RENASANT CORP - FORM 8-K/A - EX-99.3 - EXHIBIT 99.3_PRO FORMA FINANCIAL STATEMENTS - November 14, 2013

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Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
The following unaudited pro forma condensed combined financial statements are based on the separate historical financial statements of Renasant Corporation (“Renasant” or “RNST”) and First M&F Corporation (“FMFC” or “First M&F”) after giving effect to the merger, the issuance of RNST common stock in connection therewith and the other transactions contemplated by the Agreement and Plan of Merger dated as of February 2013 by and among Renasant, Renasant Bank, First M&F and Merchants and Farmers Bank, including but not limited to the redemption of First M&F’s outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Class B Non-Voting, Series CD, originally issued to the U.S. Department of the Treasury (the “CDCI preferred stock”) and related warrant by FMFC prior to the merger for cash, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.  The unaudited pro forma condensed combined balance sheet as of June 30, 2013 is presented as if the merger with RNST and the transactions that occurred therewith had occurred on June 30, 2013.  The unaudited pro forma condensed combined income statements for the year ended December 31, 2012 and the six months ended June 30, 2013 are presented as if the merger and transactions that occurred therewith had occurred on January 1, 2012 and January 1, 2013, respectively.  The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.
 
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States. RNST is the acquirer for accounting purposes. RNST has not had sufficient time to completely evaluate the significant identifiable long-lived tangible and identifiable intangible assets of First M&F. Accordingly, the unaudited pro forma adjustments, including the allocations of the purchase price, are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Certain reclassifications have been made to the historical financial statements of First M&F to conform to the presentation in RNST’s financial statements.
 
A final determination of the acquisition consideration and fair values of First M&F’s assets and liabilities will be based on the actual net tangible and intangible assets of First M&F that existed as of the date of completion of the merger, which was September 1, 2013.  Consequently, amounts preliminarily allocated to goodwill and identifiable intangibles could change from those allocations used in the unaudited pro forma condensed combined financial statements presented below and could result in a change in amortization of acquired intangible assets and amortization or accretion of other fair value adjustments.
 
In connection with the plan to integrate the operations of RNST and First M&F, RNST will incur nonrecurring charges, such as costs associated with systems implementation, severance, and other costs related to exit or disposal activities.  RNST is not fully able to determine the timing, nature and amount of these charges as of the date of this filing.  However, these charges will affect the results of operations of RNST and FMFC upon the completion of the merger, in the period in which they are incurred.  The unaudited pro forma condensed combined financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the transaction, as they are nonrecurring in nature and were not factually supportable at the time that the unaudited pro forma condensed combined financial statements were prepared.  Additionally, the unaudited pro forma adjustments do not give effect to any nonrecurring or unusual restructuring charges that may be incurred as a result of the integration of the two companies or any anticipated disposition of assets that may result from such integration. Transaction related expenses estimated at $4.6 million are not included in the unaudited pro forma condensed combined income statements.
 
The actual amounts finally recorded for the completion of the merger may differ materially from the information presented in these unaudited pro forma condensed combined financial statements as a result of:
 
•
net cash used or generated in First M&F’s operations between the signing of the merger agreement and completion of the merger;


•
other changes in First M&F’s net assets that occurred prior to the completion of the merger, which could cause material differences in the information presented below; and
•
changes in the financial results of the combined company, which could change the future discounted cash flow projections. 

The unaudited pro forma condensed combined financial statements are provided for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma condensed combined financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma condensed combined financial statements should be read together with: 

•
the accompanying notes to the unaudited pro forma condensed combined financial statements;
•
RNST’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2012, included in RNST’s Annual Report on Form 10-K for the year ended December 31, 2012;
•
First M&F’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2012, included in First M&F’s Annual Report on Form 10-K for the year ended December 31, 2012;
•
RNST’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three and six months ended June 30, 2013, and as of and for the three and nine months ended September 30, 2013, included in RNST’s Quarterly Report on Form 10-Q for the quarters ended June 30, 2013, and September 30, 2013, respectively;
•
First M&F’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three months and six months ended June 30, 2013, included in First M&F’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013; and
•
other information pertaining to RNST and First M&F contained in previous filings with the Securities and Exchange Commission.

