UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2013
Or
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number 001-13253
RENASANT CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi | 64-0676974 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
209 Troy Street, Tupelo, Mississippi | 38804-4827 | |
(Address of principal executive offices) | (Zip Code) |
(662) 680-1001
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of April 30, 2013, 25,221,488 shares of the registrants common stock, $5.00 par value per share, were outstanding. The registrant has no other classes of securities outstanding.
Renasant Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended March 31, 2013
CONTENTS
Page | ||||||
PART I |
||||||
Item 1. |
||||||
1 | ||||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
39 | ||||
Item 3. |
60 | |||||
Item 4. |
60 | |||||
PART II |
||||||
Item 1. |
61 | |||||
Item 1A. |
61 | |||||
Item 2. |
61 | |||||
Item 5 |
61 | |||||
Item 6. |
62 | |||||
63 | ||||||
64 |
Renasant Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Data)
(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2013 | 2012 | |||||||
Assets |
||||||||
Cash and due from banks |
$ | 58,530 | $ | 63,225 | ||||
Interest-bearing balances with banks |
131,498 | 69,195 | ||||||
|
|
|
|
|||||
Cash and cash equivalents |
190,028 | 132,420 | ||||||
Securities held to maturity (fair value of $358,672 and $334,475, respectively) |
344,599 | 317,766 | ||||||
Securities available for sale, at fair value |
396,014 | 356,311 | ||||||
Mortgage loans held for sale, at fair value |
26,286 | 34,845 | ||||||
Loans, net of unearned income: |
||||||||
Covered under loss-share agreements |
213,872 | 237,088 | ||||||
Not covered under loss-share agreements |
2,594,438 | 2,573,165 | ||||||
|
|
|
|
|||||
Total loans, net of unearned income |
2,808,310 | 2,810,253 | ||||||
Allowance for loan losses |
(46,505 | ) | (44,347 | ) | ||||
|
|
|
|
|||||
Loans, net |
2,761,805 | 2,765,906 | ||||||
Premises and equipment, net |
67,823 | 66,752 | ||||||
Other real estate owned: |
||||||||
Covered under loss-share agreements |
35,095 | 45,534 | ||||||
Not covered under loss-share agreements |
39,786 | 44,717 | ||||||
|
|
|
|
|||||
Total other real estate owned, net |
74,881 | 90,251 | ||||||
Goodwill |
184,779 | 184,859 | ||||||
Other intangible assets, net |
5,742 | 6,066 | ||||||
FDIC loss-share indemnification asset |
34,524 | 44,153 | ||||||
Other assets |
181,177 | 179,287 | ||||||
|
|
|
|
|||||
Total assets |
$ | 4,267,658 | $ | 4,178,616 | ||||
|
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|
|
|||||
Liabilities and shareholders equity |
||||||||
Liabilities |
||||||||
Deposits |
||||||||
Noninterest-bearing |
$ | 567,065 | $ | 568,214 | ||||
Interest-bearing |
2,988,110 | 2,893,007 | ||||||
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|
|
|
|||||
Total deposits |
3,555,175 | 3,461,221 | ||||||
Short-term borrowings |
6,848 | 5,254 | ||||||
Long-term debt |
157,215 | 159,452 | ||||||
Other liabilities |
46,045 | 54,481 | ||||||
|
|
|
|
|||||
Total liabilities |
3,765,283 | 3,680,408 | ||||||
Shareholders equity |
||||||||
Preferred stock, $.01 par value 5,000,000 shares authorized; no shares issued and outstanding |
| | ||||||
Common stock, $5.00 par value 75,000,000 shares authorized, 26,715,797 shares issued; 25,208,733 and 25,157,637 shares outstanding, respectively |
133,579 | 133,579 | ||||||
Treasury stock, at cost |
(24,933 | ) | (25,626 | ) | ||||
Additional paid-in capital |
217,951 | 218,128 | ||||||
Retained earnings |
183,902 | 180,628 | ||||||
Accumulated other comprehensive loss, net of taxes |
(8,124 | ) | (8,501 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
502,375 | 498,208 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 4,267,658 | $ | 4,178,616 | ||||
|
|
|
|
See Notes to Consolidated Financial Statements.
1
Renasant Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In Thousands, Except Share Data)
Three Months Ended March 31, |
||||||||
2013 | 2012 | |||||||
Interest income |
||||||||
Loans |
$ | 34,158 | $ | 34,282 | ||||
Securities |
||||||||
Taxable |
2,791 | 4,010 | ||||||
Tax-exempt |
1,947 | 2,128 | ||||||
Other |
49 | 85 | ||||||
|
|
|
|
|||||
Total interest income |
38,945 | 40,505 | ||||||
Interest expense |
||||||||
Deposits |
4,080 | 5,419 | ||||||
Borrowings |
1,484 | 2,243 | ||||||
|
|
|
|
|||||
Total interest expense |
5,564 | 7,662 | ||||||
|
|
|
|
|||||
Net interest income |
33,381 | 32,843 | ||||||
Provision for loan losses |
3,050 | 4,800 | ||||||
|
|
|
|
|||||
Net interest income after provision for loan losses |
30,331 | 28,043 | ||||||
Noninterest income |
||||||||
Service charges on deposit accounts |
4,500 | 4,525 | ||||||
Fees and commissions |
4,831 | 3,928 | ||||||
Insurance commissions |
818 | 898 | ||||||
Wealth management revenue |
1,724 | 1,942 | ||||||
Gains on sales of securities |
54 | 904 | ||||||
BOLI income |
730 | 1,111 | ||||||
Gains on sales of mortgage loans held for sale |
3,565 | 1,281 | ||||||
Other |
1,113 | 1,798 | ||||||
|
|
|
|
|||||
Total noninterest income |
17,335 | 16,387 | ||||||
Noninterest expense |
||||||||
Salaries and employee benefits |
21,274 | 18,649 | ||||||
Data processing |
2,043 | 2,040 | ||||||
Net occupancy and equipment |
3,604 | 3,615 | ||||||
Other real estate owned |
2,049 | 3,999 | ||||||
Professional fees |
1,173 | 971 | ||||||
Advertising and public relations |
1,490 | 1,197 | ||||||
Intangible amortization |
323 | 358 | ||||||
Communications |
1,127 | 1,103 | ||||||
Extinguishment of debt |
| 898 | ||||||
Other |
4,474 | 3,791 | ||||||
|
|
|
|
|||||
Total noninterest expense |
37,557 | 36,621 | ||||||
|
|
|
|
|||||
Income before income taxes |
10,109 | 7,809 | ||||||
Income taxes |
2,538 | 1,835 | ||||||
|
|
|
|
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Net income |
$ | 7,571 | $ | 5,974 | ||||
|
|
|
|
|||||
Basic earnings per share |
$ | 0.30 | $ | 0.24 | ||||
|
|
|
|
|||||
Diluted earnings per share |
$ | 0.30 | $ | 0.24 | ||||
|
|
|
|
|||||
Cash dividends per common share |
$ | 0.17 | $ | 0.17 | ||||
|
|
|
|
See Notes to Consolidated Financial Statements.
2
Renasant Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands, Except Share Data)
Three Months Ended March 31, |
||||||||
2013 | 2012 | |||||||
Net income |
$ | 7,571 | $ | 5,974 | ||||
Other comprehensive income, net of tax: |
||||||||
Securities available for sale: |
||||||||
Unrealized holding gains on securities |
146 | 1,018 | ||||||
Reclassification adjustment for losses (gains) realized in net income |
71 | (558 | ) | |||||
Amortization of unrealized holding gains on securities transferred to the held to maturity category |
(66 | ) | (102 | ) | ||||
|
|
|
|
|||||
Total securities available for sale |
151 | 358 | ||||||
Derivative instruments: |
||||||||
Unrealized holding gains (losses) on derivative instruments |
207 | (111 | ) | |||||
Reclassification adjustment for gains realized in net income |
(53 | ) | (94 | ) | ||||
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|
|
|
|||||
Totals derivative instruments |
154 | (205 | ) | |||||
Defined benefit pension and post-retirement benefit plans: |
||||||||
Net (loss) gain arising during the period |
| | ||||||
Less amortization of net actuarial loss recognized in net periodic pension cost |
72 | 66 | ||||||
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|
|
|
|||||
Total defined benefit pension and post-retirement benefit plans |
72 | 66 | ||||||
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|
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Other comprehensive income, net of tax |
377 | 219 | ||||||
|
|
|
|
|||||
Comprehensive income |
$ | 7,948 | $ | 6,193 | ||||
|
|
|
|
See Notes to Consolidated Financial Statements.
