RENASANT CORP 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (In Thousands, Except Share Data) The following discussion and analysis of our financial condition as of December 31, 2024 and 2023 and results of operations for each of the years then ended should be read together with the cautionary language regarding forward-looking statements at the beginning of this Annual Report on Form 10-K and the consolidated financial statements and related notes included under Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, as well as Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024, which provides a discussion of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K. Performance Overview Net income was $195,457 for 2024 compared to $144,678 for 2023. Basic and diluted earnings per share (“EPS”) were $3.29 and $3.27, respectively, for 2024 compared to $2.58 and $2.56, respectively, for 2023. At December 31, 2024, total assets increased to $18,034,868 from $17,360,535 at December 31, 2023. The changes in our financial condition and results of operations from 2023 to 2024 were driven by a number of factors, the most prominent of which are highlighted below: Financial Highlights — 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. — Noninterest income was $203,660 for 2024 compared to $113,075 for 2023. 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 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 Company used core retail deposit growth to paydown $461,441 in brokered deposits during the year. 35 A historical look at key performance indicators is presented below. 2024 2023 2022 Diluted EPS $ 3.27 $ 2.56 $ 2.95 Diluted EPS Growth 27.73 % (13.22) % (5.45) % Shareholders’ equity to assets 14.85 % 13.23 % 12.57 % Tangible shareholders’ equity to tangible assets (1) 9.84 % 7.87 % 7.01 % Return on Average Assets 1.11 % 0.84 % 1.00 % Return on Average Tangible Assets (1) 1.20 % 0.92 % 1.09 % Return on Average Shareholders’ Equity 7.92 % 6.50 % 7.60 % Return on Average Tangible Shareholders’ Equity (1) 13.63 % 12.29 % 13.97 % (1) These performance indicators are non-GAAP financial measures. A reconciliation of these financial measures from GAAP to non-GAAP as well as an explanation of why the Company provides these non-GAAP financial measures can be found under the “Non-GAAP Financial Measures” heading at the end of this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Critical Accounting Policies and Estimates Our financial statements are prepared using accounting estimates for various accounts. Wherever feasible, we utilize third-party information to provide management with estimates. Although independent third parties are engaged to assist us in the estimation process, management evaluates the results, challenges assumptions and considers other factors that could impact these estimates. We monitor the status of proposed and newly issued accounting standards to evaluate the impact (or potential impact) on our financial condition and results of operations or on the preparation of our financial statements. Our accounting policies, including the impact of newly issued accounting standards, are discussed in detail in Note 1, “Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. The following discussion supplements the discussion of our significant accounting policies in the financial statements. Allowance for Credit Losses on Loans 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”). 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. 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.” Business Combinations, Accounting for Purchased Loans The Company accounts for its acquisitions under ASC 805, “ Business Combinations ,” which requires the use of the acquisition method of accounting. For more information about the accounting for acquisitions, including the estimates and assumptions, and uncertainties underlying such estimates and assumptions, please refer to the information under the heading “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. 36 Additional details about loans acquired in connection with our acquisitions is set forth below under the heading “Risk Management - Credit Risk and Allowance for Credit Losses.” Financial Condition The following discussion provides details regarding the changes in significant balance sheet accounts at December 31, 2024 compared to December 31, 2023. Total assets were $18,034,868 at December 31, 2024 compared to $17,360,535 at December 31, 2023. Securities 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 securities portfolio also serves as an outlet to deploy excess liquidity rather than hold such excess funds as cash. The following table shows the carrying value of our securities portfolio by investment type and the percentage of such investment type relative to the entire securities portfolio at December 31: 2024 2023 Balance % of Portfolio Balance % of Portfolio Obligations of states and political subdivisions 302,596 15.46 322,764 15.05 Mortgage-backed securities 1,472,918 75.26 1,695,604 79.06 Other debt securities 181,643 9.28 126,407 5.89 $ 1,957,157 100.00 % $ 2,144,775 100.00 % Allowance for credit losses - held to maturity securities (32) (32) Securities, net of allowance for credit losses $ 1,957,125 $ 2,144,743 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. 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. During the year ended December 31, 2022, the Company transferred, at fair value, $882,927 of securities from the available for sale portfolio to the held to maturity portfolio. 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, 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. Expected credit losses on debt securities classified as held to maturity are measured on a collective basis by major security type. The estimates of expected credit losses are based on historical default rates, investment grades, current conditions, and reasonable and supportable forecasts about the future. At December 31, 2024 and 2023, the allowance for credit losses on held to maturity securities was $32. At December 31, 2024, unrealized losses of $138,608 were recorded on available for sale investment securities with a carrying value of $701,844. At December 31, 2023, unrealized losses of $139,794 were recorded on available for sale securities with a carrying value of $692,593. 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, 37 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 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. Amortized Cost Yield Held to Maturity: Obligations of states and political subdivisions Maturing within one year $ 1,494 2.61 % Maturing after one year through five years 6,017 1.00 % Maturing after five years through ten years 127,004 1.57 % Maturing after ten years 150,027 1.85 % Residential mortgage-backed securities not due at a single maturity date: Government agency MBS 372,414 1.93 % Government agency CMO 354,882 1.86 % Commercial mortgage-backed securities not due at a single maturity date: Government agency MBS 16,961 1.79 % Government agency CMO 43,662 1.79 % Other debt securities not due at a single maturity date: 53,683 2.68 % Available for Sale: Obligations of states and political subdivisions Maturing within one year or less 1,997 5.46 % Maturing after one year through five years 4,301 3.72 % Maturing after five years through ten years 9,891 1.50 % Maturing after ten years 4,077 1.30 % Other debt securities Maturing within one year or less — — % Maturing after one year through five years 37,557 6.29 % 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: Government agency MBS 185,292 1.95 % Government agency CMO 475,311 1.99 % Commercial mortgage-backed securities not due at a single maturity date: Government agency MBS 11,373 3.53 % Government agency CMO 146,510 2.24 % Other debt securities not due at a single maturity date: 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%. These yields were calculated using coupon interest for the month of December of 2024, adjusted for discount accretion and premium amortization, where applicable. For more information about the Company’s securities, see Note 2, “Securities,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. 