Derivative Instruments

3 Months Ended

Mar. 31, 2016

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 March 31, 2016, the Company had notional amounts of $71,448 on interest rate contracts with corporate customers and $71,448 in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed-rate loans.

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

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

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

The Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate residential mortgage loans. The notional amount of commitments to fund fixed-rate mortgage loans was $247,181 and $251,676 at March 31, 2016 and December 31, 2015, 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 $492,250 and $293,500 at March 31, 2016 and December 31, 2015, respectively.

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

		Fair Value
	Balance Sheet Location	March 31, 2016		December 31, 2015
Derivative assets:
Not designated as hedging instruments:
Interest rate contracts	Other Assets	$	4,181	$	2,544
Interest rate lock commitments	Other Assets	6,231		4,508
Forward commitments	Other Assets	36		446
Totals		$	10,448	$	7,498
Derivative liabilities:
Designated as hedging instruments:
Interest rate swap	Other Liabilities	$	6,328	$	4,266
Totals		$	6,328	$	4,266
Not designated as hedging instruments:
Interest rate contracts	Other Liabilities	$	4,181	$	2,544
Interest rate lock commitments	Other Liabilities	95		—
Forward commitments	Other Liabilities	3,788		509
Totals		$	8,064	$	3,053

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
	March 31,
	2016			2015
Derivatives not designated as hedging instruments:
Interest rate contracts:
Included in interest income on loans	$	533		$	557
Interest rate lock commitments:
Included in gains on sales of mortgage loans held for sale	1,628			2,705
Forward commitments
Included in gains on sales of mortgage loans held for sale	(3,688		)	(575		)
Total	$	(1,527	)	$	2,687

For the Company's derivatives designated as cash flow hedges, changes in fair value of the cash flow hedges are, to the extent that the hedging relationship is effective, recorded as other comprehensive income and are subsequently recognized in earnings at the same time that the hedged item is recognized in earnings. The ineffective portions of the changes in fair value of the hedging instruments are immediately recognized in earnings. The assessment of the effectiveness of the hedging relationship is evaluated under the hypothetical derivative method. There were no ineffective portions for the three months endedMarch 31, 2016 and 2015. The impact on other comprehensive income for the three months endedMarch 31, 2016 and 2015, can be seen at Note K, "Other Comprehensive Income."

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
	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Gross amounts recognized	$	37	$	446	$	13,312	$	6,454
Gross amounts offset in the consolidated balance sheets	—		—		—		—
Net amounts presented in the consolidated balance sheets	37		446		13,312		6,454
Gross amounts not offset in the consolidated balance sheets
Financial instruments	37		282		37		282
Financial collateral pledged	—		—		9,872		6,020
Net amounts	$	—	$	164	$	3,403	$	152