3
Renasant Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Operating activities |
||||||||
Net cash provided by operating activities |
$ | 41,340 | $ | 62,609 | ||||
Investing activities |
||||||||
Purchases of securities available for sale |
(70,720 | ) | (78,210 | ) | ||||
Proceeds from sales of securities available for sale |
9,013 | 22,685 | ||||||
Proceeds from call/maturities of securities available for sale |
21,425 | 43,433 | ||||||
Purchases of securities held to maturity |
(59,987 | ) | (53,899 | ) | ||||
Proceeds from sales of securities held to maturity |
4,461 | | ||||||
Proceeds from call/maturities of securities held to maturity |
28,590 | 27,975 | ||||||
Net increase in loans |
(3,608 | ) | (29,776 | ) | ||||
Purchases of premises and equipment |
(2,337 | ) | (3,139 | ) | ||||
Proceeds from sales of premises and equipment |
| 45 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(73,163 | ) | (70,886 | ) | ||||
Financing activities |
||||||||
Net (decrease) increase in noninterest-bearing deposits |
(1,149 | ) | 4,045 | |||||
Net increase in interest-bearing deposits |
95,103 | 56,884 | ||||||
Net increase (decrease) in short-term borrowings |
1,594 | (3,655 | ) | |||||
Repayment of long-term debt |
(2,197 | ) | (79,261 | ) | ||||
Cash paid for dividends |
(4,300 | ) | (4,275 | ) | ||||
Cash received on exercise of stock-based compensation |
225 | 200 | ||||||
Excess tax benefit from stock-based compensation |
155 | | ||||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
89,431 | (26,062 | ) | |||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
57,608 | (34,339 | ) | |||||
Cash and cash equivalents at beginning of period |
132,420 | 209,017 | ||||||
|
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|
|||||
Cash and cash equivalents at end of period |
$ | 190,028 | $ | 174,678 | ||||
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Supplemental disclosures |
||||||||
Noncash transactions: |
||||||||
Transfers of loans to other real estate owned |
$ | 5,828 | $ | 7,481 |
See Notes to Consolidated Financial Statements.
4
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note A Summary of Significant Accounting Policies
Nature of Operations: Renasant Corporation (referred to herein as the Company) owns and operates Renasant Bank (Renasant Bank or the Bank) and Renasant Insurance, Inc. The Company offers a diversified range of financial, fiduciary and insurance services to its retail and commercial customers through its subsidiaries and full service offices located throughout north and north central Mississippi, Tennessee, north and central Alabama and north Georgia.
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information regarding the Companys significant accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on March 8, 2013.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Subsequent Events: The Company has evaluated, for consideration of recognition or disclosure, subsequent events that have occurred through the date of issuance of its financial statements, and has determined that no significant events occurred after March 31, 2013 but prior to the issuance of these financial statements that would have a material impact on its Consolidated Financial Statements.
Note B Securities
(In Thousands)
The amortized cost and fair value of securities held to maturity were as follows:
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
March 31, 2013 |
||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | 125,046 | $ | 149 | $ | (263 | ) | $ | 124,932 | |||||||
Obligations of states and political subdivisions |
219,553 | 14,339 | (152 | ) | 233,740 | |||||||||||
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$ | 344,599 | $ | 14,488 | $ | (415 | ) | $ | 358,672 | ||||||||
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December 31, 2012 |
||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | 90,045 | $ | 116 | $ | (232 | ) | $ | 89,929 | |||||||
Obligations of states and political subdivisions |
227,721 | 16,860 | (35 | ) | 244,546 | |||||||||||
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|||||||||
$ | 317,766 | $ | 16,976 | $ | (267 | ) | $ | 334,475 | ||||||||
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|
In light of the ongoing fiscal uncertainty in state and local governments, the Company analyzes its exposure to potential losses in its security portfolio on at least a quarterly basis. Management reviews the underlying credit rating and analyzes the financial condition of the respective issuers. Based on this analysis, the Company sold certain securities representing obligations of state and political subdivisions that were classified as held to maturity during 2013. The securities sold showed significant credit deterioration in that an analysis of the financial condition of the respective issuers showed the issuers were operating at net deficits with little to no financial cushion to offset future contingencies. These securities had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale during the three months ended March 31, 2013. No securities classified as held to maturity were sold during the three months ended March 31, 2012.
5
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note B Securities (continued)
The amortized cost and fair value of securities available for sale were as follows:
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
March 31, 2013 |
||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | 2,163 | $ | 261 | $ | | $ | 2,424 | ||||||||
Residential mortgage backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
164,222 | 4,486 | (529 | ) | 168,179 | |||||||||||
Government agency collateralized mortgage obligations |
131,815 | 2,107 | (620 | ) | 133,302 | |||||||||||
Commercial mortgage backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
41,797 | 2,826 | (3 | ) | 44,620 | |||||||||||
Government agency collateralized mortgage obligations |
5,070 | 269 | | 5,339 | ||||||||||||
Trust preferred securities |
27,829 | | (11,667 | ) | 16,162 | |||||||||||
Other debt securities |
21,734 | 832 | (12 | ) | 22,554 | |||||||||||
Other equity securities |
2,355 | 1,079 | | 3,434 | ||||||||||||
|
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|||||||||
$ | 396,985 | $ | 11,860 | $ | (12,831 | ) | $ | 396,014 | ||||||||
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|
|
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
December 31, 2012 |
||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | 2,169 | $ | 273 | $ | | $ | 2,442 | ||||||||
Residential mortgage backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
139,699 | 5,209 | (91 | ) | 144,817 | |||||||||||
Government agency collateralized mortgage obligations |
115,647 | 2,273 | (399 | ) | 117,521 | |||||||||||
Commercial mortgage backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
41,981 | 3,077 | | 45,058 | ||||||||||||
Government agency collateralized mortgage obligations |
5,091 | 316 | | 5,407 | ||||||||||||
Trust preferred securities |
28,612 | | (13,544 | ) | 15,068 | |||||||||||
Other debt securities |
22,079 | 852 | (1 | ) | 22,930 | |||||||||||
Other equity securities |
2,355 | 713 | | 3,068 | ||||||||||||
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|||||||||
$ | 357,633 | $ | 12,713 | $ | (14,035 | ) | $ | 356,311 | ||||||||
|
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|
|
Gross realized gains and gross realized losses on sales of securities available for sale for the three months ended March 31, 2013 and 2012 were as follows:
Three Months Ended March 31, |
||||||||
2013 | 2012 | |||||||
Gross gains on sales of securities available for sale |
$ | | $ | 904 | ||||
Gross losses on sales of securities available for sale |
(115 | ) | | |||||
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|
|||||
(Loss) Gain on sales of securities available for sale, net |
$ | (115 | ) | $ | 904 | |||
|
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|
|
6
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note B Securities (continued)
At March 31, 2013 and December 31, 2012, securities with a carrying value of $402,092 and $308,362, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $14,984 and $19,006 were pledged as collateral for short-term borrowings and derivative instruments at March 31, 2013 and December 31, 2012, respectively.
