What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-23 · 102 added, 100 removed, 851 unchanged (19% of the section changed)

8 unchanged sentences

Financial Highlights

Net interest income increased $38,029 to $519,327 for 2023 as compared to $481,298 for 2022.

The increase from 2022 to 2023 was due to the continued increase in loan yields due to additional interest rate hikes by the Federal Reserve, as well as changes in the mix of earning assets during the year, partially offset by an increase in our cost of funds.

The Company increased on-balance sheet liquidity following the bank failures in March 2023 resulting in incremental interest expense, and competition for deposits increased significantly during the year driving a surge in interest expense when compared to 2022.

In July 2024, the Company and The First Bancshares, Inc.

(“The First”) entered into an agreement and plan of merger, pursuant to which, subject to the terms and conditions set forth therein, among other things, The First will merge with and into the Company, with the Company as the surviving entity in such merger, and immediately thereafter, The First’s subsidiary bank and Renasant Bank will enter into a subsidiary plan of merger, pursuant to which The First’s subsidiary bank will merge with and into Renasant Bank, with Renasant Bank as the surviving entity in such merger.

Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of common stock of The First will be converted into the right to receive one share of common stock of the Company.

The merger is expected to close in the first half of 2025 and is subject to certain closing conditions, including the receipt of required regulatory approvals

In July 2024, the Company completed its public offering of an aggregate of 7,187,500 shares of its common stock for net proceeds of approximately $217,000.

The Company intends to use the net proceeds of the offering for general corporate purposes to support its continued growth, including investments in the Bank and future strategic acquisitions.

In July 2024, Renasant Bank sold substantially all of the assets of Renasant Insurance, Inc., its insurance agency (“Renasant Insurance”), for cash proceeds of $56,390 resulting in a positive after-tax impact to earnings of $34,092, which is net of transaction expenses.

Net interest income decreased $7,131 to $512,196 for 2024 as compared to $519,327 for 2023.

The decrease from 2023 to 2024 was due to the increase in deposit costs more than offsetting the increase in interest income from higher yields, bolstered by the growth in our average earning assets exceeding the growth in interest bearing deposits.

Net charge-offs as a percentage of average loans were 0.06% and 0.10% in 2024 and 2023, respectively.

The Company recorded a provision for credit losses of $9,273 in 2024 as compared to a provision for credit losses of $15,593 in 2023.

The provision for credit losses was higher in 2022 due to the acquisition of Southeastern Commercial Finance, LLC and Republic Business Credit in March 2022 and December 2022, respectively.

Noninterest income was $203,660 for 2024 compared to $113,075 for 2023.

The decrease in noninterest income is primarily attributable to net losses on sales of securities (including impairments) in connection with the repositioning of our securities portfolio.

The increase in noninterest income is primarily attributable to the sale of Renasant Insurance in 2024 resulting in a pre-tax gross gain on sale of $53,349.

Also in 2023, the Company recognized net losses on sales of securities (including impairments) in connection with the repositioning of our securities portfolio.

Noninterest expense was $461,618 and $439,622 for 2024 and 2023, respectively.

The increase in noninterest expense is primarily attributable to increases in salaries and employee benefits and other noninterest expense.

Lower levels of loan production contributing to lower deferred origination costs, the acquisition of Republic Business Credit and the FDIC special assessment accrued in the fourth quarter of 2023 also contributed to the year-over-year increase in noninterest expense.

The increase in noninterest expense is primarily attributable to the aforementioned merger and conversion related expenses in connection with the Company’s announced acquisition of The First and the sale of Renasant Insurance.

Loans, net of unearned income, were $12,885,020 at December 31, 2024 compared to $12,351,230 at December 31, 2023, an increase of 4.3%.

Deposits totaled $14,572,612 at December 31, 2024 compared to $14,076,785 at December 31, 2023.

The increase in deposits is primarily due to an increase in money market and brokered deposits offset by a decrease in noninterest-bearing deposits.

The Company used core retail deposit growth to paydown $461,441 in brokered deposits during the year.

A historical look at key performance indicators is presented below.

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Allowance for Credit Losses on Loans

The accounting estimate most important to the presentation of our financial statements is the allowance for credit losses and the related provision for credit losses which involves considerable subjective judgment and evaluation by management.

The accounting estimate most important to the presentation of our financial statements that involves considerable subjective judgment and evaluation by management is the allowance for credit losses and the related provision for credit losses.

The allowance for credit losses is an estimate of expected losses inherent within the Company’s loans held for investment portfolio and is maintained at a level believed adequate by management to absorb such expected credit losses, as prescribed by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 326, “Financial Instruments - Credit Losses” (“ASC 326”;

ASC 326 is also referred to herein as “CECL”).

Although we consider all reasonably-available information that we believe is relevant to making the assumptions that underlie the Company’s determination of the appropriate amount of the allowance for credit losses, future adjustments to the allowance may be necessary if actual economic or other conditions ultimately differ substantially from the assumptions we used in making the evaluation.