38 Loans Held for Sale Loans held for sale were $246,171 at December 31, 2024 compared to $179,756 at December 31, 2023. Mortgage loans to be sold, which made up all of our loans held for sale at each of December 31, 2024 and 2023, 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 entities, 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 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. Loans held for sale fluctuates based on mortgage production volume. Loans Loans held for investment, which excludes loans held for sale, is the Company’s most significant earning asset, comprising 71.45% and 71.15% of total assets at December 31, 2024 and 2023, respectively. This percentage will fluctuate based on a number of factors, including the extent of our loan growth and whether the Company has excess liquidity on its balance sheet. The tables below set forth the balance of loans outstanding by loan type and the percentage of loans, by category, to total loans at December 31: December 31, 2024 December 31, 2023 Total Loans Percentage of Total Loans Total Loans Percentage of Total Loans Commercial, financial, agricultural $ 1,885,817 14.64 % $ 1,871,821 15.15 % Lease financing, net of unearned discount 90,591 0.70 % 116,020 0.94 % Real estate – construction: Residential 256,655 1.99 % 269,616 2.18 % Commercial 836,998 6.50 % 1,063,781 8.61 % Total real estate – construction 1,093,653 8.49 % 1,333,397 10.79 % Real estate – 1-4 family mortgage: Primary 2,428,076 18.84 % 2,422,482 19.61 % Home equity 544,158 4.22 % 522,688 4.23 % Rental/investment 402,938 3.13 % 373,755 3.03 % Land development 113,705 0.88 % 120,994 0.98 % Total real estate – 1-4 family mortgage 3,488,877 27.07 % 3,439,919 27.85 % Real estate – commercial mortgage: Owner-occupied 1,894,679 14.70 % 1,648,961 13.35 % Non-owner occupied 4,226,937 32.81 % 3,733,174 30.23 % Land development 114,452 0.89 % 104,415 0.85 % Total real estate – commercial mortgage 6,236,068 48.40 % 5,486,550 44.43 % Installment loans to individuals 90,014 0.70 % 103,523 0.84 % Total loans, net of unearned income $ 12,885,020 100.00 % $ 12,351,230 100.00 % Loan concentrations exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2024 and 2023, there were no concentrations of loans exceeding 10% of total loans other than loans disclosed in the table above. 39 The following table sets forth loans held for investment, net of unearned income, outstanding at December 31, 2024, which, based on remaining contractually-scheduled repayments of principal, are due in the periods indicated. Loans with balloon payments and longer amortizations are often repriced and extended beyond the initial maturity when credit conditions remain satisfactory. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported below as due in one year or less. See “Risk Management – Credit Risk and Allowance for Credit Losses on Loans and Unfunded Commitments” in this Item 7 for information regarding the risk elements applicable to, and a summary of our loan loss experience with respect to, the loans in each of the categories listed below. One Year or Less After One Year Through Five Years After Five Years Through Fifteen Years After Fifteen Years Total Commercial, financial, agricultural $ 1,326,851 $ 472,565 $ 86,116 $ 285 $ 1,885,817 Lease financing, net of unearned income 1,982 62,985 25,624 — 90,591 Real estate – construction: Residential 184,178 5,249 42,520 24,708 256,655 Commercial 768,722 56,732 9,619 1,925 836,998 Total real estate – construction 952,900 61,981 52,139 26,633 1,093,653 Real estate – 1-4 family mortgage: Primary 199,628 525,684 896,711 806,053 2,428,076 Home equity 540,152 2,879 1,046 81 544,158 Rental/investment 95,919 290,406 16,289 324 402,938 Land development 102,306 11,136 263 — 113,705 Total real estate – 1-4 family mortgage 938,005 830,105 914,309 806,458 3,488,877 Real estate – commercial mortgage: Owner-occupied 797,436 746,254 335,658 15,331 1,894,679 Non-owner occupied 2,598,060 1,427,044 200,986 847 4,226,937 Land development 64,153 47,750 2,549 — 114,452 Total real estate – commercial mortgage 3,459,649 2,221,048 539,193 16,178 6,236,068 Installment loans to individuals 36,495 41,526 11,973 20 90,014 Total loans, net of unearned income $ 6,715,882 $ 3,690,210 $ 1,629,354 $ 849,574 $ 12,885,020 40 The following table sets forth the fixed and variable rate loans maturing or scheduled to reprice after one year as of December 31, 2024: Interest Sensitivity Fixed Rate Variable Rate Commercial, financial, agricultural $ 439,653 $ 119,313 Lease financing, net of unearned income 88,609 — Real estate – construction: Residential 37,085 35,392 Commercial 67,193 1,083 Total real estate – construction 104,278 36,475 Real estate – 1-4 family mortgage: Primary 1,098,447 1,130,001 Home equity 3,847 159 Rental/investment 291,955 15,064 Land development 11,058 341 Total real estate – 1-4 family mortgage 1,405,307 1,145,565 Real estate – commercial mortgage: Owner-occupied 1,016,519 80,724 Non-owner occupied 1,506,161 122,716 Land development 48,183 2,116 Total real estate – commercial mortgage 2,570,863 205,556 Installment loans to individuals 52,295 1,224 Total loans, net of unearned income $ 4,661,005 $ 1,508,133 Deposits The Company relies on deposits as its major source of funds. Total deposits were $14,572,612 and $14,076,785 at December 31, 2024 and 2023, respectively. 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 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. Management continues to focus on growing and maintaining a stable source of funding, specifically noninterest-bearing deposits and other core deposits (that is, deposits excluding brokered deposits and time deposits greater than $250,000). Noninterest-bearing deposits decreased to 23.36% of total deposits at December 31, 2024, as compared to 25.46% of total deposits at December 31, 2023, due to noninterest-bearing deposits being moved to other types of deposits or financial products bearing higher interest rates. Under certain circumstances, management may elect to acquire non-core deposits (in the form of brokered or time deposits) or public fund deposits (which are deposits of counties, municipalities or other political subdivisions). The source of funds that we select depends on the terms and how those terms assist us in mitigating interest rate risk, maintaining our liquidity position and managing our net interest margin as well as business opportunities that may accompany deposits we acquire. Accordingly, funds are acquired to meet anticipated funding needs at the rate and with other terms that, in management’s view, best address our interest rate risk, liquidity and net interest margin parameters. Public fund deposits may be readily obtained based on the Company’s pricing bid in comparison with competitors. Public fund deposits may fluctuate as competitive and market forces change because these deposits are obtained through a bid process. Although the Company has focused on growing stable sources of deposits to reduce reliance on public fund deposits, it participates in the bidding process for public fund deposits when pricing and other terms make it reasonable given market conditions or when management perceives that other factors, such as the public entity’s use of our treasury management or other products and services, make such participation advisable. Our public fund transaction accounts are principally obtained 41 from public universities and municipalities, including school boards and utilities. Public fund deposits at December 31, 2024 were $2,256,461 compared to $1,866,495 at December 31, 2023. Deposits that are in excess of the FDIC insurance limit were $6,489,547 and $5,778,174 at December 31, 2024 and 2023, respectively. Public fund deposits in excess of the FDIC insurance limit but that were collateralized by pledged securities in the Company’s investment portfolio totaled $1,765,510. The following table shows