The amortized cost and fair value of securities at March 31, 2013 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
Held to Maturity | Available for Sale | |||||||||||||||
Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
Due within one year |
$ | 9,001 | $ | 9,063 | $ | | $ | | ||||||||
Due after one year through five years |
35,213 | 36,388 | | | ||||||||||||
Due after five years through ten years |
167,113 | 170,582 | 2,163 | 2,424 | ||||||||||||
Due after ten years |
133,272 | 142,639 | 27,829 | 16,162 | ||||||||||||
Residential mortgage backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
| | 164,222 | 168,179 | ||||||||||||
Government agency collateralized mortgage obligations |
| | 131,815 | 133,302 | ||||||||||||
Commercial mortgage backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
| | 41,797 | 44,620 | ||||||||||||
Government agency collateralized mortgage obligations |
| | 5,070 | 5,339 | ||||||||||||
Other debt securities |
| | 21,734 | 22,554 | ||||||||||||
Other equity securities |
| | 2,355 | 3,434 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 344,599 | $ | 358,672 | $ | 396,985 | $ | 396,014 | |||||||||
|
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|
|
|
|
|
|
7
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note B Securities (continued)
The following table presents the age of gross unrealized losses and fair value by investment category as of the dates presented:
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
|||||||||||||||||||
Held to Maturity: |
||||||||||||||||||||||||
March 31, 2013 |
||||||||||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | 65,161 | $ | (263 | ) | $ | | $ | | $ | 65,161 | $ | (263 | ) | ||||||||||
Obligations of states and political subdivisions |
9,183 | (151 | ) | 125 | (1 | ) | 9,308 | (152 | ) | |||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 74,344 | $ | (414 | ) | $ | 125 | $ | (1 | ) | 74,469 | $ | (415 | ) | ||||||||||
|
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|
|||||||||||||
December 31, 2012 |
||||||||||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | 35,224 | $ | (232 | ) | $ | | $ | | $ | 35,224 | $ | (232 | ) | ||||||||||
Obligations of states and political subdivisions |
2,861 | (34 | ) | 126 | (1 | ) | 2,987 | (35 | ) | |||||||||||||||
|
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|
|
|
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|
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|
|||||||||||||
Total |
$ | 38,085 | $ | (266 | ) | $ | 126 | $ | (1 | ) | $ | 38,211 | $ | (267 | ) | |||||||||
|
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|||||||||||||
Available for Sale: |
||||||||||||||||||||||||
March 31, 2013 |
||||||||||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
Residential mortgage backed securities: |
||||||||||||||||||||||||
Government agency mortgage backed securities |
39,867 | (529 | ) | | | 39,867 | (529 | ) | ||||||||||||||||
Government agency collateralized mortgage obligations |
67,740 | (620 | ) | | | 67,740 | (620 | ) | ||||||||||||||||
Commercial mortgage backed securities: |
||||||||||||||||||||||||
Government agency mortgage backed securities |
879 | (3 | ) | | | 879 | (3 | ) | ||||||||||||||||
Government agency collateralized mortgage obligations |
| | | | | | ||||||||||||||||||
Trust preferred securities |
| | 16,162 | (11,667 | ) | 16,162 | (11,667 | ) | ||||||||||||||||
Other debt securities |
3,054 | (10 | ) | 2,163 | (2 | ) | 5,217 | (12 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 111,540 | $ | (1,162 | ) | $ | 18,325 | $ | (11,669 | ) | $ | 129,865 | $ | (12,831 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2012 |
||||||||||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
Residential mortgage backed securities: |
||||||||||||||||||||||||
Government agency mortgage backed securities |
15,431 | (91 | ) | | | 15,431 | (91 | ) | ||||||||||||||||
Government agency collateralized mortgage obligations |
44,616 | (389 | ) | 1,605 | (10 | ) | 46,221 | (399 | ) | |||||||||||||||
Commercial mortgage backed securities: |
||||||||||||||||||||||||
Government agency mortgage backed securities |
| | | | | | ||||||||||||||||||
Government agency collateralized mortgage obligations |
| | | | | | ||||||||||||||||||
Trust preferred securities |
| | 15,068 | (13,544 | ) | 15,068 | (13,544 | ) | ||||||||||||||||
Other debt securities |
| | 2,188 | (1 | ) | 2,188 | (1 | ) | ||||||||||||||||
Other equity securities |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 60,047 | $ | (480 | ) | $ | 18,861 | $ | (13,555 | ) | $ | 78,908 | $ | (14,035 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
8
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note B Securities (continued)
The Company evaluates its investment portfolio for other-than-temporary-impairment (OTTI) on a quarterly basis. Impairment is assessed at the individual security level. The Company considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. Impairment is considered to be other-than-temporary if the Company intends to sell the investment security or if the Company does not expect to recover the entire amortized cost basis of the security before the Company is required to sell the security or before the securitys maturity.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $27,829 and $28,612 and a fair value of $16,162 and $15,068, at March 31, 2013 and December 31, 2012, respectively. The investments in pooled trust preferred securities consist of four securities representing interests in various tranches of trusts collateralized by debt issued by over 340 financial institutions. Managements determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Companys tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the investments amortized cost, which may be maturity. At March 31, 2013, management did not, and does not currently, believe such securities will be settled at a price less than the amortized cost of the investment, but the Company previously concluded that it was probable that there had been an adverse change in estimated cash flows for all four trust preferred securities and recognized credit related impairment losses on these securities in 2010 and 2011. No additional impairment was recognized during the three months ended March 31, 2013.
However, based on the qualitative factors discussed above, each of the four pooled trust preferred securities was classified as a nonaccruing asset at March 31, 2013. Investment interest is recorded on the cash-basis method until qualifying for return to accrual status.
The following table provides information regarding the Companys investments in pooled trust preferred securities at March 31, 2013:
Name |
Single/ Pooled |
Class/ Tranche |
Amortized Cost |
Fair Value |
Unrealized Loss |
Lowest Credit Rating |
Issuers Currently in Deferral or Default |
|||||||||||||||
XIII |
Pooled | B-2 | $ | 1,216 | $ | 1,193 | $ | (23 | ) | Ca | 35 | % | ||||||||||
XXIII |
Pooled | B-2 | 8,969 | 6,011 | (2,958 | ) | Ca | 22 | % | |||||||||||||
XXIV |
Pooled | B-2 | 12,076 | 5,867 | (6,209 | ) | Ca | 35 | % | |||||||||||||
XXVI |
Pooled | B-2 | 5,568 | 3,091 | (2,477 | ) | Ca | 33 | % | |||||||||||||
|
|
|
|
|
|
|||||||||||||||||
$ | 27,829 | $ | 16,162 | $ | (11,667 | ) | ||||||||||||||||
|
|
|
|
|
|
The following table provides a summary of the cumulative credit related losses recognized in earnings for which a portion of OTTI has been recognized in other comprehensive income:
2013 | 2012 | |||||||
Balance at January 1 |
$ | (3,337 | ) | $ | (3,337 | ) | ||
Additions related to credit losses for which OTTI was not previously recognized |
| | ||||||
Increases in credit loss for which OTTI was previously recognized |
| | ||||||
|
|
|
|
|||||
Balance at March 31 |
$ | (3,337 | ) | $ | (3,337 | ) | ||
|
|
|
|
9
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses
(In Thousands, Except Number of Loans)
The following is a summary of loans as of the dates presented:
March 31, 2013 |
December 31, 2012 |
|||||||
Commercial, financial, agricultural |
$ | 308,169 | $ | 317,050 | ||||
Lease financing |
165 | 195 | ||||||
Real estate construction |
111,132 | 105,706 | ||||||
Real estate 1-4 family mortgage |
899,694 | 903,423 | ||||||
Real estate commercial mortgage |
1,431,754 | 1,426,643 | ||||||
Installment loans to individuals |
57,399 | 57,241 | ||||||
|
|
|
|
|||||
Gross loans |
2,808,313 | 2,810,258 | ||||||
Unearned income |
(3 | ) | (5 | ) | ||||
|
|
|
|
|||||
Loans, net of unearned income |
2,808,310 | 2,810,253 | ||||||
Allowance for loan losses |
(46,505 | ) | (44,347 | ) | ||||
|
|
|
|
|||||
Net loans |
$ | 2,761,805 | $ | 2,765,906 | ||||
|
|
|
|
10
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
Past Due and Nonaccrual Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, the recognition of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer and other retail loans are typically charged-off no later than the time the loan is 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Loans may be placed on nonaccrual regardless of whether or not such loans are considered past due. All interest accrued for the current year, but not collected, for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
The following table provides an aging of past due and nonaccrual loans, segregated by class, as of the dates presented:
Accruing Loans | Nonaccruing Loans | |||||||||||||||||||||||||||||||||||
30-89 Days Past Due |
90
Days or More Past Due |
Current Loans |
Total Loans |
30-89 Days Past Due |
90 Days or More Past Due |
Current Loans |
Total Loans |
Total Loans |
||||||||||||||||||||||||||||
March 31, 2013 |
||||||||||||||||||||||||||||||||||||
Commercial, financial, agricultural |
$ | 730 | $ | | $ | 303,975 | $ | 304,705 | $ | 71 | $ | 3,205 | $ | 188 | $ | 3,464 | $ | 308,169 | ||||||||||||||||||
Lease financing |
| | 165 | 165 | | | | | 165 | |||||||||||||||||||||||||||
Real estate construction |
| | 109,484 | 109,484 | | 1,648 | | 1,648 | 111,132 | |||||||||||||||||||||||||||
Real estate 1-4 family mortgage |
8,598 | 1,487 | 865,825 | 875,910 | 1,250 | 9,071 | 13,463 | 23,784 | 899,694 | |||||||||||||||||||||||||||
Real estate commercial mortgage |
4,990 | 1,069 | 1,381,482 | 1,387,541 | 2,899 | 32,185 | 9,129 | 44,213 | 1,431,754 | |||||||||||||||||||||||||||
Installment loans to individuals |
223 | 45 | 56,886 | 57,154 | 1 | 243 | 1 | 245 | 57,399 | |||||||||||||||||||||||||||
Unearned income |
| | (3 | ) | (3 | ) | | | | | (3 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 14,541 | $ | 2,601 | $ | 2,717,814 | $ | 2,734,956 | $ | 4,221 | $ | 46,352 | $ | 22,781 | $ | 73,354 | $ | 2,808,310 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
December 31, 2012 |
||||||||||||||||||||||||||||||||||||
Commercial, financial, agricultural |
$ | 484 | $ | 15 | $ | 312,943 | $ | 313,442 | $ | 215 | $ | 3,131 | $ | 262 | $ | 3,608 | $ | 317,050 | ||||||||||||||||||
Lease financing |
| | 195 | 195 | | | | | 195 | |||||||||||||||||||||||||||
Real estate construction |
80 | | 103,978 | 104,058 | | 1,648 | | 1,648 | 105,706 | |||||||||||||||||||||||||||
Real estate 1-4 family mortgage |
6,685 | 1,992 | 867,053 | 875,730 | 1,249 | 13,417 | 13,027 | 27,693 | 903,423 | |||||||||||||||||||||||||||
Real estate commercial mortgage |
5,084 | 1,250 | 1,373,470 | 1,379,804 | 325 | 38,297 | 8,217 | 46,839 | 1,426,643 | |||||||||||||||||||||||||||
Installment loans to individuals |
197 | 50 | 56,715 | 56,962 | 7 | 265 | 7 | 279 | 57,241 | |||||||||||||||||||||||||||
Unearned income |
| | (5 | ) | (5 | ) | | | | | (5 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 12,530 | $ | 3,307 | $ | 2,714,349 | $ | 2,730,186 | $ | 1,796 | $ | 56,758 | $ | 21,513 | $ | 80,067 | $ | 2,810,253 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructured loans contractually 90 days past due totaled $646 at December 31, 2012. There were no restructured loans contractually 90 days past due at March 31, 2013. The outstanding balance of restructured loans on nonaccrual status was $9,280 and $11,420 at March 31, 2013 and December 31, 2012, respectively.