The discussion under the heading “Loans and the Allowance for Credit Losses” in Note 1, “Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report provides more information regarding the estimates and assumptions, and the uncertainties underlying such estimates and assumptions, involved in the calculation of the allowance for credit losses.

Although we consider all reasonably-available information that we believe is relevant to making the assumptions that underlie the Company’s determination of the appropriate amount of the allowance for credit losses, if actual economic or other conditions ultimately differ substantially from the assumptions we used in making the evaluation, then future adjustments (positive or negative) to the allowance may be necessary.

Additionally, banking regulators periodically review our allowance for credit losses and may require us to recognize adjustments to the allowance based on their subjective judgment of information available to them at the time of their examination.

Management evaluates the adequacy of the allowance for credit losses on a quarterly basis.

Please refer to the discussion under the heading “Loans and the Allowance for Credit Losses” in Note 1, “Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report for more information regarding the estimates and assumptions, and the uncertainties underlying such estimates and assumptions, involved in the calculation of the allowance for credit losses.

For more information about our loan policies and procedures for addressing credit risk, as well as for a discussion of the changes in the allowance for credit losses in 2024 and 2023, please refer to the disclosures in this Item under the heading “Risk Management – Credit Risk and Allowance for Credit Losses for Loans and Unfunded Commitments.”

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Portfolio Balance % of

Obligations of other U.S.

Government agencies and corporations $ — — % $ 164,660 5.76 %

Obligations of states and political subdivisions 302,596 15.46 322,764 15.05

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Securities, net of allowance for credit losses $ 1,957,125 $ 2,144,743

During 2023, we purchased $11,899 in investment securities.

Proceeds from the sale of securities totaled $488,981, which were primarily used to pay down FHLB borrowings, and resulted in a pre-tax loss of $22,438.

During 2023, proceeds from maturities and calls of securities totaled $258,978, and such proceeds were primarily used to fund loan growth.

During 2022, primarily in the first half of the year, we deployed a portion of our excess liquidity into the securities portfolio and purchased $804,899 in investment securities, with mortgage-backed securities and collateralized mortgage obligations (“CMOs”), in the aggregate, comprising the majority of such purchases.

During 2024, we deployed a portion of our liquidity into the securities portfolio and purchased $174,229 in investment securities, with mortgage-backed securities and collateralized mortgage obligations (“CMOs”), in the aggregate, comprising the majority of such 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 issued by government sponsored entities.

We did not sell any securities in 2022.

Proceeds from the sale of securities in 2024 totaled $177,185, which the Company had the intent to sell as of December 31, 2023, and therefore recognized a non-credit related impairment loss of $19,352 in 2023 in addition to losses on sales of securities earlier in the year of $22,438 .

During 2024, proceeds from maturities and calls of securities totaled $191,008, and such proceeds were primarily used to fund loan growth.

During 2023, we purchased $11,899 in investment securities, with mortgage-backed securities and CMOs, in the aggregate, comprising the majority of such purchases.

Proceeds from the sale of securities in 2023 totaled $488,981.

Proceeds from maturities and calls of securities during 2023 totaled $258,978, which were primarily reinvested in the securities portfolio or used to fund loan growth.

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The related net unrealized losses of $99,675 (after tax losses of $74,307) remained in accumulated other comprehensive income (loss) and are amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities.

At December 31, 2023 and 2022, the net unrealized after tax losses remaining to be amortized in accumulated other comprehensive income (loss) was $58,522 and $68,613, respectively.

No gains or losses were recognized at the time of transfer.

At December 31, 2024, the net unrealized after tax losses remaining to be amortized in accumulated other comprehensive income (loss) was $49,045.

The allowance for credit losses on held to maturity securities is evaluated on a quarterly basis in accordance with ASC 326.

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At December 31, 2023, unrealized losses of $139,794 were recorded on available for sale securities with a carrying value of $692,593.

At December 31, 2023, the Company had the intent to sell a portion of its securities in an unrealized loss position, and recognized a non-credit related impairment loss of $19,352 in addition to losses on sales of securities earlier in the year of $22,438.

Notwithstanding the securities sales in 2023, it is not more likely than not that the Company will be required to sell any security in the investment portfolio prior to the recovery of its amortized cost basis, which

may be maturity.

It is not more likely than not that the Company will be required to sell any security in the investment portfolio prior to the recovery of its amortized cost basis, which may be maturity.

Furthermore, more than 90% of available for sale securities have the explicit or implicit backing of the United States government.

Performance of these securities has been in line with broader market price performance, indicating to management that increases in market-based, risk free rates, and not credit-related factors, are the reason for the losses.

Performance of these securities has been in line with broader market price performance, indicating to management that increases in market-based,

risk free rates, and not credit-related factors, are the reason for the losses.