the maturity of time deposits at December 31, 2024 that are in excess of the FDIC insurance limit (or similar state deposit insurance limits) and that are otherwise uninsured: Three Months or Less $ 293,798 Over Three through Six Months 276,583 Over Six through Twelve Months 184,875 Over 12 Months 10,324 Total $ 765,580 Borrowed Funds Total borrowings include federal funds purchased, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank (“FHLB”), subordinated notes and junior subordinated debentures and are classified on the Consolidated Balance Sheets as either short-term borrowings or long-term debt. Short-term borrowings have original maturities less than one year and typically include federal funds purchased, securities sold under agreements to repurchase, and short-term FHLB advances. During 2024 and 2023, we used short-term FHLB borrowings to meet anticipated short-term liquidity needs, which varied throughout the year in response to loan demand and competition for deposits. The weighted-average interest rates on outstanding advances at December 31, 2024 and 2023 were 4.63% and 5.70%, respectively. The following table presents our short-term borrowings by type at December 31: 2024 2023 Security repurchase agreements $ 8,018 $ 7,577 Short-term borrowings from the FHLB 100,000 300,000 Total short-term borrowings $ 108,018 $ 307,577 At December 31, 2024, long-term debt consists of our junior subordinated debentures and our subordinated notes; no long-term FHLB advances were outstanding. The following table presents our long-term debt by type at December 31: 2024 2023 Junior subordinated debentures $ 113,916 $ 112,978 Subordinated notes 316,698 316,422 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 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. The subordinated notes qualify as Tier 2 capital under the current regulatory guidelines. Finally, the Company owns the outstanding common securities of business trusts that issued corporation-obligated mandatorily redeemable preferred capital securities to third-party investors. The trusts used the proceeds from the issuance of their preferred capital securities and common securities (collectively referred to as “capital securities”) to buy floating rate junior subordinated debentures issued by the Company (or by companies that the Company subsequently acquired). The debentures are the trusts’ only assets and interest payments from the debentures finance the distributions paid on the capital securities. For more information about the terms and conditions of the Company’s junior subordinated debentures and subordinated notes, see Note 11, “Long-Term Debt,” in the Notes to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. 42 Results of Operations Net Income Net income for the year ended December 31, 2024 was $195,457 compared to net income of $144,678 for the year ended December 31, 2023. Basic earnings per share for the year ended December 31, 2024 was $3.29 as compared to $2.58 for the year ended December 31, 2023. Diluted earnings per share for the year ended December 31, 2024 was $3.27 as compared to $2.56 for the year ended December 31, 2023. From time to time, the Company incurs expenses and charges in connection with certain transactions with respect to which management is unable to accurately predict when these expenses or charges will be incurred or, when incurred, the amount of such expenses or charges. The following table presents the impact of these expenses and charges on reported EPS for the dates presented. The gain on the sale of mortgage servicing rights (“MSRs”), gain on extinguishment of debt and losses on security sales are discussed below under the “Noninterest Income” heading. Twelve Months Ended December 31, 2024 2023 Pre-tax After-tax Impact to Diluted EPS Pre-tax After-tax Impact to Diluted EPS Gain on sale of MSR $ (3,724) $ (2,793) $ (0.05) $ (547) $ (44) $ — Merger and conversion expenses 13,349 11,395 0.19 — — — Gain on extinguishment of debt (56) (42) — (620) (503) (0.01) Gain on sale of insurance agency (53,349) (38,951) (0.65) — — — Losses on security sales (including impairments) — — — 41,790 33,926 0.60 Note: Balances in the table above are shown to reflect impact to income if removed (i.e. negative balances for income items and positive balances for expense items). 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 71.95% of total net revenue in 2024. 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. 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. The following table sets forth the daily 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 on each such category for the years ended December 31, 2024, 2023 and 2022: 43 2024 2023 2022 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 held for investment (1) $ 12,579,143 $ 801,807 6.37 % $ 11,963,141 $ 713,897 5.97 % $ 10,677,995 $ 476,746 4.15 % Loans held for sale 224,734 13,614 6.06 % 181,253 11,807 6.51 % 203,981 9,212 4.52 % Securities: Taxable (2) 1,825,404 37,383 2.05 % 2,313,874 44,619 1.93 % 2,699,556 45,769 1.70 % Tax-exempt 264,615 5,746 2.17 % 332,749 7,634 2.29 % 401,960 9,636 2.40 % Total securities 2,090,019 43,129 2.06 % 2,646,623 52,253 1.97 % 3,101,516 55,405 1.79 % Interest-bearing balances with banks 772,274 39,557 5.12 % 568,155 30,375 5.35 % 846,768 8,853 1.05 % Total interest-earning assets 15,666,170 898,107 5.73 % 15,359,172 808,332 5.26 % 14,830,260 550,216 3.71 % Cash and due from banks 188,487 187,127 201,419 Intangible assets 1,006,665 1,012,239 967,018 Other assets 691,373 673,345 639,155 Total assets $ 17,552,695 $ 17,231,883 $ 16,637,852 Liabilities and shareholders’ equity Interest-bearing liabilities: Deposits: Interest-bearing demand (3) $ 7,254,646 $ 226,563 3.12 % $ 6,357,753 $ 138,730 2.18 % $ 6,420,905 $ 25,840 0.40 % Savings deposits 829,818 2,894 0.35 % 971,522 3,197 0.33 % 1,116,013 1,023 0.09 % Brokered deposits 237,164 12,942 5.46 % 697,699 36,039 5.17 % 23,634 1,072 — % Time deposits 2,466,906 104,193 4.22 % 1,874,224 54,365 2.90 % 1,310,398 7,273 0.56 % Total interest-bearing deposits 10,788,534 346,592 3.21 % 9,901,198 232,331 2.35 % 8,870,950 35,208 0.40 % Borrowed funds 566,332 28,989 5.12 % 890,765 45,661 5.13 % 624,887 25,304 4.05 % Total interest-bearing liabilities 11,354,866 375,581 3.31 % 10,791,963 277,992 2.58 % 9,495,837 60,512 0.64 % Noninterest-bearing deposits 3,509,958 3,979,951 4,760,432 Other liabilities 221,487 235,463 196,980 Shareholders’ equity 2,466,384 2,224,506 2,184,603 Total liabilities and shareholders’ equity $ 17,552,695 $ 17,231,883 $ 16,637,852 Net interest income/ net interest margin $ 522,526 3.34 % $ 530,340 3.45 % $ 489,704 3.31 % (1) Shown net of unearned income. (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 daily average balances of nonaccruing assets are included in the foregoing table. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21% and a state tax rate of 4.45%, which is net of federal tax benefit. Net interest income and net interest margin are influenced by internal and external factors. Internal factors include balance sheet changes in volume and mix as well as loan and deposit pricing decisions. External factors include changes in market interest rates, competition and the shape of the interest rate yield curve. 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. Information is provided in each category with respect to changes attributable to (1) changes in volume (changes in volume multiplied by prior yield/rate); (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 44 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. 