Renasant Corporation and Subsidiaries
Pro Forma Condensed Combined Balance Sheet

(In Thousands, Except Share Data)


 
Renasant Corporation
 
First M&F Corporation
 
Redemption of CDCI Preferred Stock
 
Purchase Accounting Adjustments
 
Pro Forma
 
6/30/2013
 
6/30/2013
 
 
 
6/30/2013
 
(as reported)
 
(as reported)
 
 
 
Combined
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
79,015

 
$
194,626

 
$
—

 
$
—

 
$
273,641

Securities
746,530

 
273,553

 
(34,090
)
(a)
253

(b)
986,246

Mortgage loans held for sale
50,268

 
2,614

 
—

 
—

 
52,882

Loans, net of unearned income
2,884,511

 
967,013

 
—

 
(65,027
)
(c)
3,786,497

Allowance for loan losses
(47,034
)
 
(19,431
)
 
—

 
19,431

(d)
(47,034
)
Loans, net
2,837,477

 
947,582

 
—

 
(45,596
)
 
3,739,463

Premises and equipment, net
70,117

 
36,438

 
—

 
(2,314
)
(e)
104,241

Other real estate owned
61,082

 
19,721

 
—

 
(5,797
)
(f)
75,006

Goodwill
184,779

 
—

 
—

 
91,840

(g)
276,619

Other intangible assets, net
5,429

 
3,946

 
—

 
21,087

(h)
30,462

Other assets
214,584

 
49,325

 
—

 
9,042

(i)
272,951

Total assets
$
4,249,281

 
$
1,527,805

 
$
(34,090
)
 
$
68,515

 
$
5,811,511

Liabilities and shareholders’ equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
Noninterest‑bearing
$
560,965

 
$
304,734

 
$
—

 
$
—

 
$
865,699

Interest‑bearing
2,944,193

 
1,061,474

 
—

 
3,207

(j)
4,008,874

Total deposits
3,505,158

 
1,366,208

 
—

 
3,207

 
4,874,573

Borrowings
195,789

 
35,714

 
—

 
(12,372
)
(k)
219,131

Other liabilities
47,656

 
9,310

 
—

 
4,638

(l)
61,604

Total liabilities
3,748,603

 
1,411,232

 
—

 
(4,527
)
 
5,155,308

Shareholders’ equity
 
 
 
 
 
 
 
 
 
Preferred stock
—

 
19,569

 
(19,569
)
(a)
—

 
—

Common stock
133,579

 
46,182

 
—

 
(15,353
)
(m)
164,408

Treasury stock, at cost
(24,814
)
 
—

 
—

 
—

 
(24,814
)
Additional paid-in capital
218,466

 
32,920

 
(14,521
)
(a)
106,297

(n)
343,162

Retained earnings
187,618

 
20,876

 
—

 
(20,876
)
(n)
187,618

Accumulated other comprehensive loss, net of taxes
(14,171
)
 
(2,974
)
 
—

 
2,974

(n)
(14,171
)
Total shareholders’ equity
500,678

 
116,573

 
(34,090
)
 
73,042

 
656,203

Total liabilities and shareholders’ equity
$
4,249,281

 
$
1,527,805

 
$
(34,090
)
 
$
68,515

 
$
5,811,511


See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Renasant Corporation and Subsidiaries
Pro Forma Condensed Combined Income Statement

(In Thousands, Except Share Data)

 
 
Twelve months ended December 31, 2012
 
 
Renasant Corporation
 
First M&F Corporation
 
Pro Forma Adjustments
 
Pro Forma
 
 
(as reported)
 
(as reported)
 
 
(Combined)
Interest income
 
 
 
 
 
 
 
 
Loans
 
$
137,800

 
$
55,772

 
$
3,545

(c)
$
197,117

Securities
 
21,314

 
7,004

 
(1,090
)
(a)(b)
27,228

Other
 
199

 
146

 
—

 
345

Total interest income
 
159,313

 
62,922

 
2,455

 
224,690

Interest expense
 
 
 
 
 
 
 
 
Deposits
 
19,030

 
8,627

 
(2,566
)
(j)
25,091

Borrowings
 
6,945

 
2,902

 
548

(k)
10,395

Total interest expense
 
25,975

 
11,529

 
(2,018
)
 
35,486

Net interest income
 
133,338

 
51,393

 
4,473

 
189,204

Provision for loan losses
 
18,125

 
8,520

 
—

(d)
26,645

Net interest income after provision for loan losses
 
115,213

 
42,873

 
4,473

 
162,559

Noninterest income(1)
 
 
 
 
 
 
 