For municipal and corporate securities, the Company considers historical experience with credit sensitive securities, current market conditions, the financial health of the issuer, current credit ratings, ratings changes and outlook, explicit and implicit guarantees, and/or insurance programs when determining the fair value of the contractual cash flows.

Based on its review of these factors as of December 31, 2024 and 2023, the Company determined that all such losses resulted from factors not deemed credit related.

As a result, no credit-related impairment was recognized in current earnings, and all unrealized losses for available for sale securities were recorded in Other comprehensive income.

As a result, no credit-related impairment was recognized in current earnings, and all unrealized losses for available for sale securities were recorded in Accumulated other comprehensive income (loss).

The following table sets forth the scheduled maturity distribution and weighted average yield based on the amortized cost of the debt securities in our investment portfolio as of December 31, 2024.

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Maturing after ten years 150,027 1.85 %

Other debt securities

Maturing after five years through ten years 24,258 3.04 %

Maturing after ten years 34,114 2.34 %

Residential mortgage-backed securities not due at a single maturity date:

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Government agency CMO 43,662 1.79 %

Other debt securities not due at a single maturity date:

53,683 2.68 %

Available for Sale:

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Maturing after five years through ten years 24,884 4.87 %

Maturing after ten years — — %

Residential mortgage-backed securities not due at a single maturity date:

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67,734 6.01 %

$ 2,095,071 2.20 %

In the table above, weighted average yields on tax-exempt obligations have been computed on a fully tax equivalent basis assuming a federal tax rate of 21%.

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Noninterest-bearing deposits were $3,403,981 and $3,583,675 at December 31, 2024 and 2023, respectively, while interest-bearing deposits were $11,168,631 and $10,493,110 at December 31, 2024 and 2023, respectively.

Interest-bearing deposits included brokered deposits at December 31, 2023 and 2022 of $461,441 and $233,133, respectively.

Interest-bearing deposits included brokered deposits at December 31, 2023 of $461,441, while the Company did not hold any brokered deposits at December 31, 2024.

The decrease in noninterest-bearing deposits across the Company’s footprint in 2024 and 2023 was primarily driven by increases in interest-bearing deposit rates.

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Total long-term debt $ 430,614 $ 429,400

Long-term FHLB borrowings are used to match-fund against large, fixed rate commercial or real estate loans with long-term maturities, which helps mitigate interest rate exposure when rates rise.

Long-term FHLB borrowings are used to match-fund against large, fixed rate commercial or real estate loans with long-term maturities, which helps mitigate interest rate exposure when rates rise and are also used to meet day-to-day liquidity needs, particularly when the costs of such borrowings compare favorably to the rates required to attract deposits.

The Company had $4,004,630 of availability on unused lines of credit with the FHLB at December 31, 2024 compared to $2,922,315 at December 31, 2023.

The Company also had credit available at the Federal Reserve Discount Window in the amount of $656,683.

The Company owns subordinated notes, the proceeds of which have been used for general corporate purposes.

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Gain on sale of MSR $ (3,724) $ (2,793) $ (0.05) $ (547) $ (44) $ —

Restructuring charges — — — 732 568 0.01

Merger and conversion expenses 13,349 11,395 0.19 — — —

Gain on extinguishment of debt (56) (42) — (620) (503) (0.01)

Initial provision for acquisition — — — 2,820 2,187 0.04

Voluntary reimbursement of certain re-presentment NSF fees — — — 1,255 973 0.02

Gain on sale of insurance agency (53,349) (38,951) (0.65) — — —

Losses on security sales (including impairments) — — — 41,790 33,926 0.60

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Total net revenue consists of net interest income on a fully taxable equivalent basis and noninterest income.

The percentage of net interest income as a share of total net revenue decreased from prior years in 2024 due to the sale of our insurance agency and the corresponding increase in noninterest income.

If not for the sale of the insurance agency, the percentage of net interest income as a share of total net revenue would be consistent with prior years.

The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.

Net interest income increased 7.90% to $519,327 for 2023 compared to $481,298 in 2022.

On a tax equivalent basis, net interest income increased $40,636 to $530,340 in 2023 as compared to $489,704 in 2022.

As discussed below, net interest income decreased 1.37% to $512,196 for 2024 compared to $519,327 in 2023.

On a tax equivalent basis, net interest income decreased $7,814 to $522,526 in 2024 as compared to $530,340 in 2023.

Net interest margin was 3.34% for 2024 as compared to 3.45% for 2023.

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External factors include changes in market interest rates, competition and the shape of the interest rate yield curve.

During 2023, net interest income growth was primarily driven by the rising rate environment throughout 2022 and 2023.

The higher interest rates benefited yields on earnings assets, which, coupled with steady loan growth, resulted in an increase in interest income year over year.

This increase was partially offset by an increase in interest expense.

The rising interest rates negatively impacted both the cost and mix of our funding sources, and management’s decision to increase on-balance sheet liquidity following the bank failures in March 2023 also resulted in higher cost of funds and interest expense.