2024 Compared to 2023 2023 Compared to 2022 Volume Rate Net Volume Rate Net Interest income: Loans $ 37,847 $ 50,063 $ 87,910 $ 62,453 $ 174,698 $ 237,151 Loans held for sale 2,679 (872) 1,807 (1,118) 3,713 2,595 Securities: Taxable (9,871) 2,635 (7,236) (6,997) 5,847 (1,150) Tax-exempt (1,497) (391) (1,888) (1,602) (400) (2,002) Interest-bearing balances with banks 10,503 (1,321) 9,182 (3,800) 25,322 21,522 Total interest-earning assets 39,661 50,114 89,775 48,936 209,180 258,116 Interest expense: Interest-bearing demand deposits 21,651 66,182 87,833 (257) 113,147 112,890 Savings deposits (486) 183 (303) (149) 2,323 2,174 Brokered deposits (25,025) 1,928 (23,097) 34,798 169 34,967 Time deposits 20,402 29,426 49,828 4,351 42,741 47,092 Borrowed funds (17,553) 881 (16,672) 12,535 7,822 20,357 Total interest-bearing liabilities (1,011) 98,600 97,589 51,278 166,202 217,480 Change in net interest income $ 40,672 $ (48,486) $ (7,814) $ (2,342) $ 42,978 $ 40,636 The daily average balances of nonaccruing assets are included in the foregoing table. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21% and a state tax rate of 4.45%, which is net of federal tax benefit. Interest income, on a tax equivalent basis, was $898,107 for 2024 compared to $808,332 for 2023, an increase of $89,775. The following table presents the percentage of total average earning assets, by type and yield, for 2024 and 2023: Percentage of Total Yield 2024 2023 2024 2023 Loans held for investment 80.29 % 77.89 % 6.37 % 5.97 % Loans held for sale 1.43 1.18 6.06 6.51 Securities 13.34 17.23 2.06 1.97 Interest-bearing balances with banks 4.94 3.70 5.12 5.35 Total earning assets 100.00 % 100.00 % 5.73 % 5.26 % 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 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: Twelve months ended December 31, 2024 2023 Net interest income collected on problem loans $ 770 $ 219 Accretable yield recognized on purchased loans 3,402 4,166 Total impact to interest income on loans $ 4,172 $ 4,385 Impact to total loan yield 0.03 % 0.04 % Impact to net interest margin 0.03 % 0.03 % 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. 45 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: Twelve months ended December 31, 2024 2023 Taxable equivalent interest income on securities $ 43,129 $ 52,253 Average securities $ 2,090,019 $ 2,646,623 Taxable equivalent yield on securities 2.06 % 1.97 % Interest expense was $375,581 in 2024 compared to $277,992 in 2023. The following table presents, by type, the Company’s funding sources, which consist of total average deposits and borrowed funds, and the total cost of each funding source for each of the years presented: Percentage of Total Cost of Funds 2024 2023 2024 2023 Noninterest-bearing demand 23.61 % 26.94 % — % — % Interest-bearing demand 48.80 43.04 3.12 2.18 Savings 5.58 6.58 0.35 0.33 Brokered deposits 1.60 4.72 5.46 5.17 Time deposits 16.60 12.69 4.22 2.90 Borrowed funds 3.81 6.03 5.12 5.13 Total deposits and borrowed funds 100.00 % 100.00 % 2.53 % 1.88 % Interest expense on deposits was $346,592 and $232,331 for 2024 and 2023, respectively. The cost of total deposits was 2.42% and 1.67% for the years ending December 31, 2024 and 2023, respectively. 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 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; however, the Company may rely on brokered deposits or wholesale borrowings when advantageous or otherwise deemed advisable due to market conditions. Interest expense on total borrowings was $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 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. Noninterest Income Noninterest Income to Average Assets 2024 2023 1.16% 0.66% 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. Our focus is to develop and enhance our products that generate noninterest income in order to diversify our revenue sources. Noninterest income as a percentage of total net revenue was 28.05% and 17.57% for 2024 and 2023, respectively. 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. 46 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, 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. 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. 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 the “Other noninterest income” line item on the Consolidated Statements of Income, was $987 and $970 for 2024 and 2023, respectively. Our Wealth Management segment has two divisions: Trust and Financial Services. The Trust division operates on a custodial basis which includes administration of benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal and corporate benefit accounts, IRAs, and custodial accounts. Fees for managing these accounts are based on changes in market values of the assets under management in the account, with the amount of the fee depending on the type of account. The Financial Services division provides specialized products and services to our customers, which include fixed and variable annuities, mutual funds, and stocks offered through a third party provider. Wealth Management revenue was $23,559 for 2024 compared to $22,132 for 2023. The market value of assets under management or administration was $6,472,526 and $5,238,131 at December 31, 2024 and 2023, respectively. Mortgage banking income is derived from the origination and sale of mortgage loans and the servicing of mortgage loans that the Company has sold but retained the right to service. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market. Originations of mortgage loans to be sold totaled $1,400,467 in 2024 and $1,330,912 in 2023. 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 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: 2024 2023 Gain on sales of loans, net (1) $ 16,612 $ 14,573 Fees, net 10,216 9,051 Mortgage servicing income, net (2) 9,548 8,789 Mortgage banking income, net $ 36,376 $ 32,413 (1) Gain on sales of loans, net includes pipeline fair value adjustments (2) Mortgage servicing income, net includes gain on sale of mortgage servicing rights of $3,724 and $547, respectively. 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 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. Bank-owned life insurance (“BOLI”) income is derived from changes in the cash surrender value of the bank-owned life insurance policies and can fluctuate upon the collection of life insurance proceeds. BOLI income increased to $11,567 in 2024 as compared to $10,463 in 2023. 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 47 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 Noninterest Expense to Average Assets 2024 2023 2.63% 2.55% Noninterest expense was $461,618 and $439,622 for 2024 and 2023, respectively. Salaries and employee benefits is the largest component of noninterest expense and represented 61.47% and 64.09% of total noninterest expense at December 31, 2024 and 2023, respectively. 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 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. A portion of the restricted stock awards in both years was subject to the satisfaction of performance-based conditions. Data processing costs increased $835 to $16,030 in 2024 from $15,195 in 2023. 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 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. Professional fees were $12,418 for 2024 as compared to $13,671 for 2023. Advertising and public relations expense was $16,210 for 2024, an increase of $1,484 compared to $14,726 for 2023. During 2024 and 2023, the Company contributed approximately $1,255 and $1,392, respectively, to charitable organizations throughout Mississippi, Georgia and Alabama, for which it received a dollar-for-dollar tax credit, and such contributions are included in our advertising and public relations expense. Amortization of intangible assets totaled $4,691 for 2024 compared to $5,380 for 2023. 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 one year to ten years. Communication expenses are those expenses incurred for communication to clients and between employees. Communication expenses were $8,379 for 2024 as compared to $8,238 for 2023. 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. 