Renasant Corporation, a Mississippi corporation incorporated in 1982, owns
and operates Renasant Bank, a Mississippi banking association with operations
in Mississippi, Tennessee, Alabama, Florida and Georgia, and Renasant Insurance,
Inc., a Mississippi corporation with operations in Mississippi. Renasant Insurance,
Inc. is a wholly-owned subsidiary of Renasant Bank. Renasant Bank is referred
to herein as the “Bank” and Renasant Insurance, Inc. is referred
to herein as “Renasant Insurance.”
Our vision is to be the financial services advisor and provider of choice in
each community we serve. With this vision in mind, management has organized
the branch banks into community banks using a franchise concept. The franchise
approach empowers community bank presidents to execute their own business plans
in order to achieve our vision. Specific performance measurement tools are available
to assist these presidents in determining the success of their plan implementation.
The Company has three reportable segments: a Community Banks segment, an Insurance
segment and a Wealth Management segment.
Operations of Community Banks
Substantially all of our business activities are conducted through, and substantially
all of our assets and revenues are derived from, the operations of our community
banks, which offer a complete range of banking and financial services to individuals
and to small to medium-size businesses. These services include checking and
savings accounts, business and personal loans, interim construction loans, equipment
leasing, accounts receivable financing, as well as safe deposit and night depository
facilities. Automated teller machines are located throughout our market area.
Our Online and Mobile Banking products and our call center also provide 24-hour
banking services.
Lending Activities.Total gross revenues consist of interest income on a fully
taxable equivalent basis and noninterest income. Our lending philosophy is to
minimize credit losses by following strict credit approval standards, diversifying
our loan portfolio by both type and geography and conducting ongoing review
and management of the loan portfolio.
— Commercial, Financial and Agricultural Loans. Commercial, financial
and agricultural loans (referred to as “commercial loans”), which
accounted for approximately 11.76% of our total loans, are customarily granted
to established local business customers in our market area on a fully collateralized
basis to meet their credit needs. The terms and loan structure are dependent
on the collateral and strength of the borrower. The loan-to-value ratios range
from 50% to 85%, depending on the type of collateral. Terms are typically short
term in nature and are commensurate with the secondary source of repayment that
serves as our collateral.
Commercial lending generally involves different risks from those associated
with commercial real estate lending or construction lending. Although commercial
loans may be collateralized by equipment or other business assets, the repayment
of these types of loans depends primarily on the creditworthiness and projected
cash flow of the borrower (and any guarantors). Thus, the general business conditions
of the local economy and the local business borrower’s ability to sell
its products and services, thereby generating sufficient operating revenue to
repay us under the agreed upon terms and conditions, are the chief considerations
when assessing the risk of a commercial loan. The liquidation of collateral
is considered a secondary source of repayment. Another source of repayment are
guarantors of the loan, if any. To manage these risks, the Bank’s policy
is to secure its commercial loans with both the assets of the borrowing business
and any other additional collateral and guarantees that may be available. In
addition, we actively monitor certain financial measures of the borrower, including
advance rate, cash flow, collateral value and other appropriate credit factors.
We use commercial loan credit scoring models for smaller level commercial loans.
— Real Estate – 1-4 Family Mortgage. We offer both first and second
mortgages on residential real estate. Loans secured by residential real estate
in which the property is the principal residence of the borrower are referred
to as “primary” 1-4 family mortgages. Loans secured by residential
real estate in which the property is rented to tenants or is not the principal
residence of the borrower are referred to as “rental/investment”
1-4 family mortgages. In addition, we offer home equity lines of credit and
term loans secured by first and second mortgages on the residences of borrowers
for purchases, refinances, home improvements, education and other personal expenditures.
Both fixed and variable rate loans are offered with competitive terms and fees.
Originations of residential real estate loans are generated through either retail
efforts in our branches or through loans either originated by or referred by
our mortgage operations. We attempt to minimize the risk associated with residential
real estate loans by strictly scrutinizing the financial condition of the borrower;
typically, we also limit the maximum loan-to-value ratio.
We retain loans for our portfolio when the Bank has sufficient liquidity to
fund the needs of established customers and when rates are favorable to retain
the loans. We also originate residential real estate loans with the intention
of selling them in the secondary market to third party private investors or
directly to government sponsored agencies. These loans are collateralized by
one-to-four family residential real estate. When these loans are sold, we either
release or retain the related servicing rights, depending on a number of factors
including the pricing of such loans in the secondary market, fluctuations in
interest rates that would impact the profitability of the loans, as well as
other market-related conditions. Residential real estate originations 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 we are 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. The Company does
not actively market or originate subprime mortgage loans.