11
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for commercial, consumer and construction loans above a minimum dollar amount threshold by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are evaluated collectively for impairment. When the ultimate collectability of an impaired loans principal is in doubt, wholly or partially, all cash receipts are applied to principal. Once the recorded balance has been reduced to zero, future cash receipts are applied to interest income, to the extent any interest has been foregone, and then they are recorded as recoveries of any amounts previously charged-off. For impaired loans, a specific reserve is established to adjust the carrying value of the loan to its estimated net realizable value.
Impaired loans recognized in conformity with ASC 310, Receivables (ASC 310), segregated by class, were as follows as of the dates presented:
Unpaid Contractual Principal Balance |
Recorded Investment With Allowance |
Recorded Investment With No Allowance |
Total Recorded Investment |
Related Allowance |
||||||||||||||||
March 31, 2013 |
||||||||||||||||||||
Commercial, financial, agricultural |
$ | 4,243 | $ | 1,524 | $ | 1,593 | $ | 3,117 | $ | 699 | ||||||||||
Lease financing |
| | | | | |||||||||||||||
Real estate construction |
2,447 | | 1,648 | 1,648 | | |||||||||||||||
Real estate 1-4 family mortgage |
73,810 | 30,147 | 6,718 | 36,865 | 8,641 | |||||||||||||||
Real estate commercial mortgage |
112,680 | 36,004 | 37,323 | 73,327 | 8,194 | |||||||||||||||
Installment loans to individuals |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 193,180 | $ | 67,675 | $ | 47,282 | $ | 114,957 | $ | 17,534 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2012 |
||||||||||||||||||||
Commercial, financial, agricultural |
$ | 5,142 | $ | 1,620 | $ | 1,620 | $ | 3,240 | $ | 708 | ||||||||||
Lease financing |
| | | | | |||||||||||||||
Real estate construction |
2,447 | | 1,648 | 1,648 | | |||||||||||||||
Real estate 1-4 family mortgage |
80,022 | 28,848 | 10,094 | 38,942 | 9,201 | |||||||||||||||
Real estate commercial mortgage |
118,167 | 34,400 | 39,450 | 73,850 | 7,688 | |||||||||||||||
Installment loans to individuals |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Totals |
$ | 205,778 | $ | 64,868 | $ | 52,812 | $ | 117,680 | $ | 17,597 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The following table presents the average recorded investment and interest income recognized on impaired loans for the periods presented:
Three Months Ended March 31, 2013 |
Three Months Ended March 31, 2012 |
|||||||||||||||
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized(1) |
|||||||||||||
Commercial, financial, agricultural |
$ | 3,758 | $ | | $ | 5,910 | $ | 8 | ||||||||
Lease financing |
| | | | ||||||||||||
Real estate construction |
1,650 | | 6,474 | | ||||||||||||
Real estate 1-4 family mortgage |
43,097 | 183 | 51,005 | 324 | ||||||||||||
Real estate commercial mortgage |
79,940 | 343 | 97,938 | 519 | ||||||||||||
Installment loans to individuals |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 128,445 | $ | 526 | $ | 161,327 | $ | 851 | ||||||||
|
|
|
|
|
|
|
|
(1) | Includes interest income recognized using the cash-basis method of income recognition of $214. No interest income was recognized using the cash-basis method of income recognition during the three months ended March 31, 2013. |
12
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
Restructured Loans
Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrowers financial condition and which are performing in accordance with the new terms. Such concessions may include reduction in interest rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest. Restructured loans that are not performing in accordance with their restructured terms that are either contractually 90 days past due or placed on nonaccrual status are reported as nonperforming loans. The following table presents restructured loans segregated by class as of the dates presented:
Number of Loans |
Pre- Modification Outstanding Recorded Investment |
Post- Modification Outstanding Recorded Investment |
||||||||||
March 31, 2013 |
||||||||||||
Commercial, financial, agricultural |
| $ | | $ | | |||||||
Lease financing |
| | | |||||||||
Real estate construction |
| | | |||||||||
Real estate 1-4 family mortgage |
23 | 20,713 | 11,110 | |||||||||
Real estate commercial mortgage |
18 | 20,113 | 19,104 | |||||||||
Installment loans to individuals |
1 | 184 | 173 | |||||||||
|
|
|
|
|
|
|||||||
Total |
42 | $ | 41,010 | $ | 30,387 | |||||||
|
|
|
|
|
|
|||||||
December 31, 2012 |
||||||||||||
Commercial, financial, agricultural |
| $ | | $ | | |||||||
Lease financing |
| | | |||||||||
Real estate construction |
| | | |||||||||
Real estate 1-4 family mortgage |
19 | 18,450 | 10,853 | |||||||||
Real estate commercial mortgage |
16 | 18,985 | 18,409 | |||||||||
Installment loans to individuals |
1 | 184 | 174 | |||||||||
|
|
|
|
|
|
|||||||
Total |
36 | $ | 37,619 | $ | 29,436 | |||||||
|
|
|
|
|
|
Changes in the Companys restructured loans are set forth in the table below:
Number of Loans |
Recorded Investment |
|||||||
Totals at January 1, 2013 |
36 | $ | 29,436 | |||||
Additional loans with concessions |
6 | 1,275 | ||||||
Reductions due to: |
||||||||
Reclassified as nonperforming |
| | ||||||
Charge-offs |
| |||||||
Transfer to other real estate owned |
| | ||||||
Principal paydowns |
(324 | ) | ||||||
Lapse of concession period |
| | ||||||
|
|
|
|
|||||
Totals at March 31, 2013 |
42 | $ | 30,387 | |||||
|
|
|
|
The allocated allowance for loan losses attributable to restructured loans was $4,061 and $3,969 at March 31, 2013 and December 31, 2012, respectively. The Company had $289 and $288 in remaining availability under commitments to lend additional funds on these restructured loans at March 31, 2013 and December 31, 2012, respectively.