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 Efficiency Ratio 2024 2023 63.57% 68.33% The efficiency ratio is a measure of productivity in the banking industry. (This ratio is a measure of our ability to turn expenses into revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate a dollar of revenue.) The Company calculates this ratio by dividing noninterest expense by the sum of net interest income on a fully tax 48 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. We remain committed to aggressively managing our costs within the framework of our business model. Our goal is to improve the efficiency ratio over time from currently reported levels as a result of revenue growth while at the same time controlling noninterest expenses. Income Taxes Income tax expense for 2024 and 2023 was $49,508 and $32,509, respectively. 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. 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 and interest rate risk are discussed below, while liquidity risk is discussed in the next subsection under the heading “Liquidity and Capital Resources.” Credit Risk and Allowance for Credit Losses on Loans and Unfunded Commitments Management of Credit Risk . Inherent in any lending activity is credit risk, that is, the risk of loss should a borrower default. Credit risk is monitored and managed on an ongoing basis by a credit administration department, a problem asset resolution committee and the Board of Directors Credit Review Committee. Oversight of the Company’s lending operations (including adherence to our policies and procedures governing the loan underwriting and monitoring process), credit quality and loss mitigation are major concerns of credit administration and these committees. The Company’s central appraisal review department reviews and approves third-party appraisals obtained by the Company on real estate collateral and monitors loan maturities to ensure updated appraisals are obtained. This department is managed by a State Certified General Real Estate Appraiser and employs three additional State Certified General Real Estate Appraisers and four real estate evaluators. In addition, we maintain a loan review staff to independently monitor loan quality and lending practices. Loan review personnel monitor and, if necessary, adjust the grades assigned to loans through periodic examination, focusing their review on commercial and real estate loans rather than consumer and small balance consumer mortgage loans, such as 1-4 family mortgage loans. In compliance with loan policy, the lending staff is given lending limits based on their knowledge and experience. In addition, each lending officer’s prior performance is evaluated for credit quality and compliance as a tool for establishing and enhancing lending limits. Before funds are advanced on consumer and commercial loans below certain dollar thresholds, loans are reviewed and scored using centralized underwriting methodologies. Loan quality, or “risk-rating,” grades are assigned based upon certain factors, which include the scoring of the loans. This information is used to assist management in monitoring credit quality. Loan requests are reviewed for approval by senior credit officers. For commercial and commercial real estate secured loans, internal risk-rating grades are assigned by lending, credit administration and loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Loan grades range from 10 to 95, with 10 rated loans having the least credit risk. For more information about the Company’s loan grades, see the information under the heading “Credit Quality” in Note 3, “Loans,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. Management’s problem asset resolution committee and the Board of Directors Credit Review Committee monitor loans that are past due or those that have been downgraded and are considered special mention or substandard due to a decline in the collateral value or cash flow of the debtor; the committees then adjust loan grades accordingly. This information is used to assist management in monitoring credit quality. When the ultimate collectability of a loan’s principal is in doubt, wholly or partially, the loan is placed on nonaccrual. 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 Credit Review Committee for charge-off approval. These charge-offs reduce the allowance for credit losses on loans. 49 Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for credit losses on loans. The Company’s practice is to charge off estimated losses as soon as such loss is identified and reasonably quantified. Net charge-offs for 2024 were $8,070, or 0.06% as a percentage of average loans, compared to net charge-offs of $12,330, or 0.10% as a percentage of average loans, for 2023. The charge-offs in 2024 were fully reserved for in the Company’s allowance for credit losses. Allowance for Credit Losses on Loans; Provision for Credit Losses on Loans . The allowance for credit losses is available to absorb credit losses inherent in the loans held for investment portfolio. Loan losses are charged against the allowance for credit losses when management confirms the uncollectability of a loan balance. Subsequent recoveries, if any, are credited to the allowance. 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,” 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. These ratios include the allowance for credit losses as a percentage of total loans, net charge-offs as a percentage of average loans, nonperforming loans as a percentage of total loans and the allowance coverage on nonperforming loans. Also, management reviews past due ratios by officer, community bank and the Company as a whole. The allowance for credit losses on loans was $201,756 and $198,578 at December 31, 2024 and 2023, respectively. The following table presents the allocation of the allowance for credit losses on loans and the percentage of each loan category to total loans at December 31 for each of the years presented. 2024 2023 Balance % of Total Balance % of Total Commercial, financial, agricultural $ 38,527 14.64 % $ 43,980 15.15 % Lease financing 3,368 0.70 % 2,515 0.94 % Real estate – construction 15,126 8.49 % 18,612 10.79 % Real estate – 1-4 family mortgage 47,761 27.07 % 47,283 27.85 % Real estate – commercial mortgage 90,204 48.40 % 77,020 44.43 % Installment loans to individuals 6,770 0.70 % 9,168 0.84 % Total $ 201,756 100.00 % $ 198,578 100.00 % The provision for credit losses on loans charged to operating expense is an amount that, in the judgment of management, is necessary to maintain the allowance for credit losses on loans at a level that is believed to be adequate to meet the inherent risks of losses in our loan portfolio. The Company recorded a provision for credit losses on loans of $11,248 during 2024, as compared to $18,793 during 2023. 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. While credit metrics remained relatively stable, loan growth caused the Company’s model to indicate that the aforementioned provision for credit losses on loans was appropriate during 2024. Provision for Credit Losses on Loans to Average Loans 2024 2023 0.16% 0.16% 50 The table below reflects the activity in the allowance for credit losses on loans for the years ended December 31: 2024 2023 Balance at beginning of year $ 198,578 $ 192,090 Initial allowance for purchased loans with more than insignificant credit deterioration existing at the date of acquisition — 25 Provision for credit losses on loans 11,248 18,793 Charge-offs Commercial, financial, agricultural 4,463 8,838 Lease financing 642 1,524 Real estate – construction 145 57 Real estate – 1-4 family mortgage 966 417 Real estate – commercial mortgage 5,737 5,568 Installment loans to individuals 1,856 2,636 Total charge-offs 13,809 19,040 Recoveries Commercial, financial, agricultural 1,710 3,090 Lease financing 34 18 Real estate – construction — 48 Real estate – 1-4 family mortgage 166 389 Real estate – commercial mortgage 2,278 712 Installment loans to individuals 1,551 2,453 Total recoveries 5,739 6,710 Net charge-offs 8,070 12,330 Balance at end of year $ 201,756 $ 198,578 Provision for credit losses on loans to average loans 0.09 % 0.16 % Net charge-offs to average loans 0.06 % 0.10 % Net charge-offs to allowance for credit losses on loans 4.00 % 6.21 % Allowance for credit losses on loans to: Total loans 1.57 % 1.61 % Nonperforming loans 178.11 % 286.26 % Nonaccrual loans 182.07 % 288.56 % Nonaccrual loans to total loans: 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. 