557		2,390,076
Installment loans to individuals	324		124		92,179			92,627			—		21		—		21		92,648			429		72		102,901			103,402			1		28		21		50		103,452
Unearned income	—		—		(2,409		)	(2,409		)	—		—		—		—		(2,409		)	—		—		(3,341		)	(3,341		)	—		—		—		—		(3,341		)
Total	$	10,795	$	2,079	$	4,689,425		$	4,702,299		$	741	$	5,091	$	5,441	$	11,273	$	4,713,572		$	16,979	$	3,015	$	5,558,312		$	5,578,306		$	206	$	5,915	$	4,129	$	10,250	$	5,588,556

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for commercial, consumer and construction loans above a minimum dollar amount threshold by, as applicable, the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are evaluated collectively for impairment. When the ultimate collectability of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal. Once the recorded balance has been reduced to zero, future cash receipts are applied to interest income, to the extent any interest has been foregone, and then they are recorded as recoveries of any amounts previously charged-off. For impaired loans, a specific reserve is established to adjust the carrying value of the loan to its estimated net realizable value.

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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


	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance		Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	2,118	$	1,843	$	—	$	1,843	$	30	$	2,612	$	2,491	$	—	$	2,491	$	223
Lease financing											159		159		—		159		2
Real estate – construction	897		897		—		897		4		150		150		—		150		1
Real estate – 1-4 family mortgage	10,508		8,004		704		8,708		809		9,106		8,111		—		8,111		121
Real estate – commercial mortgage	9,777		7,189		—		7,189		1,958		9,373		4,817		1,356		6,173		956
Installment loans to individuals	140		136		—		136		1		106		102		—		102		1
Total	$	23,440	$	18,069	$	704	$	18,773	$	2,802	$	21,506	$	15,830	$	1,356	$	17,186	$	1,304
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	1,577	$	1,175	$	—	$	1,175	$	136	$	3,043	$	2,365	$	—	$	2,365	$	138
Lease financing											159		159		—		159		2
Real estate – construction	517		517		—		517		1		578		578		—		578		4
Real estate – 1-4 family mortgage	10,823		9,207		—		9,207		1,091		10,018		8,169		703		8,872		561
Real estate – commercial mortgage	15,007		10,053		568		10,621		2,397		12,463		9,652		—		9,652		1,861
Installment loans to individuals	87		87		—		87		1		121		117		—		117		1
Totals	$	28,011	$	21,039	$	568	$	21,607	$	3,626	$	26,382	$	21,040	$	703	$	21,743	$	2,567

The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-20 and which are impaired loans for the periods presented:


	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	September 30, 2017				September 30, 2016				March 31, 2018				March 31, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	1,960	$	8	$	1,841	$	22	$	2,338	$	11	$	2,714	$	39
Lease financing									159		—		—		—
Real estate – construction	897		33		862		26		150		18		—		—
Real estate – 1-4 family mortgage	8,897		71		16,119		97		8,197		67		11,088		26
Real estate – commercial mortgage	7,575		46		10,953		46		6,670		92		15,314		106
Installment loans to individuals	140		1		67		1		104		1		118		—
Total	$	19,469	$	159	$	29,842	$	192	$	17,618	$	189	$	29,234	$	171

Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
Commercial, financial, agricultural $ 2,140
$ 8
$ 1,762
$ 42
Real estate – construction 861
36
671
27
Real estate – 1-4 family mortgage 8,944
165
16,354
283
Real estate – commercial mortgage 7,844
134
11,800
236
Installment loans to individuals 148
2
67
2
Total $ 19,937
$ 345
$ 30,654
$ 590

Restructured Loans

Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrower’s financial condition and which are performing in accordance with the new terms. Such concessions may include reduction in interest

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest.

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

Number of
Loans

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment
Three months ended September 30, 2017
Real estate – 1-4 family mortgage 4
$ 307
$ 307
Real estate – commercial mortgage 1
230
175
Installment loans to individuals —
—
—
Total 5
$ 537
$ 482
Three months ended September 30, 2016
Real estate – construction 1
510
510
Real estate – 1-4 family mortgage 2
$ 194
$ 147
Total 3
$ 704
$ 657

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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		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Nine months ended September 30, 2017
Real estate – 1-4 family mortgage	9	$	611	$	601
Real estate – commercial mortgage	3	683		318
Installment loans to individuals	1	4		3
Total	13	$	1,298	$	922
Nine months ended September 30, 2016
Real estate – construction	1	510		510
Three months ended March 31, 2018
Real estate – 1-4 family mortgage	10	$	1,199	$	1,096	3	$	576	$	576
Real estate – commercial mortgage	1	529		525		1	83		78
Total	12	$	2,238	$	2,131	4	$	659	$	654
Three months ended March 31, 2017
Real estate – 1-4 family mortgage						2	$	177	$	174
Real estate – commercial mortgage						2	146		156
Total						4	$	323	$	330

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

Restructured loans not performing in accordance with their restructured terms that are either contractually 90 days or more past due or placed on nonaccrual status are reported as nonperforming loans. There were ~~three~~four restructured loans in the amount of ~~$597~~$571 contractually 90 days past due or more and still accruing at ~~September 30, 2017~~March 31, 2018 and noone restructured ~~loans~~loan in the amount of $57 contractually 90 days past due or more and still accruing at ~~September 30, 2016.~~March 31, 2017. The outstanding balance of restructured loans on nonaccrual status was ~~$4,651~~$2,570 and ~~$6,485~~$6,086 at ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ respectively.

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

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~~Renasant Corporation and Subsidiaries~~

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


	Number of Loans		Recorded Investment			Number of Loans		Recorded Investment
Totals at January 1, 2017	53		$	7,447
Totals at January 1, 2018						54		$	5,588
Additional loans with concessions	13		965			4		657
Reclassified as performing	1		55
Reductions due to:
Reclassified as nonperforming	(5	)	(670		)	(3	)	(192		)
Paid in full	(7	)	(1,086		)	(2	)	(773		)
Charge-offs	(1	)	(250		)
Principal paydowns	—		(238		)	—		(64		)
Lapse of concession period	(1	)	(923		)
Totals at September 30, 2017	53		$	5,300
Totals at March 31, 2018						53		$	5,216

The allocated allowance for loan losses attributable to restructured loans was $9892 and ~~$287~~$241 at ~~September 30, 2017~~March 31, 2018 and ~~September 30, 2016,~~March 31, 2017, respectively. The Company had no$20 and $142 in remaining availability under commitments to lend additional funds on these restructured loans at ~~September 30, 2017~~March 31, 2018 and ~~had $11 in remaining availability under commitments to lend additional funds on restructured loans at September 30, 2016.~~March 31, 2017, respectively.

Credit Quality

For commercial and commercial real estate loans, internal risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances of these loans. Loan grades range between 1 and 9, with 1 being loans with the least credit risk. Loans ~~that migrate toward~~within the “Pass” grade ~~(those~~(historically, those with a risk rating between 1 and 4~~) or within the “Pass” grade~~4) generally have a lower risk of loss and therefore a lower risk factor applied to the loan balances. Management has established more granular risk rating categories to better identify heightened credit risk as loans migrate downward in the risk rating system. The “Pass” grade is now reserved for loans with a risk rating between 1 and 4A, and the “Watch” grade (those with a risk rating of 54B 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 65 and 9) generally have a higher risk of loss and therefore a

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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


	Pass		Watch		Substandard		Total		Pass		Watch		Substandard		Total
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	522,410	$	4,505	$	726	$	527,641	$	585,850	$	11,380	$	5,758	$	602,988
Real estate – construction	415,168		130		88		415,386		512,603		8,690		440		521,733
Real estate – 1-4 family mortgage	247,584		3,778		5,492		256,854		262,107		669		7,609		270,385
Real estate – commercial mortgage	1,964,371		13,408		10,654		1,988,433		2,094,811		52,407		18,988		2,166,206
Installment loans to individuals	504		—		—		504		852		—		—		852
Total	$	3,150,037	$	21,821	$	16,960	$	3,188,818	$	3,456,223	$	73,146	$	32,795	$	3,562,164
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	434,323	$	4,531	$	850	$	439,704	$	554,943	$	11,496	$	4,402	$	570,841
Real estate – construction	402,156		393		—		402,549		483,498		662		81		484,241
Real estate – 1-4 family mortgage	190,882		3,374		6,129		200,385		254,643		505		8,697		263,845
Real estate – commercial mortgage	1,734,523		18,118		13,088		1,765,729		1,983,750		50,428		24,241		2,058,419
Installment loans to individuals									921		—		—		921
Total	$	2,761,884	$	26,416	$	20,067	$	2,808,367	$	3,277,755	$	63,091	$	37,421	$	3,378,267

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



	Performing		Non- Performing		Total
March 31, 2018
Commercial, financial, agricultural	$	198,111	$	2,047	$	200,158
Lease financing	52,334		202		52,536
Real estate – construction	60,648		49		60,697
Real estate – 1-4 family mortgage	1,511,105		3,781		1,514,886
Real estate – commercial mortgage	336,584		890		337,474
Installment loans to individuals	102,130		77		102,207
Total	$	2,260,912	$	7,046	$	2,267,958
December 31, 2017
Commercial, financial, agricultural	$	191,473	$	1,509	$	192,982
Lease financing	53,854		159		54,013
Real estate – construction	63,417		—		63,417
Real estate – 1-4 family mortgage	1,462,347		3,342		1,465,689
Real estate – commercial mortgage	330,441		1,216		331,657
Installment loans to individuals	102,409		122		102,531
Total	$	2,203,941	$	6,348	$	2,210,289

2018

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Performing
Non-
Performing
Total
September 30, 2017
Commercial, financial, agricultural $ 178,294
$ 1,900
$ 180,194
Lease financing 51,737
165
51,902
Real estate – construction 62,252
—
62,252
Real estate – 1-4 family mortgage 1,384,865
2,341
1,387,206
Real estate – commercial mortgage 321,404
1,503
322,907
Installment loans to individuals 100,088
100
100,188
Total $ 2,098,640
$ 6,009
$ 2,104,649
December 31, 2016
Commercial, financial, agricultural $ 148,499
$ 1,087
$ 149,586
Lease financing 46,703
138
46,841
Real estate – construction 81,377
—
81,377
Real estate – 1-4 family mortgage 1,222,816
2,529
1,225,345
Real estate – commercial mortgage 308,609
799
309,408
Installment loans to individuals 92,504
144
92,648
Total $ 1,900,508
$ 4,697
$ 1,905,205

Note 5 – Purchased Loans

(In Thousands, Except Number of Loans)

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

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


	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Commercial, financial, agricultural	$	301,100	$	128,200	$	243,672	$	275,570
Real estate – construction	100,082		68,753		75,061		85,731
Real estate – 1-4 family mortgage	651,792		452,447		572,830		614,187
Real estate – commercial mortgage	1,079,049		823,758		960,273		1,037,454
Installment loans to individuals	23,118		15,979		16,112		18,824
Gross loans	2,155,141		1,489,137		1,867,948		2,031,766
Unearned income	—		—		—		—
Loans, net of unearned income	2,155,141		1,489,137		$	1,867,948	$	2,031,766

Past Due and Nonaccrual Loans

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

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

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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



	Accruing Loans								Nonaccruing Loans
	30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		30-89 Days Past Due		90 Days or More Past Due		Current Loans		Total Loans		Total Loans
March 31, 2018
Commercial, financial, agricultural	$	388	$	552	$	242,313	$	243,253	$	—	$	314	$	105	$	419	$	243,672
Real estate – construction	—		—		75,061		75,061		—		—		—		—		75,061
Real estate – 1-4 family mortgage	5,491		2,116		561,608		569,215		1,265		1,046		1,304		3,615		572,830
Real estate – commercial mortgage	3,142		1,856		954,128		959,126		—		830		317		1,147		960,273
Installment loans to individuals	124		40		15,789		15,953		6		52		101		159		16,112
Total	$	9,145	$	4,564	$	1,848,899	$	1,862,608	$	1,271	$	2,242	$	1,827	$	5,340	$	1,867,948
December 31, 2017
Commercial, financial, agricultural	$	1,119	$	532	$	273,488	$	275,139	$	—	$	199	$	232	$	431	$	275,570
Real estate – construction	415		—		85,316		85,731		—		—		—		—		85,731
Real estate – 1-4 family mortgage	6,070		2,280		602,464		610,814		385		879		2,109		3,373		614,187
Real estate – commercial mortgage	2,947		2,910		1,031,141		1,036,998		191		99		166		456		1,037,454
Installment loans to individuals	208		9		18,443		18,660		59		—		105		164		18,824
Total	$	10,759	$	5,731	$	2,010,852	$	2,027,342	$	635	$	1,177	$	2,612	$	4,424	$	2,031,766

Accruing Loans Nonaccruing Loans

30-89 Days
Past Due

90 Days
or More
Past Due

Current
Loans

Total
Loans

30-89 Days
Past Due

90 Days
or More
Past Due

Current
Loans

Total
Loans

Total
Loans
September 30, 2017
Commercial, financial, agricultural $ 616
$ 481
$ 299,473
$ 300,570
$ —
$ 287
$ 243
$ 530
$ 301,100
Real estate – construction —
—
100,082
100,082
—
—
—
—
100,082
Real estate – 1-4 family mortgage 3,650
2,294
642,147
648,091
139
1,422
2,140
3,701
651,792
Real estate – commercial mortgage 3,448
4,566
1,070,563
1,078,577
196
99
177
472
1,079,049
Installment loans to individuals 346
8
22,599
22,953
3
—
162
165
23,118
Total $ 8,060
$ 7,349
$ 2,134,864
$ 2,150,273
$ 338
$ 1,808
$ 2,722
$ 4,868
$ 2,155,141
December 31, 2016
Commercial, financial, agricultural $ 823
$ 990
$ 125,417
$ 127,230
$ 260
$ 381
$ 329
$ 970
$ 128,200
Real estate – construction 527
321
67,760
68,608
—
145
—
145
68,753
Real estate – 1-4 family mortgage 4,572
3,382
440,258
448,212
417
2,047
1,771
4,235
452,447
Real estate – commercial mortgage 3,045
6,112
808,886
818,043
—
2,661
3,054
5,715
823,758
Installment loans to individuals 96
10
15,591
15,697
—
156
126
282
15,979
Total $ 9,063
$ 10,815
$ 1,457,912
$ 1,477,790
$ 677
$ 5,390
$ 5,280
$ 11,347
$ 1,489,137

2219

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Impaired Loans

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

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


	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance		Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	459	$	433	$	15	$	448	$	66	$	421	$	336	$	21	$	357	$	49
Real estate – construction	1,837		759		1,074		1,833		5		252		—		249		249		—
Real estate – 1-4 family mortgage	5,239		1,521		3,118		4,639		46		6,195		1,493		4,133		5,626		47
Real estate – commercial mortgage	897		720		169		889		5		1,647		1,384		245		1,629		70
Installment loans to individuals	167		154		11		165		4		162		153		6		159		4
Total	$	8,599	$	3,587	$	4,387	$	7,974	$	126	$	8,677	$	3,366	$	4,654	$	8,020	$	170
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	732	$	487	$	224	$	711	$	310	$	757	$	625	$	74	$	699	$	52
Real estate – construction	147		145		—		145		—		1,207		—		1,199		1,199		—
Real estate – 1-4 family mortgage	3,095		1,496		1,385		2,881		43		6,173		1,385		4,225		5,610		45
Real estate – commercial mortgage	2,485		2,275		183		2,458		48		901		728		165		893		6
Installment loans to individuals	215		135		55		190		114		165		154		9		163		4
Totals	$	6,674	$	4,538	$	1,847	$	6,385	$	515	$	9,203	$	2,892	$	5,672	$	8,564	$	107

The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-20 and which are impaired loans for the periods presented:


	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	September 30, 2017				September 30, 2016				March 31, 2018				March 31, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	413	$	6	$	2,387	$	28	$	363	$	3	$	541	$	2
Real estate – construction	829		62		1,010		26		252		1		—		—
Real estate – 1-4 family mortgage	5,174		41		18,914		114		6,320		40		5,481		21
Real estate – commercial mortgage	899		8		13,425		87		1,642		18		3,090		35
Installment loans to individuals	167		—		234		1		160		—		85		—
Total	$	7,482	$	117	$	35,970	$	256	$	8,737	$	62	$	9,197	$	58

Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
Commercial, financial, agricultural $ 332
$ 9
$ 2,233
$ 48
Real estate – construction 741
62
819
28
Real estate – 1-4 family mortgage 5,221
103
19,146
309
Real estate – commercial mortgage 915
25
14,271
294
Installment loans to individuals 169
—
239
2
Total $ 7,378
$ 199
$ 36,708
$ 681

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

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

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance		Unpaid Contractual Principal Balance		Recorded Investment With Allowance		Recorded Investment With No Allowance		Total Recorded Investment		Related Allowance
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	26,853	$	6,770	$	10,689	$	17,459	$	325	$	21,363	$	5,414	$	7,519	$	12,933	$	305
Real estate – 1-4 family mortgage	71,858		17,639		42,130		59,769		614		60,590		16,093		34,103		50,196		486
Real estate – commercial mortgage	198,563		65,175		100,791		165,966		985		178,682		63,979		85,568		149,547		1,023
Installment loans to individuals	1,824		693		992		1,685		1		1,744		757		877		1,634		3
Total	$	299,098	$	90,277	$	154,602	$	244,879	$	1,925	$	262,379	$	86,243	$	128,067	$	214,310	$	1,817
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	20,697	$	4,555	$	7,439	$	11,994	$	372	$	24,179	$	5,768	$	9,547	$	15,315	$	312
Real estate – construction	1,141		—		840		840		—
Real estate – 1-4 family mortgage	86,725		21,887		50,065		71,952		841		65,049		15,910		38,059		53,969		572
Real estate – commercial mortgage	229,075		62,449		122,538		184,987		1,606		186,720		65,108		91,230		156,338		892
Installment loans to individuals	2,466		366		1,619		1,985		1		1,761		698		940		1,638		1
Totals	$	340,104	$	89,257	$	182,501	$	271,758	$	2,820	$	277,709	$	87,484	$	139,776	$	227,260	$	1,777

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


	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	September 30, 2017				September 30, 2016				March 31, 2018				March 31, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial, agricultural	$	14,201	$	507	$	15,317	$	252	$	16,899	$	225	$	14,088	$	247
Real estate – construction	—		—		987		15
Real estate – 1-4 family mortgage	67,802		808		92,830		1,056		58,749		673		78,341		865
Real estate – commercial mortgage	174,394		2,578		226,533		2,635		167,365		1,972		196,807		2,319
Installment loans to individuals	1,812		18		2,509		25		1,687		18		2,104		21
Total	$	258,209	$	3,911	$	338,176	$	3,983	$	244,700	$	2,888	$	291,340	$	3,452

Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
Commercial, financial, agricultural $ 13,530
$ 988
$ 15,768
$ 839
Real estate – construction —
—
991
48
Real estate – 1-4 family mortgage 68,933
2,301
93,900
3,000
Real estate – commercial mortgage 177,039
6,886
224,004
7,859
Installment loans to individuals 1,865
55
2,625
80
Total $ 261,367
$ 10,230
$ 337,288
$ 11,826

Restructured Loans

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

2421

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

The following tables illustrate the impact of modifications classified as restructured loans which were held on the Consolidated Balance Sheets at period end and are segregated by class for the periods presented:


	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Three months ended September 30, 2017
Three months ended March 31, 2018
Commercial, financial, agricultural						1	$	48	$	44
Real estate – commercial mortgage						1	8		7
Total						2	$	56	$	51
Three months ended March 31, 2017
Real estate – 1-4 family mortgage	18	$	1,624	$	1,189	10	$	2,221	$	1,823
Real estate – commercial mortgage	1	393		244		4	2,721		1,986
Total	19	$	2,017	$	1,433	14	$	4,942	$	3,809
Three months ended September 30, 2016
Real estate – 1-4 family mortgage	2	$	132	$	120
Total	2	$	132	$	120

Number of
Loans

Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment
Nine months ended September 30, 2017
Real estate – 1-4 family mortgage 28
$ 3,789
$ 3,062
Real estate – commercial mortgage 3
2,851
2,025
Total 31
$ 6,640
$ 5,087
Nine months ended September 30, 2016
Real estate – 1-4 family mortgage 7
$ 412
$ 325
Real estate – commercial mortgage 1
83
81
Total 8
$ 495
$ 406

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

There were ~~two restructured loans in the amount of $146 contractually 90 days past due or more and still accruing at September 30, 2017 and~~ no restructured loans contractually 90 days past due or more and still accruing at ~~September 30, 2016.~~March 31, 2018 and two restructured loans in the amount of $52 contractually 90 days past due or more and still accruing at March 31, 2017. The outstanding balance of restructured loans on nonaccrual status was ~~$504~~$616 and ~~$3,279~~$1,201 at ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ respectively.

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


	Number of Loans		Recorded Investment			Number of Loans		Recorded Investment
Totals at January 1, 2017	42		$	4,028
Totals at January 1, 2018						68		$	8,965
Additional loans with concessions	31		5,182			2		86
Reclassified as performing restructured loan	6		534			1		3
Reductions due to:
Reclassified to nonperforming loans	(8	)	(679		)
Paid in full	(1	)	(6		)	(1	)	(76		)
Charge-offs	(1	)	(17		)
Principal paydowns	—		(278		)	—		(371		)
Lapse of concession period	(1	)	(101		)
Totals at September 30, 2017	68		$	8,663
Totals at March 31, 2018						70		$	8,607

The allocated allowance for loan losses attributable to restructured loans was ~~$97~~$100 and ~~$34~~$31 at ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ respectively. The Company had $7$2 and $1,245 in ~~remaining availability under commitments to lend additional funds on these~~

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

~~restructured loans at September 30, 2017 and no~~ remaining availability under commitments to lend additional funds on these restructured loans at ~~September 30, 2016.~~March 31, 2018 and March 31, 2017, respectively.

Credit Quality

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

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Pass		Watch		Substandard		Total		Pass		Watch		Substandard		Total
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	269,798	$	2,381	$	663	$	272,842	$	208,150	$	5,116	$	5,886	$	219,152
Real estate – construction	92,825		—		—		92,825		70,974		1,537		500		73,011
Real estate – 1-4 family mortgage	105,040		6,042		252		111,334		85,590		2,525		5,903		94,018
Real estate – commercial mortgage	877,455		7,583		1,835		886,873		755,454		15,789		10,048		781,291
Installment loans to individuals	696		—		3		699		662		—		3		665
Total	$	1,345,814	$	16,006	$	2,753	$	1,364,573	$	1,120,830	$	24,967	$	22,340	$	1,168,137
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	102,777	$	2,370	$	1,491	$	106,638	$	241,195	$	4,974	$	2,824	$	248,993
Real estate – construction	61,206		2,640		—		63,846		81,220		—		—		81,220
Real estate – 1-4 family mortgage	105,265		7,665		364		113,294		91,369		2,498		6,172		100,039
Real estate – commercial mortgage	608,192		8,445		723		617,360		827,372		17,123		9,003		853,498
Installment loans to individuals	—		—		114		114		678		—		3		681
Total	$	877,440	$	21,120	$	2,692	$	901,252	$	1,241,834	$	24,595	$	18,002	$	1,284,431

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


	Performing			Non- Performing		Total		Performing		Non- Performing		Total
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	10,741		$	58	$	10,799	$	11,548	$	39	$	11,587
Real estate – construction	7,257			—		7,257		2,050		—		2,050
Real estate – 1-4 family mortgage	479,069			1,620		480,689		427,099		1,517		428,616
Real estate – commercial mortgage	26,088			122		26,210		29,313		122		29,435
Installment loans to individuals	20,572			162		20,734		13,617		196		13,813
Total	$	543,727		$	1,962	$	545,689	$	483,627	$	1,874	$	485,501
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	9,489		$	79	$	9,568	$	11,216	$	46	$	11,262
Real estate – construction	3,601		5	466		4,067		4,511		—		4,511
Real estate – 1-4 family mortgage	265,697			1,504		267,201		459,038		1,141		460,179
Real estate – commercial mortgage	21,353			58		21,411		27,495		123		27,618
Installment loans to individuals	13,712			168		13,880		16,344		161		16,505
Total	$	313,852		$	2,275	$	316,127	$	518,604	$	1,471	$	520,075

Loans Purchased with Deteriorated Credit Quality

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

2623

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)


	Total Purchased Credit Deteriorated Loans		Total Purchased Credit Deteriorated Loans
September 30, 2017
March 31, 2018
Commercial, financial, agricultural	$	17,459	$	12,933
Real estate – 1-4 family mortgage	59,769		50,196
Real estate – commercial mortgage	165,966		149,547
Installment loans to individuals	1,685		1,634
Total	$	244,879	$	214,310
December 31, 2016
December 31, 2017
Commercial, financial, agricultural	$	11,994	$	15,315
Real estate – construction	840
Real estate – 1-4 family mortgage	71,952		53,969
Real estate – commercial mortgage	184,987		156,338
Installment loans to individuals	1,985		1,638
Total	$	271,758	$	227,260

The following table presents the fair value of loans that exhibited evidence of deteriorated credit quality at the time of acquisition at ~~September 30, 2017:~~March 31, 2018:


	Total Purchased Credit Deteriorated Loans			Total Purchased Credit Deteriorated Loans
Contractually-required principal and interest	$	340,513		$	300,368
Nonaccretable difference⁽¹⁾	(61,435		)	(55,373		)
Cash flows expected to be collected	279,078			244,995
Accretable yield⁽²⁾	(34,199		)	(30,685		)
Fair value	$	244,879		$	214,310


(1)	Represents contractual principal and interest cash flows of ~~$52,109~~$46,019 and ~~$9,326,~~$9,354, respectively, not expected to be collected.