13
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
Credit Quality
For loans originated for commercial purposes, internal risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances of these loans. Loan grades range between 1 and 9, with 1 being loans with the least credit risk. Loans that migrate toward the Pass grade (those with a risk rating between 1 and 4) or within the Pass grade generally have a lower risk of loss and therefore a lower risk factor. The Watch grade (those with a risk rating of 5) is utilized on a temporary basis for Pass grade loans where a significant risk-modifying action is anticipated in the near term. Loans that migrate toward the Substandard grade (those with a risk rating between 6 and 9) generally have a higher risk of loss and therefore a higher risk factor applied to those related loan balances. The following table presents the Companys loan portfolio by risk-rating grades as of the dates presented:
Pass | Watch | Substandard | Total | |||||||||||||
March 31, 2013 |
||||||||||||||||
Commercial, financial, agricultural |
$ | 223,166 | $ | 2,216 | $ | 1,962 | $ | 227,344 | ||||||||
Real estate construction |
78,948 | 772 | | 79,720 | ||||||||||||
Real estate 1-4 family mortgage |
98,816 | 17,132 | 32,038 | 147,986 | ||||||||||||
Real estate commercial mortgage |
999,221 | 43,856 | 41,445 | 1,084,522 | ||||||||||||
Installment loans to individuals |
1 | | | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,400,152 | $ | 63,976 | $ | 75,445 | $ | 1,539,573 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2012 |
||||||||||||||||
Commercial, financial, agricultural |
$ | 226,540 | $ | 1,939 | $ | 3,218 | $ | 231,697 | ||||||||
Real estate construction |
71,633 | 651 | | 72,284 | ||||||||||||
Real estate 1-4 family mortgage |
96,147 | 24,138 | 32,589 | 152,874 | ||||||||||||
Real estate commercial mortgage |
989,095 | 46,148 | 37,996 | 1,073,239 | ||||||||||||
Installment loans to individuals |
7 | | | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,383,422 | $ | 72,876 | $ | 73,803 | $ | 1,530,101 | ||||||||
|
|
|
|
|
|
|
|
For portfolio balances of consumer, consumer mortgage and certain other loans originated for other than commercial purposes, allowance factors are determined based on historical loss ratios by portfolio for the preceding eight quarters and may be adjusted by other qualitative criteria. The following table presents the performing status of the Companys loan portfolio not subject to risk rating as of the dates presented:
Performing | Non- Performing |
Total | ||||||||||
March 31, 2013 |
||||||||||||
Commercial, financial, agricultural |
$ | 70,121 | $ | 165 | $ | 70,286 | ||||||
Lease financing |
165 | | 165 | |||||||||
Real estate construction |
29,764 | | 29,764 | |||||||||
Real estate 1-4 family mortgage |
678,363 | 5,444 | 683,807 | |||||||||
Real estate commercial mortgage |
202,517 | 1,023 | 203,540 | |||||||||
Installment loans to individuals |
55,295 | 94 | 55,389 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,036,225 | $ | 6,726 | $ | 1,042,951 | ||||||
|
|
|
|
|
|
|||||||
December 31, 2012 |
||||||||||||
Commercial, financial, agricultural |
$ | 74,003 | $ | 210 | $ | 74,213 | ||||||
Lease financing |
195 | | 195 | |||||||||
Real estate construction |
31,774 | | 31,774 | |||||||||
Real estate 1-4 family mortgage |
670,074 | 5,328 | 675,402 | |||||||||
Real estate commercial mortgage |
195,086 | 449 | 195,535 | |||||||||
Installment loans to individuals |
54,918 | 91 | 55,009 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,026,050 | $ | 6,078 | $ | 1,032,128 | ||||||
|
|
|
|
|
|
14
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
Loans Acquired with Deteriorated Credit Quality
Loans acquired in business combinations that exhibited, at the date of acquisition, evidence of deterioration of the credit quality since origination, such that it was probable that all contractually required payments would not be collected, were as follows as of the dates presented:
Impaired Covered Loans |
Other Covered Loans |
Not Covered Loans |
Total | |||||||||||||
March 31, 2013 |
||||||||||||||||
Commercial, financial, agricultural |
$ | | $ | 10,157 | $ | 382 | $ | 10,539 | ||||||||
Lease financing |
| | | | ||||||||||||
Real estate construction |
| 1,648 | | 1,648 | ||||||||||||
Real estate 1-4 family mortgage |
1,999 | 63,490 | 2,412 | 67,901 | ||||||||||||
Real estate commercial mortgage |
25,204 | 111,337 | 7,151 | 143,692 | ||||||||||||
Installment loans to individuals |
| 37 | 1,972 | 2,009 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 27,203 | $ | 186,669 | $ | 11,917 | $ | 225,789 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2012 |
||||||||||||||||
Commercial, financial, agricultural |
$ | | $ | 10,800 | $ | 340 | $ | 11,140 | ||||||||
Lease financing |
| | | | ||||||||||||
Real estate construction |
| 1,648 | | 1,648 | ||||||||||||
Real estate 1-4 family mortgage |
6,122 | 67,326 | 1,699 | 75,147 | ||||||||||||
Real estate commercial mortgage |
25,782 | 125,379 | 6,708 | 157,869 | ||||||||||||
Installment loans to individuals |
| 31 | 2,194 | 2,225 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 31,904 | $ | 205,184 | $ | 10,941 | $ | 248,029 | ||||||||
|
|
|
|
|
|
|
|
The following table presents the fair value of loans determined to be impaired at the time of acquisition and determined not to be impaired at the time of acquisition at March 31, 2013:
Impaired Covered Loans |
Other Covered Loans |
Not Covered Loans |
Total | |||||||||||||
Contractually-required principal and interest |
$ | 73,565 | $ | 220,553 | $ | 14,215 | $ | 308,333 | ||||||||
Nonaccretable difference(1) |
(46,357 | ) | (29,998 | ) | (1,187 | ) | (77,542 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flows expected to be collected |
27,208 | 190,555 | 13,028 | 230,791 | ||||||||||||
Accretable yield(2) |
(5 | ) | (3,886 | ) | (1,111 | ) | (5,002 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Fair value |
$ | 27,203 | $ | 186,669 | $ | 11,917 | $ | 225,789 | ||||||||
|
|
|
|
|
|
|
|
(1) | Represents contractual principal and interest cash flows of $68,453 and $9,088, respectively, not expected to be collected. |
(2) | Represents contractual interest payments of $3,723 expected to be collected and purchase discount of $1,279. |
Changes in the accretable yield of loans acquired with deteriorated credit quality were as follows:
Impaired Covered Loans |
Other Covered Loans |
Not Covered Loans |
Total | |||||||||||||
Balance at January 1, 2013 |
$ | (13 | ) | $ | (6,705 | ) | $ | (1,130 | ) | $ | (7,848 | ) | ||||
Reclasses from nonaccretable difference |
(71 | ) | (309 | ) | (179 | ) | (559 | ) | ||||||||
Accretion |
79 | 3,128 | 198 | 3,405 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at March 31, 2013 |
$ | (5 | ) | $ | (3,886 | ) | $ | (1,111 | ) | $ | (5,002 | ) | ||||
|
|
|
|
|
|
|
|
15
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
Allowance for Loan Losses
The allowance for loan losses is maintained at a level believed adequate by management to absorb probable credit losses inherent in the entire loan portfolio. The appropriate level of the allowance is based on an ongoing analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including collective impairment as recognized under ASC 450, Contingencies. Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310. The balance of these loans and their related allowance is included in managements estimation and analysis of the allowance for loan losses. Management and the internal loan review staff evaluate the adequacy of the allowance for loan losses quarterly. The allowance for loan losses is evaluated based on a continuing assessment of problem loans, the types of loans, historical loss experience, new lending products, emerging credit trends, changes in the size and character of loan categories and other factors, including its risk rating system, regulatory guidance and economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses is established through a provision for loan losses charged to earnings resulting from measurements of inherent credit risk in the loan portfolio and estimates of probable losses or impairments of individual loans. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
16
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
The following table provides a rollforward of the allowance for loan losses and a breakdown of the ending balance of the allowance based on the Companys impairment methodology for the periods presented:
Commercial | Real Estate
- Construction |
Real Estate - 1-4 Family Mortgage |
Real Estate
- Commercial Mortgage |
Installment and Other(1) |
Total | |||||||||||||||||||
Three Months Ended March 31, 2013 |
||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||
Beginning balance |
$ | 3,307 | $ | 711 | $ | 18,347 | $ | 21,416 | $ | 566 | $ | 44,347 | ||||||||||||
Charge-offs |
(234 | ) | | (614 | ) | (593 | ) | (64 | ) | (1,505 | ) | |||||||||||||
Recoveries |
157 | 16 | 339 | 91 | 10 | 613 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net charge-offs |
(77 | ) | 16 | (275 | ) | (502 | ) | (54 | ) | (892 | ) | |||||||||||||