51 The table below reflects net charge-offs to daily average loans outstanding, by loan category, during the years ended December 31: 2024 2023 Net Charge-offs Average Loans Net Charge-offs to Average Loans Net Charge-offs Average Loans Net Charge-offs to Average Loans Commercial, financial, agricultural $ 2,753 $ 1,848,195 0.15% $ 5,748 $ 1,761,103 0.33% Lease financing 608 101,517 0.60% 1,506 119,376 1.26% Real estate – construction 145 1,264,819 0.01% 9 1,347,228 —% Real estate – 1-4 family mortgage 800 3,427,368 0.02% 28 3,382,553 —% Real estate – commercial mortgage 3,459 5,842,796 0.06% 4,856 5,241,881 0.09% Installment loans to individuals 305 94,448 0.32% 183 111,000 0.16% Total $ 8,070 $ 12,579,143 0.06% $ 12,330 $ 11,963,141 0.10% The following table provides further details of the Company’s net charge-offs (recoveries) of loans secured by real estate for the years ended December 31: 2024 2023 Real estate – construction: Residential $ 145 $ 9 Real estate – 1-4 family mortgage: Primary 392 (111) Home equity 414 76 Rental/investment (5) 82 Land development (1) (19) Total real estate – 1-4 family mortgage 800 28 Real estate – commercial mortgage: Owner-occupied (75) 157 Non-owner occupied 3,527 4,699 Land development 7 — Total real estate – commercial mortgage 3,459 4,856 Total net charge-offs of loans secured by real estate $ 4,404 $ 4,893 Allowance for Credit Losses on Unfunded Commitments; Provision for Credit Losses on Unfunded Commitments . The Company maintains a separate allowance for credit losses on unfunded loan commitments, which is included in the “Other liabilities” line item on the Consolidated Balance Sheets. Management estimates the amount of expected losses on unfunded loan commitments by calculating a likelihood of funding over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss on loans methodology described above to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company. A roll-forward of the allowance for credit losses on unfunded commitments is shown in the table below. Year Ended December 31, 2024 2023 Allowance for credit losses on unfunded loan commitments: Beginning balance $ 16,918 $ 20,118 Recovery of credit losses on unfunded loan commitments (1,975) (3,200) Ending balance $ 14,943 $ 16,918 52 Nonperforming Assets . Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans are loans on which the accrual of interest has stopped and loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. Management, the problem asset resolution committee and our loan review staff closely monitor loans that are considered to be nonperforming. Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for credit losses. Reductions in the carrying value subsequent to acquisition are charged to earnings and are included in “Other real estate owned” in the Consolidated Statements of Income. The following table provides details of the Company’s nonperforming assets as of December 31 for each of the years presented. 2024 2023 Nonaccruing loans $ 110,811 $ 68,816 Accruing loans past due 90 days or more 2,464 554 Total nonperforming loans 113,275 69,370 Other real estate owned 8,673 9,622 Total nonperforming assets $ 121,948 $ 78,992 Nonperforming loans to total loans 0.88 % 0.56 % Nonaccruing loans to total loans 0.88 % 0.56 % Nonperforming assets to total assets 0.68 % 0.46 % 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. 2024 2023 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 — Real estate – 1-4 family mortgage: Primary 55,037 44,174 Home equity 3,404 2,849 Rental/investment 388 2,238 Land development 1,760 19 Total real estate – 1-4 family mortgage 60,589 49,280 Real estate – commercial mortgage: Owner-occupied 12,679 3,373 Non-owner occupied 29,280 9,774 Land development 3,291 300 Total real estate – commercial mortgage 45,250 13,447 Installment loans to individuals 114 361 Total nonperforming loans $ 113,275 $ 69,370 53 Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans at December 31, 2024. Management also continually monitors past due loans for potential credit quality deterioration. 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 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”). 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: 2024 2023 Residential real estate $ 2,966 $ 1,211 Commercial real estate 5,681 8,407 Residential land development 19 4 Commercial land development 7 — Total other real estate owned $ 8,673 $ 9,622 Changes in the Company’s other real estate owned were as follows for the periods presented: 2024 2023 Balance as of January 1 $ 9,622 $ 1,763 Transfers of loans 5,037 10,738 Impairments (438) (18) Dispositions (3,123) (2,840) Other (2,425) (21) Balance as of December 31 $ 8,673 $ 9,622 We realized net gains of $227 and $275 on dispositions of other real estate owned during 2024 and 2023, respectively. Interest Rate Risk Market risk is the risk of loss from adverse changes in market prices and rates. The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets and inventories. Our market risk arises primarily from interest rate risk inherent in lending and deposit-taking activities. Management believes a significant impact on the Company’s financial results stems from our ability to react to changes in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. Because of the impact of interest rate fluctuations on our profitability, the Board of Directors and management actively monitor and manage our interest rate risk exposure. We have an Asset/Liability Committee (the “ALCO”) that is authorized by the Board of Directors to monitor our interest rate sensitivity and to make decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital. The ALCO uses an asset/liability model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model is used to perform both net interest income forecast simulations for multiple year horizons and economic value of equity (“EVE”) analyses, each under various interest rate scenarios, which could impact the results presented in the table below. 54 Net interest income simulations measure the short and medium-term earnings exposure from changes in market interest rates in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet. The following table presents the projected impact of a change in interest rates on (1) static EVE and (2) earnings at risk (that is, net interest income) for the 1-12 and 13-24 month periods commencing January 1, 2025, in each case as compared to the result under rates present in the market on December 31, 2024. 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. Percentage Change In: Immediate Change in Rates of: Economic Value Equity (EVE) Earning at Risk (EAR) (Net Interest Income) Static 1-12 Months 13-24 Months +200 4.44% 6.40% 8.83% +100 2.69% 3.75% 4.99% -100 (3.48)% (4.48)% (5.71)% -200 (7.79)% (8.33)% (11.08)% The rate shock results for the EVE and net interest income simulations for the next 24 months produce an asset sensitive position at December 31, 2024. The preceding measures assume no change in the size or asset/liability compositions of the balance sheet, and they do not reflect future actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in the increments described in the table above. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions including asset prepayment speeds, the impact of competitive factors on our pricing of loans and deposits, how responsive our deposit repricing is to the change in market rates and the expected life of non-maturity deposits. These business assumptions are based upon our experience, business plans and published industry experience. Such assumptions may not necessarily reflect the manner or timing in which cash flows, asset yields and liability costs respond to changes in market rates. Because these assumptions are inherently uncertain, actual results will differ from simulated results. The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, forward commitments, and interest rate lock commitments, as part of its ongoing efforts to mitigate its interest rate risk exposure. For more information about the Company’s derivative financial instruments, see the “Off-Balance Sheet Transactions” section below and Note 13, “Derivative Instruments,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. Liquidity and Capital Resources Liquidity management is the ability to meet the cash flow requirements of customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Core deposits, which are deposits excluding time deposits greater than $250,000 and brokered deposits, are the major source of funds used by the Bank to meet short- and long-term cash flow needs. Maintaining the ability to acquire these funds as needed in a variety of markets is the key to assuring the Bank’s liquidity. We may also choose to access the brokered deposit market where rates are favorable to other sources of liquidity. 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. At December 31, 2024 and 2023, the Company remained below limits on brokered deposits and other funding sources established by the ALCO. 55 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 11.3% 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 December 31, 2024, securities with a carrying value of $843,870 were pledged to secure government, public, trust, and other deposits and as collateral for short-term borrowings and derivative instruments as compared to $895,044 at December 31, 2023. Other sources available for meeting liquidity needs include federal funds purchased, security repurchase agreements and short-term and long-term advances from the FHLB. Interest is charged at the prevailing market rate on these borrowings. 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, 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. Long-term FHLB borrowings are used to match-fund fixed rate loans in order to minimize interest rate risk and also are used to meet day-to-day liquidity needs, particularly when the cost of such borrowings compares favorably to the rates that we would be required to pay to attract deposits. At December 31, 2024 and 2023, there were no outstanding long-term advances with the FHLB. The total amount of the remaining credit available to us from the FHLB at December 31, 2024 was $4,004,630. We also maintain lines of credit with other commercial banks totaling $150,000. These are unsecured, uncommitted lines of credit maturing at various times within the next twelve months. There were no amounts outstanding under these lines of credit at December 31, 2024 or 2023. Finally, we can access the capital markets to meet liquidity needs. The Company maintains a shelf registration statement with the SEC, which allows the Company to raise capital from time to time through the sale of common stock, preferred stock, debt securities, 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 be required to 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 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. 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. Accordingly, management targets growth of non-interest 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, short- and long-term liquidity needs and evaluate the effect that various funding sources have on our financial position. 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 each of the years presented: Percentage of Total Cost of Funds 2024 2023 2024 2023 Noninterest-bearing demand 23.61 % 26.94 % — % — % Interest-bearing demand 48.80 43.04 3.12 2.18 Savings 5.58 6.58 0.35 0.33 Brokered deposits 1.60 4.72 5.46 5.17 Time deposits 16.60 12.69 4.22 2.90 Borrowings 3.81 6.03 5.12 5.13 Total deposits and borrowed funds 100.00 % 100.00 % 2.53 % 1.88 % Cash and cash equivalents were $1,092,032 at December 31, 2024, compared to $801,351 at December 31, 2023. Cash used in investing activities for the year ended December 31, 2024 was $298,041 compared to $55,399 in 2023. 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 fund loan growth or purchase investment securities. Purchases of investment securities were $174,229 for 2024 compared to $11,899 for 2023. 56 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 $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 The Company’s liquidity and capital resources, as well as its ability to pay dividends to our shareholders, are substantially dependent on the ability of the Bank to transfer funds to the Company in the form of dividends, loans and advances. Under Mississippi law, a Mississippi bank may not pay dividends unless its earned surplus is in excess of three times capital stock. A Mississippi bank with earned surplus in excess of three times capital stock may pay a dividend, subject to the approval of the DBCF. In addition, the FDIC has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the Bank, could include the payment of dividends. Accordingly, the approval of the DBCF is required prior to the Bank paying dividends to the Company, and under certain circumstances the approval of the FDIC may be required. In addition to the FDIC and DBCF restrictions on dividends payable by the Bank to the Company, 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. The Federal Reserve’s criteria evaluates whether the holding company (1) has net income over the past four quarters sufficient to fully fund the proposed dividend (taking into account prior dividends paid during this period), (2) is considering stock repurchases or redemptions in the quarter, (3) does not have a concentration in commercial real estate and (4) is in good supervisory condition, based on its overall condition and its asset quality risk. A holding company not meeting these criteria will require more in-depth consultations with the Federal Reserve. Federal Reserve regulations also limit the amount the Bank may loan to the Company unless such loans are collateralized by specific obligations. At December 31, 2024, the maximum amount available for transfer from the Bank to the Company in the form of loans was $202,274. The Company maintains a line of credit collateralized by cash with the Bank totaling $3,000. There were no amounts outstanding under this line of credit at December 31, 2024. None of these restrictions had any impact on the Company’s ability to meet its cash obligations in 2024, nor does management expect such restrictions to materially impact the Company’s ability to meet its currently-anticipated cash obligations. Contractual Obligations The following table presents, as of December 31, 2024, significant fixed and determinable contractual obligations to third parties by payment date, that may impact the Company’s liquidity position. The Note Reference below refers to the applicable footnote in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. Payments Due In: Note Reference Less Than One Year One to Three Years Three to Five Years Over Five Years Total Lease liabilities (1) 23 $ 6,186 $ 10,094 $ 8,768 $ 42,294 $ 67,342 Deposits without a stated maturity (2) 9 12,093,328 — — — 12,093,328 Time deposits (2) 9 2,394,116 72,912 11,078 1,178 2,479,284 Short-term Federal Home Loan Bank advances 10 100,000 — — — 100,000 Other short-term borrowings 10 8,018 — — — 8,018 Junior subordinated debentures 11 — — — 113,916 113,916 Subordinated notes 11 — — — 316,698 316,698 Total contractual obligations $ 14,601,648 $ 83,006 $ 19,846 $ 474,086 $ 15,178,586 (1) Represents the undiscounted cash flows. (2) Excludes interest. Off-Balance Sheet Commitments 57 The Company enters into loan commitments, standby letters of credit and derivative financial instruments 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. 