In addition to the other information contained in or incorporated by reference into this Form 10-K and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. The risks disclosed below, either alone or in combination, could materially adversely affect the business, financial condition or results of operations of the Company. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations.
Risks Related To Our Business and Industry
Our business may be adversely affected by current economic conditions in general and specifically in our Mississippi, Tennessee, Alabama and Georgia markets.
Over the past few years, the United States economy and the global economy have experienced a severe economic downturn. Only in the past few quarters has it appeared that United States and global economic conditions are beginning to improve. Notwithstanding these signs of improvement, business activity across a wide range of industries and regions remains greatly reduced, and local governments and many businesses are in serious difficulty due to the lack of consumer spending and the lack of liquidity in the credit markets. Unemployment has also increased. The markets in which we operate have not been immune from the effects of this economic downturn.
Since mid-2007, the financial services industry and the securities markets generally were materially and adversely affected by significant declines in the values of nearly all asset classes and by a significant lack of liquidity in the credit markets. This was initially triggered by declines in home prices and the values of subprime mortgages. The global markets have since been characterized by substantially increased volatility and an overall loss of investor confidence, initially in financial institutions, but now in companies in virtually all other industries and in the broader markets.
Declining asset values, defaults on mortgages and consumer loans, and the lack of market and investor confidence, as well as other factors, have all combined to cause rating agencies to lower credit ratings, and to otherwise increase the cost and decrease the availability of liquidity, despite very significant and lasting declines in Federal Reserve borrowing rates and other government actions. As a result of this market volatility, many banks and other institutions have suffered significant losses and have become reluctant to lend, even on a secured basis, due to the increased risk of default and the impact of declining asset values on the value of collateral. This has significantly weakened the strength and liquidity of many financial institutions worldwide, resulting in the failure or near-failure of many institutions.
In addition, the economic conditions in the states of Mississippi, Tennessee, Alabama and Georgia and the specific local markets in which we operate will particularly affect our results of operations and our financial condition. Due to our limited market areas, the local economic conditions in these areas have a significant impact on the demand for our products and services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources.
Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, is highly dependent upon the business conditions in the markets where we operate, in the United States as a whole and abroad. These conditions include liquidity in the credit markets, short-term and long-term interest rates, inflation, deflated money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance and the strength of the U.S. economy and the local economies in which we operate, all of which are beyond our control. We anticipate that the business environment in our markets and the United States as a whole will recover only marginally over the foreseeable future, and there remains a possibility of further deterioration. In either case, the credit quality of our loans and the value of loan collateral, as well as our results of operations and financial condition, are likely to be materially and adversely affected. We believe that the impact of the economic downturn in the United States heightens all of the risks described in the remainder of this Item 1A.
We are subject to lending risk.
There are inherent risks associated with our lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where we operate as well as those across the United States. Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans. For the reasons explained below, if current trends in the housing and real estate markets continue, we may experience higher than normal delinquencies and credit losses.
14
| (i) |
Report on Management’s Assessment of Internal Control over Financial Reporting | |
| (ii) |
Reports of Independent Registered Public Accounting Firm | |
| (iii) |
Consolidated Balance Sheets – December 31, 2011 and 2010 | |
| (iv) |
Consolidated Statements of Income – Years ended December 31, 2011, 2010 and 2009 | |
| (v) |
Consolidated Statements of Changes in Shareholders’ Equity – Years ended December 31, 2011, 2010 and 2009 | |
| (vi) |
Consolidated Statements of Cash Flows – Years ended December 31, 2011, 2010 and 2009 | |