Provision for loan losses |
(53 | ) | (52 | ) | 1,197 | 1,825 | 542 | 3,459 | ||||||||||||||||
Benefit attributable to FDIC loss-share agreements |
(247 | ) | | (261 | ) | (661 | ) | | (1,169 | ) | ||||||||||||||
Recoveries payable to FDIC |
12 | 1 | 729 | 18 | | 760 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Provision for loan losses charged to operations |
(288 | ) | (51 | ) | 1,665 | 1,182 | 542 | 3,050 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending balance |
$ | 2,942 | $ | 676 | $ | 19,737 | $ | 22,096 | $ | 1,054 | $ | 46,505 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Period-End Amount Allocated to: |
||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 699 | $ | | $ | 8,641 | $ | 8,194 | $ | | $ | 17,534 | ||||||||||||
Collectively evaluated for impairment |
2,243 | 676 | 11,096 | 13,902 | 1,054 | 28,971 | ||||||||||||||||||
Acquired with deteriorated credit quality |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending balance |
$ | 2,942 | $ | 676 | $ | 19,737 | $ | 22,096 | $ | 1,054 | $ | 46,505 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Three Months Ended March 31, 2012 |
||||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||
Beginning balance |
$ | 4,197 | $ | 1,073 | $ | 17,191 | $ | 20,979 | $ | 900 | $ | 44,340 | ||||||||||||
Charge-offs |
(1,388 | ) | (4 | ) | (1,874 | ) | (1,882 | ) | (71 | ) | (5,219 | ) | ||||||||||||
Recoveries |
22 | | 161 | 52 | 20 | 255 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net charge-offs |
(1,366 | ) | (4 | ) | (1,713 | ) | (1,830 | ) | (51 | ) | (4,964 | ) | ||||||||||||
Provision for loan losses |
604 | (170 | ) | 4,943 | 3,283 | (46 | ) | 8,614 | ||||||||||||||||
Benefit attributable to FDIC loss-share agreements |
(217 | ) | (17 | ) | (1,549 | ) | (2,076 | ) | | (3,859 | ) | |||||||||||||
Recoveries payable to FDIC |
2 | | 20 | 23 | | 45 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Provision for loan losses charged to operations |
389 | (187 | ) | 3,414 | 1,230 | (46 | ) | 4,800 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending balance |
$ | 3,220 | $ | 882 | $ | 18,892 | $ | 20,379 | $ | 803 | $ | 44,176 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Period-End Amount Allocated to: |
||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 868 | $ | 16 | $ | 5,722 | $ | 6,868 | $ | | $ | 13,474 | ||||||||||||
Collectively evaluated for impairment |
2,352 | 866 | 13,170 | 13,511 | 803 | 30,702 | ||||||||||||||||||
Acquired with deteriorated credit quality |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending balance |
$ | 3,220 | $ | 882 | $ | 18,892 | $ | 20,379 | $ | 803 | $ | 44,176 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes lease financing receivables. |
17
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note C Loans and the Allowance for Loan Losses (continued)
The following table provides the recorded investment in loans, net of unearned income, based on the Companys impairment methodology as of the dates presented:
Commercial | Real Estate
- Construction |
Real Estate - 1-4 Family Mortgage |
Real Estate
- Commercial Mortgage |
Installment and Other(1) |
Total | |||||||||||||||||||
March 31, 2013 |
||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 1,524 | $ | | $ | 30,147 | $ | 36,004 | $ | | $ | 67,675 | ||||||||||||
Collectively evaluated for impairment |
296,106 | 109,484 | 801,646 | 1,252,058 | 55,552 | 2,514,846 | ||||||||||||||||||
Acquired with deteriorated credit quality |
10,539 | 1,648 | 67,901 | 143,692 | 2,009 | 225,789 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending balance |
$ | 308,169 | $ | 111,132 | $ | 899,694 | $ | 1,431,754 | $ | 57,561 | $ | 2,808,310 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
December 31, 2012 |
||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 1,620 | $ | | $ | 28,848 | $ | 34,400 | $ | | $ | 64,868 | ||||||||||||
Collectively evaluated for impairment |
304,290 | 104,058 | 799,428 | 1,234,374 | 55,206 | 2,497,356 | ||||||||||||||||||
Acquired with deteriorated credit quality |
11,140 | 1,648 | 75,147 | 157,869 | 2,225 | 248,029 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending balance |
$ | 317,050 | $ | 105,706 | $ | 903,423 | $ | 1,426,643 | $ | 57,431 | $ | 2,810,253 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes lease financing receivables. |
18
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note D Other Real Estate Owned
(In Thousands)
The following table provides details of the Companys other real estate owned (OREO) covered and not covered under a loss-share agreement, net of valuation allowances and direct write-downs as of the dates presented:
Covered OREO |
Not Covered OREO |
Total OREO |
||||||||||
March 31, 2013 |
||||||||||||
Residential real estate |
$ | 6,692 | $ | 5,559 | $ | 12,251 | ||||||
Commercial real estate |
10,098 | 7,288 | 17,386 | |||||||||
Residential land development |
3,495 | 20,428 | 23,923 | |||||||||
Commercial land development |
14,810 | 6,126 | 20,936 | |||||||||
Other |
| 385 | 385 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 35,095 | $ | 39,786 | $ | 74,881 | ||||||
|
|
|
|
|
|
|||||||
December 31, 2012 |
||||||||||||
Residential real estate |
$ | 8,778 | $ | 7,842 | $ | 16,620 | ||||||
Commercial real estate |
14,368 | 7,779 | 22,147 | |||||||||
Residential land development |
5,005 | 22,490 | 27,495 | |||||||||
Commercial land development |
17,383 | 6,221 | 23,604 | |||||||||
Other |
| 385 | 385 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 45,534 | $ | 44,717 | $ | 90,251 | ||||||
|
|
|
|
|
|
Changes in the Companys OREO covered and not covered under a loss-share agreement were as follows:
Covered OREO |
Not Covered OREO |
Total OREO |
||||||||||
Balance at January 1, 2013 |
$ | 45,534 | $ | 44,717 | $ | 90,251 | ||||||
Transfers of loans |
4,262 | 1,566 | 5,828 | |||||||||
Capitalized improvements |
| 129 | 129 | |||||||||
Impairments(1) |
(3,115 | ) | (363 | ) | (3,478 | ) | ||||||
Dispositions |
(11,559 | ) | (6,263 | ) | (17,822 | ) | ||||||
Other |
(27 | ) | | (27 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance at March 31, 2013 |
$ | 35,095 | $ | 39,786 | $ | 74,881 | ||||||
|
|
|
|
|
|
(1) | Of the total impairment charges of $3,115 recorded for covered OREO, $623 was included in the Consolidated Statements of Income for the three months ended March 31, 2013, while the remaining $2,492 increased the FDIC loss-share indemnification asset. |
Components of the line item Other real estate owned in the Consolidated Statements of Income were as follows:
Three Months Ended March 31, |
||||||||
2013 | 2012 | |||||||
Repairs and maintenance |
$ | 353 | $ | 579 | ||||
Property taxes and insurance |
353 | 449 | ||||||
Impairments |
986 | 2,098 | ||||||
Net losses on OREO sales |
470 | 998 | ||||||
Rental income |
(113 | ) | (125 | ) | ||||
|
|
|
|
|||||
Total |
$ | 2,049 | $ | 3,999 | ||||
|
|
|
|
19
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note E FDIC Loss-Share Indemnification Asset
(In Thousands)
As part of the loan portfolio and other real estate owned fair value estimation in connection with FDIC-assisted acquisitions, a FDIC loss-share indemnification asset is established, which represents the present value as of the acquisition date of the estimated losses on covered assets to be reimbursed by the FDIC. The estimated losses are based on the same cash flow estimates used in determining the fair value of the covered assets. The FDIC loss-share indemnification asset is reduced as losses are recognized on covered assets and loss-share payments are received from the FDIC. Realized losses in excess of estimates as of the date of the acquisition increase the FDIC loss-share indemnification asset. Conversely, when realized losses are less than these estimates, the portion of the FDIC loss-share indemnification asset no longer expected to result in a payment from the FDIC is amortized into interest income using the effective interest method.
Changes in the FDIC loss-share indemnification asset were as follows:
Balance at January 1, 2013 |
$ | 44,153 | ||
Realized losses in excess of initial estimates on: |
||||
Loans |
1,169 | |||
OREO |
2,492 | |||
Reimbursable expenses |
619 | |||
Accretion |
(731 | ) | ||
Reimbursements received from the FDIC |
(13,178 | ) | ||
|
|
|||
Balance at March 31, 2013 |
$ | 34,524 | ||
|
|
20
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note F Mortgage Servicing Rights
(In Thousands)
The Company retains the right to service certain mortgage loans that it sells to secondary market investors. These mortgage servicing rights, included in Other assets on the Consolidated Balance Sheets, are recognized as a separate asset on the date the corresponding mortgage loan is sold. Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. Mortgage servicing rights were carried at amortized cost at March 31, 2013 and December 31, 2012.
Impairment losses on mortgage servicing rights are recognized to the extent by which the unamortized cost exceeds fair value. No impairment losses on mortgage servicing rights were recognized in earnings for the three months ended March 31, 2013 and 2012.