The Company has continued its efforts to mitigate increases in the cost of funding through maintaining noninterest-bearing deposits, staying disciplined yet competitive in pricing on interest-bearing deposits in the current rate environment and accessing alternative sources of liquidity, such as brokered deposits.

In 2023, however, management’s paramount concern was ensuring the safe and sound operation of the Bank in light of industry-wide conditions, which led to the Company significantly increasing its brokered deposits and borrowed funds in the 2023 as compared to 2022 to maintain robust on-balance sheet liquidity.

During 2024, the decline in net interest income and margin was primarily driven by the increase in the cost of deposits year over year.

The higher interest rate environment continued to benefit yields on earnings assets, which, coupled with steady loan growth, resulted in an increase in interest income year over year, but this increase was offset by an increase in deposit interest expense.

The rate environment negatively impacted both the cost and mix of our funding sources while we continued to grow deposits.

The Company has continued its efforts to mitigate increases in the cost of funding through maintaining noninterest-bearing deposits and staying disciplined yet competitive in pricing on interest-bearing deposits in the current rate environment.

The following table sets forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from changes in volume and rates for the Company for the years indicated.

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(2) changes in yield/rate (changes in yield/rate multiplied by prior volume);

and (3) changes in both yield/rate and volume (changes in yield/rate multiplied by changes in volume).

and (3) changes in both yield/rate and volume (changes in yield/rate

multiplied by changes in volume).

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.

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In 2024, interest income on loans held for investment, on a tax equivalent basis, increased $87,910 to $801,807 from $713,897 in 2023.

This increase was primarily due to additional interest rate increases by the Federal Reserve since March 2022, coupled with a $1,285,146 increase in our average balance of loans to $11,963,141 in 2023 from $10,677,995 in 2022.

This increase was primarily due to a $616,002 increase in our average balance of loans to $12,579,143 in 2024 from $11,963,141 in 2023, bolstered by a continued mix shift from the repricing of maturing fixed rate lower yielding assets into higher yielding assets

The impact from interest income collected on problem loans and purchase accounting adjustments on purchased loans to total interest income on loans, loan yield and net interest margin is shown in the table below for the periods presented:

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Impact to net interest margin 0.03 % 0.03 %

(1) Includes additional interest income recognized in connection with the acceleration of paydowns and payoffs from purchased loans of $2,002 and $2,274 for the twelve months ended December 31, 2023 and 2022, respectively, which increased loan yield by 2 basis points for both 2023 and 2022.

Interest income on loans held for sale, on a tax equivalent basis, increased $2,595 to $11,807 in 2023 from $9,212 in 2022, due to an increase in yields during 2023, offset slightly by a decrease in the average balance of loans held for sale during the year.

In 2023, investment income, on a tax equivalent basis, decreased $3,152 to $52,253 from $55,405 in 2022, primarily due to the decrease in the balance of the securities portfolio during the year, offset by the increase in yield on securities during 2023 due to the sale or maturity of lower yielding securities.

Interest income on loans held for sale, on a tax equivalent basis, increased $1,807 to $13,614 in 2024 from $11,807 in 2023, due to an increase in average balances during 2024, offset by a decrease in the yield on loans held for sale during the year.

In 2024, investment income, on a tax equivalent basis, decreased $9,124 to $43,129 from $52,253 in 2023, primarily due to the decrease in the balance of the securities portfolio during the year, offset slightly by the increase in yield on securities during 2024 due to the sale or maturity of lower yielding securities.

The following table presents the taxable equivalent yield on securities for the periods presented:

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The cost of interest-bearing deposits was 3.21% and 2.35% for the same respective periods.

The increase in both deposit expense and cost is attributable to the Company’s efforts to offer competitive deposit rates in the rising interest rate environment and its decision to maintain additional on-balance sheet liquidity following the bank failures and broader industry concerns about bank liquidity that arose in March 2023.

During 2023, the Company continued its efforts to maintain noninterest-bearing deposits.

The increase in both deposit expense and cost is attributable to the Company’s efforts to offer competitive deposit rates in the high interest rate environment and the continued focus on deposit growth, even while the Company continued its efforts to maintain noninterest-bearing deposits.

Low cost deposits continue to be the preferred choice of funding;

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Interest expense on total borrowings was $28,989 and $45,661 for the years ending December 31, 2024 and 2023, respectively, while the cost of total borrowings was 5.12% and 5.13% for the years ended December 31, 2024 and 2023, respectively.

The increase in interest expense is a result of higher average borrowings and interest rates driven by an increase in short-term FHLB borrowings in the latter part of 2022 and beginning of 2023.

The repayment of FHLB borrowings during 2023 had a nominal impact to interest expense for the year ended December 31, 2023.

The decrease in interest expense is a result of lower average borrowings during 2024.

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.

