RENASANT CORPRNST
RENASANT CORP Income Taxes Disclosure
Income Taxes
(In Thousands)
Significant components of the provision for income taxes are as follows for the periods presented:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 42,179 | $ | 36,138 | $ | 39,507 | |||||||||||
| State | 2,680 | 1,376 | 3,453 | ||||||||||||||
| 44,859 | 37,514 | 42,960 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 7,028 | (1,187) | 1,630 | ||||||||||||||
| State | (2,379) | (3,818) | 650 | ||||||||||||||
| 4,649 | (5,005) | 2,280 | |||||||||||||||
| $ | 49,508 | $ | 32,509 | $ | 45,240 | ||||||||||||
Total income tax expense does not reflect the tax effects of items that are included in other comprehensive income each period. The tax effects included each period resulted in net expense in other comprehensive income of $4,012 and $19,716 in 2024 and 2023, respectively, and a net benefit in other comprehensive income of $67,453 in 2022.
The reconciliation of income taxes computed at the United States federal statutory tax rates to the provision for income taxes is as follows, for the periods presented:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Tax at U.S. statutory rate | $ | 51,443 | $ | 37,209 | $ | 44,375 | |||||||||||
| Increase (decrease) in taxes resulting from: | |||||||||||||||||
| Tax-exempt interest income | (1,750) | (1,505) | (1,832) | ||||||||||||||
| BOLI income | (1,178) | (2,197) | (1,946) | ||||||||||||||
| Investment tax credits | (3,950) | (1,901) | (928) | ||||||||||||||
| Amortization of investment in low-income housing tax credits | 2,851 | 1,741 | 683 | ||||||||||||||
| State income tax expense, net of federal benefit | (262) | (1,929) | 3,241 | ||||||||||||||
| Nondeductible transaction costs | 1,060 | — | — | ||||||||||||||
| Other items, net | 1,294 | 1,091 | 1,647 | ||||||||||||||
| $ | 49,508 | $ | 32,509 | $ | 45,240 | ||||||||||||
Significant components of the Company’s deferred tax assets and liabilities are as follows for the periods presented:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets | |||||||||||
| Allowance for credit losses | $ | 53,349 | $ | 53,432 | |||||||
| Loans | — | 1,631 | |||||||||
| Deferred compensation | 15,695 | 15,310 | |||||||||
| Net unrealized losses on securities | 47,199 | 51,211 | |||||||||
| Impairment of assets | 874 | 138 | |||||||||
| Tax credits | 8,781 | 4,035 | |||||||||
| Net operating loss carryforwards | 2 | 33 | |||||||||
| Investments in partnerships | 77 | 1,491 | |||||||||
| Lease liabilities under operating leases | 12,423 | 13,066 | |||||||||
| Realized losses on securities | — | 4,892 | |||||||||
| Other | 3,073 | 2,660 | |||||||||
| Total deferred tax assets | 141,473 | 147,899 | |||||||||
| Deferred tax liabilities | |||||||||||
| Fixed assets | 9,927 | 11,023 | |||||||||
| Mortgage servicing rights | 15,841 | 21,282 | |||||||||
| Junior subordinated debt | 1,452 | 1,708 | |||||||||
| Intangibles | 3,652 | 2,447 | |||||||||
| Lease right-of-use asset | 11,775 | 12,399 | |||||||||
| Loans | 7,638 | — | |||||||||
| Other | 4,153 | 3,344 | |||||||||
| Total deferred tax liabilities | 54,438 | 52,203 | |||||||||
| Net deferred tax assets | $ | 87,035 | $ | 95,696 | |||||||
The effective tax rate was 20.21% and 18.35% for the year ended December 31, 2024 and 2023, respectively. The Company and its subsidiaries file a consolidated U.S. federal income tax return. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2021 through 2023. The Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2020 through 2023.
The Company previously had Federal net operating losses which were fully utilized in the year ending December 31, 2024. No valuation allowance existed against these net operating losses, as we determined it was more likely than not they would be fully utilized.
The Company has unused state tax credits in various jurisdictions for the year ended December 31, 2024 and 2023 of $11,115 and $5,107, respectively, which can be carried forward for periods ranging from to 25 years. The Company determined, based on all available evidence, that it is more likely than not that the Company will realize the full amount of these credits, and no valuation allowance has been recorded.
The table below presents the breakout of net operating losses as of December 31, 2023. There were no net operating losses as of December 31, 2024.
| December 31, | |||||
| 2023 | |||||
| Net Operating Losses | |||||
| Federal | $ | 138 | |||
| State | — | ||||
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, related to federal and state income tax matters as of December 31 follows below:
| 2024 | 2023 | 2022 | |||||||||||||||
| Balance at January 1 | $ | 399 | $ | 407 | $ | 408 | |||||||||||
| Additions based on positions related to current period | 190 | 78 | 65 | ||||||||||||||
| Reductions due to lapse of statute of limitations | (88) | (86) | (66) | ||||||||||||||
| Balance at December 31 | $ | 501 | $ | 399 | $ | 407 | |||||||||||
If ultimately recognized, the Company does not anticipate any material increase in the effective tax rate for 2024 relative to any tax positions taken prior to January 1, 2024. The Company has accrued $41, $26 and $17 for interest and penalties related to unrecognized tax benefits as of December 31, 2024, 2023 and 2022, respectively. The Company recognized accrued interest and penalties on unrecognized tax benefits as a component of income tax expense.
The Company holds investments in limited partnerships and similar entities (“LP”) that are not consolidated in the financial statements. These LP construct, own, and operate affordable housing and similar projects. Typically, an unrelated third party is the general partner or managing member and is primarily responsible for overseeing and controlling these projects. As an investor in these LP, certain tax credits (“ITC”), primarily Low-Income Housing Tax Credits under Section 42 of the Internal Revenue Code, are allocated to the Company. These ITC are recognized as income tax benefits in the Company’s Consolidated Statements of Income over the period in which they are earned, which is typically ten years beginning when the related projects are placed in service as determined by the Internal Revenue Code and related regulations. These investments are recorded to Other assets on the Consolidated Balance Sheets, and are amortized ratably based on the realization of ITC using the practical expedient method described in ASU 2014-01. The balance of these investments recorded to Other assets was $13,366 and $11,951 at December 31 2024 and December 31 2023, respectively. In the years ended December 31, 2024 and December 31, 2023, the Company recognized $2,977 and $1,844 of benefits from ITC, and recorded $2,851 and $1,741 of amortization on the LP investments, all of which were recorded to the Income taxes line of the Consolidated Statements of Income. The non-income-tax-related income or expenses related to our LP entities were not significant in 2024 and 2023. The Company is continuing to pursue opportunities to invest in similar LP entities, and as of December 31, 2024, had unfunded commitments related to similar ITC investments of $16,711. The Company’s risk of loss on these projects is generally mitigated by policies requiring that the project qualify for the expected ITC prior to making its investment.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.