(2)	Represents contractual principal and interest cash flows of ~~$1,643~~$1,588 and ~~$32,556,~~$29,097, respectively, expected to be collected.

Changes in the accretable yield of loans purchased with deteriorated credit quality were as ~~follows:~~

follows as of March 31, 2018:


	Total Purchased Credit Deteriorated Loans			Total Purchased Credit Deteriorated Loans
Balance at January 1, 2017	$	(37,474	)
Additions due to acquisition	(1,794		)
Balance at January 1, 2018				$	(32,207	)
Reclasses from nonaccretable difference	(7,718		)	(1,499		)
Accretion	11,619			2,971
Charge-offs	1,168			50
Balance at September 30, 2017	$	(34,199	)
Balance at March 31, 2018				$	(30,685	)

The following table presents the fair value of loans purchased from ~~KeyWorth~~Metropolitan as of the ~~April~~July 1, ~~2016~~2017 acquisition date.



At acquisition date:	July 1, 2017
Contractually-required principal and interest	$	1,198,741
Nonaccretable difference	(79,165		)
Cash flows expected to be collected	1,119,576
Accretable yield	(154,543		)
Fair value	$	965,033

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

At acquisition date: April 1, 2016
  Contractually-required principal and interest $ 289,495
  Nonaccretable difference (3,848 )
  Cash flows expected to be collected 285,647
  Accretable yield (13,317 )
      Fair value $ 272,330

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

At acquisition date: July 1, 2017
  Contractually-required principal and interest $ 1,198,132
  Nonaccretable difference (80,887 )
  Cash flows expected to be collected 1,117,245
  Accretable yield (152,821 )
      Fair value $ 964,424

Note 6 – Allowance for Loan Losses

(In ~~Thousands, Except Number of Loans)~~Thousands)

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


	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Commercial, financial, agricultural	$	1,008,935		$	717,490		$	1,046,818		$	1,039,393
Lease financing	54,688			49,250			55,898			57,354
Real estate – construction	577,720			552,679			657,491			633,389
Real estate – 1-4 family mortgage	2,295,852			1,878,177			2,358,101			2,343,721
Real estate – commercial mortgage	3,390,389			2,898,895			3,463,953			3,427,530
Installment loans to individuals	123,810			108,627			119,171			122,276
Gross loans	7,451,394			6,205,118			7,701,432			7,623,663
Unearned income	(2,786		)	(2,409		)	(3,362		)	(3,341		)
Loans, net of unearned income	7,448,608			6,202,709			7,698,070			7,620,322
Allowance for loan losses	(44,531		)	(42,737		)	(46,401		)	(46,211		)
Net loans	$	7,404,077		$	6,159,972		$	7,651,669		$	7,574,111

Allowance for Loan Losses

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

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

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


	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total			Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Three Months Ended September 30, 2017
Three Months Ended March 31, 2018
Allowance for loan losses:
Beginning balance	$	5,092		$	2,580	$	12,104		$	22,600		$	1,773		$	44,149		$	5,542		$	3,428	$	12,009		$	23,384		$	1,848		$	46,211
Charge-offs	(974		)	—		(575		)	(543		)	(124		)	(2,216		)	(659		)	—		(671		)	(613		)	(122		)	(2,065		)
Recoveries	137			67		145			72			27			448			235			4		133			108			25			505
Net (charge-offs) recoveries	(837		)	67		(430		)	(471		)	(97		)	(1,768		)	(424		)	4		(538		)	(505		)	(97		)	(1,560		)
Provision for loan losses charged to operations ⁽²⁾	938			161		439			481			131			2,150
Provision for loan losses charged to operations																		1,953			766		(67		)	(965		)	63			1,750
Ending balance	$	5,193		$	2,808	$	12,113		$	22,610		$	1,807		$	44,531		$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401
Period-End Amount Allocated to:
Individually evaluated for impairment																		$	272		$	1	$	168		$	1,026		$	5		$	1,472
Collectively evaluated for impairment																		6,494			4,197		10,750			19,865			1,806			43,112
Purchased with deteriorated credit quality																		305			—		486			1,023			3			1,817
Ending balance																		$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401


	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total			Commercial			Real Estate - Construction			Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Nine Months Ended September 30, 2017
Three Months Ended March 31, 2017
Allowance for loan losses:
Beginning balance	$	5,486		$	2,380	$	14,294		$	19,059		$	1,518		$	42,737		$	5,486		$	2,380		$	14,294		$	19,059		$	1,518		$	42,737
Charge-offs	(2,110		)	—		(1,401		)	(1,204		)	(513		)	(5,228		)	(832		)	—			(275		)	(227		)	(264		)	(1,598		)
Recoveries	258			101		291			884			88			1,622			57			31			82			95			19			284
Net (charge-offs) recoveries	(1,852		)	101		(1,110		)	(320		)	(425		)	(3,606		)	(775		)	31			(193		)	(132		)	(245		)	(1,314		)
Provision for loan losses charged to operations ⁽²⁾	1,559			327		(1,071		)	3,871			714			5,400
Provision for loan losses charged to operations																		401			(292		)	(1,939		)	3,146			184			1,500
Ending balance	$	5,193		$	2,808	$	12,113		$	22,610		$	1,807		$	44,531		$	5,112		$	2,119		$	12,162		$	22,073		$	1,457		$	42,923
Period-End Amount Allocated to:
Individually evaluated for impairment	$	96		$	9	$	855		$	1,963		$	5		$	2,928		$	165		$	—		$	1,139		$	2,670		$	3		$	3,977
Collectively evaluated for impairment	4,772			2,799		10,644			19,662			1,801			39,678			4,569			2,119			10,256			17,830			1,453			36,227
Purchased with deteriorated credit quality	325			—		614			985			1			1,925			378			—			767			1,573			1			2,719
Ending balance	$	5,193		$	2,808	$	12,113		$	22,610		$	1,807		$	44,531		$	5,112		$	2,119		$	12,162		$	22,073		$	1,457		$	42,923


(1)	Includes lease financing receivables.

2926

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Commercial
Real Estate -
Construction

Real Estate -
1-4 Family
Mortgage

Real Estate -
Commercial
Mortgage

Installment
and Other⁽¹⁾
Total
Three Months Ended September 30, 2016
Allowance for loan losses:
Beginning balance $ 4,512
$ 2,269
$ 14,219
$ 21,683
$ 1,415
$ 44,098
Charge-offs (394 ) —
(242 ) (466 ) (201 ) (1,303 )
Recoveries 85
4
188
181
21
479
Net (charge-offs) recoveries (309 ) 4
(54 ) (285 ) (180 ) (824 )
Provision for loan losses 1,308
(52 ) 1,154
(87 ) 353
2,676
Benefit attributable to FDIC loss-share agreements (61 ) —
—
(47 ) (41 ) (149 )
Recoveries payable to FDIC 4
2
93
24
—
123
Provision for loan losses charged to operations 1,251
(50 ) 1,247
(110 ) 312
2,650
Ending balance $ 5,454
$ 2,223
$ 15,412
$ 21,288
$ 1,547
$ 45,924

Commercial
Real Estate -
Construction

Real Estate -
1-4 Family
Mortgage

Real Estate -
Commercial
Mortgage

Installment
and Other⁽¹⁾
Total
Nine Months Ended September 30, 2016
Allowance for loan losses:
Beginning balance $ 4,186
$ 1,852
$ 13,908
$ 21,111
$ 1,380
$ 42,437
Charge-offs (1,099 ) —
(745 ) (1,653 ) (573 ) (4,070 )
Recoveries 243
15
753
582
84
1,677
Net (charge-offs) recoveries (856 ) 15
8
(1,071 ) (489 ) (2,393 )
Provision for loan losses 2,174
348
1,333
1,067
697
5,619
Benefit attributable to FDIC loss-share agreements (61 ) —
(115 ) (48 ) (41 ) (265 )
Recoveries payable to FDIC 11
8
278
229
—
526
Provision for loan losses charged to operations 2,124
356
1,496
1,248
656
5,880
Ending balance $ 5,454
$ 2,223
$ 15,412
$ 21,288
$ 1,547
$ 45,924
Period-End Amount Allocated to:
Individually evaluated for impairment $ 1,004
$ 2
$ 5,144
$ 2,635
$ 114
$ 8,899
Collectively evaluated for impairment 4,002
2,221
9,542
16,410
1,432
33,607
Purchased with deteriorated credit quality 448
—
726
2,243
1
3,418
Ending balance $ 5,454
$ 2,223
$ 15,412
$ 21,288
$ 1,547
$ 45,924


~~(1)~~	~~Includes lease financing receivables.~~


~~(2)~~	~~Due to the termination of the loss-share agreements on December 8, 2016, there was no loss-share impact to the provision for loan losses in 2017.~~

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

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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


	Commercial		Real Estate - Construction		Real Estate - 1-4 Family Mortgage		Real Estate - Commercial Mortgage		Installment and Other⁽¹⁾		Total		Commercial		Real Estate - Construction		Real Estate - 1-4 Family Mortgage		Real Estate - Commercial Mortgage		Installment and Other⁽¹⁾		Total
September 30, 2017
March 31, 2018
Individually evaluated for impairment	$	2,291	$	2,730	$	13,347	$	8,078	$	301	$	26,747	$	2,848	$	399	$	13,737	$	7,802	$	420	$	25,206
Collectively evaluated for impairment	989,185		574,990		2,222,736		3,216,345		173,726		7,176,982		1,031,037		657,092		2,294,168		3,306,604		169,653		7,458,554
Purchased with deteriorated credit quality	17,459		—		59,769		165,966		1,685		244,879		12,933		—		50,196		149,547		1,634		214,310
Ending balance	$	1,008,935	$	577,720	$	2,295,852	$	3,390,389	$	175,712	$	7,448,608	$	1,046,818	$	657,491	$	2,358,101	$	3,463,953	$	171,707	$	7,698,070
December 31, 2016
December 31, 2017
Individually evaluated for impairment	$	1,886	$	662	$	12,088	$	13,079	$	277	$	27,992	$	3,064	$	1,777	$	14,482	$	10,545	$	439	$	30,307
Collectively evaluated for impairment	703,610		551,177		1,794,137		2,700,829		153,206		5,902,959		1,021,014		631,612		2,275,270		3,260,648		174,211		7,362,755
Purchased with deteriorated credit quality	11,994		840		71,952		184,987		1,985		271,758		15,315		—		53,969		156,337		1,639		227,260
Ending balance	$	717,490	$	552,679	$	1,878,177	$	2,898,895	$	155,468	$	6,202,709	$	1,039,393	$	633,389	$	2,343,721	$	3,427,530	$	176,289	$	7,620,322


(1)	Includes lease financing receivables.

Note 7 – Other Real Estate Owned

(In Thousands)

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

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


	Purchased OREO		Non Purchased OREO		Total OREO		Purchased OREO		Non Purchased OREO		Total OREO
September 30, 2017
March 31, 2018
Residential real estate	$	1,780	$	847	$	2,627	$	1,061	$	1,087	$	2,148
Commercial real estate	5,552		1,401		6,953		3,593		1,572		5,165
Residential land development	1,233		829		2,062		698		1,045		1,743
Commercial land development	4,731		1,447		6,178		4,402		1,097		5,499
Total	$	13,296	$	4,524	$	17,820	$	9,754	$	4,801	$	14,555
December 31, 2016
December 31, 2017
Residential real estate	$	2,230	$	699	$	2,929	$	1,683	$	758	$	2,441
Commercial real estate	6,401		1,680		8,081		4,314		1,624		5,938
Residential land development	2,344		1,688		4,032		1,100		781		1,881
Commercial land development	6,395		1,862		8,257		4,427		1,247		5,674
Total	$	17,370	$	5,929	$	23,299	$	11,524	$	4,410	$	15,934

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

Purchased
OREO
Non Purchased OREO
Total
OREO
Balance at January 1, 2017 $ 17,370
$ 5,929
$ 23,299
Acquired OREO 1,203
—
1,203
Transfers of loans 4,513
905
5,418
Capitalized improvements —
—
—
Impairments (935 ) (519 ) (1,454 )
Dispositions (8,474 ) (2,262 ) (10,736 )
Other (381 ) 471
90
Balance at September 30, 2017 $ 13,296
$ 4,524
$ 17,820



	Purchased OREO			Non Purchased OREO			Total OREO
Balance at January 1, 2018	$	11,524		$	4,410		$	15,934
Transfers of loans	39			1,115			1,154
Impairments	(305		)	(47		)	(352		)
Dispositions	(1,504		)	(677		)	(2,181		)
Balance at March 31, 2018	$	9,754		$	4,801		$	14,555

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Notes to Consolidated Financial Statements (Unaudited)

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2018			2017
Repairs and maintenance	$	206		$	209		$	602		$	815		$	113		$	197
Property taxes and insurance	87			127			495			745			112			332
Impairments	697			1,048			1,454			2,330			352			378
Net losses (gains) on OREO sales	(350		)	204			(488		)	435			96			(327		)
Rental income	(37		)	(48		)	(147		)	(214		)	(16		)	(48		)
Total	$	603		$	1,540		$	1,916		$	4,111		$	657		$	532

Note 8 – Goodwill and Other Intangible Assets

(In Thousands)

The carrying amounts of goodwill by operating segments for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 were as follows:


	Community Banks		Insurance		Total		Community Banks		Insurance		Total
Balance at January 1, 2017	$	467,767	$	2,767	$	470,534
Balance at January 1, 2018							$	608,279	$	2,767	$	611,046
Addition to goodwill from acquisition	140,512		—		140,512		—		—		—
Adjustment to previously recorded goodwill	—		—		—		—		—		—
Balance at September 30, 2017	$	608,279	$	2,767	$	611,046
Balance at March 31, 2018							$	608,279	$	2,767	$	611,046

~~The addition to goodwill during 2017 represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in the Metropolitan acquisition.~~ The Company is finalizing the fair values of certain assets, including property and equipment and taxes, related to the Metropolitan acquisition; as such, the recorded balance of goodwill is subject to change.

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


	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
September 30, 2017
March 31, 2018
Core deposit intangibles	$	54,958	$	(29,911	)	$	25,047	$	54,958	$	(33,204	)	$	21,754
Customer relationship intangible	1,970		(799		)	1,171		1,970		(865		)	1,105
Total finite-lived intangible assets	$	56,928	$	(30,710	)	$	26,218	$	56,928	$	(34,069	)	$	22,859
December 31, 2016
December 31, 2017
Core deposit intangibles	$	47,992	$	(25,188	)	$	22,804	$	54,958	$	(31,586	)	$	23,372
Customer relationship intangible	1,970		(700		)	1,270		1,970		(832		)	1,138
Total finite-lived intangible assets	$	49,962	$	(25,888	)	$	24,074	$	56,928	$	(32,418	)	$	24,510

Current year amortization expense for finite-lived intangible assets ~~was as follows for~~is presented in the ~~periods presented.~~table below.



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

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Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Amortization expense for:
Core deposit intangibles $ 1,733
$ 1,651
$ 4,723
$ 5,024
Customer relationship intangible 33
33
99
99
Total intangible amortization $ 1,766
$ 1,684
$ 4,822
$ 5,123

The estimated amortization expense of finite-lived intangible assets for the year ending December 31, ~~2017~~2018 and the succeeding four years is summarized as follows:


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

2017	$	6,399	$	131	$	6,530
2018	6,130		131		6,261		$	6,130	$	131	$	6,261
2019	5,212		131		5,343		5,212		131		5,343
2020	4,186		131		4,317		4,186		131		4,317
2021	3,107		131		3,238		3,107		131		3,238
2022							2,187		131		2,318

Note 9 – Mortgage Servicing Rights

(In Thousands)

The Company retains the right to service certain mortgage loans that it sells to secondary market investors. These mortgage servicing rights (“MSRs”) are recognized as a separate asset on the date the corresponding mortgage loan is sold. MSRs are amortized in proportion to and over the period of estimated net servicing income. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. Impairment losses on MSRs are recognized to the extent by which the unamortized cost exceeds fair value. During the first nine months of 2016, the Company recognized an impairment loss on MSRs in earnings in the amount of $40, which was included in “Mortgage banking income” in the Consolidated Statements of Income. There were no impairment losses recognized during the ~~nine~~three months ended ~~September 30, 2017.~~

During the first nine months of 2016, the Company sold MSRs relating to mortgage loans having an aggregate unpaid principal balance totaling $1,830,444 to a third party for net proceeds of $18,508. There were no sales of MSRs during the nine months ended September 30,March 31, 2018 and 2017.

Changes in the Company’s MSRs were as follows:


Balance at January 1, 2017	$	26,302
Balance at January 1, 2018				$	39,339
Capitalization	12,379			2,098
Amortization	(2,751		)	(1,221		)
Balance at September 30, 2017	$	35,930
Balance at March 31, 2018				$	40,216

Data and key economic assumptions related to the Company’s MSRs as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 are as follows:

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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


	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Unpaid principal balance	$	3,703,064		$	2,763,344		$	4,089,045		$	4,012,519

Weighted-average prepayment speed (CPR)	8.89		%	7.34		%	7.42		%	8.04		%
Estimated impact of a 10% increase	$	(1,501	)	$	(1,034	)	$	(1,692	)	$	(1,592	)
Estimated impact of a 20% increase	(2,910		)	(2,010		)	(3,280		)	(3,095		)

Discount rate	9.68		%	9.64		%	9.40		%	9.69		%
Estimated impact of a 10% increase	$	(1,711	)	$	(1,368	)	$	(2,374	)	$	(2,027	)
Estimated impact of a 20% increase	(3,292		)	(2,629		)	(4,556		)	(3,896		)

Weighted-average coupon interest rate	3.89		%	3.83		%	3.89		%	3.89		%
Weighted-average servicing fee (basis points)	26.22			25.87			26.54			26.36
Weighted-average remaining maturity (in years)	14.94			11.11			8.27			7.98

The Company recorded servicing fees of ~~$1,461~~$2,370 and ~~$595~~$1,233 for the three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016, respectively, and $4,128 and $2,212 for the nine months ended September 30, 2017 and 2016,~~ respectively, which are included in “Mortgage banking income” in the Consolidated Statements of Income.

~~Note 10 – Redemption of Long-term Debt~~

~~(In Thousands)~~

During the first quarter of 2017, the Company redeemed the Heritage Financial Statutory Trust I junior subordinated debentures. The debentures were redeemed for an aggregate amount of $10,515, which included the principal amount of $10,310 and a prepayment penalty of $205. Prior to the redemption, the Company obtained all required board and regulatory approval.

During the third quarter of 2016, the Company incurred a prepayment penalty of $2,210 in connection with the prepayment of $38,886 in long-term borrowings from the Federal Home Loan Bank. Additionally, during the second quarter of 2016, the Company incurred a prepayment penalty of $329 in connection with the prepayment of $3,483 of similar long-term borrowings.

~~There were no other prepayments of long-term debt during the first nine months of 2017 or 2016.~~

Note 1110 - Employee Benefit and Deferred Compensation Plans

(In Thousands, Except Share Data)

Pension and Post-retirement Medical Plans

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Notes to Consolidated Financial Statements (Unaudited)

The Company sponsors a noncontributory defined benefit pension plan, under which participation and future benefit accruals ceased as of December 31, 1996. In connection with the acquisition of Heritage Financial Group, Inc. (“Heritage”) in July 2015, the Company assumed the noncontributory defined benefit pension plan maintained by HeritageBank of the South, Heritage's wholly-owned banking subsidiary (“HeritageBank”), under which accruals had ceased and the plan had been terminated by HeritageBank immediately prior to the acquisition date. Final distribution of all benefits under the plan was completed in August 2016.

The Company also provides retiree health benefits for certain employees who were employed by the Company and enrolled in the ~~Company's~~Company’s health plan as of December 31, 2004. To receive benefits, an eligible employee must retire from service with the Company and its affiliates between age 55 and 65 and be credited with at least 15 years of service or with 70 points, determined as the sum of age and service at retirement. The Company periodically determines the portion of the premium to be paid by each eligible retiree and the portion to be paid by the Company. Coverage ceases when an employee attains age 65 and is eligible for Medicare. The Company also provides life insurance coverage for each retiree in the face amount of $5 until age 70. Retirees can purchase additional insurance or continue coverage beyond age 70 at their sole expense.

The plan expense for the legacy Renasant defined benefit pension plan (“Pension Benefits - Renasant”)~~, the assumed HeritageBank defined pension plan (“Pension Benefits - HeritageBank”)~~ and post-retirement health and life plans (“Other Benefits”) for the periods presented was as follows:

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



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

Pension Benefits Pension Benefits
Renasant HeritageBank Other Benefits
Three Months Ended Three Months Ended Three Months Ended
September 30, September 30, September 30,
2017 2016 2017 2016 2017 2016
Service cost $ —
$ —
$ —
$ —
$ 2
$ 1
Interest cost 292
304
—
34
11
14
Expected return on plan assets (485 ) (468 ) —
(23 ) —
—
Recognized actuarial loss 101
101
—
—
2
23
Settlement/curtailment/termination gains —
—
—
(780 ) —
—
Net periodic benefit (return) cost $ (92 ) $ (63 ) $ —
$ (769 ) $ 15
$ 38

Pension Benefits Pension Benefits
Renasant HeritageBank Other Benefits
Nine Months Ended Nine Months Ended Nine Months Ended
September 30, September 30, September 30,
2017 2016 2017 2016 2017 2016
Service cost $ —
$ —
$ —
$ —
$ 6
$ 9
Interest cost 876
912
—
172
32
43
Expected return on plan assets (1,456 ) (1,404 ) —
(113 ) —
—
Recognized actuarial loss 301
303
—
—
5
57
Settlement/curtailment/termination gains —
—
—
(780 ) —
—
Net periodic benefit (return) cost $ (279 ) $ (189 ) $ —
$ (721 ) $ 43
$ 109

Incentive Compensation Plans

In March 2011, the Company adopted a long-term equity incentive plan, which provides for the grant of stock options and the award of restricted stock. The plan replaced the long-term incentive plan adopted in 2001, which expired in October 2011. The Company issues shares of treasury stock to satisfy stock options exercised or restricted stock granted under the plan. Options granted under the plan allow participants to acquire shares of the ~~Company's~~Company’s common stock at a fixed exercise price and expire ten years after the grant date. Options vest and become exercisable in installments over a three-year period measured from the grant date. Options that have not vested are forfeited and ~~canceled~~cancelled upon the termination of a ~~participant's~~participant’s employment. There were no stock options granted during the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2018 or ~~2016.~~2017.

The following table summarizes the changes in stock options as of and for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018:


	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding at beginning of period	185,625		$	15.97	89,750		$	15.67
Granted	—		—		—		—
Exercised	(93,625	)	16.22		(27,000	)	15.76
Forfeited	—		—		—		—
Options outstanding at end of period	92,000		$	15.72	62,750		$	15.64

The Company awards performance-based restricted stock to executives and other officers ~~and employees~~ and time-based restricted stock to directors, executives and other officers and employees under the long-term equity incentive plan. The performance-based restricted stock vests upon completion of a ~~specified performance cycle~~designated service period and the attainment of ~~designated~~specified performance goals. Target performance levels are derived from the Company’s budget, with threshold performance set at approximately 5% below target and superior performance set at approximately 5% above target. Performance-based restricted stock is ~~issued~~granted at the target level; the number of shares ultimately awarded is determined at the end of ~~each~~the applicable performance ~~cylce~~period and may be increased or decreased

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Notes to Consolidated Financial Statements (Unaudited)

depending onupon the Company ~~falling short of,~~ meeting or exceeding (or failing to meet or exceed) the financial performance measures defined by the Board of Directors. Time-based restricted stock vests at the end of the service period defined in the respective grant. The fair value of each restricted stock ~~award~~grant is the closing price of the ~~Company's~~Company’s common

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

stock on the day immediately preceding the ~~award~~grant date. The following table summarizes the changes in restricted stock as of and for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018:


	Performance-Based Restricted Stock		Weighted Average Grant-Date Fair Value		Time- Based Restricted Stock		Weighted Average Grant-Date Fair Value		Performance-Based Restricted Stock	Weighted Average Grant-Date Fair Value		Time- Based Restricted Stock		Weighted Average Grant-Date Fair Value
Nonvested at beginning of period	—		$	—	117,345		$	31.76	—	$	—	218,075		$	39.08
Awarded	54,450		42.22		153,270		42.81		95,183	40.89		110,833		40.93
Vested	—		—		(43,305	)	32.36		—	—		(35,099	)	35.61
Cancelled	(2,000	)	42.22		(5,460	)	37.74		—	—		(7,501	)	42.99
Nonvested at end of period	52,450		$	42.22	221,850		$	39.13	95,183	$	40.89	286,308		$	40.12

During the ~~nine~~three months ended~~September 30, 2017~~, March 31, 2018, the Company reissued ~~99,318~~71,747 shares from treasury in connection with the exercise of stock options and awards of restricted stock. The Company recorded total stock-based compensation expense of ~~$1,359~~$1,792 and ~~$848~~$1,174 for the three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and~~ ~~2016, respectively, and $3,770 and $2,563 for the nine months ended September 30, 2017 and 2016,~~ respectively.

Note 1211 – 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, 2017~~March 31, 2018, the Company had notional amounts of $~~219,914~~212,840 on interest rate contracts with corporate customers and $~~219,914~~212,840 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed-rate loans.

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

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

In connection with its merger with First M&F Corporation (“First M&F”), the Company assumed an interest rate swap designed to convert floating rate interest payments into fixed rate payments. Based on the terms of the agreement, which terminates in March 2018, 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 interest rate swap 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 junior subordinated debentures assumed in the merger with First M&F.~~

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 $~~188,614~~208,883 and ~~$120,050~~$131,000 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, 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 $~~304,000~~344,000 and ~~$257,000~~$199,000 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, respectively.

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

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


		Fair Value					Fair Value
	Balance Sheet Location	September 30, 2017		December 31, 2016		Balance Sheet Location	March 31, 2018		December 31, 2017
Derivative assets:
Not designated as hedging instruments:
Interest rate contracts	Other Assets	$	4,681	$	1,985	Other Assets	$	3,636	$	3,171
Interest rate lock commitments	Other Assets	3,327		2,643		Other Assets	4,940		2,756
Forward commitments	Other Assets	561		4,480		Other Assets	735		50
Totals		$	8,569	$	9,108		$	9,311	$	5,977
Derivative liabilities:
Designated as hedging instruments:
Interest rate swaps	Other Liabilities	$	3,242	$	3,410	Other Liabilities	$	1,385	$	2,536
Totals		$	3,242	$	3,410		$	1,385	$	2,536
Not designated as hedging instruments:
Interest rate contracts	Other Liabilities	$	4,681	$	1,985	Other Liabilities	$	3,636	$	3,171
Interest rate lock commitments	Other Liabilities	57		246		Other Liabilities	4		4
Forward commitments	Other Liabilities	449		269		Other Liabilities	925		328
Totals		$	5,187	$	2,500		$	4,565	$	3,503

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


	Three Months Ended					Nine Months Ended						Three Months Ended
	September 30,					September 30,						March 31,
	2017			2016		2017			2016			2018		2017
Derivatives not designated as hedging instruments:
Interest rate contracts:
Included in interest income on loans	$	1,652		$	660	$	3,021		$	1,786		$	986	$	679
Interest rate lock commitments:
Included in mortgage banking income	(441		)	2,297		874			3,359			2,184		2,853
Forward commitments
Included in mortgage banking income	(486		)	3,020		(4,099		)	(1,599		)	88		(5,869		)
Total	$	725		$	5,977	$	(204	)	$	3,546		$	3,258	$	(2,337	)

For the ~~Company's~~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~~three months ended ~~September 30, 2017~~March 31, 2018 or ~~2016.~~2017. The impact on other comprehensive income for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, can be seen at Note ~~16, "Other~~15, “Other Comprehensive Income."”

Offsetting

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

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

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

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Notes to Consolidated Financial Statements (Unaudited)

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


	Offsetting Derivative Assets				Offsetting Derivative Liabilities				Offsetting Derivative Assets				Offsetting Derivative Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Gross amounts recognized	$	892	$	4,778	$	7,879	$	4,893	$	3,232	$	717	$	3,449	$	5,303
Gross amounts offset in the Consolidated Balance Sheets	—		—		—		—		—		—		—		—
Net amounts presented in the Consolidated Balance Sheets	892		4,778		7,879		4,893		3,232		717		3,449		5,303
Gross amounts not offset in the Consolidated Balance Sheets
Financial instruments	780		567		780		567		2,913		717		2,913		717
Financial collateral pledged	—		—		6,922		4,326		—		—		231		4,357
Net amounts	$	112	$	4,211	$	177	$	—	$	319	$	—	$	305	$	229

Note 1312 – Income Taxes

(In Thousands)

The following table is a summary of the ~~Company's~~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,		March 31,		December 31,
	2017		2016		2016		2018		2017
Deferred tax assets
Allowance for loan losses	$	20,421	$	21,418	$	19,934	$	14,025	$	13,966
Loans	25,585		24,299		23,240		13,697		15,062
Deferred compensation	10,857		12,368		11,254		6,871		7,093
Securities	2,573		2,346		2,439		6,044		3,659
Net unrealized losses on securities - OCI	1,942		4,016		10,096		—		—
Impairment of assets	2,383		3,877		2,512		1,701		1,748
Federal and State net operating loss carryforwards	3,338		3,113		2,867		1,401		2,419
Intangibles	—		1,012		1,247		—		—
Other	7,319		7,958		3,463		5,204		4,722
Total deferred tax assets	74,418		80,407		77,052		48,943		48,669
Deferred tax liabilities
FDIC loss-share indemnification asset	—		1,939		—
Investment in partnerships	946		2,001		1,556		655		757
Intangibles	428		—		—
Fixed assets	1,429		2,598		2,517		3,077		3,163
Mortgage servicing rights	3,360		3,589		3,360		10,440		10,139
Junior subordinated debt	3,620		4,128		4,111		2,363		2,394
Other	1,770		4,294		2,876		1,656		1,859
Total deferred tax liabilities	11,553		18,549		14,420		18,191		18,312
Net deferred tax assets	$	62,865	$	61,858	$	62,632	$	30,752	$	30,357

The Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. As a result, the Company calculated taxes in the current quarter based on a 21% federal corporate tax rate, whereas taxes were calculated in previous periods based on a 35% federal corporate tax rate. Under the guidance of ASC 740, “Income Taxes” (“ASC 740”), the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realized

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Notes to Consolidated Financial Statements (Unaudited)

~~The Company acquired federal~~at the lower tax rate implemented by the new legislation. After reviewing the Company’s inventory of deferred tax assets and ~~state net operating losses as part~~liabilities on the date of enactment and giving consideration to the future impact of the ~~Heritage acquisition. The federal~~lower corporate tax rates and other provisions of the new legislation, the Company’s revaluation of its net ~~operating loss acquired totaled $18,321,~~deferred tax assets was $14,486, which was included in “Income taxes” in the Consolidated Statements of Income for the year ended December 31, 2017. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which ~~$6,160 remained to~~cannot be ~~utilized~~fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act had not been completed as of ~~September 30,~~December 31, 2017 ~~while state net operating losses totaled $17,168,~~and, therefore, considered its accounting for the tax effects of ~~which $7,995 remained~~the Tax Act on its deferred tax assets and liabilities to ~~be utilized~~have been completed as of ~~September 30,~~December 31, 2017. ~~Both the federal and state net operating losses will expire at various dates beginning in 2024.~~

The Company expects to utilize ~~the~~its federal and state net operating losses prior to expiration. Because the benefits are expected to be fully realized, the Company recorded no valuation allowance against the net operating losses for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 or 2017 ~~or 2016~~ or the year ended December 31, ~~2016.~~2017.

Note 1413 – Investments in Qualified Affordable Housing Projects

(In Thousands)

The Company has investments in qualified affordable housing projects (“QAHPs”) that provide low income housing tax credits and operating loss benefits over an extended period. At ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the Company’s carrying value of QAHPs was ~~$8,359~~$7,232 and ~~$6,331,~~$7,637, respectively. During the first quarter of 2017, the Company sold its interest in a limited liability partnership which reduced the carrying value of the investment in QAHPs by approximately $2,450. On July 1, 2017, the Company acquired $5,469 in QAHPs in connection with its acquisition of Metropolitan. The Company has no remaining funding obligations related to the QAHPs. The investments in QAHPs are being accounted for using the effective yield method. The investments in QAHPs are included in “Other assets” on the Consolidated Balance Sheets.

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2018			2017
Tax credit amortization	$	472		$	353		$	995		$	1,001		$	394		$	262
Tax credits and other benefits	(671		)	(503		)	(1,519		)	(1,445		)	(572		)	(460		)
Total	$	(199	)	$	(150	)	$	(524	)	$	(444	)	$	(178	)	$	(198	)

Note 1514 – Fair Value Measurements

(In Thousands)

Fair Value Measurements and the Fair Level Hierarchy

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

Recurring Fair Value Measurements

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

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

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

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Notes to Consolidated Financial Statements (Unaudited)

and other debt securities. Where quoted market prices in active markets are available, securities are classified within Level 1 of the fair value hierarchy. If quoted prices from active markets are not available, fair values are based on quoted market prices for

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

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

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

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

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

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Notes to Consolidated Financial Statements (Unaudited)


	Level 1			Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
September 30, 2017
March 31, 2018
Financial assets:
Securities available for sale:
Obligations of other U.S. Government agencies and corporations	$	—		$	14,638	$	—	$	14,638	$	—	$	3,528	$	—	$	3,528
Obligations of states and political subdivisions	—			350,354		—		$	350,354	—		226,342		—		$	226,342
Residential mortgage-backed securities:
Government agency mortgage backed securities	—			459,558		—		459,558		—		409,470		—		409,470
Government agency collateralized mortgage obligations	—			232,658		—		232,658		—		237,666		—		237,666
Commercial mortgage-backed securities:
Government agency mortgage backed securities	—			45,929		—		45,929		—		27,502		—		27,502
Government agency collateralized mortgage obligations	—			11,443		—		11,443		—		9,872		—		9,872
Trust preferred securities	—			—		8,960		8,960		—		—		10,045		10,045
Other debt securities	—			26,919		—		26,919		—		23,940		—		23,940
Total securities available for sale	—			1,141,499		8,960		1,150,459		—		938,320		10,045		948,365
Derivative instruments:
Interest rate contracts	—			4,681		—		4,681		—		3,636		—		3,636
Interest rate lock commitments	—			3,327		—		3,327		—		4,940		—		4,940
Forward commitments	—			561		—		561		—		735		—		735
Total derivative instruments	—			8,569		—		8,569		—		9,311		—		9,311
Mortgage loans held for sale	—			207,288		—		207,288		—		204,472		—		204,472
Total financial assets	$	—		$	1,357,356	$	8,960	$	1,366,316	$	—	$	1,152,103	$	10,045	$	1,162,148
Financial liabilities:
Derivative instruments:
Interest rate swaps	$	—		$	3,242	$	—	$	3,242	$	—	$	1,385	$	—	$	1,385
Interest rate contracts	—			4,681		—		4,681		—		3,636		—		3,636
Interest rate lock commitments	—		��	57		—		57		—		4		—		4
Forward commitments	—			449		—		449		—		925		—		925
Total derivative instruments	—			8,429		—		8,429		—		5,950		—		5,950
Total financial liabilities	$	—		$	8,429	$	—	$	8,429	$	—	$	5,950	$	—	$	5,950

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Notes to Consolidated Financial Statements (Unaudited)


	Level 1		Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
December 31, 2016
December 31, 2017
Financial assets:
Securities available for sale:
Obligations of other U.S. Government agencies and corporations	$	—	$	2,158	$	—	$	2,158	$	—	$	3,564	$	—	$	3,564
Obligations of states and political subdivisions									—		234,481		—		234,481
Residential mortgage-backed securities:
Government agency mortgage backed securities	—		409,317		—		409,317		—		193,950		—		193,950
Government agency collateralized mortgage obligations	—		168,826		—		168,826		—		176,639		—		176,639
Commercial mortgage-backed securities:
Government agency mortgage backed securities	—		50,863		—		50,863		—		31,170		—		31,170
Government agency collateralized mortgage obligations	—		2,550		—		2,550		—		5,006		—		5,006
Trust preferred securities	—		—		18,389		18,389		—		—		9,388		9,388
Other debt securities	—		22,145		—		22,145		—		17,290		—		17,290
Total securities available for sale	—		655,859		18,389		674,248		—		662,100		9,388		671,488
Derivative instruments:
Interest rate contracts	—		1,985		—		1,985		—		3,171		—		3,171
Interest rate lock commitments	—		2,643		—		2,643		—		2,756		—		2,756
Forward commitments	—		4,480		—		4,480		—		50		—		50
Total derivative instruments	—		9,108		—		9,108		—		5,977		—		5,977
Mortgage loans held for sale	—		177,866		—		177,866		—		108,316		—		108,316
Total financial assets	$	—	$	842,833	$	18,389	$	861,222	$	—	$	776,393	$	9,388	$	785,781
Financial liabilities:
Derivative instruments:
Interest rate swaps	$	—	$	3,410	$	—	$	3,410	$	—	$	2,536	$	—	$	2,536
Interest rate contracts	—		1,985		—		1,985		—		3,171		—		3,171
Interest rate lock commitments	—		246		—		246		—		4		—		4
Forward commitments	—		269		—		269		—		328		—		328
Total derivative instruments	—		5,910		—		5,910		—		6,039		—		6,039
Total financial liabilities	$	—	$	5,910	$	—	$	5,910	$	—	$	6,039	$	—	$	6,039

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~~three months ended ~~September 30, 2017~~March 31, 2018.

The following tables provide a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, during the ~~three and~~ ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017, respectively:

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Notes to Consolidated Financial Statements (Unaudited)


Three Months Ended September 30, 2017	Trust preferred securities
Balance at July 1, 2017	$	16,992
Three Months Ended March 31, 2018				Trust preferred securities
Balance at January 1, 2018				$	9,388
Accretion included in net income	28			9
Unrealized gains included in other comprehensive income	1,307			669
Purchases	—			—
Sales	(9,346		)	—
Issues	—			—
Settlements	(21		)	(21		)
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Balance at September 30, 2017	$	8,960
Balance at March 31, 2018				$	10,045


Three Months Ended September 30, 2016	Trust preferred securities
Balance at July 1, 2016	$	18,179
Three Months Ended March 31, 2017				Trust preferred securities
Balance at January 1, 2017				$	18,389
Accretion included in net income	8			8
Unrealized losses included in other comprehensive income	(41		)
Unrealized gains included in other comprehensive income				537
Purchases	—			—
Sales	—			—
Issues	—			—
Settlements	(54		)	(1,111		)
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Balance at September 30, 2016	$	18,092
Balance at March 31, 2017				$	17,823

Nine Months Ended September 30, 2017
Trust preferred
securities
Balance at January 1, 2017 $ 18,389
Accretion included in net income 74
Unrealized gains included in other comprehensive income 1,866
Purchases —
Sales (9,346 )
Issues —
Settlements (2,023 )
Transfers into Level 3 —
Transfers out of Level 3 —
Balance at September 30, 2017 $ 8,960

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

Nine Months Ended September 30, 2016
Trust preferred
securities
Balance at January 1, 2016 $ 19,469
Accretion included in net income 23
Unrealized losses included in other comprehensive income (168 )
Reclassification adjustment —
Purchases —
Sales —
Issues —
Settlements (1,232 )
Transfers into Level 3 —
Transfers out of Level 3 —
Balance at September 30, 2016 $ 18,092

For each of the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017, there were no gains or losses included in earnings that were attributable to the change in unrealized gains or losses related to assets or liabilities held at the end of each respective period that were measured on a recurring basis using significant unobservable inputs.

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Notes to Consolidated Financial Statements (Unaudited)

The following table presents information as of ~~September 30, 2017~~March 31, 2018 about significant unobservable inputs (Level 3) used in the valuation of assets and liabilities measured at fair value on a recurring basis:

Financial instrument

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Trust preferred securities

8,960

Discounted cash flows

Default rate

0-100%

10,045

Discounted cash flows

Default rate

0-100%

Nonrecurring Fair Value Measurements

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


September 30, 2017	Level 1		Level 2		Level 3		Totals
March 31, 2018									Level 1		Level 2		Level 3		Totals
Impaired loans	$	—	$	—	$	8,107	$	8,107	$	—	$	—	$	4,228	$	4,228
OREO	—		—		7,942		7,942		—		—		1,636		1,636
Total	$	—	$	—	$	16,049	$	16,049	$	—	$	—	$	5,864	$	5,864


December 31, 2016	Level 1		Level 2		Level 3		Totals
December 31, 2017									Level 1		Level 2		Level 3		Totals
Impaired loans	$	—	$	—	$	4,101	$	4,101	$	—	$	—	$	9,251	$	9,251
OREO	—		—		6,741		6,741		—		—		7,392		7,392
Mortgage servicing rights	—		—		26,302		26,302
Total	$	—	$	—	$	37,144	$	37,144	$	—	$	—	$	16,643	$	16,643

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

Impaired loans: Loans considered impaired are reserved for at the time the loan is identified as impaired taking into account the fair value of the collateral less estimated selling costs. Collateral may be real estate and/or business assets including but not limited to equipment, inventory and accounts receivable. The fair value of real estate is determined based on appraisals by qualified licensed appraisers. The fair value of the business assets is generally based on amounts reported on the business’s financial statements. 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 $~~8,301~~4,533 and $~~4,406~~9,608 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, respectively, and a specific reserve for these loans of $~~194~~305 and $~~305~~357 was included in the allowance for loan losses as of such dates.

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

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


	September 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Carrying amount prior to remeasurement	$	9,174		$	8,290		$	1,951		$	8,732
Impairment recognized in results of operations	(1,232		)	(1,549		)	(315		)	(1,340		)
Fair value	$	7,942		$	6,741		$	1,636		$	7,392

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Notes to Consolidated Financial Statements (Unaudited)

~~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, 2017 and December 31, 2016, and $40 in impairment charges were recognized in earnings during the twelve months ended December 31, 2016. There were no impairment charges recognized in earnings for the nine months ended September 30, 2017.

Financial instrument

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Fair

Value

Valuation Technique

Significant

Unobservable Inputs

Range of Inputs

Impaired loans

8,107

Appraised value of collateral less estimated costs to sell

Estimated costs to sell

4-10%

4,228

Appraised value of collateral less estimated costs to sell

Estimated costs to sell

4-10%

OREO

7,942

Appraised value of property less estimated costs to sell

Estimated costs to sell

4-10%

1,636

Appraised value of property less estimated costs to sell

Estimated costs to sell

4-10%

Fair Value Option

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

Net gains of $~~5,093~~1,437 and ~~net losses of~~ $~~145~~3,998 resulting from fair value changes of these mortgage loans were recorded in income during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016,~~2017, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in “Mortgage banking income” in the Consolidated Statements of Income.

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

The following table summarizes the differences between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of ~~September 30, 2017:~~March 31, 2018:


	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference		Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	207,288	$	200,293	$	6,995	$	204,472	$	199,539	$	4,933
Past due loans of 90 days or more	—		—		—		—		—		—
Nonaccrual loans	—		—		—		—		—		—

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Notes to Consolidated Financial Statements (Unaudited)

Fair Value of Financial Instruments

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


			Fair Value										Fair Value
As of September 30, 2017	Carrying Value		Level 1		Level 2		Level 3		Total
As of March 31, 2018											Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	332,200	$	332,200	$	—	$	—	$	332,200	$	250,978	$	250,978	$	—	$	—	$	250,978
Securities available for sale	1,150,459		—		1,141,499		8,960		1,150,459		948,365		—		938,320		10,045		948,365
Mortgage loans held for sale	207,288		—		207,288		—		207,288		204,472		—		204,472		—		204,472
Loans, net	7,404,077		—		—		7,373,870		7,373,870		7,651,669		—		—		7,482,089		7,482,089
Mortgage servicing rights	35,930		—		—		41,822		41,822		40,216		—		—		53,426		53,426
Derivative instruments	8,569		—		8,569		—		8,569		9,311		—		9,311		—		9,311
Financial liabilities
Deposits	$	8,118,518	$	6,290,726	$	1,827,910	$	—	$	8,118,636	$	8,357,769	$	6,504,003	$	1,843,895	$	—	$	8,347,898
Short-term borrowings	384,230		384,230		—		—		384,230		57,753		57,753		—		—		57,753
Other long-term borrowings	111		111		—		—		111		86		86		—		—		86
Federal Home Loan Bank advances	7,760		—		8,005		—		8,005		7,276		—		7,362		—		7,362
Junior subordinated debentures	85,744		—		67,785		—		67,785		86,018		—		77,692		—		77,692
Subordinated notes	114,088		—		118,575		—		118,575		114,059		—		116,763		—		116,763
Derivative instruments	8,429		—		8,429		—		8,429		5,950		—		5,950		—		5,950


			Fair Value										Fair Value
As of December 31, 2016	Carrying Value		Level 1		Level 2		Level 3		Total
As of December 31, 2017											Carrying Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	306,224	$	306,224	$	—	$	—	$	306,224	$	281,453	$	281,453	$	—	$	—	$	281,453
Securities held to maturity	356,282		—		362,893		—		362,893
Securities available for sale	674,248		—		655,859		18,389		674,248		671,488		—		662,100		9,388		671,488
Mortgage loans held for sale	177,866		—		177,866		—		177,866		108,316		—		108,316		—		108,316
Loans, net	6,159,972		—		—		5,989,790		5,989,790		7,574,111		—		—		7,514,185		7,514,185
Mortgage servicing rights	26,302		—		—		32,064		32,064		39,339		—		—		47,868		47,868
Derivative instruments	9,108		—		9,108		—		9,108		5,977		—		5,977		—		5,977
Financial liabilities
Deposits	$	7,059,137	$	5,438,384	$	1,631,027	$	—	$	7,069,411	$	7,921,075	$	6,114,391	$	1,809,085	$	—	$	7,923,476
Short-term borrowings	109,676		109,676		—		—		109,676		89,814		89,814		—		—		89,814
Other long-term borrowings	147		147		—		—		147		98		98		—		—		98
Federal Home Loan Bank advances	8,542		—		8,777		—		8,777		7,493		—		7,661		—		7,661
Junior subordinated debentures	95,643		—		73,301		—		73,301		85,881		—		69,702		—		69,702
Subordinated notes	98,127		—		101,000		—		101,000		114,074		—		118,650		—		118,650
Derivative instruments	5,910		—		5,910		—		5,910		6,039		—		6,039		—		6,039

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or nonrecurring basis were discussed previously.

~~Cash and cash equivalents~~: Cash and cash equivalents consist of cash and due from banks and interest-bearing balances with banks. The carrying amount reported in the Consolidated Balance Sheets for cash and cash equivalents approximates fair value based on the short-term nature of these assets.

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Notes to Consolidated Financial Statements (Unaudited)

~~Securities held to maturity~~: Securities held to maturity consist of debt securities such as obligations of U.S. Government agencies, states, and other political subdivisions. Where quoted market prices in active markets are available, securities are classified within Level 1 of the fair value hierarchy. If quoted prices in 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.

~~Loans, net~~: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values of fixed-rate loans, including mortgages, commercial, agricultural and consumer loans, are estimated using a discounted cash flow analysis based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

~~Deposits~~: The fair values disclosed for demand deposits, both interest-bearing and noninterest-bearing, are, by definition, equal to the amount payable on demand at the reporting date. Such deposits are classified within Level 1 of the fair value hierarchy. The fair values of certificates of deposit and individual retirement accounts are estimated using a discounted cash flow based on currently effective interest rates for similar types of deposits. These deposits are classified within Level 2 of the fair value hierarchy.

~~Short-term borrowings~~: Short-term borrowings consist of securities sold under agreements to repurchase and short-term FHLB advances. The fair value of these borrowings approximates the carrying value of the amounts reported in the Consolidated Balance Sheets for each respective account given the short-term nature of the liabilities.

~~Federal Home Loan Bank advances: The fair value for Federal Home Loan Bank (“FHLB”) advances is determined by discounting the expected future cash outflows using current market rates for similar borrowings, or Level 2 inputs.~~

~~Junior subordinated debentures and subordinated notes: The fair value for the Company’s junior subordinated debentures and subordinated notes is determined using quoted market prices for similar instruments traded in active markets.~~

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

Note 1615 – Other Comprehensive Income (Loss)

(In Thousands)

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

Pre-Tax
Tax Expense
(Benefit)
Net of Tax
Three months ended September 30, 2017
Securities available for sale:
Unrealized holding losses on securities $ (1,245 ) $ (481 ) $ (764 )
Unrealized holding gains on securities transfered from held to maturity to available for sale 13,218
5,110
8,108
Amortization of unrealized holding gains on securities transferred to the held to maturity category (7 ) (3 ) (4 )
Total securities available for sale 11,966
4,626
7,340
Derivative instruments:
Unrealized holding gains on derivative instruments 163
63
100
Total derivative instruments 163
63
100
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost 101
39
62
Total defined benefit pension and post-retirement benefit plans 101
39
62
Total other comprehensive income $ 12,230
$ 4,728
$ 7,502
Three months ended September 30, 2016
Securities available for sale:
Unrealized holding gains on securities $ 2,258
$ 873
$ 1,385
Amortization of unrealized holding gains on securities transferred to the held to maturity category (18 ) (7 ) (11 )
Total securities available for sale 2,240
866
1,374
Derivative instruments:
Unrealized holding gains on derivative instruments 807
312
495
Total derivative instruments 807
312
495
Defined benefit pension and post-retirement benefit plans:
Reclassification adjustment for net settlement gain realized in net income (383 ) (148 ) (235 )
Amortization of net actuarial loss recognized in net periodic pension cost 124
48
76
Total defined benefit pension and post-retirement benefit plans (259 ) (100 ) (159 )
Total other comprehensive income $ 2,788
$ 1,078
$ 1,710

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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



	Pre-Tax			Tax Expense (Benefit)			Net of Tax
Three months ended March 31, 2018
Securities available for sale:
Unrealized holding losses on securities	$	(10,609	)	$	(2,700	)	$	(7,909	)
Total securities available for sale	(10,609		)	(2,700		)	(7,909		)
Derivative instruments:
Unrealized holding gains on derivative instruments	1,151			293			858
Total derivative instruments	1,151			293			858
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	87			21			66
Total defined benefit pension and post-retirement benefit plans	87			21			66
Total other comprehensive loss	$	(9,371	)	$	(2,386	)	$	(6,985	)
Three months ended March 31, 2017
Securities available for sale:
Unrealized holding gains on securities	$	4,739		$	1,832		$	2,907
Amortization of unrealized holding gains on securities transferred to the held to maturity category	(246		)	(95		)	(151		)
Total securities available for sale	4,493			1,737			2,756
Derivative instruments:
Unrealized holding gains on derivative instruments	276			107			169
Total derivative instruments	276			107			169
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost	113			44			69
Total defined benefit pension and post-retirement benefit plans	113			44			69
Total other comprehensive income	$	4,882		$	1,888		$	2,994

Pre-Tax
Tax Expense
(Benefit)
Net of Tax
Nine months ended September 30, 2017
Securities available for sale:
Unrealized holding gains on securities $ 7,682
$ 2,970
$ 4,712
Unrealized holding gains on securities transfered from held to maturity to available for sale

13,218
5,110
8,108
Amortization of unrealized holding gains on securities transferred to the held to maturity category (282 ) (109 ) (173 )
Total securities available for sale 20,618
7,971
12,647
Derivative instruments:
Unrealized holding gains on derivative instruments 169
65
104
Total derivative instruments 169
65
104
Defined benefit pension and post-retirement benefit plans:
Amortization of net actuarial loss recognized in net periodic pension cost 305
118
187
Total defined benefit pension and post-retirement benefit plans 305
118
187
Total other comprehensive income $ 21,092
$ 8,154
$ 12,938
Nine months ended September 30, 2016
Securities available for sale:
Unrealized holding gains on securities $ 8,573
$ 3,313
$ 5,260
Reclassification adjustment for gains realized in net income (1,186 ) (458 ) (728 )
Amortization of unrealized holding gains on securities transferred to the held to maturity category (79 ) (30 ) (49 )
Total securities available for sale 7,308
2,825
4,483
Derivative instruments:
Unrealized holding losses on derivative instruments (1,959 ) (760 ) (1,199 )
Total derivative instruments (1,959 ) (760 ) (1,199 )
Defined benefit pension and post-retirement benefit plans:
Reclassification adjustment for net settlement gain realized in net income (383 ) (148 ) (235 )
Amortization of net actuarial loss recognized in net periodic pension cost 360
132
228
Total defined benefit pension and post-retirement benefit plans (23 ) (16 ) (7 )
Total other comprehensive income $ 5,326
$ 2,049
$ 3,277

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

September 30,
2017 December 31, 2016
Unrealized gains on securities $ 14,732
$ 9,490
Non-credit related portion of other-than-temporary impairment on securities (9,313 ) (16,719 )
Unrealized losses on derivative instruments (1,252 ) (1,355 )
Unrecognized losses on defined benefit pension and post-retirement benefit plans obligations (7,133 ) (7,320 )
Total accumulated other comprehensive loss $ (2,966 ) $ (15,904 )



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

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Notes to Consolidated Financial Statements (Unaudited)

Note 1716 – Net Income Per Common Share

(In Thousands, Except Share Data)

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


	Three Months Ended				Three Months Ended
	September 30,				March 31,
	2017		2016		2018		2017
Basic
Net income applicable to common stock	$	26,421	$	23,179	$	33,826	$	23,972
Average common shares outstanding	49,316,572		42,091,164		49,356,417		44,364,337
Net income per common share - basic	$	0.54	$	0.55	$	0.69	$	0.54
Diluted
Net income applicable to common stock	$	26,421	$	23,179	$	33,826	$	23,972
Average common shares outstanding	49,316,572		42,091,164		49,356,417		44,364,337
Effect of dilutive stock-based compensation	118,653		219,194		146,533		116,162
Average common shares outstanding - diluted	49,435,225		42,310,358		49,502,950		44,480,499
Net income per common share - diluted	$	0.53	$	0.55	$	0.68	$	0.54

Nine Months Ended
September 30,
2017 2016
Basic
Net income applicable to common stock $ 75,677
$ 67,295
Average common shares outstanding 46,050,250
41,500,407
Net income per common share - basic $ 1.64
$ 1.62
Diluted
Net income applicable to common stock $ 75,677
$ 67,295
Average common shares outstanding 46,050,250
41,500,407
Effect of dilutive stock-based compensation 117,891
229,501
Average common shares outstanding - diluted 46,168,141
41,729,908
Net income per common share - diluted $ 1.64
$ 1.61

There were no ~~stock options~~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 for the periods presented above.

Note 1817 – Regulatory Matters

(In Thousands)

~~Renasant~~The Company and the Bank isare 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 ~~Renasant Bank’s~~the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, ~~Renasant~~the Company and the Bank must meet specific capital guidelines that involve quantitative measures of ~~Renasant Bank’s~~ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. ~~Renasant Bank’s capital~~Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

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

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Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



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

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


	September 30, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Renasant Corporation
Tier 1 Capital to Average Assets (Leverage)	$	970,005	10.05	%	$	858,850	10.59	%	$	1,000,640	10.61	%	$	979,604	10.18	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	887,234		11.21	%	766,560		11.47	%	917,501		11.38	%	896,733		11.34	%
Tier 1 Capital to Risk-Weighted Assets	970,005		12.26	%	858,850		12.86	%	1,000,640		12.41	%	979,604		12.39	%
Total Capital to Risk-Weighted Assets	1,131,605		14.30	%	1,004,038		15.03	%	1,164,193		14.44	%	1,142,926		14.46	%
Renasant Bank
Tier 1 Capital to Average Assets (Leverage)	$	990,117	10.28	%	$	824,850	10.20	%	$	1,023,486	10.88	%	$	1,000,715	10.42	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	990,117		12.54	%	824,850		12.38	%	1,023,486		12.71	%	1,000,715		12.69	%
Tier 1 Capital to Risk-Weighted Assets	990,117		12.54	%	824,850		12.38	%	1,023,486		12.71	%	1,000,715		12.69	%
Total Capital to Risk-Weighted Assets	1,038,473		13.15	%	871,911		13.09	%	1,073,712		13.33	%	1,050,751		13.32	%

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 ~~July 2013,~~addition, the Company must maintain a “capital conservation buffer,” which is a specified amount of CET1 capital in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer is designed to absorb losses during periods of economic stress. If the Company’s ratio of CET1 to risk-weighted capital is below the capital conservation buffer, the Company will face restrictions on its ability to pay dividends, repurchase outstanding stock and make certain discretionary bonus payments. When fully phased in on January 1, 2019, the required capital conservation buffer will be 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements; as of March 31, 2018, the capital conservation buffer is 1.875% of risk-weighted assets. In addition, the Basel III regulatory capital reforms and rules effecting certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 issued by the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency ~~approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act~~ (the “Basel III Rules”) that call for broad and comprehensive revision of regulatory capital standards for U.S. banking organizations. Generally, the new Basel III Rules became effective on January 1, 2015, although parts of the Basel III Rules will be phased in through 2019. The Basel III Rules implemented a new common equity Tier 1 minimum capital requirement (“CET1”), and a higher minimum Tier 1 capital requirement, as reflected in the table above, and adjusted other items affecting the calculation of the numerator of a banking organization’s risk-based capital ratios. The new CET1 capital ratio includes common equity as defined under GAAP and does not include any other type of non-common equity under GAAP. Additionally, the Basel III Rules apply limits to a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of CET1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements.

Further, the Basel III Rules changed the agencies’ general risk-based capital requirements for determining risk-weighted assets, which affect the calculation of the denominator of a banking organization’s risk-based capital ratios. The Basel III Rules have revised the agencies’ rules for calculating risk-weighted assets to enhance risk sensitivity and to incorporate certain international capital standards of the Basel Committee on Banking ~~Supervision set forth in~~Supervision. These revisions affect the ~~standardized approach of the “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”.~~

~~The~~ calculation of ~~risk-weighted assets in~~ the denominator of ~~the Basel III~~a banking organization’s risk-based capital ratios ~~has been adjusted~~ to reflect the ~~higher risk~~higher-risk nature of certain types of loans. ~~Specifically, as~~As applicable to ~~the Company and~~ Renasant Bank:

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

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

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

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Notes to Consolidated Financial Statements (Unaudited)

~~term, use of negative amortization~~Finally, Tier 1 capital treatment for “hybrid” capital items like trust preferred securities has been eliminated, subject to various grandfathering and ~~balloon payments, certain rate increases and documented and verified borrower income.~~transition rules.

~~— Commercial mortgages: Replaced the former 100% risk weight with a 150% risk weight for certain high volatility commercial real estate acquisition, development and construction loans.~~

~~— Nonperforming loans: Replaced the former 100% risk weight with a 150% risk weight for loans, other than residential mortgages, that are 90 days past due or on nonaccrual status.~~

The Basel III Rules also introduce a new capital conservation buffer designed to absorb losses during periods of economic stress. The capital conservation buffer is composed entirely of CET1, on top of these minimum risk-weighted asset ratios. In addition, the Final Rules provide for a countercyclical capital buffer applicable only to certain covered institutions. It is not expected that the countercyclical capital buffer will be applicable to the Company or Renasant Bank. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a 4-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).

~~Table of Contents~~

~~Renasant Corporation and Subsidiaries~~

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

Note 1918 – Segment Reporting

(In Thousands)

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

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

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

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

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

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


	Community Banks		Insurance		Wealth Management			Other			Consolidated		Community Banks		Insurance		Wealth Management		Other			Consolidated
Three months ended September 30, 2017
Three months ended March 31, 2018
Net interest income (loss)	$	92,007	$	114	$	564		$	(2,668	)	$	90,017	$	91,427	$	106	$	313	$	(2,606	)	$	89,240
Provision for loan losses	2,150		—		—			—			2,150		1,750		—		—		—			1,750
Noninterest income	28,120		2,394		3,213			(314		)	33,413		27,918		2,772		3,527		(264		)	33,953
Noninterest expense	75,681		1,805		2,887			287			80,660		72,633		1,731		3,392		188			77,944
Income (loss) before income taxes	42,296		703		890			(3,269		)	40,620		44,962		1,147		448		(3,058		)	43,499
Income tax expense (benefit)	15,199		275		—			(1,275		)	14,199		10,167		297		—		(791		)	9,673
Net income (loss)	$	27,097	$	428	$	890		$	(1,994	)	$	26,421	$	34,795	$	850	$	448	$	(2,267	)	$	33,826

Total assets	$	10,216,826	$	25,729	$	59,703		$	21,429		$	10,323,687	$	10,135,478	$	24,125	$	61,800	$	16,910		$	10,238,313
Goodwill	608,279		2,767		—			—			611,046		608,279		2,767		—		—			611,046

Three months ended September 30, 2016
Three months ended March 31, 2017
Net interest income (loss)	$	77,064	$	85	$	472		$	(1,890	)	$	75,731	$	75,956	$	92	$	487	$	(2,520	)	$	74,015
Provision for loan losses	2,655		—		(5		)	—			2,650		1,500		—		—		—			1,500
Noninterest income	32,773		2,454		3,248			(203		)	38,272		26,578		2,549		3,119		(225		)	32,021
Noninterest expense	71,784		1,762		2,745			177			76,468		64,221		1,692		2,996		400			69,309
Income (loss) before income taxes	35,398		777		980			(2,270		)	34,885		36,813		949		610		(3,145		)	35,227
Income tax expense (benefit)	12,284		301		—			(879		)	11,706		12,110		375		—		(1,230		)	11,255
Net income (loss)	$	23,114	$	476	$	980		$	(1,391	)	$	23,179	$	24,703	$	574	$	610	$	(1,915	)	$	23,972

Total assets	$	8,446,403	$	22,708	$	51,176		$	22,184		$	8,542,471	$	8,673,576	$	24,032	$	54,537	$	12,566		$	8,764,711
Goodwill	467,767		2,767		—			—			470,534		467,767		2,767		—		—			470,534

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Notes to Consolidated Financial Statements (Unaudited)

Note 19 – Revenue Recognition

(In Thousands)

As previously discussed in Note 1, “Summary of Significant Accounting Policies,” the Company adopted ASU 2014-09, an update to ASC 606, in the first quarter of 2018. The majority of the Company’s revenue streams are governed by other authoritative guidance and, therefore, considered out-of-scope of ASC 606. The Company’s revenue streams that are considered in-scope of ASC 606 are discussed below.

Additionally, ASC 606 requires costs that are incremental to obtaining a contract to be capitalized. In the case of the Company, these costs would include sales commissions for insurance and wealth management products. ASC 606 has established, and the Company has utilized, a practical expedient to allow for: costs that if capitalized would have an amortization period of one year or less may instead be expensed as incurred.

Service Charges on Deposit Accounts

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

Insurance Commissions

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

Under the agency bill method, Renasant Insurance is responsible for billing the customers directly and then collecting and remitting the premiums to the insurance carriers. Agency bill revenue is recognized at the later of the invoice date or effective date of the policy. The Company has established a reserve for such policies which is derived from historical collection experience and updated annually. The contract balances (i.e. accounts receivable and accounts payable related to insurance commisions earned and premiums due) and the reserve established are considered inconsequential to the overall financial results of the Company.

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

The Company also earns contingency income which it recognizes on a cash basis. Contingency income is a bonus received from the insurance underwriters and is based both on commission income and claims experience on the Company’s clients’ policies during the previous year. Increases and decreases in contingency income are reflective of corresponding increases and decreases in the amount of claims paid by insurance carriers. Contingency income, which is included in “Other noninterest income” in the Consolidated Statements of Income, was $762 and $687 for the three months ending March 31, 2018 and 2017, respectively.

Wealth Management Revenue

Wealth management consists of the Trust division and the Financial Services division. The Trust division operates on a custodial basis which includes administration of benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal and corporate benefit accounts, self-directed IRAs, and custodial accounts. Fees for managing these accounts are based on the value of assets under management in the account, with the amount of the fee depending on the type of account. Revenue is recognized on monthly basis, and there is little to no risk of a material reversal of revenue. The contract balance (i.e. management fee receivable) recognized is considered inconsequential to the overall financial results of the Company.

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

Sales of Other Real Estate Owned

Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Community
Banks
Insurance
Wealth
Management
Other Consolidated
Nine months ended September 30, 2017
Net interest income (loss) $ 249,355
$ 330
$ 1,575
$ (7,625 ) $ 243,635
Provision for loan losses 5,400
—
—
—
5,400
Noninterest income (loss) 83,290
7,207
9,599
(397 ) 99,699
Noninterest expense 209,920
5,263
8,788
839
224,810
Income (loss) before income taxes 117,325
2,274
2,386
(8,861 ) 113,124
Income tax expense (benefit) 40,021
888
—
(3,462 ) 37,447
Net income (loss) $ 77,304
$ 1,386
$ 2,386
$ (5,399 ) $ 75,677

Total assets $ 10,216,826
$ 25,729
$ 59,703
$ 21,429
$ 10,323,687
Goodwill 608,279
2,767
—
—
611,046

Nine months ended September 30, 2016
Net interest income (loss) $ 225,449
$ 259
$ 1,349
$ (4,115 ) $ 222,942
Provision for loan losses 5,893
—
(13 ) —
5,880
Noninterest income 89,515
7,734
9,296
615
107,160
Noninterest expense 209,442
5,240
8,312
547
223,541
Income (loss) before income taxes 99,629
2,753
2,346
(4,047 ) 100,681
Income tax expense (benefit) 33,875
1,074
—
(1,563 ) 33,386
Net income (loss) $ 65,754
$ 1,679
$ 2,346
$ (2,484 ) $ 67,295

Total assets $ 8,446,403
$ 22,708
$ 51,176
$ 22,184
$ 8,542,471
Goodwill 467,767
2,767
—
—
470,534
The Company continually markets the properties included in the OREO portfolio. The Company will at times, in the ordinary course of business, provide seller-financing on the sales of OREO. In cases where a sale is seller-financed, the Company must ensure the commitment of both parties to perform their respective obligations and the collectability of the transaction price in order to properly recognize the revenue on the sale of OREO. This is accomplished through the Company’s loan underwriting process. In this process the Company considers things such as the buyer’s initial equity in the property, the credit quality of the borrower, the financing terms of the loan and the cash flow from the property, if applicable. If it is determined that the contract criteria in ASC 606 have been met, the revenue on the sale of OREO will be recognized on the closing date of the sale when the Company has transferred title to the buyer and obtained the right to receive payment for the property. In instances where sales are not seller-financed, the Company recognizes revenue on the closing date of the sale when the Company has obtained payment for the property and transferred title to the buyer. For additional information on OREO please see Note 7, “Other Real Estate Owned.”

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”) ~~which may~~that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements usually include words such as “expects,” “projects,” “proposes,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” ~~“possible”~~“possible,” “approximately,” “should” and variations of such words and other similar expressions. ~~Prospective investors~~The forward-looking statements in, or incorporated by reference into, this report reflect our current assumptions and estimates of, among other things, future economic circumstances, industry conditions, business strategy and decisions, Company performance and financial results. Management believes its assumptions and estimates are reasonable, but they are all inherently subject to significant business, economic and competitive risks and uncertainties, many beyond management’s control, that could cause the Company’s actual results and experience to differ from the anticipated results and expectations indicated or implied in such forward-looking statements. Such differences may be material. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and, ~~involve risks and uncertainties and that actual results may differ materially from those contemplated by such~~accordingly, investors should not place undue reliance on these forward-looking ~~statements.~~statements, which speak only as of the date they are made.

Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following risks: (1) the Company’s ability to efficiently integrate acquisitions into its operations, retain the customers of these businesses, ~~and~~ grow the acquired ~~operations;~~operations and realize the cost savings expected from an acquisition to the extent and in the time frame anticipated by management, including with respect to its pending acquisition of Brand Group Holdings, Inc.; (2) the effect of economic conditions and interest rates on a national, regional or international basis; (3) ~~the~~ timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (4) competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, mortgage lending and auto lending industries; (5) the financial resources of, and products available to, competitors; (6) changes in laws and regulations ~~including~~as well as changes in accounting standards; (7) changes in policy by regulatory agencies; (8) changes in the securities and foreign exchange markets; (9) the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (10) changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers; (11) an insufficient allowance for loan losses as a result of inaccurate assumptions; (12) general economic, market or business ~~conditions;~~conditions, including the impact of inflation; (13) changes in demand for loan products and financial services; (14) concentration of credit exposure; (15) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (16) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (17) natural disasters and ~~(16)~~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. ~~Management undertakes no~~

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

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America ~~("GAAP"~~(“GAAP”), this document contains ~~certain~~an adjusted efficiency ratio, which is a non-GAAP financial ~~measures~~measure. The efficiency ratio is adjusted to exclude expenses that ~~exclude net interest income collected on problem loans~~(1) the Company does not consider to be part of our normal operations, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as merger and ~~purchase accounting adjustments from loan interest income~~conversion related expenses and ~~net interest income when calculating the Company's taxable equivalent loan yields and net interest margin, respectively.~~debt prepayment penalties. Management uses ~~these non-GAAP financial measures~~the adjusted efficiency ratio to evaluate ongoing operating results and ~~to assess ongoing profitability.~~efficiency of the Company's operations. The ~~reconciliations~~reconciliation from GAAP to non-GAAP for ~~these~~this financial ~~measures can be found in “Results of Operations”~~measure is below.



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

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

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

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

The presentation of ~~these~~this non-GAAP financial ~~measures~~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~~Company’s calculations may not be comparable to other similarly titled measures presented by other companies. Also, there may be limits in the usefulness of ~~these measures~~this measure to readers of this document. As a result, the Company encourages readers to consider its consolidated financial statements and footnotes thereto in their entirety and not to rely on any single financial measure.

Financial Condition

The following discussion provides details regarding the changes in significant balance sheet accounts at ~~September 30, 2017~~March 31, 2018 compared to December 31, ~~2016.~~

~~Mergers and Acquisitions~~

On July 1, 2017, the Company completed its acquisition of Metropolitan BancGroup, Inc. (“Metropolitan”), the parent company of Metropolitan Bank. At closing, Metropolitan merged with and into the Company, with the Company the surviving corporation in the merger; immediately thereafter, Metropolitan Bank merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger. The acquisition increased total assets $1,350,881, including an increase in total loans of $967,804, and increased total deposits by $942,084. The Company is finalizing the fair values of the assets acquired and liabilities assumed as part of the acquisition; accordingly, the foregoing amounts remain subject to change.

See Note 2, “Mergers and Acquisitions,” in the Notes to Consolidated Financial Statements included in Item 1, “Financial Statements,” for details regarding the Company’s recent mergers and acquisitions. The Company's financial condition and results of operations include the impact of Metropolitan's operations since the acquisition date.2017.

Assets

Total assets were ~~$10,323,687~~$10,238,313 at ~~September 30, 2017~~March 31, 2018 compared to ~~$8,699,851~~$9,829,981 at December 31, ~~2016.~~2017.

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, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Balance		Percentage of Portfolio		Balance		Percentage of Portfolio		Balance		Percentage of Portfolio		Balance		Percentage of Portfolio
Obligations of other U.S. Government agencies and corporations	$	14,638	1.27	%	$	16,259	1.58	%	$	3,528	0.37	%	$	3,564	0.53	%
Obligations of states and political subdivisions	350,354		30.45		342,181		33.20		226,342		23.87		234,481		34.92
Mortgage-backed securities	749,588		65.16		631,556		61.29		684,510		72.18		406,765		60.58
Trust preferred securities	8,960		0.78		18,389		1.78		10,045		1.06		9,388		1.40
Other debt securities	26,919		2.34		22,145		2.15		23,940		2.52		17,290		2.57
	$	1,150,459	100.00	%	$	1,030,530	100.00	%	$	948,365	100.00	%	$	671,488	100.00	%

The balance of our securities portfolio at ~~September 30, 2017~~March 31, 2018 increased ~~$119,929~~$276,877 to ~~$1,150,459~~$948,365 from ~~$1,030,530~~$671,488 at December 31, ~~2016. On~~2017. As discussed in the ~~acquisition date, Metropolitan added approximately $108,697~~Company’s Annual Report on Form 10-K for the year ended December 31, 2017, in the fourth quarter of 2017, we implemented strategic initiatives, collectively referred to as our ~~securities portfolio.~~“deleveraging strategy,” to manage total assets below $10,000,000 as of December 31, 2017, which included the sale of certain investment securities. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, we purchased ~~$191,679~~$317,922 in investment ~~securities.~~securities as part of the releveraging of the Company’s balance sheet. Mortgage-backed securities and collateralized mortgage obligations (“CMOs”), in the aggregate, comprised approximately ~~96%~~98% of these purchases. CMOs are included in the “Mortgage-backed securities” line item in the above table. The mortgage-backed securities and CMOs held in our investment portfolio are primarily issued by government sponsored entities. Proceeds from maturities, calls ~~sales~~ and principal payments on securities during the first ~~nine~~three months of ~~2017~~2018 totaled ~~$196,296.~~ $29,335. There were no securities sold during the first three months of 2018.

For more information about the ~~Company's decision to transfer all held to maturity securities to securities available for sale in the third quarter of 2017,~~Company’s security portfolio, see Note 3, “Securities,” in the Notes to Consolidated Financial Statements of the Company in Item 1, ~~“Financial Statements,” in this report.~~

The Company holds investments in pooled trust preferred securities. This portfolio had a cost basis of $12,454 and $23,749 and a fair value of $8,960 and $18,389 at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the investment in pooled trust preferred securities consisted of two securities representing interests in various tranches of trusts collateralized by debt issued by over 160 financial institutions. During the third quarter of 2017, the Company sold one of its pooled trust preferred securities (XXIV) with a carrying value of $9,346 at the time of sale for net proceeds of $9,403 resulting in a gain of $57 on the sale. For more information about the Company’s trust preferred securities, see Note 3, “Securities,” in the Notes to Consolidated Financial Statements, ~~of the Company in Item 1, “Financial Statements,”~~ in this report.

Loans

Total loans at ~~September 30, 2017~~March 31, 2018 were ~~$7,448,608,~~$7,698,070, an increase of ~~$1,245,899~~$77,748 from ~~$6,202,709~~$7,620,322 at December 31, ~~2016.~~2017.

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


	September 30, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Balance		Percentage of Total Loans		Balance		Percentage of Total Loans		Balance		Percentage of Total Loans		Balance		Percentage of Total Loans
Commercial, financial, agricultural	$	1,008,935	13.55	%	$	717,490	11.57	%	$	1,046,818	13.60	%	$	1,039,393	13.64	%
Lease financing	51,902		0.70		46,841		0.75		52,536		0.68		54,013		0.71
Real estate – construction	577,720		7.75		552,679		8.91		657,491		8.54		633,389		8.31
Real estate – 1-4 family mortgage	2,295,852		30.82		1,878,177		30.28		2,358,101		30.63		2,343,721		30.76
Real estate – commercial mortgage	3,390,389		45.52		2,898,895		46.74		3,463,953		45.00		3,427,530		44.98
Installment loans to individuals	123,810		1.66		108,627		1.75		119,171		1.55		122,276		1.60
Total loans, net of unearned income	$	7,448,608	100.00	%	$	6,202,709	100.00	%	$	7,698,070	100.00	%	$	7,620,322	100.00	%

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities ~~which~~that would cause them to be similarly impacted by economic or other conditions. At ~~September 30, 2017,~~March 31, 2018, there were no concentrations of loans exceeding 10% of total loans which are not disclosed as a category of loans separate from the categories listed above.

Non purchased loans totaled ~~$5,293,467~~$5,830,122 at ~~September 30, 2017~~March 31, 2018 compared to ~~$4,713,572~~$5,588,556 at December 31, ~~2016.~~2017. With the exception of ~~construction~~lease financing and installment loans to individuals, the Company experienced loan growth across all categories of non purchased loans, with loans from our specialty commercial business lines, which consist of our asset-based lending, healthcare, factoring, and equipment lease financing banking groups as well as loans meeting the criteria to be guaranteed by the Small Business Administration (“SBA”), contributing ~~$85,068~~$47,097 of the total increase in loans from December 31, ~~2016.~~2017.

Looking at the change in loans geographically, non purchased loans in our Mississippi, Georgia, and Tennessee markets increased ~~by $99,173, $285,017,~~$29,542, $99,252, and ~~$64,802,~~$46,813, respectively, when compared to December 31, ~~2016.~~2017. Non purchased loans in our Alabama and Florida markets (collectively referred to as our “Central Region”) increased ~~$129,347.~~$67,181.

Loans purchased in previous acquisitions totaled ~~$2,155,141~~$1,867,948 and ~~$1,489,137~~$2,031,766 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. The following tables provide a breakdown of non purchased loans and purchased loans as of the dates presented:


	September 30, 2017						March 31, 2018
	Non Purchased		Purchased		Total Loans		Non Purchased		Purchased		Total Loans
Commercial, financial, agricultural	$	707,835	$	301,100	$	1,008,935	$	803,146	$	243,672	$	1,046,818
Lease financing, net of unearned income	51,902		—		51,902		52,536		—		52,536
Real estate – construction:
Residential	178,080		42,499		220,579		182,392		15,488		197,880
Commercial	295,144		54,345		349,489		389,639		59,573		449,212
Condominiums	4,414		3,238		7,652		10,399		—		10,399
Total real estate – construction	477,638		100,082		577,720		582,430		75,061		657,491
Real estate – 1-4 family mortgage:
Primary	862,541		426,286		1,288,827		973,836		375,972		1,349,808
Home equity	431,826		122,644		554,470		448,679		107,550		556,229
Rental/investment	271,471		78,115		349,586		282,433		69,983		352,416
Land development	78,222		24,747		102,969		80,323		19,325		99,648
Total real estate – 1-4 family mortgage	1,644,060		651,792		2,295,852		1,785,271		572,830		2,358,101
Real estate – commercial mortgage:
Owner-occupied	884,376		447,187		1,331,563		968,573		407,449		1,376,022
Non-owner occupied	1,298,198		581,246		1,879,444		1,401,133		507,830		1,908,963
Land development	128,766		50,616		179,382		133,974		44,994		178,968
Total real estate – commercial mortgage	2,311,340		1,079,049		3,390,389		2,503,680		960,273		3,463,953
Installment loans to individuals	100,692		23,118		123,810		103,059		16,112		119,171
Total loans, net of unearned income	$	5,293,467	$	2,155,141	$	7,448,608	$	5,830,122	$	1,867,948	$	7,698,070


	December 31, 2016						December 31, 2017
	Non Purchased		Purchased		Total Loans		Non Purchased		Purchased		Total Loans
Commercial, financial, agricultural	$	589,290	$	128,200	$	717,490	$	763,823	$	275,570	$	1,039,393
Lease financing, net of unearned income	46,841		—		46,841		54,013		—		54,013
Real estate – construction:
Residential	197,029		19,282		216,311		178,400		25,041		203,441
Commercial	285,638		49,471		335,109		361,345		55,734		417,079
Condominiums	1,259		—		1,259		7,913		4,956		12,869
Total real estate – construction	483,926		68,753		552,679		547,658		85,731		633,389
Real estate – 1-4 family mortgage:
Primary	747,678		281,721		1,029,399		924,468		403,637		1,328,105
Home equity	400,448		86,151		486,599		445,149		116,990		562,139
Rental/investment	219,237		62,917		282,154		281,662		72,590		354,252
Land development	58,367		21,658		80,025		78,255		20,970		99,225
Total real estate – 1-4 family mortgage	1,425,730		452,447		1,878,177		1,729,534		614,187		2,343,721
Real estate – commercial mortgage:
Owner-occupied	833,509		378,756		1,212,265		938,444		436,011		1,374,455
Non-owner occupied	1,106,727		397,404		1,504,131		1,319,453		554,239		1,873,692
Land development	134,901		47,598		182,499		132,179		47,204		179,383
Total real estate – commercial mortgage	2,075,137		823,758		2,898,895		2,390,076		1,037,454		3,427,530
Installment loans to individuals	92,648		15,979		108,627		103,452		18,824		122,276
Total loans, net of unearned income	$	4,713,572	$	1,489,137	$	6,202,709	$	5,588,556	$	2,031,766	$	7,620,322

Mortgage Loans Held for Sale

Mortgage loans held for sale were ~~$207,288~~$204,472 at ~~September 30, 2017~~March 31, 2018 compared to ~~$177,866~~$108,316 at December 31, ~~2016.~~2017. The Company's aforementioned strategy to manage consolidated assets below $10,000,000 at December 31, 2017 included shortening the holding period of mortgage loans held for sale. During the first quarter of 2018, the holding period of mortgage loans held for sale reverted to standard practice, which was the primary reason for the increase in the balance from December 31, 2017.

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. ~~These~~Our standard practice is to sell the loans ~~are typically sold~~ within 30-40 days after the loan is funded. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.

Deposits

The Company relies on deposits as its major source of funds. Total deposits were ~~$8,118,518~~$8,357,769 and ~~$7,059,137~~$7,921,075 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. Noninterest-bearing deposits were ~~$1,835,300~~$1,861,136 and ~~$1,561,357~~$1,840,424 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, while interest-bearing deposits were ~~$6,283,218~~$6,496,633 and ~~$5,497,780~~$6,080,651 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. ~~On the acquisition date, Metropolitan added approximately $267,479 in noninterest-bearing deposits and approximately $674,605 in interest-bearing deposits.~~ Management continues to focus on growing and maintaining a stable source of funding, specifically core deposits. Under certain circumstances, however, management may ~~elect~~seek to acquire non-core deposits in the form of public fund deposits or time deposits. The source of funds that we select depends on the terms and how those terms assist us in mitigating interest rate risk, maintaining our liquidity position and managing our net interest margin. Accordingly, funds are acquired to meet anticipated funding needs at the rate and with other terms that, in ~~management's~~management’s view, best address our interest rate risk, liquidity and net interest margin parameters. During the fourth quarter of 2017, as part of our efforts to manage consolidated assets below $10,000,000 at December 31, 2017, the Company reduced the balance of its wholesale deposit funding sources. These deposits were reacquired during the first quarter of 2018 accounting for a portion of the increase in deposits from December 31, 2017.

Public fund deposits are those of counties, municipalities or other political subdivisions and may be readily obtained based on the Company’s pricing bid in comparison with competitors. Since public fund deposits are obtained through a bid process, these deposit balances may fluctuate as competitive and market forces change. The Company has focused on growing stable sources of deposits to reduce reliance on public fund deposits. However, the Company continues to participate in the bidding process for public fund deposits when it is reasonable under the circumstances. Our public fund transaction accounts are principally obtained

from municipalities including school boards and utilities. Public fund deposits were ~~$969,032~~$1,067,663 and ~~$894,321~~$1,000,324 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

Looking at the change in deposits geographically, ~~and excluding deposits assumed in connection with the Metropolitan acquisition,~~ deposits in our Mississippi, Georgia and Tennessee markets increased ~~$150,560, $24,012~~$161,951, $40,385 and ~~$3,902,~~$79,432, respectively, from December 31, ~~2016,~~2017, while deposits in our Central Division market decreased ~~$41,897~~$13,324 from December 31, ~~2016.~~2017.

Borrowed Funds

Total borrowings include securities sold under agreements to repurchase, short-term borrowings, advances from the FHLB, subordinated notes and junior subordinated debentures and are classified on the Consolidated Balance Sheets as either short-term borrowings or long-term debt. Short-term borrowings have original maturities less than one year and typically include securities sold under agreements to repurchase, federal funds purchased and short-term FHLB advances. At ~~September 30, 2017,~~March 31, 2018, short-term borrowings consisted of ~~$9,230~~$7,753 in security repurchase agreements and short-term borrowings from the FHLB of ~~$375,000,~~$50,000, compared to security repurchase agreements of ~~$9,676~~$6,814 and short-term borrowings from the FHLB of ~~$100,000~~$83,000 at December 31, ~~2016. Our short-term borrowings increased from December 31, 2016 in order to fund our growth, as growth in non purchased loans outpaced our organic deposit growth.~~2017.

At ~~September 30, 2017,~~March 31, 2018, long-term debt totaled ~~$207,703~~$207,438 compared to ~~$202,459~~$207,546 at December 31, ~~2016.~~2017. Funds are borrowed from the FHLB primarily to match-fund against certain loans, negating interest rate exposure when rates rise. Such match-funded loans are typically large, fixed rate commercial or real estate loans with long-term maturities. Long-term FHLB advances were ~~$7,760~~$7,276 and ~~$8,542~~$7,493 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. At ~~September 30, 2017, $103 of the total~~March 31, 2018, there were no long-term FHLB advances outstanding ~~were~~ scheduled to mature within twelve months or less. The Company had ~~$2,205,612~~$2,706,761 of availability on unused lines of credit with the FHLB at ~~September 30, 2017~~March 31, 2018 compared to ~~$2,633,543~~$2,670,141 at December 31, ~~2016.~~2017.

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'~~trusts’ only assets and interest payments from the debentures finance the distributions paid on the capital securities. ~~During the first quarter of 2017, the Company prepaid $10,310 of junior subordinated debentures and incurred a prepayment penalty of $205.~~ The ~~Company's~~Company’s junior subordinated debentures totaled ~~$85,744~~$86,018 at ~~September 30, 2017~~March 31, 2018 compared to ~~$95,643~~$85,881 at December 31, ~~2016.~~2017.

The Company’s subordinated notes, net of unamortized debt issuance costs, totaled ~~$114,088~~$114,059 at ~~September 30, 2017~~March 31, 2018 compared to ~~$98,127~~$114,074 at December 31, ~~2016. As part of the Metropolitan acquisition, the Company assumed $15,000 of 6.50% fixed-to-floating rate subordinated notes due July 1, 2026.~~2017.

Results of Operations

~~Three Months Ended September 30, 2017 as Compared to the Three Months Ended September 30, 2016~~

Net Income

Net income for the three ~~month period~~months ended ~~September 30, 2017~~March 31, 2018 was $~~26,421~~33,826 compared to net income of $~~23,179~~23,972 for the three ~~month period~~months ended ~~September 30, 2016~~March 31, 2017. Basic and diluted ~~earnings per share ("EPS")~~EPS for the three ~~month period~~months ended ~~September 30, 2017~~March 31, 2018 were $~~0.54~~0.69 and ~~$0.53,~~$0.68, respectively, as compared to basic and diluted EPS of $~~0.55~~0.54 for the three ~~month period~~months ended ~~September 30, 2016~~March 31, 2017.

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

Three Months Ended
September 30, 2017 September 30, 2016
Pre-tax After-tax Impact to Diluted EPS Pre-tax After-tax Impact to Diluted EPS
Merger and Conversion expenses $ 6,266
$ 4,075
$ 0.09
$ 268
$ 178
$ —
Debt prepayment penalty —
—
—
2,210
1,468
0.03

~~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 73.34% of total net revenue for the third quarter of 2017. Total net revenue consists of net interest income on a fully taxable equivalent basis and noninterest income. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.

Net interest income increased to $90,017 for the third quarter of 2017 compared to $75,731 for the same period in 2016. On a tax equivalent basis, net interest income was $91,935 for the third quarter of 2017 as compared to $77,483 for the third quarter of 2016. Net interest margin, the tax equivalent net yield on earning assets, decreased to 4.08% during the third quarter of 2017 compared to 4.15% for the third quarter of 2016. Net interest margin, excluding the impact from interest income collected on problem loans and purchase accounting adjustments on loans, was 3.76% and 3.72% for the third quarter of 2017 and 2016, respectively. The table below presents the reconciliation of this non-GAAP financial measure to reported net interest margin.

Three Months Ended
September 30,
2017 2016
Taxable equivalent net interest income, as reported $ 91,935
$ 77,483
Net interest income collected on problem loans 963
1,019
Accretable yield recognized on purchased loans⁽¹⁾
6,259
6,866
Net interest income (adjusted) $ 84,713
$ 69,598

Average earning assets $ 8,944,067
$ 7,433,461

Net interest margin, as reported 4.08 % 4.15 %
Net interest margin, adjusted 3.76 % 3.72 %


⁽¹⁾	~~Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $2,770 and $3,317 for the~~ ~~three months ended September 30, 2017~~ ~~and 2016, respectively, which increased net interest margin by 12 basis points and 18 basis points for the same periods, respectively.~~

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. The Company is continuing its efforts to replace maturing loans with new or renewed loans at similar rates. For the three months ended September 30, 2017 as compared to the same period in 2016, the increase in loan yields, after excluding the impact of purchase accounting, outpaced the increases in the cost of deposits, which is a result of competitive market forces, driving the increase in net interest income and the expansion of our net interest margin on an adjusted basis.

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

Three Months Ended September 30,
2017 2016

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate
Assets
Interest-earning assets:
Loans:
Not purchased $ 5,095,445
$ 57,560
4.48 % $ 4,424,727
$ 47,809
4.30 %
Purchased 2,279,965
33,133
5.77 % 1,584,179
26,618
6.68 %
Purchased and covered⁽¹⁾
—
—
— % 39,111
701
7.13 %
Total Loans 7,375,410
90,693
4.88 % 6,048,017
75,128
4.94 %
Mortgage loans held for sale 226,512
2,419
4.24 % 241,314
2,026
3.34 %
Securities:
Taxable⁽²⁾
807,001
4,758
2.34
695,589
3,418
1.95
Tax-exempt 340,156
4,046
4.72
350,316
4,081
4.63
Interest-bearing balances with banks 194,988
697
1.42
98,225
131
0.53
Total interest-earning assets 8,944,067
102,613
4.55
7,433,461
84,784
4.54
Cash and due from banks 152,654
124,794

Intangible assets 636,977
497,064

FDIC loss-share indemnification asset⁽¹⁾
—
4,816

Other assets 543,778
502,064

Total assets $ 10,277,476
$ 8,562,199

Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽³⁾
$ 3,869,297
$ 2,757
0.28 % $ 3,106,568
$ 1,515
0.19 %
Savings deposits 575,684
101
0.07
528,794
94
0.07
Time deposits 1,814,268
3,976
0.87
1,619,740
3,029
0.74
Total interest-bearing deposits 6,259,249
6,834
0.43
5,255,102
4,638
0.35
Borrowed funds 575,816
3,844
2.65
550,222
2,663
1.93
Total interest-bearing liabilities 6,835,065
10,678
0.62
5,805,324
7,301
0.50
Noninterest-bearing deposits 1,849,396
1,510,309

Other liabilities 97,424
111,493

Shareholders’ equity 1,495,591
1,135,073

Total liabilities and shareholders’ equity $ 10,277,476
$ 8,562,199

Net interest income/net interest margin $ 91,935
4.08 % $ 77,483
4.15 %


⁽¹⁾	Represents information associated with purchased loans covered under loss-share agreements with the Federal Deposit Insurance Corporation (the “FDIC”) prior to the termination of such agreements on December 8, 2016.


⁽²⁾	~~U.S. Government and some U.S. Government agency securities are tax-exempt in the states in which we operate.~~


⁽³⁾	~~Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.~~

The average balances of nonaccruing assets are included in the table above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 35% and a state tax rate of 3.66%, which is net of federal tax benefit.

Volume Rate
Net⁽¹⁾
Interest income:
Loans:
Not purchased $ 7,680
$ 2,071
$ 9,751
Purchased 10,226
(3,711 ) 6,515
Purchased and covered ⁽²⁾
(701 ) —
(701 )
Mortgage loans held for sale (161 ) 554
393
Securities:
Taxable 661
679
1,340
Tax-exempt (92 ) 57
(35 )
Interest-bearing balances with banks 346
220
566
Total interest-earning assets 17,959
(130 ) 17,829
Interest expense:
Interest-bearing demand deposits 546
696
1,242
Savings deposits 8
(1 ) 7
Time deposits 430
517
947
Borrowed funds 172
1,009
1,181
Total interest-bearing liabilities 1,156
2,221
3,377
Change in net interest income $ 16,803
$ (2,351 ) $ 14,452


⁽¹⁾	~~Changes in interest due to both volume and rate have been allocated on a pro-rata basis using the absolute ratio value of amounts calculated.~~


⁽²⁾	~~Represents information associated with purchased loans covered under loss-share agreements with the FDIC prior to the termination of such agreements on December 8, 2016.~~

~~Interest income, on a tax equivalent basis, was $102,613 for the third quarter of 2017 compared to $84,784 for the same period in~~ ~~2016~~. This increase in interest income, on a tax equivalent basis, is due primarily to the additional earning assets from the Metropolitan acquisition and loan growth in the Company's non purchased loan portfolio as well as an overall increase in the yield on the Company's earning assets due to replacing maturing assets with assets earning similar or higher rates of interest.

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

Percentage of Total Average Earning Assets Yield
Three Months Ended Three Months Ended
September 30, September 30,
2017 2016 2017 2016
Loans 82.46 % 81.36 % 4.88 % 4.94 %
Mortgage loans held for sale 2.53
3.25
4.24
3.34
Securities 12.83
14.07
3.04
2.85
Other 2.18
1.32
1.42
0.53
Total earning assets 100.00 % 100.00 % 4.55 % 4.54 %

For the third quarter of 2017, loan income, on a tax equivalent basis, increased $15,565 to $90,693 from $75,128 compared to the same period in 2016. The average balance of loans increased $1,327,393 from the third quarter of 2017 compared to the third quarter of 2016 due to the Metropolitan acquisition coupled with strong organic loan growth. The tax equivalent yield on loans was 4.88% for the second quarter of 2017, a 6 basis point decrease from the ~~third quarter of 2016. Excluding the impact from interest income collected on problem loans and purchase accounting adjustments on loans, the tax equivalent yield on loans was~~

~~4.49% and 4.42% for the third quarter of 2017 and 2016, respectively. The table below presents the reconciliation of this non-GAAP financial measure to reported taxable equivalent yield on loans.~~

Three Months Ended
September 30,
2017 2016
Taxable equivalent interest income on loans, as reported $ 90,693
$ 75,128
Net interest income collected on problem loans 963
1,019
Accretable yield recognized on purchased loans⁽¹⁾
6,259
6,866
Interest income on loans (adjusted) $ 83,471
$ 67,243

Average loans $ 7,375,410
$ 6,048,017

Loan yield, as reported 4.88 % 4.94 %
Loan yield, adjusted 4.49 % 4.42 %


⁽¹⁾	~~Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $2,770 and $3,317 for the~~ ~~three months ended September 30, 2017~~ ~~and 2016, respectively, which increased our taxable equivalent loan yield by 15 basis points and 22 basis points for the same periods, respectively.~~

~~Investment income, on a tax equivalent basis, increased $1,305 to~~ ~~$8,804~~ ~~for the~~ ~~third quarter of 2017~~ ~~from~~ ~~$7,499~~ ~~for the third quarter of 2016. The average balance in the investment portfolio for the~~ ~~third quarter of 2017~~ ~~was~~ ~~$1,147,157~~ ~~compared to~~ ~~$1,045,905~~ ~~for the same period in~~ ~~2016~~. The growth in the investment portfolio resulting from the Metropolitan acquisition was offset by our use of the proceeds from the investment portfolio to fund loan growth. The tax equivalent yield on the investment portfolio for the third quarter of 2017 was 3.04%, up 19 basis points from the same period in ~~2016~~.

~~Interest expense was $10,678 for the third quarter of 2017 as compared to $7,301 for the same period in 2016. The cost of interest-bearing liabilities was 0.62% for the~~ ~~three months ended September 30, 2017~~ ~~as compared to 0.50% for the three months ended September 30, 2016.~~

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

Percentage of Total Average Deposits and Borrowed Funds Cost of Funds
Three Months Ended Three Months Ended
September 30, September 30,
2017 2016 2017 2016
Noninterest-bearing demand 21.30 % 20.65 % — % — %
Interest-bearing demand 44.55
42.46
0.28
0.19
Savings 6.63
7.23
0.07
0.07
Time deposits 20.89
22.14
0.87
0.74
Short term borrowings 4.24
5.20
1.17
0.46
Long-term Federal Home Loan Bank advances 0.09
0.43
3.36
3.89
Subordinated notes 1.31
0.58
5.88
5.47
Other borrowed funds 0.99
1.31
4.63
5.54
Total deposits and borrowed funds 100.00 % 100.00 % 0.49 % 0.40 %

Interest expense on deposits was $6,834 and $4,638 for the third quarter of 2017 and 2016, respectively. The cost of total deposits was 0.33% and 0.27% for the same periods. The increase is attributable to both the increase in the average balance of total interest bearing deposits resulting from the Metropolitan acquisition as well as an increase in the interest rates on interest bearing demand deposits and time deposits. Although the Company continues to seek changes in the mix of our deposits from higher costing time deposits to lower costing interest-bearing deposits and noninterest-bearing deposits, rates offered on the Company's interest-bearing

~~deposit accounts, including time deposits, have increased to match competitive market interest rates in order to maintain stable sources of funding.~~

Interest expense on total borrowings was $3,844 and $2,663 for the third quarter of 2017 and 2016, respectively. The average balance of borrowings increased $25,594 to $575,816 for the three months ended September 30, 2017, as compared to $550,222 for the same period in 2016. The increase is attributable to the subordinated notes offered in the third quarter of 2016 offset by a decrease in average short-term borrowings from the Federal Home Loan Bank. The cost of total borrowed funds was 2.65% and 1.93% for the third quarter of 2017 and 2016, respectively.

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

~~Noninterest Income~~

Noninterest Income to Average Assets
Three Months Ended September 30,
2017 2016
1.29% 1.78%

Total noninterest income includes fees generated from deposit services, originations and sales of mortgage loans, insurance products, trust and other wealth management products and services, security gains and all other noninterest income. Our focus is to develop and enhance our products that generate noninterest income in order to diversify our revenue sources. Noninterest income was ~~$33,413~~ ~~for the~~ ~~third quarter of 2017~~ ~~as compared to~~ ~~$38,272~~ for the same period in 2016. The decrease in noninterest income and its related components is primarily attributable to a decrease in mortgage banking income as compared to the corresponding period in 2016.

Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees. Service charges on deposit accounts were $8,676 and $8,200 for the third quarter of 2017 and 2016, respectively. Overdraft fees, the largest component of service charges on deposits, were ~~$5,957~~ ~~for the~~ ~~three months ended September 30, 2017~~ ~~compared to~~ ~~$5,946~~ ~~for the same period in~~ ~~2016~~.

~~Fees and commissions increased to~~ ~~$5,618~~ ~~during the~~ ~~third quarter of 2017~~ ~~as compared to~~ ~~$4,921~~ ~~for the same period in~~ ~~2016~~. 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 2017, interchange fees on debit card transactions, the largest component of fees and commissions, were $4,562 as compared to $4,024 for the same period in ~~2016~~. At September 30, 2017, our assets were in excess of $10,000,000. If our assets remain above $10,000,000 at December 31, 2017, then beginning on July 1, 2018 we will become 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/A for the year ended December 31, 2016). Based on management’s current estimates, the impact of the Durbin Amendment on the Company’s interchange fee income will be approximately $2,100 to $2,300 per quarter. Management is continuing to examine this issue and develop strategies to offset the impact of the Durbin Amendment.

~~Through Renasant Insurance, we offer a range of commercial and personal insurance products through major insurance carriers.~~

~~Income earned on insurance products was~~ ~~$2,365~~ ~~and~~ ~~$2,420~~ ~~for the~~ ~~three months ended September 30, 2017~~ ~~and~~ ~~2016~~, respectively. Contingency income is a bonus received from the insurance underwriters and is based both on commission income and claims experience on our clients' policies during the previous year. Increases and decreases in contingency income are reflective of corresponding increases and decreases in the amount of claims paid by insurance carriers. Contingency income, which is included in “Other noninterest income” in the Consolidated Statements of Income, was $23 and $25 for the ~~three months ended September 30, 2017~~ ~~and 2016, respectively.~~

The Trust division within the Wealth Management segment operates on both a fully discretionary and a directed basis which includes administration of employee benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal, corporate and employee benefit accounts, self-directed IRAs, and custodial accounts. Fees for managing these accounts are based on changes in market values of the assets under management in the account, with the amount of the fee depending on the type of account. Additionally, the Financial Services division within the Wealth Management segment provides specialized investment products and services to our customers, which include fixed and variable annuities, mutual funds, and stocks offered through a third party provider. Wealth Management revenue was ~~$2,963~~ ~~for~~

~~the~~ ~~third quarter of 2017~~ ~~compared to~~ ~~$3,040~~ ~~for the same period in~~ ~~2016. The market value of assets under management or administration was $3,073,271 and $3,091,815 at~~ ~~September 30, 2017~~ ~~and~~ ~~September 30, 2016, 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 $483,777 in the three months ended September 30, 2017 compared to $510,143 for the same period in 2016. The decrease in mortgage loan originations is due to a reduction in the refinancing of mortgage loans as mortgage interest rates have increased. This impact is compounded by margin compression as a result of increased competition due to a reduction in the housing supply in a number of our markets. We expect conditions to remain competitive while mortgage rates remain high and housing supply remains down. The following table presents the components of mortgage banking income included in noninterest income for the three months ending September 30:

2017 2016
Mortgage servicing income, net $ 387
$ (158 )
Gain on sales of loans, net 4,111
13,716
Fees, net 6,118
2,288
Mortgage banking income, net $ 10,616
$ 15,846

Bank-owned life insurance (“BOLI”) income is derived from changes in the cash surrender value of the bank-owned life insurance policies. BOLI income increased slightly to $1,136 for the three months ended September 30, 2017 as compared to $979 for the same period in 2016.

~~Other noninterest income was $1,982 and $2,866 for the~~ ~~three months ended September 30, 2017~~ and 2016, respectively. Other noninterest income includes contingency income from our insurance underwriters, income from our SBA banking division, and other miscellaneous income and can fluctuate based on the claims experience in our Insurance agency, production in our SBA banking division, and recognition of other unseasonal income items.

~~Noninterest Expense~~

Noninterest Expense to Average Assets
Three Months Ended September 30,
2017 2016
3.11% 3.55%

Noninterest expense was $80,660 and $76,468 for the third quarter of 2017 and 2016, respectively. The Company recorded merger and conversion expenses of $6,266 for the three months ended September 30, 2017, as compared to $268 for the same period in 2016. During the third quarter of 2016, the Company recognized a penalty charge of $2,210 in connection with the prepayment of certain long-term FHLB advances. No such charge was incurred during the comparable quarter in 2017. Merger and conversion expenses and debt prepayment penalties are considered nonrecurring expenses.

Salaries and employee benefits increased $3,828 to $48,530 for the third quarter of 2017 as compared to $44,702 for the same period in 2016. The increase in salaries and employee benefits as a result of the Metropolitan acquisition was slightly offset by a decrease in commission expense from the mortgage production decrease during the third quarter of 2017 compared to the same period of 2016.

~~Data processing costs decreased to $4,179 in the third quarter of 2017 from $4,560 for the same period in 2016. The decrease for the third quarter of 2017 as compared to the same period in~~ ~~2016~~ ~~was primarily attributable to the cost savings realized through contract renegotiations.~~

Net occupancy and equipment expense for the third quarter of 2017 was $9,470, up from $8,830 for the same period in 2016. The increase is attributable to the addition of Metropolitan operations and the enhancements to our IT infrastructure in response to banking and governmental regulation and increased global risk from cyber security breaches.

Expenses related to other real estate owned for the third quarter of 2017 were $603 compared to $1,540 for the same period in 2016. Expenses on other real estate owned for the third quarter of 2017 included write downs of $697 of the carrying value to fair

value on certain pieces of property held in other real estate owned. Other real estate owned with a cost basis of $3,750 was sold during the three months ended September 30, 2017, resulting in a net gain of $350. Expenses on other real estate owned for the three months ended September 30, 2016 included a $1,048 write down of the carrying value to fair value on certain pieces of property held in other real estate owned. Other real estate owned with a cost basis of $3,287 was sold during the three months ended September 30, 2016, resulting in a net loss of $204.

~~Professional fees include fees for legal and accounting services. Professional fees were $1,552 for the~~ ~~third quarter of 2017~~ ~~as compared to $1,824 for the same period in~~ ~~2016~~. Professional fees remain elevated in large part due to additional legal, accounting and consulting fees associated with compliance costs of newly enacted as well as existing banking and governmental regulation. Professional fees attributable to legal fees associated with loan workouts and foreclosure proceedings remain at higher levels in correlation with the credit deterioration identified in our loan portfolio and the Company’s efforts to bring these credits to resolution.

Advertising and public relations expense was $1,802 for the third quarter of 2017 compared to $1,661 for the same period in 2016. This increase is primarily attributable to an increased focus on digital and television marketing throughout our footprint in 2017.

~~Amortization of intangible assets totaled $1,766 and $1,684 for the~~ ~~third quarter of 2017~~ ~~and~~ ~~2016~~, respectively. This amortization relates to finite-lived intangible assets which are being amortized over the useful lives as determined at acquisition. These finite-lived intangible assets have remaining estimated useful lives ranging from approximately 3 years to approximately 10 years.

~~Communication expenses, those expenses incurred for communication to clients and between employees, were $1,927 for the~~ ~~third quarter of 2017~~ ~~as compared to $2,097 for the same period in~~ ~~2016. The decrease can be attributed to the transition from a traditional telephone system to a Voice over IP phone system, which is more cost efficient.~~

Efficiency Ratio
Three Months Ended September 30,
2017 2016
64.35% 66.06%

~~Income Taxes~~

Income tax expense for the third quarter of 2017 and 2016 was $14,199 and $11,706, respectively. The effective tax rates for those periods were 34.96% and 33.56%, respectively. The increase in taxable income has contributed to the increase in the effective tax rate for the third quarter of 2017 as compared to the same period in 2016.

~~Results of Operations~~

~~Nine Months Ended September 30, 2017 as Compared to the Nine Months Ended September 30, 2016~~

~~Net Income~~

~~Net income for the~~ ~~nine months ended September 30, 2017~~ ~~was~~ ~~$75,677~~ ~~compared to net income of~~ ~~$67,295~~ ~~for the~~ ~~nine months ended September 30, 2016. Basic and diluted EPS for the~~ ~~nine months ended September 30, 2017~~ ~~were both~~ ~~$1.64, as compared to basic and diluted EPS of~~ ~~$1.62~~ ~~and $1.61, respectively, for the~~ ~~nine months ended September 30, 2016~~.

The Company incurred expenses and charges in connection with certain transactions that are considered to be infrequent or non-recurring in nature. The following table presents the impact of these charges on reported earnings per share for the dates presented:

Nine Months Ended
September 30, 2017 September 30, 2016
Pre-tax After-tax Impact to Diluted EPS Pre-tax After-tax Impact to Diluted EPS
Merger and Conversion expenses $ 9,655
$ 6,459
$ 0.14
$ 4,023
$ 2,689
$ 0.07
Debt prepayment penalty 205
137
—
2,539
1,697
0.05



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

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 ~~71.43%~~72.79% of total net revenue for the first ~~nine~~three months of ~~2017.~~2018. Total net revenue consists of net interest income on a fully taxable equivalent basis and noninterest income. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.

Net interest income increased to $~~243,635~~89,240 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to $~~222,942~~74,015 for the same period in ~~2016~~2017. On a tax equivalent basis, net interest income was $~~249,295~~90,807 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to $~~228,228~~75,907 for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017. The increases to the target federal funds rate implemented by the Federal Reserve Board over the last two years have resulted in higher yields on loans in our portfolio that earn a variable rate of interest. Net interest margin, the tax equivalent net yield on earning assets, ~~decreased~~increased to ~~4.12%~~4.20% during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, as compared to ~~4.21%~~4.01% for the ~~nine~~three months ended ~~September 30, 2016. Net~~March 31, 2017. The following table presents reported net interest ~~margin, excluding the~~margin.



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

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

Net interest margin	4.20		%	4.01		%

The impact from interest income collected on problem loans and purchase accounting adjustments on loans ~~was 3.76% and 3.78% for the~~ ~~nine months ended September 30, 2017~~ ~~and 2016, respectively. The following table presents the reconciliation of this non-GAAP financial measure~~ to ~~reported~~ net interest ~~margin.~~income and net interest margin is shown in the following table.

Nine Months Ended
September 30,
2017 2016
Taxable equivalent net interest income, as reported $ 249,295
$ 228,228
Net interest income collected on problem loans 4,264
2,610
Accretable yield recognized on purchased loans⁽¹⁾
17,273
21,135
Net interest income (adjusted) $ 227,758
$ 204,483

Average earning assets $ 8,094,838
$ 7,233,302

Net interest margin, as reported 4.12 % 4.21 %
Net interest margin, adjusted 3.76 % 3.78 %



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

Impact to net interest margin	0.30		%	0.32		%


⁽¹⁾	Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of ~~$8,185~~$3,358 and ~~$9,616~~$2,731 for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, which increased net interest margin by 1416 basis points and 1814 basis points for the same periods, respectively.

Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes in volume, mix and pricing decisions. External factors include changes in market interest rates, competition and the shape of the interest rate yield curve. Growth in the ~~Company's~~Company’s loan portfolio is the largest contributing factor to the increase in net interest income. Furthermore, the Company is continuing its efforts to replace maturing loans with new or renewed loans at similar rates driving further interest income and interest margin expansion ~~(after~~(before and after excluding the impact from purchase accounting adjustments).

The following table sets forth average balance sheet data, including all major categories of interest-earning assets and ~~interest bearing~~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:


	Nine Months Ended September 30,												Three Months Ended March 31,
	2017						2016						2018						2017
	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning assets:
Loans:
Not purchased	$	4,930,254	$	163,530	4.43	%	$	4,186,798	$	136,982	4.37	%
Non purchased													$	5,689,210	$	64,611	4.61	%	$	4,752,628	$	51,143	4.36	%
Purchased	1,696,594		79,730		6.28		1,569,785		77,175		6.57		1,957,781		28,762		5.96		1,446,077		22,567		6.33
Purchased and covered⁽¹⁾	—		—		—		54,767		2,909		7.10
Total Loans	6,626,848		243,260		4.91		5,811,350		217,066		4.99		7,646,991		93,373		4.95		6,198,705		73,710		4.82
Mortgage loans held for sale	169,508		5,399		4.26		254,930		6,870		3.60		152,299		1,671		4.45		112,105		1,148		4.15
Securities:
Taxable⁽²⁾	750,141		13,168		2.35		732,915		11,875		2.16
Taxable⁽¹⁾													606,642		3,914		2.62		704,805		4,070		2.34
Tax-exempt	336,937		12,234		4.85		353,954		12,466		4.70		226,434		2,406		4.31		338,892		4,297		5.14
Interest-bearing balances with banks	211,404		1,762		1.11		80,153		308		0.51		128,313		583		1.84		314,075		556		0.72
Total interest-earning assets	8,094,838		275,823		4.56		7,233,302		248,585		4.59		8,760,679		101,947		4.72		7,668,582		83,781		4.43
Cash and due from banks	133,846						134,238						163,141						131,874
Intangible assets	541,571						490,225						634,898						493,816
FDIC loss-share indemnification asset⁽¹⁾	—						5,725
Other assets	487,833						493,949						497,037						465,176
Total assets	$	9,258,088					$	8,357,439					$	10,055,755					$	8,759,448
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽³⁾	$	3,551,102	$	6,487	0.24		$	3,058,663	$	4,277	0.19
Interest-bearing demand⁽²⁾													$	3,911,802	$	3,407	0.35		$	3,410,606	$	1,813	0.22
Savings deposits	566,148		295		0.07		521,176		276		0.07		581,194		151		0.11		553,985		96		0.07
Time deposits	1,679,165		10,515		0.84		1,573,749		8,465		0.72		1,821,118		4,501		1.00		1,617,262		3,240		0.81
Total interest-bearing deposits	5,796,415		17,297		0.40		5,153,588		13,018		0.34		6,314,114		8,059		0.52		5,581,853		5,149		0.37
Borrowed funds	364,865		9,231		3.38		561,294		7,339		1.75		314,228		3,081		3.98		282,008		2,725		3.92
Total interest-bearing liabilities	6,161,280		26,528		0.58		5,714,882		20,357		0.48		6,628,342		11,140		0.68		5,863,861		7,874		0.54
Noninterest-bearing deposits	1,673,289						1,435,438						1,817,848						1,558,809
Other liabilities	88,798						104,464						85,692						89,875
Shareholders’ equity	1,334,721						1,102,655						1,523,873						1,246,903
Total liabilities and shareholders’ equity	$	9,258,088					$	8,357,439					$	10,055,755					$	8,759,448
Net interest income/net interest margin			$	249,295	4.12	%			$	228,228	4.21	%			$	90,807	4.20	%			$	75,907	4.01	%

(1)~~Represents information associated with purchased loans covered under loss-share agreements with the FDIC prior to the termination of such agreements on December 8, 2016.~~

~~(2)~~U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which we operate.

~~(3)~~(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.

The average balances of nonaccruing assets are included in the table above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of ~~35%~~21% and a state tax rate of ~~3.66%~~4.45%, which is net of federal tax benefit.

The following table sets forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from changes in volume and rates for the Company for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to the same period in ~~2016:~~2017 (the changes attributable to the combined impact of yield/rate and volume have been allocated on a pro-rata basis using the absolute ratio value of amounts calculated):


	Volume			Rate			Net			Volume			Rate			Net
Interest income:
Loans:
Not purchased	$	24,543		$	2,005		$	26,548
Non purchased										$	10,508		$	2,960		$	13,468
Purchased	5,870			(3,315		)	2,555			7,598			(1,403		)	6,195
Purchased and covered ⁽¹⁾	(2,909		)	—			(2,909		)
Mortgage loans held for sale	(2,732		)	1,261			(1,471		)	441			82			523
Securities:
Taxable	300			993			1,293			(634		)	478			(156		)
Tax-exempt	(650		)	418			(232		)	(1,195		)	(696		)	(1,891		)
Interest-bearing balances with banks	1,094			360			1,454			(844		)	871			27
Total interest-earning assets	25,516			1,722			27,238			15,874			2,292			18,166
Interest expense:
Interest-bearing demand deposits	898			1,312			2,210			437			1,157			1,594
Savings deposits	23			(4		)	19			7			48			55
Time deposits	658			1,392			2,050			504			757			1,261
Borrowed funds	(4,951		)	6,843			1,892			316			40			356
Total interest-bearing liabilities	(3,372		)	9,543			6,171			1,264			2,002			3,266
Change in net interest income	$	28,888		$	(7,821	)	$	21,067		$	14,610		$	290		$	14,900


⁽¹⁾	~~Represents information associated with purchased loans covered under loss-share agreements with the FDIC prior to the termination of such agreements on December 8, 2016.~~

Interest income, on a tax equivalent basis, was ~~$275,823~~$101,947 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to ~~$248,585~~$83,781 for the same period in ~~2016.~~2017. This increase in interest income, on a tax equivalent basis, is due primarily to the additional earning assets from the Metropolitan acquisition and loan growth in the ~~Company's~~Company’s non purchased loan portfolio, slightly offset by a decrease in the Company’s investment portfolio. As of March 31, 2018, we intentionally had not yet repurchased investment securities in an amount completely offsetting the sales of investment securities effected as ~~well as~~part of the deleveraging strategy implemented in the fourth quarter of 2017. We delayed fully re-leveraging the balance sheet during the first quarter of 2018 due to the rising rate environment. The increase in interest income is also being driven by an overall increase in the yield on the ~~Company's~~Company’s earning assets due to replacing maturing assets with assets earning similar or higher rates of interest.

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


	Percentage of Total Average Earning Assets				Yield				Percentage of Total Average Earning Assets				Yield
	Nine Months Ended				Nine Months Ended				Three Months Ended				Three Months Ended
	September 30,				September 30,				March 31,				March 31,
	2017		2016		2017		2016		2018		2017		2018		2017
Loans	81.87	%	80.34	%	4.91	%	4.99	%	87.29	%	80.83	%	4.95	%	4.82	%
Mortgage loans held for sale	2.09		3.52		4.26		3.60		1.74		1.46		4.45		4.15
Securities	13.43		15.03		3.12		2.99		9.51		13.61		3.08		3.25
Other	2.61		1.11		1.11		0.51
Interest-bearing balances with banks									1.46		4.10		1.84		0.72
Total earning assets	100.00	%	100.00	%	4.56	%	4.59	%	100.00	%	100.00	%	4.72	%	4.43	%

For the ~~nine~~three months ending ~~September 30, 2017,~~March 31, 2018, loan income, on a tax equivalent basis, increased ~~$26,194~~$19,663 to ~~$243,260~~$93,373 from ~~$217,066~~$73,710 in the same period in ~~2016.~~2017. The average balance of loans increased ~~$815,498~~$1,448,286 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to the same period in ~~2016~~2017 due to the Metropolitan acquisition coupled with strong organic loan growth. The tax equivalent yield on loans was ~~4.91%~~4.95% for the ~~nine~~three months ending ~~September 30, 2017,~~March 31, 2018, a 813 basis point ~~decrease~~increase from the same period in ~~2016. Excluding the~~2017. The following table presents reported taxable equivalent yield on loans.



	Three Months Ended
	March 31,
	2018			2017
Taxable equivalent interest income on loans	$	93,373		$	73,710

Average loans	7,646,991			6,198,705

Loan yield	4.95		%	4.82		%

The impact from interest income collected on problem loans and purchase accounting adjustments ~~the~~

~~tax equivalent yield~~ on loans ~~was 4.47%~~to total interest income on loans and ~~4.44% for~~loan yield is shown in the ~~nine months ending September 30, 2017 and 2016. The table below presents the reconciliation of this non-GAAP financial measure to reported taxable equivalent yield on loans.~~

following table.

Nine Months Ended
September 30,
2017 2016
Taxable equivalent interest income on loans, as reported $ 243,260
$ 217,066
Net interest income collected on problem loans 4,264
2,610
Accretable yield recognized on purchased loans⁽¹⁾
17,273
21,135
Interest income on loans (adjusted) $ 221,723
$ 193,321

Average loans $ 6,626,848
$ 5,811,350

Loan yield, as reported 4.91 % 4.99 %
Loan yield, adjusted 4.47 % 4.44 %



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

Impact to loan yield	0.34		%	0.40		%

⁽¹⁾

Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of ~~$8,185~~$3,358 and ~~$9,616~~$2,731 for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, which increased our taxable equivalent loan yield by ~~17 basis points and 22~~18 basis points for the same ~~periods, respectively.~~periods.

Investment income, on a tax equivalent basis, ~~increased $1,061~~decreased $2,047 to ~~$25,402~~$6,320 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 from ~~$24,341~~$8,367 for the same period in ~~2016.~~2017. The average balance in the investment portfolio for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 was ~~$1,087,078~~$833,076 compared to ~~$1,086,869~~$1,043,697 for the same period in ~~2016.~~2017. The decrease in the average balance of the investment portfolio was due to the pace at which we repurchased investment securities following the deleveraging strategy implemented by the Company in the fourth quarter of 2017. The tax equivalent yield on the investment portfolio for the first ~~nine~~three months of ~~2017~~2018 was ~~3.12%~~3.08%, ~~up 13~~down 17 basis points from ~~2.99%~~3.25% in the same period in ~~2016. Due to the recent increases in interest rates, the prepayment speeds for mortgage backed securities slowed in the first quarter of 2017 which led to a higher yield on these securities.~~2017.

Interest expense for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 was ~~$26,528~~$11,140 as compared to ~~$20,357~~$7,874 for the same period in ~~2016.~~2017. The cost of interest-bearing liabilities was ~~0.58%~~0.68% for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to ~~0.48%~~0.54% for the same period in ~~2016.~~2017.

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


	Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds				Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds
	Nine Months Ended				Nine Months Ended				Three Months Ended				Three Months Ended
	September 30,				September 30,				March 31,				March 31,
	2017		2016		2017		2016		2018		2017		2018		2017
Noninterest-bearing demand	21.36	%	20.08	%	—	%	—	%	21.52	%	21.00	%	—	%	—	%
Interest-bearing demand	45.33		42.78		0.24		0.19		46.31		45.96		0.35		0.22
Savings	7.23		7.29		0.07		0.07		6.88		7.46		0.11		0.07
Time deposits	21.43		22.01		0.84		0.72		21.56		21.79		1.00		0.81
Short-term borrowings	2.11		5.68		1.08		0.47		1.27		1.12		1.45		0.54
Long-term Federal Home Loan Bank advances	0.10		0.63		3.43		4.05		0.09		0.11		3.41		3.50
Subordinated notes	1.32		0.20		5.64		5.45		1.35		1.32		5.63		5.52
Other long term borrowings	1.12		1.33		5.06		5.54		1.02		1.24		4.97		5.32
Total deposits and borrowed funds	100.00	%	100.00	%	0.45	%	0.38	%	100.00	%	100.00	%	0.53	%	0.43	%

Interest expense on deposits was ~~$17,297~~$8,059 and ~~$13,018~~$5,149 for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively. The cost of total deposits was ~~0.31%~~0.40% and ~~0.26%~~0.29% for the same periods. The increase is attributable to both the increase in the average balance of all ~~interest bearing~~interest-bearing deposits resulting from the Metropolitan acquisition and organic deposit growth as well as an increase in

the interest rates on ~~interest bearing demand deposits and time~~interest-bearing deposits. Although the Company continues to seek changes in the mix of our deposits from higher costing time deposits to lower costing interest-bearing deposits and ~~non-interest bearing~~

noninterest-bearing deposits, rates offered on the ~~Company's~~Company’s interest-bearing deposit accounts, including time deposits, have increased to match competitive market interest rates in order to maintain stable sources of funding.

Interest expense on total borrowings was ~~$9,231~~$3,081 and ~~$7,339~~$2,725 for the first ~~nine~~three months of ~~2017~~2018 and ~~2016,~~2017, respectively. The average balance of borrowings ~~decreased $196,429~~increased $32,220 to ~~$364,865~~$314,228 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, as compared to ~~$561,294~~$282,008 for the same period in ~~2016.~~2017. The ~~decrease~~increase is attributable to ~~a decrease~~an increase in short-term borrowings from the Federal Home Loan Bank ~~offset by the~~and an increase in subordinated notes ~~offered~~which were assumed in the ~~third quarter of 2016.~~Metropolitan acquisition. The cost of total borrowed funds was ~~3.38%~~3.98% and ~~1.75%~~3.92% for the first ~~nine~~three months of 2018 and 2017, respectively. The increases in borrowing expense and ~~2016, respectively. Although~~cost of total borrowings are both attributable to a higher rate charged on the ~~average balance of borrowings have decreased, the lower costing~~ short-term borrowings ~~discussed above were replaced with~~from the Federal Home Loan Bank and the higher costing subordinated ~~notes.~~notes that were assumed in the Metropolitan acquisition.

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

Noninterest Income

Noninterest Income to Average Assets
Nine Months Ended September 30,
2017 2016
1.44% 1.71%



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

Noninterest income was $~~99,699~~33,953 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to $~~107,160~~32,021 for the same period in ~~2016~~2017. The ~~decrease~~increase in noninterest income and its related components is ~~primarily~~ attributable to ~~a decrease~~the addition of Metropolitan, coupled with an increase in service charges on deposit accounts, fee income on loan and deposit products and mortgage banking ~~income and the absence of a material gain on the sale of securities in the first nine months of 2017 as compared to the corresponding period in 2016.~~income.

Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees. Service charges on deposit accounts were ~~$24,565~~$8,473 and ~~$23,712~~$7,931 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017, respectively. Overdraft fees, the largest component of service charges on deposits, were $~~17,414~~5,908 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to $~~17,014~~5,679 for the same period in ~~2016~~2017.

Fees and commissions increased to $~~16,287~~5,685 for the first ~~nine~~three months of ~~September 30, 2017~~March 31, 2018 as compared to $~~14,042~~5,199 for the same period in ~~2016~~2017. Fees and commissions include fees related to deposit services, such as ATM fees and interchange fees on debit card transactions. Interchange fees on debit card transactions, the largest component of fees and commissions, were $~~13,440~~4,787 for the ~~nine~~three months ending ~~September 30, 2017~~March 31, 2018 as compared to $~~12,178~~4,299 for the same period in ~~2016~~2017. ~~Please refer~~If our total assets remain above $10,000,000 at December 31, 2018, then beginning on July 1, 2019 we will become subject to the ~~section above addressing our noninterest income~~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 ~~three months~~year ended ~~September 30, 2017 for a discussion of~~December 31, 2017). Management is continuing to examine this issue and develop strategies to offset the ~~potential~~ impact of the Durbin ~~Amendment on the Company.~~Amendment.

Through Renasant Insurance, we offer a range of commercial and personal insurance products through major insurance carriers. Income earned on insurance products was $2,005 and $1,860 for the ~~$6,406~~three months ended March 31, 2018 and ~~$6,557~~ ~~for the~~ ~~nine months ended September 30,~~ 2017 ~~and~~ ~~2016~~, respectively. Contingency income is a bonus received from the insurance underwriters and is based both on commission income and claims experience on our ~~clients'~~clients’ policies during the previous year. Increases and decreases in contingency income are reflective of corresponding increases and decreases in the amount of claims paid by insurance carriers. Contingency income, which is included in “Other noninterest income” in the Consolidated Statements of Income, was ~~$789~~$762 and ~~$1,154~~$687 for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively.

The Trust division within the Wealth Management segment operates on both a fully discretionary and a directed basis which includes administration of employee benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal, corporate and employee benefit accounts, self-directed IRAs, and custodial accounts. Fees for managing these accounts are based on changes in market values of the assets under management in the account, with the amount of the fee depending on the type of account. Additionally, the Financial Services division within the Wealth Management segment provides specialized products and services to our customers, which include fixed and variable annuities, mutual funds, and stocks offered through a third party provider. Wealth Management revenue was $~~8,884~~3,262 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to $~~8,803~~2,884 for the same period in ~~2016~~2017. The market value of assets under management or administration was ~~$3,073,271~~$3,234,775 and ~~$3,091,815~~$3,021,347 at ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ respectively.

loans to be sold totaled ~~$1,256,233~~$362,803 in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to ~~$1,516,650~~$318,144 for the same period in ~~2016.~~2017. The ~~decrease~~increase in mortgage loan originations is due to ~~a reduction~~an increase in the refinancing of mortgage loans as mortgage interest rates have increased. This impact is compounded by margin compression as a result of increased competition due to a reduction in the housing supply in a number ofproducers throughout our ~~markets. We expect conditions to remain competitive while mortgage rates remain high and housing supply remains down.~~footprint. The following table presents the components of mortgage banking income included in noninterest income for the ~~nine~~three months ending ~~September 30:~~March 31:


	2017		2016		2018		2017
Mortgage servicing income, net	$	1,380	$	187	$	1,154	$	410
Gain on sales of loans, net	15,719		26,685		8,798		6,554
Fees, net	16,445		14,309		1,008		3,540
Mortgage banking income, net	$	33,544	$	41,181	$	10,960	$	10,504

Bank-owned life insurance (“BOLI”) income is derived from changes in the cash surrender value of the bank-owned life insurance ~~policies.~~policies and death benefits received on covered individuals. BOLI income ~~increased~~decreased to ~~$3,234~~$945 for the first ~~nine~~three months of ~~September 30, 2017~~March 31, 2018 as compared to ~~$2,929~~$1,113 for the same period in ~~2016. The increase is primarily driven by death benefits received from existing policies.~~2017.