For more information about our outstanding subordinated notes and junior subordinated debentures, see Note 11, “Long-Term Debt,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

Noninterest Income

Noninterest Income to Average Assets

the 2023 noninterest income to average assets ratio was negatively impacted by 13 basis points due to losses on sales and impairments of securities.

Total noninterest income includes fees generated from deposit services and other fees and commissions, income from our insurance, wealth management and mortgage banking operations, realized gains and losses on the sale or impairment of securities and all other noninterest income.

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Noninterest income as a percentage of total net revenue was 28.05% and 17.57% for 2024 and 2023, respectively.

Noninterest income was $113,075 for the year ended December 31, 2023, a decrease of $36,178, or 24.24%, as compared to $149,253 for 2022.

The decrease during the year was driven primarily by the loss on the sale of securities (including impairment charges) during 2023.

Noninterest income was $203,660 for the year ended December 31, 2024, an increase of $90,585, or 80.11%, as compared to $113,075 for 2023.

The increase during the year was driven primarily by the gain on the sale of Renasant Insurance in July 2024 (which is also the reason that our noninterest income as a percentage of total net revenue was elevated as compared to 2023).

The Company also recognized a loss on the sale of securities (including impairment charges) during 2023.

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 $41,779 and $39,199 for the twelve months ended December 31, 2024 and 2023, respectively.

Overdraft fees, the largest component of service charges on deposits, decreased to $20,095 for the twelve months ended December 31, 2023 compared to $21,575 for the same period in 2022.

The Company completed its plans to eliminate certain overdraft and NSF fees, which became effective January 1, 2023.

These fees totaled approximately $5,500 and $4,700 in 2022 and 2021, respectively.

Fees and commissions increased to $17,901 in 2023 as compared to $17,268 in 2022.

Overdraft fees, the largest component of service charges on deposits, increased to $20,611 for the twelve months ended December 31, 2024 compared to $20,095 for the same period in 2023.

Fees and commissions decreased to $16,190 in 2024 as compared to $17,901 in 2023.

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 $8,911 for the twelve months ended December 31, 2024 compared to $9,383 for the same period in 2023.

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

Income earned on insurance products was $11,102 and $10,754 for the years ended December 31, 2023 and 2022, respectively.

The Company sold Renasant Insurance in July 2024 recognizing a gross gain on sale of $53,349.

Prior to the sale, income earned on insurance products in 2024 was $5,473, as compared to $11,102 for the year ended December 31, 2023.

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.

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Originations of mortgage loans to be sold totaled $1,400,467 in 2024 and $1,330,912 in 2023.

The decrease in mortgage loan originations in 2023 was due to the continued material increases in mortgage interest rates from historically low rates and exacerbated by a general lack of housing supply, each of which significantly dampened demand for mortgages nationwide.

In 2024, the Company sold a portion of its mortgage servicing rights portfolio with a carrying value of $19,539 for a pre-tax gain of $3,472.

The Company recognized a gain of $547 in 2023 related to a holdback on those previously sold mortgage servicing rights assets.

The Company recognized a gain of $547 in 2023 related to the release of a holdback on previously sold mortgage servicing rights assets.

The following table presents the components of mortgage banking income included in noninterest income at December 31:

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Losses on sales of securities for the twelve months ended 2023 were $22,438, resulting from the sale of approximately $511,419 in securities.

The Company also determined to sell a portion of its available-for-sale securities portfolio in December of 2023 and thus recognized an impairment on those identified securities of $19,352 as of year-end (the securities were subsequently sold in January 2024).

There were no net gains or losses on sales of securities during 2022.

The Company also determined to sell a portion of its available-for-sale securities portfolio in December 2023 and thus recognized an impairment on those identified securities of $19,352 as of year-end (the securities were subsequently sold in January 2024).

There were no other net gains or losses on sales of securities during 2024.

For more information on securities sold in 2024, see Note 2, “Securities,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

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BOLI income increased to $11,567 in 2024 as compared to $10,463 in 2023.

The Company purchased $80,000 in additional BOLI policies during the first quarter of 2022.

No such purchases were made in 2023.

The Company recognized a $620 gain in 2023 in connection with the extinguishment of $3,300 of its subordinated debt.

In addition to the contingency income described above, other noninterest income includes income from our SBA banking division, our capital markets division and other miscellaneous income and can fluctuate based on the claims experience in our Insurance agency, SBA production and recognition of other nonseasonal income items.

For 2023 other noninterest income included a one-time payment of $2,300 related to our participation in a recovery agreement assumed as part of a previous acquisition.

Other noninterest income was $15,311 for 2024 compared to $21,035 for 2023.

In addition to the contingency income described above, other noninterest income includes income from our SBA banking division, our capital markets division and other miscellaneous income and can fluctuate based on production within our SBA and capital markets divisions and recognition of

other nonseasonal income items.

For 2023 other noninterest income included a one-time payment of $2,300 related to our participation in a recovery agreement assumed as part of a previous acquisition.

