0001193125-13-207888.txt : 20130508 0001193125-13-207888.hdr.sgml : 20130508 20130508172632 ACCESSION NUMBER: 0001193125-13-207888 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20130508 DATE AS OF CHANGE: 20130508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENASANT CORP CENTRAL INDEX KEY: 0000715072 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640676974 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13253 FILM NUMBER: 13825706 BUSINESS ADDRESS: STREET 1: 209 TROY STREET CITY: TUPELO STATE: MS ZIP: 38804-4827 BUSINESS PHONE: (662) 680-1001 MAIL ADDRESS: STREET 1: P.O. BOX 709 CITY: TUPELO STATE: MS ZIP: 38802-0709 FORMER COMPANY: FORMER CONFORMED NAME: PEOPLES HOLDING CO DATE OF NAME CHANGE: 19920703 10-Q 1 d516513d10q.htm 10-Q 10-Q
Table of Contents

 

 

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

(Registrant’s 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 registrant’s common stock, $5.00 par value per share, were outstanding. The registrant has no other classes of securities outstanding.

 

 

 


Table of Contents

Renasant Corporation and Subsidiaries

Form 10-Q

For the Quarterly Period Ended March 31, 2013

CONTENTS

 

         Page  

PART I

 

Financial Information

  

Item 1.

 

Financial Statements (Unaudited)

  
 

Consolidated Balance Sheets

     1   
 

Consolidated Statements of Income

     2   
 

Consolidated Statements of Comprehensive Income

     3   
 

Condensed Consolidated Statements of Cash Flows

     4   
 

Notes to Consolidated Financial Statements

     5   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     39   

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

     60   

Item 4.

 

Controls and Procedures

     60   

PART II

 

Other Information

  

Item 1.

 

Legal Proceedings

     61   

Item 1A.

 

Risk Factors

     61   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     61   

Item 5

 

Other Information

     61   

Item 6.

 

Exhibits

     62   

SIGNATURES

     63   

EXHIBIT INDEX

     64   


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

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   
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Liabilities

    

Deposits

    

Noninterest-bearing

   $ 567,065      $ 568,214   

Interest-bearing

     2,988,110        2,893,007   
  

 

 

   

 

 

 

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


Table of Contents

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   
  

 

 

    

 

 

 

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


Table of Contents

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
  

 

 

   

 

 

 

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   
  

 

 

   

 

 

 

Total defined benefit pension and post-retirement benefit plans

     72        66   
  

 

 

   

 

 

 

Other comprehensive income, net of tax

     377        219   
  

 

 

   

 

 

 

Comprehensive income

   $ 7,948      $ 6,193   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

3


Table of Contents

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   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 190,028      $ 174,678   
  

 

 

   

 

 

 

Supplemental disclosures

    

Noncash transactions:

    

Transfers of loans to other real estate owned

   $ 5,828      $ 7,481   

See Notes to Consolidated Financial Statements.

 

4


Table of Contents

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 Company’s significant accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s 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   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 344,599       $ 14,488       $ (415   $ 358,672   
  

 

 

    

 

 

    

 

 

   

 

 

 

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   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 317,766       $ 16,976       $ (267   $ 334,475   
  

 

 

    

 

 

    

 

 

   

 

 

 

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


Table of Contents

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   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 396,985       $ 11,860       $ (12,831   $ 396,014   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     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   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 357,633       $ 12,713       $ (14,035   $ 356,311   
  

 

 

    

 

 

    

 

 

   

 

 

 

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     —     
  

 

 

   

 

 

 

(Loss) Gain on sales of securities available for sale, net

   $ (115   $ 904   
  

 

 

   

 

 

 

 

6


Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7


Table of Contents

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
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 74,344       $ (414   $ 125       $ (1     74,469       $ (415
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

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
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 38,085       $ (266   $ 126       $ (1   $ 38,211       $ (267
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

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


Table of Contents

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 security’s 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. Management’s 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 Company’s 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 Company’s 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


Table of Contents

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


Table of Contents

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


Table of Contents

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 loan’s effective interest rate, the loan’s 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 loan’s 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


Table of Contents

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 borrower’s 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 Company’s 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


Table of Contents

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 Company’s 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 Company’s 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


Table of Contents

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


Table of Contents

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 management’s 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


Table of Contents

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 Company’s 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


Table of Contents

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 Company’s 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


Table of Contents

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 Company’s 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 Company’s 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


Table of Contents

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


Table of Contents

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 Company’s 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 Company’s 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


Table of Contents

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 Company’s 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


Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note H – Segment Reporting

(In Thousands)

The operations of the Company’s 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 IRA’s, 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 Company’s 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 Company’s 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


Table of Contents

Renasant Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note H – Segment Reporting (continued)

 

The following table provides financial information for the Company’s 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   

 

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Table of Contents

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 Company’s recurring fair value measurements are based on the requirement to carry such assets and liabilities at fair value or the Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s forward commitments is based on current prices for securities backed by similar types of loans. Because these assumptions are observable in active markets, the Company’s 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.

 

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Table of Contents

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


Table of Contents

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 Company’s 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.

 

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Table of Contents

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
Unobservable Inputs

   Range of Inputs

Trust preferred securities

   $ 16,162       Discounted cash flows    Default rate    0-100%

 

28


Table of Contents

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