| (vii) |
Notes to Consolidated Financial Statements | |
| (2)(i) |
Purchase and Assumption Agreement – Whole Bank – All Deposits, among the Federal Deposit Insurance Corporation, as Receiver of Crescent Bank & Trust Company, Jasper, Georgia, the Federal Deposit Insurance Corporation and Renasant Bank, dated as of July 23, 2010(1) | |
| (3)(i) |
Articles of Incorporation of the Company, as amended(2) | |
| (3)(ii) |
Restated Bylaws of the Company (3) | |
| (4)(i) |
Articles of Incorporation of the Company, as amended(2) | |
| (4)(ii) |
Restated Bylaws of the Company (3) | |
| (10)(i) |
The Peoples Holding Company 2001 Long-Term Incentive Plan, as amended*(4) | |
| (10)(ii) |
Renasant Corporation Deferred Stock Unit Plan, as amended*(5) | |
| (10)(iii) |
The Peoples Holding Company Plan of Assumption of Renasant Bancshares, Inc. Stock Option Plan*(6) | |
| (10)(iv) |
The Peoples Holding Company Plan of Assumption of Heritage Financial Holding Corporation Incentive Stock Compensation Plan*(7) | |
| (10)(v) |
Description of Performance Based Rewards Bonus Plan*(8) | |
| (10)(vi) |
Renasant Bank Executive Deferred Income Plan, as amended*(9) | |
| (10)(vii) |
Renasant Bank Directors’ Deferred Fee Plan, as amended*(10) | |
| (10)(viii) |
Employment Agreement dated as of June 29, 2007 by and between R. Rick Hart and Renasant Corporation, as amended.*(11) | |
| (10)(ix) |
Termination and Release Agreement dated as of June 29, 2007 by and among R. Rick Hart, Capital Bancorp, Inc., Capital Bank & Trust Company and Renasant Corporation.*(12) | |
| (10)(x) |
Employment Agreement dated as of June 29, 2007 by and between John W. Gregory, Jr. and Renasant Bank.*(13) | |
| (10)(xi) |
Termination and Release Agreement dated as of June 29, 2007 by and among John W. Gregory, Jr., Capital Bancorp, Inc., Capital Bank & Trust Company and Renasant Corporation.*(14) | |
| (10)(xii) |
Second Amendment to the Capital Bank & Trust Company Supplemental Executive Retirement Plan Agreement dated August 20, 2003 for R. Rick Hart, executed June 29, 2007.*(15) | |
| (10)(xiii) |
Second Amendment to the Capital Bank & Trust Company Supplemental Executive Retirement Plan Agreement dated July 10, 2006 for R. Rick Hart, executed June 29, 2007.*(16) | |
| (10)(xiv) |
Second Amendment to the Capital Bank & Trust Company Supplemental Executive Retirement Plan Agreement dated August 20, 2003 for John W. Gregory, Jr., executed June 29, 2007.*(17) | |
| (10)(xv) |
Second Amendment to the Capital Bank & Trust Company Supplemental Executive Retirement Plan Agreement dated July 10, 2006 for John W. Gregory, Jr., executed June 29, 2007.*(18) | |
| (10)(xvi) |
Supplemental Agreement to the Capital Bancorp, Inc. 2001 Stock Option Plan for R. Rick Hart, executed June 29, 2007.*(19) | |
| (10)(xvii) |
Supplemental Agreement to the Capital Bancorp, Inc. 2001 Stock Option Plan for John W. Gregory, Jr., executed June 29, 2007.*(20) | |
| (10)(xviii) |
Renasant Corporation Plan of Assumption of Capital Bancorp, Inc. 2001 Stock Option Plan*(21) | |
| (10)(xix) |
Renasant Corporation Plan of Assumption of Capital Bancorp, Inc. Director Deferred Stock Compensation Plan*(22) | |
| (10)(xx) |
Executive Employment Agreement dated January 2, 2008 by and between E. Robinson McGraw and Renasant Corporation*(23) | |
| (10)(xxi) |
Renasant Corporation Severance Pay Plan*(24) | |
| (10)(xxii) |
Change in Control Agreement dated as of January 1, 2009 between Renasant Corporation and Stuart R. Johnson*(25) | |
| (10)(xxiii) |
Change in Control Agreement dated as of January 1, 2009 between Renasant Corporation and C. Mitchell Waycaster*(26) | |
| (10)(xxiv) |
Change in Control Agreement dated as of January 1, 2009 between Renasant Corporation and Michael D. Ross*(27) | |
| (10)(xxv) |
The Renasant Corporation 2011 Long-Term Incentive Compensation Plan, as amended*(28) | |
| (10)(xxvi) |
Change in Control Agreement dated as of January 1, 2009 between Renasant Corporation and Kevin D. Chapman*(29) | |
| (21) |
Subsidiaries of the Registrant | |
| (23) |
Consent of Independent Registered Public Accounting Firm | |
| (31)(i) |
Certification of the Chief Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| (31)(ii) |
Certification of the Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| (31)(iii) |
Certification of the Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| (32)(i) |
Certification of the Chief Executive Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| (32)(ii) |
Certification of the Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| (32)(iii) |
Certification of the Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| (101) |
The following materials from Renasant Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011 were formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2011 and December 31, 2010, (ii) Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009, (iii) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2011, 2010 and 2009, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009 and (v) Notes to Consolidated Financial Statements. | |