Noninterest Expense

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During 2024, salaries and employee benefits increased $2,000, or 0.71%, to $283,768 as compared to $281,768 for 2023.

The increase in salaries and employee benefits is primarily due to increases in the minimum wage we pay our employees that were implemented in May 2022 along with annual merit increases implemented in April 2023.

The acquisition of Republic Business Credit added $6,362 to salaries and employee benefits expense in 2023.

The increase in salaries and employee benefits is primarily due to annual merit increases implemented in April 2024 along with increased health and life insurance costs due to unusual claims experience.

Compensation expense recorded in connection with awards of restricted stock, which is included within salaries and employee benefits, was $12,736 and $12,746 for 2024 and 2023, respectively.

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The Company continues to examine new and existing contracts to negotiate favorable terms to offset the increased variable cost components of our data processing costs, such as new accounts and increased transaction volume.

Net occupancy and equipment expense in 2023 was $46,471, an increase of $1,652 from $44,819 for 2022.

Net occupancy and equipment expense in 2024 was $45,960, a decrease of $511 from $46,471 for 2023.

Professional fees include fees for legal and accounting services, such as routine litigation matters, external audit services as well as assistance in complying with newly-enacted and existing banking and governmental regulation.

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Communication expenses were $8,379 for 2024 as compared to $8,238 for 2023.

Other noninterest expense includes business development and travel expenses, other discretionary expenses, loan fees expense and other miscellaneous fees and operating expenses.

Merger and conversion related expenses totaled $13,349 in 2024.

These expenses are related to the announced acquisition of The First and the sale of Renasant Insurance.

There were no such expense in 2023.

Other noninterest expense includes business development and travel expenses, other discretionary expenses, loan fees expense, fraud losses and other miscellaneous fees and operating expenses.

Other noninterest expense was $59,955 for 2024 as compared to $53,906 for 2023.

The increase in other noninterest expense is primarily attributable to lower deferred loan origination expense in 2023 compared to 2022 and the accrual in the fourth quarter of 2023 of an FDIC deposit insurance special assessment of $2,700.

The amount of loan origination expense deferred is directly correlated to the volume and mix of our loan production during the period.

Increased levels of fraud losses from, for example, counterfeit or forged checks, unauthorized debit card charges and wire fraud, is the primary reason for the increase in other noninterest expense.

Working with its vendors, the Company is actively working to implement policies and procedures designed to curtail the opportunity for, and the losses resulting from, fraud.

Efficiency Ratio

3 unchanged sentences

(This ratio is a measure of our ability to turn expenses into revenue.

That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate a dollar of revenue.) The Company calculates this ratio by dividing noninterest expense by the sum of net interest income on a fully tax equivalent basis and noninterest income.

equivalent basis and noninterest income.

The efficiency ratio for 2024 was positively impacted by 504 basis points due to the sale of the insurance agency and was negatively impacted by 184 basis points due to merger and conversion expenses.

The efficiency ratio for 2023 was negatively impacted by 496 basis points due to losses and impairments on strategic sales of securities.

2 unchanged sentences

Income tax expense for 2024 and 2023 was $49,508 and $32,509, respectively.

The effective tax rates for those years were 18.82% and 21.78%, respectively, with the decrease in rate driven by the loss we incurred in connection with our securities sales in 2023.

The effective tax rates for those years were 20.21% and 18.35%, respectively, with the increase in rate driven primarily by changes in the Company’s BOLI portfolio, nondeductible transaction costs related to our potential merger with The First and the gain on the divestiture of the insurance agency.

For additional information regarding the Company’s income taxes, please refer to in Note 14, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

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The purchase price is applied to the outstanding loan balance.

If the loan balance is greater than the sales proceeds, the deficient balance is sent to the Board of Directors’ Credit Review Committee for charge-off approval.

If the loan balance is greater than the sales proceeds, the deficient balance is sent to the Credit Review Committee for charge-off approval.

These charge-offs reduce the allowance for credit losses on loans.

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Management evaluates the adequacy of the allowance on a quarterly basis.

For an in-depth discussion of our accounting policies and our methodology for determining the appropriate level of the allowance for credit losses, please refer to the information in the “Critical Accounting Policies and Estimates” section above as well as the information under the headings “Loans and the Allowance for Credit Losses” and “Business Combinations, Accounting for Purchased Credit Deteriorated Loans and Related Assets” in Note 1, “Significant Accounting Policies,” and Note 4, “Allowance for Credit Losses,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

For an in-depth discussion of our accounting policies and our methodology for determining the appropriate level of the allowance for credit losses, please refer to the information in the “Critical Accounting Policies and Estimates” section above as well as the information under the headings “Loans and the Allowance for Credit Losses” and “Business Combinations, Accounting for Purchased Credit Deteriorated Loans and Related Assets” in Note 1, “Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

In addition to its quarterly analysis of the allowance for credit losses, on a regular basis, management and the Board of Directors review loan ratios.