Other noninterest income was ~~$6,722~~$2,623 and ~~$8,750~~$2,530 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016,~~2017, respectively. Other noninterest income includes contingency income from our insurance underwriters, income from our SBA banking division, and other miscellaneous income and can fluctuate based on the claims experience ~~in our~~at Renasant Insurance, ~~agency,~~ production in our SBA banking division, and recognition of other unseasonal income items.

Noninterest Expense

Noninterest Expense to Average Assets
Nine Months Ended September 30,
2017 2016
3.25% 3.57%



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

Noninterest expense was ~~$224,810~~$77,944 and ~~$223,541~~$69,309 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017, respectively. Merger and conversion expense was ~~$9,655~~$900 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018, as compared to ~~$4,023~~$345 for the same period in ~~2016. During the~~ ~~nine months ended September 30, 2017, the~~2017. The Company recognized a penalty charge of $205 in connection with the prepayment of $10,310 of junior subordinated ~~debentures. The Company recognized a~~debentures in the first quarter of 2017. There was no such penalty ~~charge of $2,539 in connection with the prepayment of certain long-term FHLB advances~~incurred during the ~~same time period in 2016. Merger and conversion expenses and debt prepayment penalties are considered nonrecurring expenses.~~first three months of 2018.

Salaries and employee benefits increased ~~$3,271~~$6,575 to ~~$135,753~~$48,784 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to ~~$132,482~~$42,209 for the same period in ~~2016~~2017. The increase in salaries and employee benefits ~~as a result of~~is primarily due to the Metropolitan ~~acquisition was slightly offset by a decrease in commission expense from the mortgage production decrease during the first nine months of 2017 compared to the same period of 2016.~~acquisition.

Data processing costs ~~decreased to $12,248 in~~were $4,244 for the ~~nine~~three months ended ~~September 30, 2017 from $13,220~~March 31, 2018 as compared to $4,234 for the same period in ~~2016~~2017. ~~The decrease for the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily attributable to~~Increased costs arising on account of our greater size were almost completely offset by the cost savings realized through contract renegotiations.

Net occupancy and equipment expense for the first ~~nine~~three months of ~~2017~~2018 was ~~$27,603,~~$9,822, up from ~~$25,585~~$9,319 for the same period in ~~2016~~2017. The increase in occupancy and equipment expense is primarily attributable to the additional locations and assets added from the Metropolitan ~~acquisition coupled with enhancements to our IT infrastructure in response to banking and governmental regulation and increased global risk from cyber security breaches.~~acquisition.

Expenses related to other real estate owned for the first ~~nine~~three months of ~~2017~~2018 were ~~$1,916~~$657 compared to ~~$4,111~~$532 for the same period in ~~2016.~~2017. Expenses on other real estate owned for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 included write downs of ~~$1,454~~$352 of the carrying value to fair value on certain pieces of property held in other real estate owned. Other real estate owned with a cost basis of ~~$10,736~~$2,181 was sold during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, resulting in a net ~~gain~~loss of ~~$488.~~$96. Expenses on other real estate owned for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017 included ~~a $2,330~~ write ~~down~~downs of $378 of the carrying value to fair value

on certain pieces of property held in other real estate owned. Other real estate owned with a cost basis of ~~$11,475~~$4,719 was sold during the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2017, resulting in a net ~~loss~~gain of ~~$435.~~$327.

Professional fees include fees for legal and accounting services. Professional fees were $~~5,501~~2,138 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to $~~5,459~~2,067 for the same period in ~~2016~~2017. Professional fees remain elevated in large part due to additional

legal, accounting and consulting fees associated with compliance costs of newly enacted as well as existing banking and governmental regulation. Professional fees attributable to legal fees associated with loan workouts and foreclosure proceedings remain at higher levels in correlation with the credit deterioration identified in our loan portfolio and the Company’s efforts to bring these credits to resolution.

Advertising and public relations expense was ~~$5,824~~$2,203 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to ~~$5,040~~$1,592 for the same period in ~~2016.~~2017. This increase is primarily attributable to an increased focus on digital marketing and ~~television marketing~~branding throughout our footprint, an increase in ~~2017.~~the overall size of the Company and also an increase in the marketing of the Company’s community involvement.

Amortization of intangible assets totaled $~~4,822~~1,651 and $~~5,123~~1,563 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017, respectively. This amortization relates to finite-lived intangible assets which are being amortized over the useful lives as determined at acquisition. These finite-lived intangible assets have remaining estimated useful lives ranging from approximately 3 years to approximately 10 years.

Communication expenses, those expenses incurred for communication to clients and between employees, were $~~5,698~~1,969 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to $~~6,308~~1,863 for the same period in ~~2016~~2017. The ~~decrease can be attributed~~increase in communication expenses is primarily attributable to the ~~transition from a traditional telephone system to a Voice over IP phone system, which is more cost efficient.~~additional locations added as part of the Metropolitan acquisition.

Efficiency Ratio

Efficiency Ratio
Nine Months Ended September 30,
2017 2016
64.42% 66.65%



	Efficiency Ratio
	Three Months Ended March 31,
	2018	2017
Efficiency ratio	62.48%	64.22%
Impact on efficiency ratio from:
Intangible amortization	(1.33)%	(1.45)%
Merger and conversion related expenses	(0.72)%	(0.32)%
Extinguishment of debt	—%	(0.19)%
Adjusted efficiency ratio	60.43%	62.26%

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. The Company calculates this ratio by dividing noninterest expense by the sum of net interest income on a fully tax equivalent basis and noninterest income. ~~Merger~~The table above shows the impact on the efficiency ratio of expenses that (1) the Company does not consider to be part of our normal operations, such as amortization of intangibles, or (2) the Company incurred in connection with certain transactions where management is unable to accurately predict the timing of when these expenses will be incurred or, when incurred, the amount of such expenses, such as merger and conversion related expenses and debt prepayment ~~penalties contributed approximately 277 basis points and 6 basis points, respectively, to the efficiency ratio for the first nine months of~~ ~~2017. Merger and conversion expenses and debt prepayment penalties contributed approximately 120 basis points and 76 basis points, respectively, to the efficiency ratio for first nine months of 2016.~~penalties. We remain committed to aggressively managing our costs within the framework of our business model. We expect the efficiency ratio to continue to improve from currently reported levels as a result of revenue growth while at the same time controlling noninterest expenses.

Income Taxes

Income tax expense for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017 was ~~$37,447~~$9,673 and ~~$33,386,~~$11,255, respectively. The effective tax rates for those periods were ~~33.10%~~22.24% and ~~33.16%~~31.95%, respectively. Although taxable income has continued to increase, the decreased effective tax rate for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 as compared to the same period in ~~2016~~2017 is the result of the ~~excess~~lower corporate tax ~~benefit realized~~rate that resulted from the ~~exercise~~enactment of ~~stock options~~the Tax Cuts and ~~vesting of restricted stock.~~Jobs Act.

Risk Management

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

Credit Risk and Allowance for Loan Losses

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

Management of Credit Risk. Credit risk is monitored and managed on an ongoing basis by a credit administration department, ~~senior loan committee,~~ a loss management committee and the Board of Directors loan committee. Credit quality, adherence to policies and loss mitigation are major concerns of credit administration and these committees. The Company’s central appraisal review department reviews and approves third-party appraisals obtained

by the Company on real estate collateral and monitors loan maturities to ensure updated appraisals are obtained. This department is managed by a State Certified General Real Estate Appraiser and employs two additional State Certified General Real Estate ~~Appraisers,~~appraisers, one Appraisal Intern 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 ~~loan and~~ loss management committees and the Board of Directors loan 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 by senior credit officers ~~in-house loan committees~~ or the loan committee of the Board of Directors.

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

The loss management committee and the Board of Directors’ loan committee monitor loans that are past due or those that have been downgraded and placed on the Company’s internal watch list due to a decline in the collateral value or cash flow of the debtor; the committees then adjust loan grades accordingly. This information is used to assist management in monitoring credit quality. In addition, the Company’s portfolio management committee monitors and identifies risks within the Company’s loan portfolio by focusing its efforts on reviewing and analyzing loans which are not on the Company’s internal watch list. The portfolio management committee monitors loans in portfolios or regions that management believes could be stressed or experiencing credit deterioration.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for problem loans of $500 or greater by, as applicable, the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For real estate collateral, the fair market value of the collateral is based upon a recent appraisal by a qualified and licensed appraiser of the underlying collateral. When the ultimate collectability of a loan’s principal is in doubt, wholly or partially, the loan is placed on nonaccrual.

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

The Company’s practice is to charge off estimated losses as soon as such loss is identified and reasonably quantified. Net charge-offs for the ~~third~~first quarter of ~~2017~~2018 were ~~$1,768,~~$1,560, or ~~0.10%~~0.08% of average loans (annualized), compared to net charge-offs of ~~$824,~~$1,314, or ~~0.05%~~0.09% of average loans (annualized), for the same period in ~~2016.~~2017. The ~~levels of net~~ charge-offs ~~relative to~~in 2018 were fully reserved for in the ~~size of our~~Company’s allowance for loan ~~portfolio continue to represent the lowest levels of charge-offs since the 2008-2009 recession. These metrics are due~~losses and resulted in no additional provision for loan loss expense.

part to the pace of the economic recovery, declining unemployment levels, improved labor participation rate, improved performance in the housing market, and the Company's continued efforts to bring problem credits to resolution.

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

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

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


	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2018		December 31, 2017		March 31, 2017
Commercial, financial, agricultural	$	5,193	$	5,486	$	5,454	$	7,071	$	5,542	$	5,112
Lease financing	556		196		208		596		555		225
Real estate – construction	2,808		2,380		2,223		4,198		3,428		2,119
Real estate – 1-4 family mortgage	12,113		14,294		15,412		11,404		12,009		12,162
Real estate – commercial mortgage	22,610		19,059		21,288		21,914		23,384		22,073
Installment loans to individuals	1,251		1,322		1,339		1,218		1,293		1,232
Total	$	44,531	$	42,737	$	45,924	$	46,401	$	46,211	$	42,923

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


	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2018		December 31, 2017		March 31, 2017
Specific reserves for impaired loans	$	2,928	$	4,141	$	8,899	$	1,472	$	2,674	$	3,977
Allocated reserves for remaining portfolio	39,678		35,776		33,607		43,112		41,760		36,227
Purchased with deteriorated credit quality	1,925		2,820		$	3,418	1,817		1,777		$	2,719
Total	$	44,531	$	42,737	$	45,924	$	46,401	$	46,211	$	42,923

The provision for loan losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for loan losses at a level that is believed to be adequate to meet the inherent risks of losses in our loan portfolio. Factors considered by management in determining the amount of the provision for loan losses include the internal risk rating of individual credits, historical and current trends in net charge-offs, trends in nonperforming loans, trends in past due loans, trends in the market values of underlying collateral securing loans and the current economic conditions in the markets in which we operate. The provision for loan losses was ~~$5,400~~$1,750 and ~~$5,880~~$1,500 for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017, respectively. Although the Company has experienced lower levels of classified loans and ~~2016, respectively. The consistent amounts of provisioning period over period reflects improving~~nonperforming loans in the current year, as illustrated in the nonperforming loan tables later in this section, and while our other credit quality ~~trends offset by providing for significant loan growth. For~~measures have also improved, the growth in non purchased loans has dictated that we increase the provision ~~is calculated based on evidence~~for loans losses in order to maintain the allowance for loan losses at an acceptable level in light of the increased size of our non purchased loan portfolio.

For a purchased loan, ~~has deteriorated from performance expectations established in conjunction with~~as part of the ~~determination of its "Day~~acquisition we establish a “Day 1 Fair ~~Value" (which~~Value,” which equals the outstanding customer balance of a purchased loan on the acquisition date less any credit and/or yield discount applied against the purchased ~~loan) or since our most recent review of such portfolio's performance. Purchased loans~~loan. A purchased loan will either ~~(1)~~meet or exceed the performance expectations established in determining the Day 1 Fair Values ~~resulting in a reversal of any previous provision for such loans,~~ or ~~(2)~~ deteriorate from such expected performance. If the purchased loan’s performance deteriorates from expectations established in determining the Day 1 Fair Values ~~resulting~~or since our most recent review of such portfolio’s performance, then the Company provides for such loan in ~~partial~~the provision for loan losses and may ultimately partially or ~~full~~

~~charge-offs of~~fully charge-off the carrying value of such purchased ~~loans.~~loan. If aperformance expectations are exceeded, then the Company reverses any previous provision for such loan. If the purchased loan continues to exceed expectations subsequent to the reversal of ~~previously established~~previously-established provision, then an adjustment to accretable yield is warranted, which has a positive impact on interest income.

~~A majority of the~~Certain loans purchased ~~in the Company’s FDIC-assisted acquisitions and certain loans purchased and not covered under the Company's FDIC loss-share agreements (prior to the termination of such agreements in December 2016)~~ are accounted for under ASC 310-30, “Loans and Debt Securities Purchased with Deteriorated Credit Quality” (“ASC 310-30”), and are carried at values which, in management’s opinion, reflect the estimated future cash flows, based on the facts and circumstances surrounding each respective loan at the date of acquisition. As of ~~September 30, 2017,~~March 31, 2018, the fair value of loans accounted for in accordance with ASC 310-30 was ~~$244,879.~~$214,310. The Company continually monitors these loans as part of our normal credit review and monitoring procedures for changes in the estimated future cash flows; to the extent future cash flows deteriorate below initial projections, the Company may be required to reserve for these loans in the allowance for loan losses through future provision for loan losses. Of the entire allowance for loan losses as of ~~September 30,~~March 31, 2018 and 2017, $1,817 and ~~2016, $1,925 and $3,418,~~$2,719, respectively, is allocated to loans accounted for under ASC 310-30.

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2018			2017
Balance at beginning of period	$	44,149		$	44,098		$	42,737		$	42,437		$	46,211		$	42,737
Charge-offs
Commercial, financial, agricultural	974			394			2,110			1,099			659			832
Lease financing	—			—			—			—
Real estate – construction	—			—			—			—
Real estate – 1-4 family mortgage	575			242			1,401			745			671			275
Real estate – commercial mortgage	543			466			1,204			1,653			613			227
Installment loans to individuals	124			201			513			573			122			264
Total charge-offs	2,216			1,303			5,228			4,070			2,065			1,598
Recoveries
Commercial, financial, agricultural	137			85			258			243			235			57
Lease financing	—			—			—			—
Real estate – construction	67			4			101			15			4			31
Real estate – 1-4 family mortgage	145			188			291			753			133			82
Real estate – commercial mortgage	72			181			884			582			108			95
Installment loans to individuals	27			21			88			84			25			19
Total recoveries	448			479			1,622			1,677			505			284
Net charge-offs	1,768			824			3,606			2,393			1,560			1,314
Provision for loan losses	2,150			2,650			5,400			5,880			1,750			1,500
Balance at end of period	$	44,531		$	45,924		$	44,531		$	45,924		$	46,401		$	42,923
Net charge-offs (annualized) to average loans	0.10		%	0.05		%	0.07		%	0.06		%	0.08		%	0.09		%
Allowance for loan losses to:
Total non purchased loans	0.84		%	1.01		%	0.84		%	1.01		%	0.80		%	0.89		%
Nonperforming non purchased loans	335.70		%	310.95		%	335.70		%	310.95		%	356.71		%	289.94		%

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

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Real estate – construction:
Residential $ (67 ) $ (4 ) $ (101 ) $ (13 )
Condominiums —
—
—
(2 )
Total real estate – construction (67 ) (4 ) (101 ) (15 )
Real estate – 1-4 family mortgage:
Primary 338
4
851
104
Home equity 119
62
208
113
Rental/investment (12 ) 3
68
137
Land development (15 ) (15 ) (17 ) (362 )
Total real estate – 1-4 family mortgage 430
54
1,110
(8 )
Real estate – commercial mortgage:
Owner-occupied 319
115
399
343
Non-owner occupied 141
80
211
325
Land development 11
90
(290 ) 403
Total real estate – commercial mortgage 471
285
320
1,071
Total net charge-offs of loans secured by real estate $ 834
$ 335
$ 1,329
$ 1,048

~~Nonperforming Assets~~



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

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

~~Investment securities may be transferred to nonaccrual status where~~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 ~~recognition~~lower of ~~investment interest is discontinued. A number~~cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of ~~qualitative factors, including but not limited to~~foreclosure of properties are charged against the ~~financial condition of the underlying issuer and current and projected deferrals or defaults, are considered by management~~allowance for loan losses. Reductions in the ~~determination of whether an investment security should be transferred~~carrying value subsequent to ~~nonaccrual status. The interest on these nonaccrual investment securities is accounted for on the cash-basis method until qualifying for return~~acquisition are charged to ~~accrual status. As discussed above~~earnings and are included in “Other real estate owned” in the “Investments” section under the “Financial Condition” heading, there were no nonaccruing investment securities available-for-sale held in our portfolio at September 30, 2017, while at December 31, 2016 one of the Company’s investments in pooled trust preferred securities was on nonaccrual status. This security was sold during the third quarter of 2017. For more information about the Company’s trust preferred securities, see Note 3, “Securities,” in the Notes to Consolidated ~~Financial~~ Statements of ~~the Company in Item 1, “Financial Statements,” in this report.~~

Income.

The following table provides details of the Company’s non purchased and purchased nonperforming assets as of the dates presented. ~~The nonperforming assets that were covered under FDIC loss-share agreements at the time of termination are included in the “Purchased” column as of December 31, 2016.~~


	Non Purchased		Purchased		Total			Non Purchased		Purchased		Total
September 30, 2017
March 31, 2018
Nonaccruing loans	$	9,970	$	4,868	$	14,838		$	9,403	$	5,340	$	14,743
Accruing loans past due 90 days or more	3,295		7,349		10,644			3,605		4,564		8,169
Total nonperforming loans	13,265		12,217		25,482			13,008		9,904		22,912
Other real estate owned	4,524		13,296		17,820			4,801		9,754		14,555
Total nonperforming loans and OREO	17,789		25,513		43,302			17,809		19,658		37,467
Total nonperforming assets	$	17,789	$	25,513	$	43,302		$	17,809	$	19,658	$	37,467
Nonperforming loans to total loans					0.34		%					0.30		%
Nonperforming assets to total assets					0.42		%					0.37		%

December 31, 2016
December 31, 2017
Nonaccruing loans	$	11,273	$	11,347	$	22,620		$	10,250	$	4,424	$	14,674
Accruing loans past due 90 days or more	2,079		10,815		12,894			3,015		5,731		8,746
Total nonperforming loans	13,352		22,162		35,514			13,265		10,155		23,420
Other real estate owned	5,929		17,370		23,299			4,410		11,524		15,934
Total nonperforming loans and OREO	19,281		39,532		58,813			17,675		21,679		39,354
Nonaccruing securities available-for-sale, at fair value	9,646		—		9,646
Total nonperforming assets	$	28,927	$	39,532	$	68,459		$	17,675	$	21,679	$	39,354
Nonperforming loans to total loans					0.57		%					0.31		%
Nonperforming assets to total assets					0.79		%					0.40		%

The Company experienced improving credit quality metrics during the first ~~nine~~three months of ~~2017.~~2018. The level of nonperforming loans decreased ~~$10,032~~$508 from December 31, ~~2016~~2017 while OREO decreased ~~$5,479~~$1,379 during the same period. As of September 30, 2017, the acquisition of Metropolitan added nonperforming loans of $230 and OREO of $1,175. As discussed above, at September 30, 2017, the Company had no investment securities on nonaccrual status as compared to $9,646 at December 31, 2016.

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


	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2018		December 31, 2017		March 31, 2017
Commercial, financial, agricultural	$	3,464	$	3,709	$	3,428	$	4,141	$	2,921	$	3,807
Real estate – construction:
Residential	—		466		707		49		—		—
Total real estate – construction	—		466		707		49		—		—
Real estate – 1-4 family mortgage:
Primary	6,006		6,179		8,722		6,963		6,221		7,802
Home equity	2,031		2,777		1,342		2,557		2,701		2,413
Rental/investment	1,734		2,292		2,446		459		395		1,962
Land development	994		1,656		2,550		378		1,078		1,624
Total real estate – 1-4 family mortgage	10,765		12,904		15,060		10,357		10,395		13,801
Real estate – commercial mortgage:
Owner-occupied	6,732		8,282		10,287		4,118		5,473		7,062
Non-owner occupied	3,001		6,821		9,161		2,764		3,087		8,316
Land development	1,082		2,757		2,632		1,005		1,090		1,826
Total real estate – commercial mortgage	10,815		17,860		22,080		7,887		9,650		17,204
Installment loans to individuals	273		575		290		276		295		384
Lease financing	165		—		342		202		159		—
Total nonperforming loans	$	25,482	$	35,514	$	41,907	$	22,912	$	23,420	$	35,196

The decrease in the level of nonperforming loans from December 31, ~~2016~~2017 is a reflection of the ~~Company's~~Company’s continued strategy to aggressively manage problem loans and assets. The Company continues its efforts to bring problem credits to resolution. Total nonperforming loans as a percentage of total loans were ~~0.34%~~0.30% as of ~~September 30, 2017~~March 31, 2018 as compared to ~~0.57%~~0.31% as of December 31, ~~2016~~2017 and ~~0.69%~~0.56% as of ~~September 30, 2016.~~March 31, 2017. The Company’s coverage ratio, or its allowance for loan losses as a percentage of nonperforming loans, was ~~174.75%~~202.52% as of ~~September 30, 2017~~March 31, 2018 as compared to ~~120.34%~~197.31% as of December 31, ~~2016~~2017 and ~~109.59%~~121.95% as of ~~September 30, 2016.~~March 31, 2017. The coverage ratio for non purchased, nonperforming loans was ~~335.70%~~356.71% as of ~~September 30, 2017~~March 31, 2018 as compared to ~~320.08%~~348.37% as of December 31, ~~2016~~2017 and ~~310.95%~~289.94% as of ~~September 30, 2016.~~March 31, 2017.

Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for loan losses at ~~September 30, 2017.~~March 31, 2018. Management also continually monitors past due loans for potential credit quality deterioration. Total loans 30-89 days past due were ~~$20,452~~$28,573 at ~~September 30, 2017~~March 31, 2018 as compared to ~~$19,858~~$27,738 at December 31, ~~2016~~2017 and ~~$22,380~~$13,955 at ~~September 30, 2016. The acquisition of Metropolitan added $570 of purchased loans 30-89 days past due at September 30,~~March 31, 2017.

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

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



	March 31, 2018		December 31, 2017		March 31, 2017
Commercial, financial, agricultural	$	372	$	331	$	—
Real estate – 1-4 family mortgage:
Primary	6,490		6,213		5,854
Home equity	460		282		253
Rental/investment	1,960		2,247		2,264
Land development	4		4		10
Total real estate – 1-4 family mortgage	8,914		8,746		8,381
Real estate – commercial mortgage:
Owner-occupied	3,296		3,503		4,361
Non-owner occupied	747		1,466		1,550
Land development	428		440		577
Total real estate – commercial mortgage	4,471		5,409		6,488
Installment loans to individuals	66		67		66

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

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



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

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,
2017 December 31, 2016 September 30,
2016
Nonaccruing loans $ 14,838
$ 22,620
$ 26,187
Accruing loans past due 90 days or more 10,644
12,894
15,721
Total nonperforming loans 25,482
35,514
41,908
Restructured loans in compliance with modified terms 13,963
11,475
10,720
Total nonperforming and restructured loans $ 39,445
$ 46,989
$ 52,628

~~As shown above, restructured loans totaled $13,963 at~~ ~~September 30, 2017~~ ~~compared to $11,475 at December 31, 2016 and $10,720 at~~ ~~September 30, 2016. At~~ ~~September 30, 2017~~, loans restructured through interest rate concessions represented 27% 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,
2017 December 31, 2016 September 30,
2016
Commercial, financial, agricultural $ —
$ 17
$ 244
Real estate – construction:
Residential —
518
510
Total real estate – construction —
518
510
Real estate – 1-4 family mortgage:
Primary 6,026
5,060
4,542
Home equity 286
246
250
Rental/investment 2,304
868
744
Land development 4
12
10
Total real estate – 1-4 family mortgage 8,620
6,186
5,546
Real estate – commercial mortgage:
Owner-occupied 3,324
2,496
2,406
Non-owner occupied 1,503
1,589
1,439
Land development 448
603
508
Total real estate – commercial mortgage 5,275
4,688
4,353
Installment loans to individuals 68
66
67

Total restructured loans in compliance with modified terms $ 13,963
$ 11,475
$ 10,720

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

2017 2016
Balance at January 1, $ 11,475
$ 13,453
Additional loans with concessions 6,147
2,926
Reclassified as performing 589
—
Reductions due to:
Reclassified as nonperforming (1,349 ) (1,336 )
Paid in full (1,092 ) (3,304 )
Charge-offs (267 ) (32 )
Transfer to other real estate owned —
(51 )
Paydowns (516 ) (936 )
Lapse of concession period (1,024 ) —
Balance at September 30, $ 13,963
$ 10,720

Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for loan losses. Reductions in the carrying value subsequent to acquisition are charged to earnings and are included in “Other real estate owned” in the Consolidated Statements of Income. Other real estate owned with a cost basis of $10,736 was sold during the nine months ended September 30, 2017, resulting in a net gain of $488, while other real estate owned with a cost basis of $11,475 was sold during the nine months ended September 30, 2016, resulting in a net loss of $435.