 
Service charges on deposits
 
18,612

 
10,180

 
—

 
28,792

Fees and commissions
 
17,595

 
—

 
—

 
17,595

Insurance commissions
 
3,630

 
3,486

 
—

 
7,116

Wealth management revenue
 
6,926

 
587

 
—

 
7,513

Gains on sales of securities, net of other than temporary impairment
 
1,894

 
528

 
—

 
2,422

Gains on sales of mortgage loans
 
12,499

 
5,304

 
—

 
17,803

BOLI income
 
3,370

 
696

 
—

 
4,066

Other
 
4,185

 
2,017

 
—

 
6,202

Total noninterest income
 
68,711

 
22,798

 
—

 
91,509

Noninterest expense(1)
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
81,002

 
26,887

 
—

 
107,889

Data processing
 
8,724

 
1,428

 
—

 
10,152

Net occupancy and equipment
 
14,597

 
5,280

 
(77
)
(e)
19,800

Other real estate owned
 
13,596

 
5,186

 
—

 
18,782

Advertising and public relations
 
4,835

 
1,071

 
—

 
5,906

Intangible amortization
 
1,381

 
427

 
4,124

(h)
5,932

Other
 
26,324

 
15,999

 
—

 
42,323

Total noninterest expense
 
150,459

 
56,278

 
4,047

 
210,784

Income before income taxes
 
33,465

 
9,393

 
426

 
43,284

Income taxes
 
6,828

 
2,408

 
164

(o)
9,400

Net income
 
26,637

 
6,985

 
262

 
33,884

Dividends and accretion on preferred stock
 
—

 
1,901

 
(1,901
)
(a)
—

Net income applicable to common stock(1)
 
$
26,637

 
$
5,084

 
$
2,163

 
$
33,884

Earnings per common share:
 
 
 
 
 
 
 
 
Basic
 
$
1.06

 
 
 
 
 
$
1.08

Diluted
 
$
1.06

 
 
 
 
 
$
1.08

Dividends per common share
 
$
0.68

 
 
 
 
 
$
0.68

Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
Basic
 
25,108,652

 
9,181,012

 
(3,004,750)

(p)
31,284,914

Diluted
 
25,174,992

 
9,182,034

 
(3,005,772)

(p)
31,351,254


See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Renasant Corporation and Subsidiaries
Pro Forma Condensed Combined Income Statement

(In Thousands, Except Share Data)

 
 
Six months ended June 30, 2013
 
 
Renasant Corporation
 
First M&F Corporation
 
Pro Forma Adjustments
 
Pro Forma
 
 
(as reported)
 
(as reported)
 
 
(Combined)
Interest income
 
 
 
 
 
 
 
 
Loans
 
$
68,723

 
$
25,431

 
$
1,773

(c)
$
95,927

Securities
 
10,065

 
3,269

 
(540
)
(a)(b)
12,794

Other
 
102

 
110

 
—

 
212

Total interest income
 
78,890

 
28,810

 
1,233

 
108,933

Interest expense
 
 
 
 
 
 
 
 
Deposits
 
8,175

 
2,968

 
(641
)
(j)
10,502

Borrowings
 
2,930

 
1,286

 
274

(k)
4,490

Total interest expense
 
11,105

 
4,254

 
(367
)
 
14,992

Net interest income
 
67,785

 
24,556

 
1,600

 
93,941

Provision for loan losses
 
6,050

 
2,660

 
—

(d)
8,710

Net interest income after provision for loan losses
 
61,735

 
21,896

 
1,600

 
85,231

Noninterest income(1)
 
 
 
 
 
 
 
 
Service charges on deposits
 
9,009

 
4,808

 
—

 
13,817

Fees and commissions
 
9,679

 
—

 
—

 
9,679

Insurance commissions
 
1,812

 
1,700

 
—

 
3,512

Wealth management revenue
 
3,439

 
363

 
—

 
3,802

Gains on sales of securities, net of other than temporary impairment
 
54

 
(644
)
 
—

 
(590
)
Gains on sales of mortgage loans
 
7,435

 
1,910

 
—

 
9,345

BOLI income
 
1,365

 
347

 
—

 
1,712

Other
 
1,902

 
1,315

 
—

 
3,217

Total noninterest income
 
34,695

 
9,799

 
—

 
44,494

Noninterest expense(1)
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
43,180

 
12,739

 
—

 
55,919

Data processing
 
4,088

 
911

 
—

 
4,999

Net occupancy and equipment
 
7,276

 
2,506

 
(39
)
(e)
9,743

Other real estate owned
 
3,822

 
2,639

 
—

 
6,461

Advertising and public relations
 
2,736

 
476

 
—

 
3,212

Intangible amortization
 
637

 
213

 
1,835

(h)
2,685

Other
 
13,595

 
8,630

 
—

 
22,225

Total noninterest expense
 
75,334

 
28,114

 
1,796

 
105,244

Income before income taxes
 
21,096

 
3,581

 
(196
)
 