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The Company recorded a provision for credit losses on loans of $11,248 during 2024, as compared to $18,793 during 2023.

The provision for credit losses in 2022 included an initial provision for the Southeastern Commercial Finance, LLC and Republic Business Credit acquisitions of $2,820.

The Company’s allowance for credit loss model considers economic projections, primarily the national unemployment rate and GDP, over a reasonable and supportable period of two years.

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0.88 % 0.56 %

The decrease in the ratio of the allowance for credit losses on loans to each of nonperforming loans and nonaccrual loans is primarily attributable to the increase in nonaccrual loans from the prior year.

The migration of three large relationships accounted for a significant majority of the increase in nonaccrual loans from 2023.

The reserve for each loan, if any, is derived from the value of the underlying collateral and is believed to be sufficient to cover any expected loss.

The table below reflects net charge-offs to daily average loans outstanding, by loan category, during the years ended December 31:

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Beginning balance $ 16,918 $ 20,118

(Recovery of) provision for credit losses on unfunded loan commitments (3,200) 83

Recovery of credit losses on unfunded loan commitments (1,975) (3,200)

Ending balance $ 14,943 $ 16,918

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Nonperforming assets to total assets 0.68 % 0.46 %

The level of nonperforming loans increased $12,494 from December 31, 2022, while other real estate owned increased $7,859 during the same period.

The level of nonperforming loans increased $43,905 from December 31, 2023, while other real estate owned decreased $949 during the same period.

The increase in nonperforming loans is primarily due to current macroeconomic conditions with the impact spread among commercial and consumer loans.

The following table presents nonperforming loans by loan category at December 31 for each of the years presented.

Commercial, financial, agricultural $ 2,000 $ 6,282

Lease financing 4,083 —

Real estate – construction:

Residential 1,223 —

Commercial 16 —

Total real estate – construction 1,239 —

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Total loans 30-89 days past due on which interest was still accruing were $39,842 at December 31, 2024 as compared to $54,031 at December 31, 2023.

Certain modifications of loans made to borrowers experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay (including an extension of the amortization period), or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, are required to be disclosed in accordance with Accounting Standards Update 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Certain modifications of loans made to borrowers experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay (including extension of the amortization period), or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, are required to be disclosed in accordance with ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”).

At December 31, 2023, modifications meeting the disclosure criteria in ASU 2022-02 that were performing in accordance with their modified terms, including unused commitments, totaled $3,115.

Upon the Company’s determination that a modified loan has been subsequently deemed uncollectible, the loan, or portion of the loan, is charged off, the amortized cost basis of the loan is reduced by the uncollectible amount, and the allowance for credit losses is adjusted accordingly.

For more information about loan modifications made to borrowers experiencing financial difficulty, see the information under the heading “Certain Modifications to Borrowers Experiencing Financial Difficulty” in Note 3, “Loans,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

Unused commitments relating to such modified loans totaled $1,135 and $3,115 at December 31, 2024 and 2023, respectively.

Upon the Company’s determination that a modification has been subsequently deemed uncollectible, the loan, or portion of the loan, is charged off, the amortized cost basis of the loan is reduced by the uncollectible amount, and the allowance for credit losses is adjusted accordingly.

See the information under the heading “Certain Modifications to Borrowers Experiencing Financial Difficulties” in Note 3, “Loans,” Item 8, Financials Statements and Supplementary Data, in this report for more information.

The following table provides details of the Company’s other real estate owned as of December 31 for each of the years presented:

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Dispositions (3,123) (2,840)

Other (2,425) (21)

Balance as of December 31 $ 8,673 $ 9,622

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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 January 1, 2024, in each case as compared to the result

under rates present in the market on December 31, 2023.

The changes in interest rates assume an instantaneous and parallel shift in the yield curve and do not take into account changes in the slope of the yield curve.

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We may also choose to access the brokered deposit market where rates are favorable to other sources of liquidity.

Brokered deposits totaled $461,441 and $233,133 at December 31, 2023 and 2022, respectively, and the maturities of these deposits are described in the table under the “Contractual Obligations” heading below.

We did not hold any brokered deposits at December 31, 2024, while our brokered deposits were $461,446 at December 31, 2023.

The maturities of these deposits are described in the table under the “Contractual Obligations” heading below.

Management continually monitors the Bank’s liquidity and non-core dependency ratios to ensure compliance with targets established by the ALCO.

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Federal funds are short term borrowings, generally overnight borrowings, between financial institutions, while security repurchase agreements represent funds received from customers, generally on an overnight or continuous basis, that are collateralized by investment securities owned or, at times, borrowed and re-hypothecated by the Company.

There were no federal funds

purchased outstanding at December 31, 2023, and 2022, while security repurchase agreements were $7,577 at December 31, 2023, as compared to $12,232 at December 31, 2022.