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: 2024 2023 Loan commitments $ 2,856,308 $ 3,091,997 Standby letters of credit 90,267 113,970 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, floors and/or collars, 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 December 31, 2024, the Company had notional amounts of $880,371 on interest rate contracts with corporate customers and $877,051 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. Finally, the Company enters into forward interest rate swap contracts on its FHLB borrowings and its junior subordinated debentures that are accounted for as cash flow hedges. Under each of these contracts, the Company pays a fixed rate of interest and receives a variable rate of interest. The Company entered into an interest rate swap contract on its subordinated notes that is accounted for as a fair value hedge. Under this contract, the Company pays a variable rate of interest and receives a fixed rate of interest. For more information about the Company’s off-balance sheet transactions, see Note 13, “Derivative Instruments” and Note 18, “Commitments, Contingent Liabilities and Financial Instruments with Off-Balance Sheet Risk,” in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in this report. Shareholders’ Equity and Regulatory Matters Total shareholders’ equity of the Company was $2,678,318 and $2,297,383 at December 31, 2024 and 2023, respectively. 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 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. The program will remain in effect until the earlier of October 2025 or the repurchase of the entire amount of common stock authorized to be repurchased by the Board of Directors. 58 The Company has junior subordinated debentures with a carrying value of $113,916 at December 31, 2024, of which $110,325 are included in the Company’s Tier 1 capital. Federal Reserve guidelines limit the amount of securities that, similar to our junior subordinated debentures, are includable in Tier 1 capital, but these guidelines did not impact the amount of debentures we include in Tier 1 capital. 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. 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 (which include the “capital conservation buffer” discussed below): 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 includes the capital ratios and capital amounts for the Company and the Bank as of the dates presented: 59 Actual Minimum Capital Requirement to be Well Capitalized Minimum Capital Requirement to be Adequately Capitalized (including the Capital Conservation Buffer) Amount Ratio Amount Ratio Amount Ratio December 31, 2024 Renasant Corporation: Tier 1 leverage ratio $ 1,935,522 11.34 % $ 853,556 5.00 % $ 682,845 4.00 % Common equity tier 1 capital ratio 1,825,197 12.73 % 932,162 6.50 % 1,003,867 7.00 % Tier 1 risk-based capital ratio 1,935,522 13.50 % 1,147,276 8.00 % 1,218,981 8.50 % Total risk-based capital ratio 2,449,129 17.08 % 1,434,095 10.00 % 1,505,800 10.50 % Renasant Bank: Tier 1 leverage ratio $ 1,843,123 10.80 % $ 852,933 5.00 % $ 682,346 4.00 % Common equity tier 1 capital ratio 1,843,123 12.85 % 932,552 6.50 % 1,004,287 7.00 % Tier 1 risk-based capital ratio 1,843,123 12.85 % 1,147,756 8.00 % 1,219,491 8.50 % Total risk-based capital ratio 2,022,737 14.10 % 1,434,695 10.00 % 1,506,430 10.50 % December 31, 2023 Renasant Corporation: Tier 1 leverage ratio $ 1,578,918 9.62 % $ 820,428 5.00 % $ 656,342 4.00 % Common equity tier 1 capital ratio 1,469,531 10.52 % 908,163 6.50 % 978,022 7.00 % Tier 1 risk-based capital ratio 1,578,918 11.30 % 1,117,740 8.00 % 1,187,598 8.50 % Total risk-based capital ratio 2,085,531 14.93 % 1,397,175 10.00 % 1,467,033 10.50 % Renasant Bank: Tier 1 leverage ratio $ 1,714,965 10.45 % $ 820,761 5.00 % $ 656,608 4.00 % Common equity tier 1 capital ratio 1,714,965 12.25 % 909,711 6.50 % 979,689 7.00 % Tier 1 risk-based capital ratio 1,714,965 12.25 % 1,119,644 8.00 % 1,189,622 8.50 % Total risk-based capital ratio 1,888,104 13.49 % 1,399,556 10.00 % 1,469,533 10.50 % As previously disclosed, the Company adopted CECL as of January 1, 2020. The Company has elected to take advantage of transitional relief offered by the Federal Reserve and FDIC to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transitional period to phase out the capital benefit provided by the two-year delay. For a detailed discussion of the capital adequacy guidelines applicable to the Company and the Bank, please refer to the information under the heading “Capital Adequacy Guidelines” in the “Supervision and Regulation-Supervision and Regulation of Renasant Corporation” section and the “Supervision and Regulation-Supervision and Regulation of Renasant Bank” section in Item 1, Business, in this report. Non-GAAP Financial Measures In addition to results presented in accordance with GAAP, this document contains certain non-GAAP financial measures, namely, return on average tangible shareholders’ equity, return on average tangible assets and the ratio of tangible equity to tangible assets. These non-GAAP financial measures adjust GAAP financial measures to exclude intangible assets. Management uses these non-GAAP financial measures when evaluating capital utilization and adequacy. In addition, the Company believes that these non-GAAP financial measures facilitate the making of period-to-period comparisons and are meaningful indicators of its operating performance, particularly because these measures are widely used by industry analysts for companies with merger and acquisition activities. Also, because intangible assets such as goodwill and the core deposit intangible can vary extensively from company to company and are excluded from the calculation of a financial institution’s regulatory capital, the Company believes that the presentation of this non-GAAP financial information allows readers to more easily compare the Company’s results to information provided in other regulatory reports and the results of other companies. The reconciliations from GAAP to non-GAAP for these financial measures are below. 60 Return on average tangible shareholders’ equity and Return on average tangible assets 2024 2023 2022 Net income (GAAP) $ 195,457 $ 144,678 $ 166,068 Amortization of intangibles 4,691 5,380 5,122 Tax effect of adjustment noted above (1) (1,173) (1,012) (1,119) Tangible net income (non-GAAP) $ 198,975 $ 149,046 $ 170,071 Average shareholders’ equity (GAAP) $ 2,466,384 $ 2,224,506 $ 2,184,603 Intangibles 1,006,665 1,012,239 967,018 Average tangible shareholders’ equity (non-GAAP) $ 1,459,719 $ 1,212,267 $ 1,217,585 Average total assets (GAAP) $ 17,552,695 $ 17,231,883 $ 16,637,852 Intangibles 1,006,665 1,012,239 967,018 Average tangible assets (non-GAAP) $ 16,546,030 $ 16,219,644 $ 15,670,834 Return on (average) shareholders’ equity (GAAP) 7.92 % 6.50 % 7.60 % Effect of adjustment for intangible assets 5.71 % 5.79 % 6.37 % Return on average tangible shareholders’ equity (non-GAAP) 13.63 % 12.29 % 13.97 % Return on (average) assets (GAAP) 1.11 % 0.84 % 1.00 % Effect of adjustment for intangible assets 0.09 % 0.08 % 0.09 % Return on average tangible assets (non-GAAP) 1.20 % 0.92 % 1.09 % (1) Tax effect is calculated based on the applicable periods’ effective tax rate. Tangible common equity ratio (Tangible shareholders’ equity to tangible assets) 2024 2023 2022 Shareholders’ equity (GAAP) $ 2,678,318 $ 2,297,383 $ 2,136,016 Intangibles 1,003,003 1,010,460 1,015,884 Tangible shareholders’ equity (non-GAAP) $ 1,675,315 $ 1,286,923 $ 1,120,132 Total assets (GAAP) $ 18,034,868 $ 17,360,535 $ 16,988,176 Intangibles 1,003,003 1,010,460 1,015,884 Tangible assets (non-GAAP) $ 17,031,865 $ 16,350,075 $ 15,972,292 Shareholders’ equity to assets (GAAP) 14.85 % 13.23 % 12.57 % Effect of adjustment for intangible assets 5.01 % 5.36 % 5.56 % Tangible shareholders’ equity to tangible assets (non-GAAP) 9.84 % 7.87 % 7.01 % None of the non-GAAP financial measures the Company has included in this document is intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Readers of this Form 10-K should note that, because there are no standard definitions for how to calculate the non-GAAP financial measures that we use as well as the results, the Company’s calculations may not be comparable to similarly titled measures presented by other companies. Also, there may be limits in the usefulness of these measures 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. 61