24,481

Income taxes
 
5,506

 
761

 
(76
)
(o)
6,191

Net income
 
15,590

 
2,820

 
(120
)
 
18,290

Dividends and accretion on preferred stock
 
—

 
1,004

 
(1,004
)
(a)
—

Net income applicable to common stock(1)
 
$
15,590

 
$
1,816

 
$
884

 
$
18,290

Earnings per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.62

 
 
 
 
 
$
0.58

Diluted
 
$
0.62

 
 
 
 
 
$
0.58

Dividends per common share
 
$
0.34

 
 
 
 
 
$
0.34

Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
Basic
 
25,186,229

 
9,232,963

 
(3,056,701)

(p)
31,381,354

Diluted
 
25,288,785

 
9,403,561

 
(3,227,299)

(p)
31,511,160

(1)    Certain historical amounts for Renasant and First M&F have been reclassified to ensure consistency and comparability of pro forma amounts. The reclassifications had no impact on total noninterest income, total noninterest expense or net income applicable to common stock.
See the accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Renasant Corporation and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Statements
(In Thousands, Except Share Data)


Note 1 – Pro Forma Adjustments
(In Thousands, Except Share Data)
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial statements. All adjustments are based on current valuations and assumptions which are subject to change.
(a)
Redemption of CDCI Preferred Stock – Cash and shareholders’ equity were adjusted for the fair value adjustment to and the subsequent redemption of First M&F CDCI preferred stock and the related warrant. The preferred stock had a par value of $30,000 and a carrying value of $19,569 at June 30, 2013. The warrant had an assumed fair value of $4,090. The impact of the adjustment was to reverse the dividends and accretion on preferred stock recognized during the year ended December 31, 2012, and the six months ended June 30, 2013, as well as reduce interest income by the amount of interest foregone of $797 and $393 for the year ended December 31, 2012, and six months ended June 30, 2013, respectively, assuming a weighted average yield of 2.35% on the acquired portfolio.
(b)
Purchase Accounting Adjustments – A net premium was recorded to reflect the excess of the purchase price over the par value of acquired investment securities. The net premium will be recognized over the estimated remaining life of the related investment securities. The impact was to reduce interest income related to securities by $293 and $147 for the year ended December 31, 2012, and the six months ended June 30, 2013, respectively.
(c)
Purchase Accounting Adjustments – Based on Renasant’s evaluation of the acquired portfolio, a mark of 6.72% was applied to the acquired loans and leases resulting in a fair value adjustment of $65,027. The adjustment is primarily related to credit marks identified in the portfolio coupled with management's expectations to more aggressively market and liquidate problem assets. The remainder, the accretable yield, is recognized as an adjustment to reflect the difference between actual interest rates and current rates offered by Renasant on similar loans. This accretable yield adjustment will be recognized over the remaining life of the loan and lease portfolio. The impact of the adjustment was to increase loan interest income by $3,545 and $1,773 for the year ended December 31, 2012, and the six months ended June 30, 2013, respectively.
(d)
Purchase Accounting Adjustments – The allowance for loan losses was adjusted to reflect the reversal of First M&F’s recorded allowance. Purchased loans acquired in a business combination are required to be recorded at fair value, and the recorded allowance for loan losses may not be carried over. While Renasant anticipates significantly reducing the provision for loan losses as a result of acquired loans being recorded at fair value, no adjustment to the historic amounts of First M&F’s provision has been recorded in the Pro Forma Condensed Combined Income Statements.
(e)
Purchase Accounting Adjustments – A fair value adjustment was recorded to long-lived fixed assets based on current market appraisals of the acquired properties. The adjustment will be recognized over the remaining useful lives of the respective assets. The impact of the adjustment was to decrease depreciation expense by $77 and $39 for the year ended December 31, 2012, and the six months ended June 30, 2013, respectively.
(f)
Purchase Accounting Adjustments – Based on Renasant’s evaluation of the acquired portfolio of OREO, a mark of 29.39% was applied to acquired OREO resulting in a fair value adjustment of $5,797. The fair value adjustment reflects management’s expectations to more aggressively market and liquidate problem assets quickly. The adjustment has no impact on the Pro Forma Condensed Combined Income Statements.
(g)
Purchase Accounting Adjustments – Goodwill of $91,840 was generated as a result of the total purchase price and fair value of liabilities assumed exceeding the fair value of assets purchased. See Note 2, “Pro Forma Allocation of Purchase Price,” for the allocation of the purchase price to acquired net assets. The adjustment has no impact on the Pro Forma Condensed Combined Income Statements.