	March 31, 2018		December 31, 2017		March 31, 2017
Nonaccruing loans	$	14,743	$	14,674	$	21,124
Accruing loans past due 90 days or more	8,169		8,746		14,072
Total nonperforming loans	22,912		23,420		35,196
Restructured loans in compliance with modified terms	13,823		14,553		14,935
Total nonperforming and restructured loans	$	36,735	$	37,973	$	50,131

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


	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2018		December 31, 2017		March 31, 2017
Residential real estate	$	2,627	$	2,929	$	3,028	$	2,148	$	2,441	$	2,981
Commercial real estate	6,953		8,081		8,412		5,165		5,938		7,923
Residential land development	2,062		4,032		4,140		1,743		1,881		3,264
Commercial land development	6,178		8,257		10,748		5,499		5,674		7,154
Total other real estate owned	$	17,820	$	23,299	$	26,328	$	14,555	$	15,934	$	21,322

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


	2017			2016			2018			2017
Balance at January 1,	$	23,299		$	35,402		$	15,934		$	23,299
Acquired OREO	1,203			—
Transfers of loans	5,418			5,147			1,154			3,168
Impairments	(1,454		)	(2,427		)	(352		)	(378		)
Dispositions	(10,736		)	(11,475		)	(2,181		)	(4,719		)
Other	90			(319		)	—			(48		)
Balance at September 30,	$	17,820		$	26,328
Balance at March 31,							$	14,555		$	21,322

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

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. ~~To that end,~~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 ~~monitors~~monitor and ~~manages~~manage our interest rate risk exposure.

We have an Asset/Liability Committee (“ALCO”) which 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. Profitability is affected by fluctuations 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.

~~We utilize~~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, under various interest rate scenarios.

Net interest income simulations measure the short and medium-term earnings exposure from changes in market interest rates in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying 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~~April 1, ~~2017,~~2018, in each case as compared to the result under rates present in the market on ~~September 30, 2017.~~March 31, 2018. The changes in interest rates assume an instantaneous and parallel shift in the yield curve and does not take into account changes in the slope of the yield curve.


	Percentage Change In:			Percentage Change In:
Immediate Change in Rates of:	Economic Value Equity (EVE)	Earning at Risk (EAR) (Net Interest Income)
Immediate Change in Rates of:	Static	1-12 Months	13-24 Months
Immediate Change in Rates of (in basis points):				Economic Value Equity (EVE)	Earning at Risk (EAR) (Net Interest Income)
Immediate Change in Rates of (in basis points):				Static	1-12 Months	13-24 Months
+400	17.93%	10.25%	18.77%	15.39%	15.02%	24.07%
+300	13.56%	8.17%	14.98%	12.07%	11.16%	17.94%
+200	7.68%	5.82%	10.63%	7.58%	7.93%	12.78%
+100	3.71%	3.25%	5.91%	3.46%	3.92%	6.24%
-100	(9.09)%	(8.56)%	(12.08)%	(5.32)%	(8.67)%	(11.11)%

The rate shock results for the net interest income simulations for the next twenty-four months produce ~~a slightly~~an asset sensitive position at ~~September 30, 2017.~~March 31, 2018. The ~~Company's~~Company’s interest rate risk strategy is to remain in an asset sensitive position with a focus on increasing variable rate loan production and generating deposits that are less sensitive to increases in interest rates.

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

The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, forward commitments, and interest rate lock commitments, as part of its ongoing efforts to mitigate its interest rate risk exposure. For more information about the Company’s derivative financial instruments, see the “Off-Balance Sheet Transactions” section below and Note ~~12,~~11, “Derivative Instruments,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.

Liquidity and Capital Resources

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

~~continually monitors the Bank's liquidity and non-core dependency ratios to ensure compliance with targets established by the Asset/Liability Management Committee.~~

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

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Within the next twelve months the securities portfolio is forecasted to generate cash flow through principal payments and maturities equal to approximately ~~14.20%~~14.14% 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, 2017~~March 31,

2018, securities with a carrying value of ~~$486,533~~$280,332 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 ~~$666,873~~$243,755 similarly pledged at December 31, ~~2016~~2017.

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 ~~$375,000~~$50,000 at ~~September 30, 2017~~March 31, 2018 compared to $~~100,000~~83,000 at December 31, ~~2016~~2017. 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, 2017~~March 31, 2018, the balance of our outstanding long-term advances with the FHLB was ~~$7,760.~~$7,276. The total amount of the remaining credit available to us from the FHLB at ~~September 30, 2017~~March 31, 2018 was ~~$2,205,612.~~$2,706,761. We also maintain lines of credit with other commercial banks totaling $80,000. 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, 2017~~March 31, 2018 or December 31, ~~2016~~2017.

In the third quarter of 2016, the Company issued and sold $60,000 aggregate principal amount of its 5.00% Fixed-to-Floating Rate Subordinated Notes due 2026 and $40,000 aggregate principal amount of its 5.50% Fixed-to-Floating Rate Subordinated Notes due 2031. As part of the Metropolitan acquisition, the Company assumed $15,000 aggregate principal amount of 6.50% fixed-to-floating rate subordinated notes due July 1, 2026. Additionally, in 2016, we accessed the debt capital market to generate liquidity in the form of subordinated notes. The carrying value of the combined subordinated notes, net of unamortized debt issuance costs, was ~~$114,088~~$114,059 at ~~September 30, 2017.~~March 31, 2018.


	Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds				Percentage of Total Average Deposits and Borrowed Funds				Cost of Funds
	Nine Months Ended				Nine Months Ended				Three Months Ended				Three Months Ended
	September 30,				September 30,				March 31,				March 31,
	2017		2016		2017		2016		2018		2017		2018		2017
Noninterest-bearing demand	21.36	%	20.08	%	—	%	—	%	21.52	%	21.00	%	—	%	—	%
Interest-bearing demand	45.33		42.78		0.24		0.19		46.31		45.96		0.35		0.22
Savings	7.23		7.29		0.07		0.07		6.88		7.46		0.11		0.07
Time deposits	21.43		22.01		0.84		0.72		21.56		21.79		1.00		0.81
Short-term borrowings	2.11		5.68		1.08		0.47		1.27		1.12		1.45		0.54
Long-term Federal Home Loan Bank advances	0.10		0.63		3.43		4.05		0.09		0.11		3.41		3.50
Subordinated notes	1.32		0.20		5.64		5.45		1.35		1.32		5.63		5.52
Other borrowed funds	1.12		1.33		5.06		5.54		1.02		1.24		4.97		5.32
Total deposits and borrowed funds	100.00	%	100.00	%	0.45	%	0.38	%	100.00	%	100.00	%	0.53	%	0.43	%

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 ~~non-interest bearing~~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 ~~$332,200~~$250,978 at ~~September 30, 2017~~March 31, 2018 compared to ~~$217,391~~$370,744 at ~~September 30, 2016~~March 31, 2017. Cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 was ~~$225,501~~$365,230 compared to ~~$240,085~~$42,322 for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017. Proceeds from the sale, maturity or call of securities within our investment portfolio were ~~$196,296~~$29,335 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 compared to ~~$230,565~~$41,456 for the same period in ~~2016.~~2017. These proceeds were reinvested into the investment portfolio or used to fund loan growth. Purchases of investment securities were ~~$191,679~~$317,922 for the first ~~nine~~three months of ~~2017~~2018 compared to ~~$92,887~~$52,683 for the same period in ~~2016~~2017. The large increase in purchases of investment securities in 2018 is related to the releveraging of the Company's balance sheet.

Cash provided by financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and 2017 was $395,926 and ~~2016 was $199,080 and $121,167,~~$51,708, respectively. Deposits increased ~~$119,318~~$437,471 and ~~$248,411~~$172,225 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 and ~~2016~~2017, respectively. A portion of the increase in deposits during the first quarter of 2018 is the result of the Company reacquiring certain wholesale deposit funding sources which had been reduced during the fourth quarter of 2017 as part of the Company’s efforts to manage consolidated assets below $10,000,000. Cash provided through deposit growth was ~~primarily~~ used to fund loan ~~growth.~~growth and purchase investment securities.

Restrictions on Bank Dividends, Loans and Advances

The Company’s liquidity and capital resources, as well as its ability to pay dividends to its shareholders, are substantially dependent on the ability of Renasant Bank to transfer funds to the Company in the form of dividends, loans and advances. Under Mississippi law, a Mississippi bank may not pay dividends unless its earned surplus is in excess of three times capital stock. A Mississippi bank with earned surplus in excess of three times capital stock may pay a dividend, subject to the approval of the Mississippi Department of Banking and Consumer ~~Finance.~~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 ~~this supervisory authority~~the DBCF is required prior to Renasant Bank paying dividends to the ~~Company.~~Company, and under certain circumstances the approval of the FDIC may be required.

Federal Reserve regulations also limit the amount Renasant Bank may loan to the Company unless such loans are collateralized by specific obligations. At ~~September 30, 2017~~March 31, 2018, the maximum amount available for transfer from Renasant Bank to the Company in the form of loans was ~~$99,012.~~$107,371. The Company maintains a line of credit collateralized by cash with Renasant Bank totaling $3,045. There were no amounts outstanding under this line of credit at ~~September 30, 2017~~March 31, 2018. These restrictions did not have any impact on the Company’s ability to meet its cash obligations in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, nor does management expect such restrictions to materially impact the Company’s ability to meet its currently-anticipated cash obligations.

Off-Balance Sheet Transactions

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

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


	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Loan commitments	$	1,600,771	$	1,263,059	$	1,667,704	$	1,619,022
Standby letters of credit	55,404		44,086		66,203		68,946

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

The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, as part of its ongoing efforts to mitigate its interest rate risk exposure and to facilitate the needs of its customers. The Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position with other financial institutions. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At ~~September 30, 2017,~~March 31, 2018, the Company had notional amounts of ~~$219,914~~$212,840 on interest rate contracts with corporate customers and ~~$219,914~~$212,840 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts.

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 residential mortgage loans and also enters into forward commitments to sell residential mortgage loans to secondary market investors.

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

For more information about the Company’s off-balance sheet transactions, see Note ~~12,~~11, “Derivative Instruments,” in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.

Shareholders’ Equity and Regulatory Matters

Total shareholders’ equity of the Company was $~~1,511,826~~1,532,765 at ~~September 30, 2017~~March 31, 2018 compared to $~~1,232,883~~1,514,983 at December 31, ~~2016~~2017. Book value per share was ~~$30.65~~$31.03 and ~~$27.81~~$30.72 at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, respectively. The growth in shareholders’ equity was attributable to ~~the Metropolitan acquisition,~~ earnings retention ~~and~~offset by changes in accumulated other comprehensive ~~income offset by~~loss and dividends declared.

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

The Company has junior subordinated debentures with a carrying value of ~~$85,744~~$86,018 at ~~September 30, 2017~~March 31, 2018, of which ~~$82,866~~$83,140 are included in the Company’s Tier 1 capital. ~~The~~ Federal Reserve ~~Board issued guidance in March 2005 providing more strict quantitative limits on~~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.~~capital at March 31, 2018. 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 ~~issued after May 19, 2010 may~~are not ~~be included~~includable in Tier 1 capital. Further, if as a result of an acquisition we exceed $15,000,000 in assets, or if we make any acquisition after we have exceeded $15,000,000 in assets, we will lose Tier 1 treatment of our junior subordinated debentures.

The Company has subordinated notes with a carrying value of ~~$114,088~~$114,059 at ~~September 30, 2017~~March 31, 2018. These notes are included in the ~~Company's~~Company’s Tier 2 capital.



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

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


	Actual				Minimum Capital Requirement to be Well Capitalized				Minimum Capital Requirement to be Adequately Capitalized (including the phase-in of the Capital Conservation Buffer)				Actual				Minimum Capital Requirement to be Well Capitalized				Minimum Capital Requirement to be Adequately Capitalized (including the phase-in of the Capital Conservation Buffer)
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2017
March 31, 2018
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	887,234	11.21	%	$	514,261	6.50	%	$	454,923	5.75	%	$	917,501	11.38	%	$	524,152	6.50	%	$	514,072	6.375	%
Tier 1 risk-based capital ratio	970,005		12.26	%	632,937		8.00	%	573,599		7.25	%	1,000,640		12.41	%	645,110		8.00	%	635,030		7.875	%
Total risk-based capital ratio	1,131,605		14.30	%	791,171		10.00	%	731,833		9.25	%	1,164,193		14.44	%	806,388		10.00	%	796,308		9.875	%
Leverage capital ratios:
Tier 1 leverage ratio	970,005		10.05	%	482,424		5.00	%	385,939		4.00	%	1,000,640		10.61	%	471,556		5.00	%	377,245		4.00	%

Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	990,117	12.54	%	$	513,199	6.50	%	$	453,984	5.75	%	$	1,023,486	12.71	%	$	523,381	6.50	%	$	513,316	6.375	%
Tier 1 risk-based capital ratio	990,117		12.54	%	631,630		8.00	%	572,415		7.25	%	1,023,486		12.71	%	644,161		8.00	%	634,096		7.875	%
Total risk-based capital ratio	1,038,473		13.15	%	789,537		10.00	%	730,322		9.25	%	1,073,712		13.33	%	805,202		10.00	%	795,137		9.875	%
Leverage capital ratios:
Tier 1 leverage ratio	990,117		10.28	%	481,665		5.00	%	385,332		4.00	%	1,023,486		10.88	%	470,445		5.00	%	376,356		4.00	%

December 31, 2016
December 31, 2017
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	766,560	11.47	%	$	434,267	6.50	%	$	342,403	5.125	%	$	896,733	11.34	%	$	513,827	6.50	%	$	454,539	5.75	%
Tier 1 risk-based capital ratio	858,850		12.86	%	534,483		8.00	%	442,619		6.625	%	979,604		12.39	%	632,402		8.00	%	573,114		7.25	%
Total risk-based capital ratio	1,004,038		15.03	%	668,103		10.00	%	576,239		8.625	%	1,142,926		14.46	%	790,503		10.00	%	731,215		9.25	%
Leverage capital ratios:
Tier 1 leverage ratio	858,850		10.59	%	405,441		5.00	%	324,353		4.00	%	979,604		10.18	%	481,086		5.00	%	384,968		4.00	%

Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio	$	824,850	12.38	%	$	433,105	6.50	%	$	341,487	5.125	%	$	1,000,715	12.69	%	$	512,570	6.50	%	$	453,427	5.75	%
Tier 1 risk-based capital ratio	824,850		12.38	%	533,052		8.00	%	441,434		6.625	%	1,000,715		12.69	%	630,856		8.00	%	571,713		7.25	%
Total risk-based capital ratio	871,911		13.09	%	666,315		10.00	%	574,697		8.625	%	1,050,751		13.32	%	788,569		10.00	%	729,427		9.25	%
Leverage capital ratios:
Tier 1 leverage ratio	824,850		10.20	%	404,442		5.00	%	323,554		4.00	%	1,000,715		10.42	%	480,353		5.00	%	384,282		4.00	%

~~In July 2013,~~For more information regarding the ~~Federal Reserve, the FDIC and the Office of the Comptroller of the Currency approved the implementation of the Basel III regulatory~~ capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act (the “Basel III Rules”) that call for broad and comprehensive revision of regulatory capital standards for U.S. banking organizations. Generally, the Basel III Rules became effective on January 1, 2015, although parts of the Basel III Rules will be phased in through 2019.

The Basel III Rules implemented a new common equity Tier 1 minimum capital requirement (“CET1”) and a higher minimum Tier 1 capital requirement, as reflected in the table above, and adjusted other items affecting the calculation of the numerator of a banking organization’s risk-based capital ratios. The new CET1 capital ratio includes common equity as defined under GAAP and does not include any other type of non-common equity under GAAP. Additionally, the Basel III Rules apply limits to a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of CET1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements.

Further, the Basel III Rules changed the agencies’ general risk-based capital requirements for determining risk-weighted assets, which affect the calculation of the denominator of a banking organization’s risk-based capital ratios. The Basel III Rules have revised the agencies’ rules for calculating risk-weighted assets to enhance risk sensitivity and to incorporate certain international capital standards of the Basel Committee on Banking Supervision set forth in the standardized approach of the “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”.

~~The calculation of risk-weighted assets in the denominator of the Basel III capital ratios has been adjusted to reflect the higher risk nature of certain types of loans. Specifically, as~~adequacy guidelines applicable to the Company and Renasant ~~Bank:~~

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

~~— Commercial mortgages: Replaced the former 100% risk weight with a 150% risk weight for certain high volatility commercial real estate acquisition, development and construction loans.~~

~~— Nonperforming loans: Replaced the former 100% risk weight with a 150% risk weight for loans, other than residential mortgages, that are 90 days past due or on nonaccrual status.~~

~~The Basel III Rules also introduce a new capital conservation buffer designed~~Bank, please refer to absorb losses during periods of economic stress. The capital conservation buffer is composed entirely of CET1, on top of these minimum risk-weighted asset ratios. In addition, the Basel III Rules provide for a countercyclical capital buffer applicable only to certain covered institutions. It is not expected that the countercyclical capital buffer will be applicable to the Company or Renasant Bank. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The implementation of the capital conservation buffer began on JanuaryNote 17, “Regulatory Matters,” in Item 1, ~~2016 at the 0.625% level and will be phased in over a 4-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).~~

Financial Statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk since December 31, ~~2016.~~2017. For additional information regarding our market risk, see our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2016.~~2017.

Item 4. CONTROLS AND PROCEDURES

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

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

Part II. OTHER INFORMATION

Item 1A. RISK FACTORS

Information regarding risk factors appears in Part I, Item 1A, ~~“Risk~~Risk Factors,” of the Company’s Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2016~~2017. There have been no material changes in the risk factors disclosed in the Annual Report on Form ~~10-K/A~~10-K.

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

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

~~The Company did not repurchase any shares of its outstanding stock during~~During the three month period ended ~~September 30, 2017.~~March 31, 2018, the Company repurchased shares of its common stock as indicated in the following table:



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


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

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~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this report, which is incorporated by reference herein.

Item 6. EXHIBITS



Exhibit Number		Description

(2)(i)		~~Agreement and Plan of Merger by and among Renasant Corporation, Renasant Bank, First M&F Corporation and Merchants and Farmers Bank dated as of February 6, 2013~~⁽¹⁾

~~(2)(ii)~~		~~Agreement and Plan of Merger by and among Renasant Corporation, Renasant Bank, Heritage Financial Group, Inc. and HeritageBank of the South~~⁽²⁾

~~(2)(iii)~~		~~Agreement and Plan of Merger by and among Renasant Corporation, Renasant Bank and KeyWorth Bank dated as of October 20, 2015~~ ⁽³⁾

~~(2)(iv)~~		Agreement and Plan of Merger by and among Renasant Corporation, Renasant Bank, Metropolitan BancGroup, Inc. and Metropolitan Bank dated as of January 17, 2017 ⁽⁴⁾(1)

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

(3)(i)		Articles of Incorporation of Renasant Corporation, as amended⁽⁵⁾ (3)

(3)(ii)		Restated Bylaws of Renasant Corporation, as amended ⁽⁶⁾(4)

(4)(i)		Articles of Incorporation of Renasant Corporation, as amended⁽⁵⁾ (3)

(4)(ii)		Restated Bylaws of Renasant Corporation, as amended ⁽⁶⁾(4)

~~(10)(i)~~		~~Executive Employment Agreement dated July 1, 2017 between Renasant Bank and Curtis J. Gabardi~~ ⁽⁷⁾

~~(12)(i)~~		~~Computation of Ratios of Earnings to Fixed Charges~~

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

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

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

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

~~(101)~~		The following materials from Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 were formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements (Unaudited).


~~(1)~~	~~Filed as exhibit 2.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on February 11, 2013 and incorporated herein by reference.~~


~~(2)~~	~~Filed as exhibit 2.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on December 15, 2014 and incorporated herein by reference.~~


~~(3)~~	~~Filed as exhibit 2.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on October 23, 2015 and incorporated herein by reference.~~


~~(4)~~	~~Filed as exhibit 2.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 19, 2017 and incorporated herein by reference.~~


~~(5)~~	~~Filed as exhibit 3.1 to the Form 10-Q of the Company filed with the Securities and Exchange Commission on May 10, 2016 and incorporated herein by reference.~~


~~(6)~~	Filed as exhibit 3.2 to the Pre-Effective Amendment No. 1 to Form S-4 Registration Statement of the Company (File No. 333-208753) filed with the Securities and Exchange Commission on January 29, 2016 and incorporated herein by reference.


~~(7)~~	~~Filed as exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on July 7, 2017 and incorporated herein by reference.~~

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

~~SIGNATURES~~

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



		~~RENASANT CORPORATION~~
		~~(Registrant)~~

~~Date:~~	~~November 9, 2017~~	~~/s/ E. Robinson McGraw~~
		~~E. Robinson McGraw~~
		~~Chairman of the Board, Director,~~
		~~and Chief Executive Officer~~
		~~(Principal Executive Officer)~~

~~Date:~~	~~November 9, 2017~~	~~/s/ Kevin D. Chapman~~
		~~Kevin D. Chapman~~
		~~Executive Vice President and~~
		~~Chief Financial Officer~~
		~~(Principal Financial Officer)~~

~~EXHIBIT INDEX~~



~~Exhibit~~ ~~Number~~		~~Description~~

~~(12)(i)~~		~~Computation of Ratios of Earnings to Fixed Charges.~~

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

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

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

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

(101)		The following materials from Renasant Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2018 were formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements (Unaudited).


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


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


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


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

SIGNATURES

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



		RENASANT CORPORATION
		(Registrant)

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

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



		Page
PART I	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	12
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5547

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8873

Item 4.	Controls and Procedures	8873

PART II	Other Information
Item 1A.	Risk Factors	8975

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8975

Item 6.	Exhibits	8976

SIGNATURES		91

~~EXHIBIT INDEX~~		9277



At acquisition date:	April 1, 2016
Contractually-required principal and interest	$	289,495
Nonaccretable difference	(3,848		)
Cash flows expected to be collected	285,647
Accretable yield	(13,317		)
Fair value	$	272,330




Nine Months Ended September 30, 2016	Trust preferred securities
Balance at January 1, 2016	$	19,469
Accretion included in net income	23
Unrealized losses included in other comprehensive income	(168		)
Reclassification adjustment	—
Purchases	—
Sales	—
Issues	—
Settlements	(1,232		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at September 30, 2016	$	18,092



	Three Months Ended September 30,
	2017						2016
	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning assets:
Loans:
Not purchased	$	5,095,445	$	57,560	4.48	%	$	4,424,727	$	47,809	4.30	%
Purchased	2,279,965		33,133		5.77	%	1,584,179		26,618		6.68	%
Purchased and covered⁽¹⁾	—		—		—	%	39,111		701		7.13	%
Total Loans	7,375,410		90,693		4.88	%	6,048,017		75,128		4.94	%
Mortgage loans held for sale	226,512		2,419		4.24	%	241,314		2,026		3.34	%
Securities:
Taxable⁽²⁾	807,001		4,758		2.34		695,589		3,418		1.95
Tax-exempt	340,156		4,046		4.72		350,316		4,081		4.63
Interest-bearing balances with banks	194,988		697		1.42		98,225		131		0.53
Total interest-earning assets	8,944,067		102,613		4.55		7,433,461		84,784		4.54
Cash and due from banks	152,654						124,794
Intangible assets	636,977						497,064
FDIC loss-share indemnification asset⁽¹⁾	—						4,816
Other assets	543,778						502,064
Total assets	$	10,277,476					$	8,562,199
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand⁽³⁾	$	3,869,297	$	2,757	0.28	%	$	3,106,568	$	1,515	0.19	%
Savings deposits	575,684		101		0.07		528,794		94		0.07
Time deposits	1,814,268		3,976		0.87		1,619,740		3,029		0.74
Total interest-bearing deposits	6,259,249		6,834		0.43		5,255,102		4,638		0.35
Borrowed funds	575,816		3,844		2.65		550,222		2,663		1.93
Total interest-bearing liabilities	6,835,065		10,678		0.62		5,805,324		7,301		0.50
Noninterest-bearing deposits	1,849,396						1,510,309
Other liabilities	97,424						111,493
Shareholders’ equity	1,495,591						1,135,073
Total liabilities and shareholders’ equity	$	10,277,476					$	8,562,199
Net interest income/net interest margin			$	91,935	4.08	%			$	77,483	4.15	%



	Volume			Rate			Net⁽¹⁾
Interest income:
Loans:
Not purchased	$	7,680		$	2,071		$	9,751
Purchased	10,226			(3,711		)	6,515
Purchased and covered ⁽²⁾	(701		)	—			(701		)
Mortgage loans held for sale	(161		)	554			393
Securities:
Taxable	661			679			1,340
Tax-exempt	(92		)	57			(35		)
Interest-bearing balances with banks	346			220			566
Total interest-earning assets	17,959			(130		)	17,829
Interest expense:
Interest-bearing demand deposits	546			696			1,242
Savings deposits	8			(1		)	7
Time deposits	430			517			947
Borrowed funds	172			1,009			1,181
Total interest-bearing liabilities	1,156			2,221			3,377
Change in net interest income	$	16,803		$	(2,351	)	$	14,452