Changes in the Companys mortgage servicing rights were as follows:
Carrying value at January 1, 2013 |
$ | 4,233 | ||
Capitalization |
1,556 | |||
Amortization |
(146 | ) | ||
|
|
|||
Carrying value at March 31, 2013 |
$ | 5,643 | ||
|
|
Data and key economic assumptions related to the Companys mortgage servicing rights as of March 31, 2013 are as follows:
Unpaid principal balance |
$ | 536,501 | ||
Weighted-average prepayment speed (CPR) |
3.81 | % | ||
Estimated impact of a 10% increase |
$ | (249 | ) | |
Estimated impact of a 20% increase |
(288 | ) | ||
Discount rate |
11.27 | % | ||
Estimated impact of a 10% increase |
$ | (197 | ) | |
Estimated impact of a 20% increase |
(380 | ) | ||
Weighted-average coupon interest rate |
3.22 | % | ||
Weighted-average servicing fee (basis points) |
25.09 | |||
Weighted-average remaining maturity (in months) |
284.0 |
21
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note G - Employee Benefit and Deferred Compensation Plans
(In Thousands, Except Share Data)
The plan expense for the Company-sponsored noncontributory defined benefit pension plan (Pension Benefits) and post-retirement health and life plans (Other Benefits) for the periods presented was as follows:
Pension Benefits | Other Benefits | |||||||||||||||
Three Months Ended March 31, |
Three Months Ended March 31, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Service cost |
$ | | $ | | $ | 7 | $ | 6 | ||||||||
Interest cost |
188 | 215 | 12 | 16 | ||||||||||||
Expected return on plan assets |
(311 | ) | (298 | ) | | | ||||||||||
Prior service cost recognized |
| | | | ||||||||||||
Recognized actuarial loss |
97 | 89 | 19 | 18 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
$ | (26 | ) | $ | 6 | $ | 38 | $ | 40 | |||||||
|
|
|
|
|
|
|
|
In January 2013 and 2012, the Company granted stock options which generally vest and become exercisable in equal installments of 33 1/3% upon completion of one, two and three years of service measured from the grant date. The fair value of stock option grants is estimated on the grant date using the Black-Scholes option-pricing model. The Company employed the following assumptions with respect to its stock option grants in 2013 and 2012 for the three month periods ended March 31, 2013 and 2012:
2013 Grant | 2012 Grant | |||||||
Shares granted |
37,500 | 172,000 | ||||||
Dividend yield |
3.55 | % | 4.55 | % | ||||
Expected volatility |
37 | % | 37 | % | ||||
Risk-free interest rate |
0.76 | % | 0.79 | % | ||||
Expected lives |
6 years | 6 years | ||||||
Weighted average exercise price |
$ | 19.14 | $ | 14.96 | ||||
Weighted average fair value |
$ | 4.47 | $ | 3.10 |
In addition, the Company awarded 10,000 shares of time-based restricted stock and 59,850 shares of performance-based restricted stock in January 2013. The time-based restricted stock is earned 100% upon completion of one year of service measured from the grant date. The performance-based restricted stock is earned, if at all, if the Company meets or exceeds financial performance results defined by the board of directors for the year in which the grant was made. The fair value of the restricted stock grants on the date of the grants was $19.14 per share.
In April 2012, an amendment to the Companys long-term incentive compensation plan was adopted that allows non-employee members of the Board of Directors to participate in the plan. Under this provision, on April 24, 2012, the Company awarded 9,684 shares of time-based restricted stock to non-employee directors which are earned 100% upon the completion of one year of service measured from the grant date. The fair value of the restricted stock grants on the date of the grant was $15.49 per share. In January 2013, 646 shares were forfeited due to the service requirement not being met.
During the three months ended March 31, 2013, the Company reissued 51,096 shares from treasury in connection with the exercise of stock options and issuance of fully vested restricted stock. The Company recorded total stock-based compensation expense of $478 and $292 for the three months ended March 31, 2013 and 2012, respectively.
22
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note H Segment Reporting
(In Thousands)
The operations of the Companys reportable segments are described as follows:
| The Community Banks segment delivers a complete range of banking and financial services to individuals and small to medium-sized businesses including checking and savings accounts, business and personal loans, equipment leasing, as well as safe deposit and night depository facilities. |
| The Insurance segment includes a full service insurance agency offering all lines of commercial and personal insurance through major carriers. |
| The Wealth Management segment offers a broad range of fiduciary services which includes the administration and management of trust accounts including personal and corporate benefit accounts, self-directed IRAs, and custodial accounts. In addition, the Wealth Management segment offers annuities, mutual funds and other investment services through a third party broker-dealer. |
In order to give the Companys divisional management a more precise indication of the income and expenses they can control, the results of operations for the Community Banks, the Insurance and the Wealth Management segments reflect the direct revenues and expenses of each respective segment. Indirect revenues and expenses, including but not limited to income from the Companys investment portfolio, as well as certain costs associated with data processing and back office functions, primarily support the operations of the community banks and, therefore, are included in the results of the Community Banks segment. Included in Other are the operations of the holding company and other eliminations which are necessary for purposes of reconciling to the consolidated amounts.
23
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note H Segment Reporting (continued)
The following table provides financial information for the Companys operating segments for the periods presented:
Community Banks |
Insurance | Wealth Management |
Other | Consolidated | ||||||||||||||||
Three Months Ended March 31, 2013 |
||||||||||||||||||||
Net interest income |
$ | 33,677 | $ | 23 | $ | 295 | $ | (614 | ) | $ | 33,381 | |||||||||
Provision for loan losses |
2,917 | | 133 | | 3,050 | |||||||||||||||
Noninterest income |
14,977 | 1,033 | 1,304 | 21 | 17,335 | |||||||||||||||
Noninterest expense |
35,059 | 813 | 1,581 | 104 | 37,557 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes |
10,678 | 243 | (115 | ) | (697 | ) | 10,109 | |||||||||||||
Income taxes |
2,723 | 94 | | (279 | ) | 2,538 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 7,955 | $ | 149 | $ | (115 | ) | $ | (418 | ) | $ | 7,571 | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 4,205,826 | $ | 10,214 | $ | 39,673 | $ | 11,945 | $ | 4,267,658 | ||||||||||
Goodwill |
181,996 | 2,783 | | | 184,779 | |||||||||||||||
Three Months Ended March 31, 2012 |
||||||||||||||||||||
Net interest income |
$ | 33,105 | $ | 24 | $ | 363 | $ | (649 | ) | $ | 32,843 | |||||||||
Provision for loan losses |
4,794 | | 6 | | 4,800 | |||||||||||||||
Noninterest income |
13,245 | 1,169 | 1,951 | 22 | 16,387 | |||||||||||||||
Noninterest expense |
34,263 | 783 | 1,466 | 109 | 36,621 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes |
7,293 | 410 | 842 | (736 | ) | 7,809 | ||||||||||||||
Income taxes |
1,732 | 159 | 226 | (282 | ) | 1,835 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 5,561 | $ | 251 | $ | 616 | $ | (454 | ) | $ | 5,974 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 4,118,598 | $ | 10,377 | $ | 41,528 | $ | 5,987 | $ | 4,176,490 | ||||||||||
Goodwill |
182,096 | 2,783 | | | 184,879 |
24
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note I Fair Value Measurements
(In Thousands)
Fair Value Measurements and the Fair Level Hierarchy
ASC 820, Fair Value Measurements and Disclosures, provides guidance for using fair value to measure assets and liabilities and also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to a valuation based on quoted prices in active markets for identical assets and liabilities (Level 1), moderate priority to a valuation based on quoted prices in active markets for similar assets and liabilities and/or based on assumptions that are observable in the market (Level 2), and the lowest priority to a valuation based on assumptions that are not observable in the market (Level 3).
Recurring Fair Value Measurements
The Company carries certain assets and liabilities at fair value on a recurring basis in accordance with applicable standards. The Companys recurring fair value measurements are based on the requirement to carry such assets and liabilities at fair value or the Companys election to carry certain eligible assets and liabilities at fair value. Assets and liabilities that are required to be carried at fair value include securities available for sale and derivative instruments. The Company has elected to carry mortgage loans held for sale at fair value on a recurring basis as permitted under the guidance in ASC 825, Financial Instruments (ASC 825).
The following methods and assumptions are used by the Company to estimate the fair values of the Companys financial assets and liabilities that are measured on a recurring basis:
Securities available for sale: Securities available for sale consist primarily of debt securities, such as obligations of U.S. Government agencies and corporations, mortgage-backed securities, trust preferred securities, and other debt and equity securities. Where quoted market prices in active markets are available, securities are classified within Level 1 of the fair value hierarchy. If quoted prices from active markets are not available, fair values are based on quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active, or model-based valuation techniques where all significant assumptions are observable in the market. Such instruments are classified within Level 2 of the fair value hierarchy. When assumptions used in model-based valuation techniques are not observable in the market, the assumptions used by management reflect estimates of assumptions used by other market participants in determining fair value. When there is limited transparency around the inputs to the valuation, the instruments are classified within Level 3 of the fair value hierarchy.