Renasant Corporation and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Information
(In Thousands, Except Share Data)


(h)
Purchase Accounting Adjustments – First M&F’s existing other intangible assets were reversed, and an identified incremental core deposit intangible of $25,033 was recognized. The core deposit intangible is recognized over an estimated useful life of ten years using an accelerated amortization method. The amortization expense associated with the core deposit intangible increased noninterest expense $4,124 and $1,835 for the year ended December 31, 2012, and the six months ended June 30, 2013, respectively.
(i)
Purchase Accounting Adjustments –Deferred taxes associated with the adjustments to record the assets and liabilities of First M&F at fair value were recognized using Renasant’s statutory rate of 38.6%.
(j)
Purchase Accounting Adjustments – A fair value adjustment was recorded to fixed rate deposit liabilities based on current interest rates offered by Renasant for similar instruments. The adjustment will be recognized over the estimated remaining term of the related deposit liability. The impact of the adjustment was to decrease deposit interest expense by $2,566 and $641 for the year ended December 31, 2012, and the six months ended June 30, 2013, respectively.
(k)
Purchase Accounting Adjustments – A fair value adjustment was recorded to outstanding long-term debt instruments. The adjustment will be recognized over the estimated remaining term of the long-term debt instruments. The impact of the adjustment was to increase interest expense related to borrowings by $548 and $274 for the year ended December 31, 2012, and the six months ended June 30, 2013, respectively.
(l)
Purchase Accounting Adjustments – Other liabilities were adjusted to reflect the accrual of approximately $4,638 of anticipated merger related expenses to be incurred by First M&F. Anticipated merger related expenses to be incurred by Renasant are not included in the pro forma financial information but will be expensed in the period after the merger is completed. Anticipated merger related expenses consist of investment banking fees, legal fees, accounting fees, registration fees, contract termination fees, printing costs, etc.
(m)
Purchase Accounting Adjustments – Common stock was adjusted to reverse First M&F’s common shares outstanding and to recognize the $5.00 par value of shares of Renasant common stock issued to effect the transaction. The adjustment has no impact on the Pro Forma Condensed Combined Income Statements but only affects the number of shares outstanding used in the calculation of earnings per common share.
(n)
Purchase Accounting Adjustments – Other shareholders’ equity accounts were adjusted to reverse First M&F’s historical shareholders’ equity balances and to reflect the net impact of all purchase accounting adjustments. The adjustments had no impact on the Pro Forma Condensed Combined Income Statements.
(o)
Pro Forma Adjustments – Income taxes were adjusted to reflect the tax effects of purchase accounting adjustments using Renasant’s statutory tax rate of 38.6%.
(p)
Pro Forma Adjustments – Weighted-average basic and diluted shares outstanding were adjusted to reverse First M&F basic and diluted shares outstanding and to record shares of Renasant common stock issued to effect the transaction.

Renasant Corporation and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Information
(In Thousands, Except Share Data)



Note 2 – Pro Forma Allocation of Purchase Price
(In Thousands, Except Share Data)
The following table shows the pro forma allocation of purchase price to net assets acquired and the pro forma goodwill generated from the transaction:
Purchase Price:
 
 
First M&F common shares outstanding at September 1, 2013
9,246,763

 
Restricted stock awards vested at acquisition date
366,096

 
Total First M&F shares to be paid in stock
9,612,859

 
Exchange ratio
0.6425

 
Renasant shares to be issued for First M&F shares
6,176,262

 
Price per share, based on Renasant price of $25.17 as of August 30, 2013
$
25.17

 
Pro forma value of Renasant stock to be issued
 
$
155,457

Fair value of First M&F options assumed
 
68

Total pro forma purchase price
 
$
155,525

Net Assets Acquired:
 
 
Cash and due from banks
$
194,626

 
Securities
239,716

 
Mortgage loans held for sale
2,614

 
Loans, net of unearned income
901,986

 
Premises and equipment
34,124

 
Other real estate owned
13,924

 
Other intangible assets
25,033

 
Other assets
58,367

 
Total Assets
1,470,390

 
Deposits:
 
 
Non-interest bearing
304,734

 
Interest bearing
1,064,681

 
Total Deposits
1,369,415

 
Borrowings
23,342

 
Other liabilities
13,948

 
Total Liabilities
1,406,705

 
Net Assets
 
63,685

Goodwill
 
$
91,840



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