We also offer home equity loans or lines of credit as an option to borrowers
who elect to utilize the accumulated equity in their homes by borrowing money
through either a first or second lien home equity loan or line of credit. We
limit our exposure to second lien home equity loans or lines of credit, which
inherently carry a higher risk of loss upon default, by limiting these types
of loans to borrowers with high credit scores.
— Real Estate – Commercial Mortgage. Our real estate – We
offer loans in which the owner develops a property with the intention of locating
its business there. These loans are referred to as “owner-occupied”
commercial real estate loans. Payments on these loans are dependent on the successful
development and management of the business as well as the borrower’s ability
to generate sufficient operating revenue to repay the loan. If our estimate
of value proves to be inaccurate, the Bank must mitigate that risk by having
sufficient sources of secondary repayment as well as guarantor support. In some
instances, in addition to our mortgage on the underlying real estate of the
business, our commercial real estate loans are secured by other non-real estate
collateral, such as equipment or other assets used in the course of business.
In addition to owner-occupied commercial real estate loans, we offer loans in
which the owner develops a property where the source of repayment of the loan
will come from the sale or lease of the developed property, for example, retail
shopping centers, hotels, storage facilities, nursing homes, etc. These loans
are referred to as “non-owner occupied” commercial real estate loans.
We also offer commercial real estate loans to developers of commercial properties
for purposes of site acquisition and preparation and other development prior
to actual construction (referred to in this Annual Report as “commercial
land development loans”). Non-owner occupied commercial real estate loans
and commercial land development loans are dependent on the successful completion
of the project and may be affected by adverse conditions in the real estate
market or the economy as a whole.
— Real Estate – Construction. Our real estate – construction
loans (“construction loans”) represented approximately 6.61% of
our total loans. Our construction loan portfolio consists of loans for the construction
of single family residential properties, multi-family properties and commercial
projects. Maturities for construction loans generally range from 6 to 12 months
for residential property and from 12 to 24 months for non-residential and multi-family
properties. Construction lending entails significant additional risks compared
to residential real estate or commercial real estate lending. A significant
additional risk is that loan funds are advanced upon the security of the property
under construction, which is of uncertain value prior to the completion of construction.
The risk is to evaluate accurately the total loan funds required to complete
a project and to ensure proper loan-to-value ratios during the construction
phase. However, for many of our construction loans, the Bank engages an independent
third party to actively manage the construction process to ensure advances are
in line with projects or budgets. To minimize the risks associated with construction
lending, we limit loan-to-value ratios to 85% of when-completed appraised values
for owner-occupied and investor-owned residential or commercial properties.
— Installment Loans to Individuals. Installment loans to individuals (or
“consumer loans”), which represented approximately 2.13% of our
total loans, are granted to individuals for the purchase of personal goods.
These loans are generally granted for periods ranging between one and six years
at fixed rates of interest from 100 to 500 basis points above the prime interest
rate quoted in The Wall Street Journal. Loss or decline of income by the borrower
due to unplanned occurrences represents the primary risk of default to us. In
the event of default, a shortfall in the value of the collateral may pose a
loss to us in this loan category. Before granting a consumer loan, we assess
the applicant’s credit history and ability to meet existing and proposed
debt obligations. Although the applicant’s creditworthiness is the primary
consideration, the underwriting process also includes a comparison of the value
of the collateral, if any, to the proposed loan amount. We obtain a lien against
the collateral securing the loan and hold title until the loan is repaid in
full.
— Equipment Financing and Leasing. Equipment financing loans (or “lease
financing loans”), which represented approximately 0.64% of our total
loans, are granted to provide capital to businesses for commercial equipment
needs. These loans are generally granted for periods ranging between two and
five years at fixed rates of interest. Loss or decline of income by the borrower
due to unplanned occurrences represents the primary risk of default to us. In
the event of default, a shortfall in the value of the collateral may pose a
loss to us in this loan category. We obtain a lien against the collateral securing
the loan and hold title (if applicable) until the loan is repaid in full. Transportation,
manufacturing, healthcare, material handling, printing and construction are
the industries that typically obtain lease financing. In addition, the not-for-profit
product offered as a subset of the product line includes real estate financing
for qualified customers at tax-exempt rates.