Derivative instruments: The Company uses derivatives to manage various financial risks. Most of the Companys derivative contracts are extensively traded in over-the-counter markets and are valued using discounted cash flow models which incorporate observable market based inputs including current market interest rates, credit spreads, and other factors. Such instruments are categorized within Level 2 of the fair value hierarchy and include interest rate swaps and other interest rate contracts such as interest rate caps and/or floors. The Companys interest rate lock commitments are valued using current market prices for mortgage-backed securities with similar characteristics, adjusted for certain factors including servicing and risk. The value of the Companys forward commitments is based on current prices for securities backed by similar types of loans. Because these assumptions are observable in active markets, the Companys interest rate lock commitments and forward commitments are categorized within Level 2 of the fair value hierarchy.
Mortgage loans held for sale: Mortgage loans held for sale are primarily agency loans which trade in active secondary markets. The fair value of these instruments is derived from current market pricing for similar loans, adjusted for differences in loan characteristics, including servicing and risk. Because the valuation is based on external pricing of similar instruments, mortgage loans held for sale are classified within Level 2 of the fair value hierarchy.
25
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note I Fair Value Measurements (continued)
The following table presents assets and liabilities that are measured at fair value on a recurring basis as of the dates presented:
Level 1 | Level 2 | Level 3 | Totals | |||||||||||||
March 31, 2013 |
||||||||||||||||
Financial assets: |
||||||||||||||||
Securities available for sale: |
||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | | $ | 2,424 | $ | | $ | 2,424 | ||||||||
Residential mortgage-backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
| 168,179 | | 168,179 | ||||||||||||
Government agency collateralized mortgage obligations |
| 133,302 | | 133,302 | ||||||||||||
Commercial mortgage-backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
| 44,620 | | 44,620 | ||||||||||||
Government agency collateralized mortgage obligations |
| 5,339 | | 5,339 | ||||||||||||
Trust preferred securities |
| | 16,162 | 16,162 | ||||||||||||
Other debt securities |
| 22,554 | | 22,554 | ||||||||||||
Other equity securities |
| 3,434 | | 3,434 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total securities available for sale |
| 379,852 | 16,162 | 396,014 | ||||||||||||
Derivative instruments: |
||||||||||||||||
Interest rate contracts |
| 2,796 | | 2,796 | ||||||||||||
Interest rate lock commitments |
| 1,755 | | 1,755 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total derivative instruments |
| 4,551 | | 4,551 | ||||||||||||
Mortgage loans held for sale |
| 26,286 | | 26,286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total financial assets |
$ | | $ | 410,689 | $ | 16,162 | $ | 426,851 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities: |
||||||||||||||||
Derivative instruments: |
||||||||||||||||
Interest rate swaps |
$ | | $ | 1,830 | $ | | $ | 1,830 | ||||||||
Interest rate contracts |
| 2,773 | | 2,773 | ||||||||||||
Forward commitments |
| 381 | | 381 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total derivative instruments |
| 4,984 | | 4,984 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total financial liabilities |
$ | | $ | 4,984 | $ | | $ | 4,984 | ||||||||
|
|
|
|
|
|
|
|
26
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note I Fair Value Measurements (continued)
Level 1 | Level 2 | Level 3 | Totals | |||||||||||||
December 31, 2012 |
||||||||||||||||
Financial assets: |
||||||||||||||||
Securities available for sale: |
||||||||||||||||
Obligations of other U.S. Government agencies and corporations |
$ | | $ | 2,442 | $ | | $ | 2,442 | ||||||||
Residential mortgage-backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
| 144,817 | | 144,817 | ||||||||||||
Government agency collateralized mortgage obligations |
| 117,521 | | 117,521 | ||||||||||||
Commercial mortgage-backed securities: |
||||||||||||||||
Government agency mortgage backed securities |
| 45,058 | | 45,058 | ||||||||||||
Government agency collateralized mortgage obligations |
| 5,407 | | 5,407 | ||||||||||||
Trust preferred securities |
| | 15,068 | 15,068 | ||||||||||||
Other debt securities |
| 22,930 | | 22,930 | ||||||||||||
Other equity securities |
| 3,068 | | 3,068 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total securities available for sale |
| 341,243 | 15,068 | 356,311 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivative instruments: |
||||||||||||||||
Interest rate contracts |
| 3,083 | | 3,083 | ||||||||||||
Interest rate lock commitments |
| 1,571 | | 1,571 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total derivative instruments |
| 4,654 | | 4,654 | ||||||||||||
Mortgage loans held for sale |
| 34,845 | | 34,845 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total financial assets |
$ | | $ | 380,742 | $ | 15,068 | $ | 395,810 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities: |
||||||||||||||||
Derivative instruments: |
||||||||||||||||
Interest rate swaps |
$ | | $ | 2,164 | $ | | $ | 2,164 | ||||||||
Interest rate contracts |
| 3,152 | | 3,152 | ||||||||||||
Forward commitments |
| 198 | | 198 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total derivative instruments |
| 5,514 | | 5,514 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total financial liabilities |
$ | | $ | 5,514 | $ | | $ | 5,514 | ||||||||
|
|
|
|
|
|
|
|
The Company reviews fair value hierarchy classifications on a quarterly basis. Changes in the Companys ability to observe inputs to the valuation may cause reclassification of certain assets or liabilities within the fair value hierarchy. Transfers between levels of the hierarchy are deemed to have occurred at the end of period. There were no such transfers between levels of the fair value hierarchy during the three months ended March 31, 2013.
27
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note I Fair Value Measurements (continued)
The following tables provide a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, during the three months ended March 31, 2013 and 2012, respectively:
Securities available for sale | ||||||||||||
Three Months Ended March 31, 2013 |
Trust preferred securities |
Other equity securities |
Total | |||||||||
Balance at January 1, 2013 |
$ | 15,068 | $ | | $ | 15,068 | ||||||
Realized gains (losses) included in net income |
| | | |||||||||
Unrealized gains (losses) included in other comprehensive income |
1,878 | | 1,878 | |||||||||
Purchases |
| | | |||||||||
Sales |
| | | |||||||||
Issues |
| | | |||||||||
Settlements |
(784 | ) | | (784 | ) | |||||||
Transfers into Level 3 |
| | | |||||||||
Transfers out of Level 3 |
| | | |||||||||
|
|
|
|
|
|
|||||||
Balance at March 31, 2013 |
$ | 16,162 | $ | | $ | 16,162 | ||||||
|
|
|
|
|
|
Securities available for sale | ||||||||||||
Three Months Ended March 31, 2012 |
Trust preferred securities |
Other equity securities |
Total | |||||||||
Balance at January 1, 2012 |
$ | 12,785 | $ | 2,237 | $ | 15,022 | ||||||
Realized gains (losses) included in net income |
| | | |||||||||
Unrealized gains (losses) included in other comprehensive income |
1,033 | 423 | 1,456 | |||||||||
Reclassification adjustment |
(952 | ) | | (952 | ) | |||||||
Purchases |
| | | |||||||||
Sales |
| | | |||||||||
Issues |
| | | |||||||||
Settlements |
| | | |||||||||
Transfers into Level 3 |
| | | |||||||||
Transfers out of Level 3 |
| | | |||||||||
|
|
|
|
|
|
|||||||
Balance at March 31, 2012 |
$ | 12,866 | $ | 2,660 | $ | 15,526 | ||||||
|
|
|
|
|
|
For the three months ended March 31, 2013 and 2012, there were no gains or losses included in earnings that were attributable to the change in unrealized gains or losses related to assets or liabilities held at the end of each respective period that were measured on a recurring basis using significant unobservable inputs.
The following table presents information as of March 31, 2013 about significant unobservable inputs (Level 3) used in the valuation of assets and liabilities measured at fair value on a recurring basis:
Financial instrument |
Fair Value |
Valuation Technique |
Significant |
Range of Inputs | ||||||
Trust preferred securities |
$ | 16,162 | Discounted cash flows | Default rate | 0-100% |
28
Renasant Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note I Fair Value Measurements (continued)
Nonrecurring Fair Value Measurements
Certain assets may be recorded at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically are a result of the application of the lower of cost or market accounting or a write-down occurring during the period. The following table provides the fair value measurement for assets measured at fair value on a nonrecurring basis that were still held on the Consolidated Balance Sheets as of the dates presented and the level within the fair value hierarchy each is classified:
March 31, 2013 |
Level 1 | Level 2 |