Derivative Instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

(In Thousands)

The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, caps and/or floors, as part of its ongoing efforts to mitigate its interest rate risk exposure and to facilitate the needs of its customers. The Company also from time to time enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At June 30, 2014, the Company had notional amounts of $73,628 on interest rate contracts with corporate customers and $73,628 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed-rate loans.

On June 5, 2014, the Company entered into two forward interest rate swap contracts on floating rate liabilities at the Bank level with notional amounts of $15.0 million each. The interest rate swap contracts are accounted for as a cash flow hedge with the objective of protecting against any interest rate volatility on future FHLB borrowings for a four-year and five-year period beginning June 1, 2018 and December 3, 2018 and ending June 2022 and June 2023, respectively. Under these contracts, Renasant Bank will pay a fixed interest rate of 3.593% and 3.738%, respectively, and will receive a variable interest rate based on the three-month LIBOR, with quarterly net settlements.

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

In connection with its merger with First M&F, the Company assumed an interest rate swap designed to convert floating rate interest payments into fixed rate payments. Based on the terms of the agreement, which terminates in March 2018, the Company receives a variable rate of interest based on the three-month LIBOR plus a pre-determined spread and pays a fixed rate of interest. The interest rate swap is accounted for as a cash flow hedge to reduce the variability in cash flows resulting from changes in interest rates on $30,000 of the junior subordinated debentures assumed in the merger with First M&F.

In May 2010, the Company terminated two interest rate swaps, each designated as a cash flow hedge, designed to convert the variable interest rate on an aggregate of $75,000 of loans to a fixed rate. As of the termination date, there were $1,679 of deferred gains related to the swaps, which are being amortized into interest income over the designated hedging periods ending in August 2012 and August 2013, respectively. Deferred gains amortized into net interest income were $0 and $80 for the three months ended June 30, 2014 and 2013, respectively, and $0 and $165 for the six months endedJune 30, 2014 and 2013, respectively.

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. The notional amount of commitments to fund fixed-rate mortgage loans was $88,293 and $54,807 at June 30, 2014 and December 31, 2013, respectively. The Company also enters into forward commitments to sell residential mortgage loans to secondary market investors. The notional amount of commitments to sell residential mortgage loans to secondary market investors was $80,000 and $50,000 at June 30, 2014 and December 31, 2013, respectively.

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

		Fair Value
	Balance Sheet Location	June 30, 2014		December 31, 2013
Derivative assets:
Designated as hedging instruments
Interest rate swap	Other Assets	$	—	$	208
Totals		$	—	$	208
Not designated as hedging instruments:
Interest rate contracts	Other Assets	$	1,285	$	1,812
Interest rate lock commitments	Other Assets	1,887		464
Forward commitments	Other Assets	—		335
Totals		$	3,172	$	2,611
Derivative liabilities:
Designated as hedging instruments:
Interest rate swap	Other Liabilities	$	2,838	$	1,428
Totals		$	2,838	$	1,428
Not designated as hedging instruments:
Interest rate contracts	Other Liabilities	$	1,285	$	1,812
Interest rate lock commitments	Other Liabilities	—		52
Forward commitments	Other Liabilities	624		24
Totals		$	1,909	$	1,888

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Derivatives designated as hedging instruments:
Interest rate swaps (terminated May 2010):
Included in interest income on loans	$	—		$	80		$	—		$	165
Total	$	—		$	80		$	—		$	165
Derivatives not designated as hedging instruments:
Interest rate contracts:
Included in interest income on loans	$	767		$	801		$	1,546		$	1,600
Included in other noninterest expense	—			(25		)	—			67
Interest rate lock commitments:
Included in gains on sales of mortgage loans held for sale	927			(2,284		)	1,493			(2,101		)
Forward commitments
Included in gains on sales of mortgage loans held for sale	(634		)	4,678			(445		)	4,876
Total	$	1,060		$	3,170		$	2,594		$	4,442

Offsetting

Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheet when the "right of setoff" exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company's derivative instruments are subject to master netting agreements; however, the Company has not elected to offset such financial instruments in the consolidated balance sheets. The following table presents the Company's gross derivative positions as recognized in the consolidated balance sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement:

	Offsetting Derivative Assets				Offsetting Derivative Liabilities
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Gross amounts recognized	$	3,172	$	2,818	$	4,747	$	3,315
Gross amounts offset in the consolidated balance sheets	—		—		—		—
Net amounts presented in the consolidated balance sheets	3,172		2,818		4,747		3,315
Gross amounts not offset in the consolidated balance sheets
Financial instruments	17		1,664		17		1,664
Financial collateral pledged	—		—		2,838		—
Net amounts	$	3,155	$	1,154	$	1,892	$	1,651