There were no federal funds purchased outstanding at December 31, 2024, and 2023, while security repurchase agreements were $8,018 at December 31, 2024, as compared to $7,577 at December 31, 2023.

The Company had $100,000 and $300,000 in short-term borrowings from the FHLB (i.e., advances with original maturities less than one year) at December 31, 2024, and 2023, respectively.

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The proceeds of the sale of securities, if and when offered, will be used as described in any prospectus supplement and could include general corporate purposes, the expansion of the Company’s banking, insurance and wealth management operations as well as other business opportunities.

In 2021, we accessed the capital markets to generate liquidity in the form of subordinated notes and in prior years we have issued other subordinated notes and assumed subordinated notes as part of acquisitions.

For more information about our subordinated notes, see Note 11, “Long-Term Debt” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report.

Our common stock offering described under the “Performance Overview” heading above reflects our access of the capital markets as described in this paragraph.

In addition, in previous years, we have accessed the capital markets to generate liquidity in the form of subordinated notes, as discussed under the heading “Borrowed Funds” in this Item 7.

Our strategy in choosing funding sources is focused on minimizing cost in the context of our balance sheet composition, interest rate risk position and our immediate and future liquidity needs to fund loan growth and other cash needs of customers.

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Proceeds from the sale, maturity or call of securities within our investment portfolio were $368,193 for 2024 compared to $747,959 for 2023.

Proceeds from the investment portfolio were primarily used to pay down FHLB borrowings and fund loan growth.

Proceeds from the investment portfolio were primarily used to fund loan growth or purchase investment securities.

Purchases of investment securities were $174,229 for 2024 compared to $11,899 for 2023.

Cash provided by financing activities for the year ended December 31, 2024 was $459,296 compared to $132,205 for the year ended December 31, 2023.

Total deposits increased $589,819 for the year ended December 31, 2023 compared to a decrease of $418,758 for 2022.

Total deposits increased $495,827 for the year ended December 31, 2024 compared to an increase of $589,819 for 2023.

Restrictions on Bank Dividends, Loans and Advances

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Accordingly, the approval of the DBCF is required prior to the Bank paying dividends to the Company, and under certain circumstances the approval of the FDIC may be required.

In addition to the FDIC and DBCF restrictions on dividends payable by the Bank to the Company, the Federal Reserve provided guidance on the criteria that it will use to evaluate the request by a bank holding company to pay dividends in an aggregate amount that will exceed the company’s earnings for the period in which the dividends will be paid, which did not apply to the Company in 2023 or 2022.

In addition to the FDIC and DBCF restrictions on dividends payable by the Bank to the Company, the Federal Reserve has provided guidance on the criteria that it will use to evaluate the request by a bank holding company to pay dividends in an aggregate amount that will exceed the company’s earnings for the period in which the dividends will be paid, which did not apply to the Company in 2024 or 2023.

For purposes of this analysis, “dividend” includes not only dividends on preferred and common equity but also dividends on debt underlying trust preferred securities and other Tier 1 capital instruments.

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(2) Excludes interest.

(3) Includes brokered deposits in the amount of $461,441.

Off-Balance Sheet Commitments

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Loan commitments and standby letters of credit do not necessarily represent future cash requirements of the Company.

While the borrower has the ability to draw upon these commitments at any time (assuming the borrower’s compliance with the terms

of the loan commitment), these commitments often expire without being drawn upon.

While the borrower has the ability to draw upon these commitments at any time (assuming the borrower’s compliance with the terms of the loan commitment), these commitments often expire without being drawn upon.

The Company’s unfunded loan commitments and standby letters of credit outstanding at December 31, 2024 and 2023 were as follows:

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Book value per share was $42.13 and $40.92 at December 31, 2024 and 2023, respectively.

The increase in shareholders’ equity was attributable to earnings retention, offset by changes in accumulated other comprehensive income and dividends declared.

The increase in shareholders’ equity was attributable to the common stock offering (discussed below), earnings retention and changes in accumulated other comprehensive income, offset by dividends declared.

In July 2024, the Company completed its public offering of an aggregate of 7,187,500 shares of its common stock with net proceeds of $217,000.

In October 2024, the Company’s Board of Directors approved a stock repurchase program, authorizing the Company to repurchase up to $100,000 of its outstanding common stock, either in open market purchases or privately-negotiated transactions.

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Although our existing junior subordinated debentures are currently unaffected by these Federal Reserve guidelines, on account of changes enacted as part of the Dodd-Frank Act, any new trust preferred securities are not includable in Tier 1 capital.

Further, if we complete the proposed merger with The First (or we make any other acquisition of a financial institution) now that we have exceeded $15,000,000 in assets, we will lose Tier 1 treatment of our junior subordinated debentures.

The Company has subordinated notes with a carrying value of $316,698 at December 31, 2024, and $316,422 at December 31, 2023 included in the Company’s Tier 2 capital.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis