RENASANT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 11, 2016

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Exhibit 99.1

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”) and Heritage Financial Group, Inc. (“Heritage”) after giving effect to the merger of Heritage with and into Renasant with Renasant surviving the merger, the issuance of 0.9266 shares of Renasant common stock in exchange for outstanding shares of Heritage common stock in connection therewith and the other transactions contemplated by the Agreement and Plan of Merger dated as of December 10, 2014 by and among Renasant, Renasant Bank, Heritage and HeritageBank of the South.  The unaudited pro forma condensed combined balance sheet as of June 30, 2015 is presented as if the merger with Renasant and the transactions that occurred therewith had occurred on June 30, 2015.  The unaudited pro forma condensed combined income statements for the year ended December 31, 2014 and the six months ended June 30, 2015 are presented as if the merger and transactions that occurred therewith had occurred on January 1, 2014.  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. Renasant is the acquirer for accounting purposes. Renasant is finalizing the fair value of certain assets and liabilities of Heritage. Accordingly, the unaudited pro forma adjustments 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 Heritage to conform to the presentation in Renasant's financial statements.

In connection with the integration of the operations of Renasant and Heritage, Renasant has incurred, and will in the future incur, nonrecurring charges, such as costs associated with systems implementation, severance, and other costs related to exit or disposal activities.  Renasant is not able to fully 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 Renasant and Heritage 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. Estimated transaction related expenses of Renasant 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:
•
final valuations for certain assets and liabilities of Heritage acquired as part 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;
•
Renasant’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, included in Renasant’s Annual Report on Form 10-K for the year ended December 31, 2014;
•
Heritage’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, included in Heritage’s Annual Report on Form 10-K for the year ended December 31, 2014;
•
Renasant’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2015, included in Renasant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015; and
•
other information pertaining to Renasant and Heritage 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
 
Heritage Financial Group, Inc.
 
Purchase Accounting Adjustments
 
Pro forma
 
 
 
 
 
Termination of
 
Other
 
 
 
6/30/2015
 
6/30/2015
 
Employee Stock
 
Purchase Acct
 
6/30/2015
 
(as reported)
 
(as reported)
 
Ownership Plan
 
Adjustments
 
Combined
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
154,962

 
$
35,794

 
$
2,839

(a)
$
(5,915
)
(b)
$
187,680

Securities
965,290

 
179,250

 
—

 
(1,401
)
(c)
1,143,139

Mortgage loans held for sale
108,023

 
350,986

 
—

 
(2,481
)
(d)
456,528

Loans, net of unearned income
4,037,204

 
1,137,774

 
—

 
(26,157
)
(e)
5,148,821

Allowance for loan losses
(41,888
)
 
(10,361
)
 
—

 
10,361

(f)
(41,888
)
Net loans
3,995,316

 
1,127,413

 
—

 
(15,796
)
 
5,106,933

Premises and equipment
121,072

 
49,334

 
—

 
(7,254
)
(g)
163,152

Other real estate owned
27,064

 
8,582

 
—

 
1,390

(h)
37,036

Goodwill
274,698

 
11,364

 
4,930

(a)
161,039

(i)
452,031

Other intangible assets
20,110

 
5,427

 
—

 
6,829

(j)
32,366

FDIC loss-share indemnification asset
6,659

 
17,920

 
—

 
(15,247
)
(k)
9,332

Other assets
225,996

 
83,444

 
—

 
16,385

(l)
325,825

Total assets
$
5,899,190

 
$
1,869,514

 
$
7,769

 
$
137,549

 
$
7,914,022

Liabilities and shareholders' equity
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Non-interest bearing
$
972,672

 
$
279,123

 
$
—

 
$
—

 
$
1,251,795

Interest bearing
3,917,772

 
1,092,455

 
—

 
3,776

(m)
5,014,003

Total Deposits
4,890,444

 
1,371,578

 
—

 
3,776

 
6,265,798

Short-term borrowings
64,229

 
14,656

 
—

 
—

 
78,885

Long-term debt
154,860

 
300,000

 
—

 
—

 
454,860

Other liabilities
58,681

 
22,628

 
—

 
12,895

(n)
94,204

Total liabilities
5,168,214

 
1,708,862

 
—

 
16,671

 
6,893,747

Shareholders' equity
 
 
 
 
 
 
 
 
 
Common stock
163,281

 
93

 
—

 
43,086

(o)
206,460

Treasury stock, at cost
(21,381
)
 
—

 
—

 
 
 
(21,381
)
Additional paid-in capital
344,969

 
107,503

 
5,243

(a)
133,374

(p)
591,089

Retained earnings
252,718

 
60,602

 
—

 
(60,602
)
(p)
252,718

Accumulated other comprehensive loss
(8,611
)
 
(5,020
)
 
—

 
5,020

(p)
(8,611
)
Unearned Employee Stock Ownership Plan
—

 
(2,526
)
 
2,526

(a)
 
 
—

Total shareholders' equity
730,976

 
160,652

 
7,769

 
120,878

 
1,020,275

Total liabilities and shareholders' equity
$
5,899,190

 
$
1,869,514

 
$
7,769

 
$
137,549

 
$
7,914,022

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)

 
For the year ended December 31, 2014
 
Renasant Corporation
 
Heritage Financial Group, Inc.
Norcross Branch of PrivateBank and Trust Company
Alarion Financial Services, Inc.
 
Heritage Financial Group, Inc.
 
Pro forma Adjustments
 
Pro Forma
 
(as reported)
 
(as reported)
(pro forma)
(pro forma)
 
Combined Proforma
 
 
Combined
Interest income(1)
 
 
 
 
 
 
 
 
 
 
 
Loans
$
199,844

 
$
54,670

$
1,587

$
7,113

 
$
63,370

 
$
10,620

(e)
$
273,834

Securities
26,169

 
6,227

—

—

 
6,227

 
311

(c)
32,707

Other
396

 
89

—

13

 
102

 
—

 
498

Total interest income
226,409

 
60,986

1,587

7,126

 
69,699

 
10,931

 
307,039

Interest expense
 
 
 
 
 
 
 
 
 
 
 
Deposits
16,069

 
4,845

711

696

 
6,252

 
(2,470
)
(m)
19,851

Borrowings
7,711

 
3,420

—

—

 
3,420

 
—

 
11,131

Total interest expense
23,780

 
8,265

711

696

 
9,672

 
(2,470
)
 
30,982

Net interest income
202,629

 
52,721

876

6,430

 
60,027

 
13,401

 
276,057

Provision for loan losses
6,167

 
1,569

—

50

 
1,619

 
—

 
7,786

Net interest income after provision for loan losses
196,462

 
51,152

876

6,380

 
58,408

 
13,401

 
268,271

Noninterest income(1)
 
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
25,383

 
6,187

96

305

 
6,588

 
—

 
31,971

Fees and commissions
21,873

 
12,058

—

—

 
12,058

 
—

 
33,931

Insurance commissions
8,194

 
—

—

—

 
—

 
—

 
8,194

Wealth management revenue
8,655

 
2,436

—

—

 
2,436

 
—

 
11,091

Gains on sales of securities
375

 
956

—

—

 
956

 
—

 
1,331

BOLI income
2,985

 
748

—

—

 
748

 
—

 
3,733

Gains on sales of mortgage loans held for sale
8,594

 
14,181

—

2,860

 
17,041

 
—

 
25,635

Other
4,561

 
458

—

683

 
1,141

 
—

 
5,702

Total noninterest income
80,620

 
37,024

96

3,848

 
40,968

 
—

 
121,588

Noninterest expense(1)
 
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
115,108

 
44,831

500

3,883

 
49,214

 
—

 
164,322

Data processing
11,400

 
4,834

—

660

 
5,494

 
—

 
16,894

Net occupancy and equipment
20,252

 
8,971

192

775

 
9,938

 
(41
)
(g)
30,149

Other real estate owned
4,593

 
1,638

—

11

 
1,649

 
—

 
6,242

Professional fees
4,485

 
1,892

—

613

 
2,505

 
—

 
6,990

Advertising and public relations
5,923

 
1,096

—

(37
)
 
1,059

 
—

 
6,982

Intangible amortization
5,606

 
879

—

369

 
1,248

 
2,319

(j)
9,173

Merger-related expenses
694

 
3,122

—

100

 
3,222

 
—

 
3,916

Other
23,134

 
10,091

—

1,484

 
11,575

 
—

 
34,709

Total noninterest expense
191,195

 
77,354

692

7,858

 
85,904

 
2,278

 
279,377

Income before income taxes
85,887

 
10,822

280

2,370

 
13,472

 
11,123

 
110,482

Income taxes
26,305

 
3,254

98

839

 
4,191

 
4,227

(q)
34,723

Net income
$
59,582

 
$
7,568

$
182

$
1,531

 
$
9,281

 
$
6,896

 
$
75,759

 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.89

 
 
 
 
 
 
 
 
 
$
1.89

Diluted
$
1.88

 
 
 
 
 
 
 
 
 
$
1.88

Dividends per common share
$
0.68

 
 
 
 
 
 
 
 
 
$
0.68

Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
 
 
 
Basic
31,499,498

 
 
 
 
 
 
 
8,635,879

(r)
40,135,377

Diluted
31,759,647

 
 
 
 
 
 
 
8,635,879

(r)
40,395,526

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)

 
For the six months ended June 30, 2015
 
Renasant Corporation
 
Heritage Financial Group, Inc.
 
Pro forma Adjustments
 
Pro Forma
 
(as reported)
 
(as reported)
 
 
Combined
Interest income(1)
 
 
 
 
 
 
 
Loans
$
97,891

 
$
33,071

 
$
5,310

(e)
$
136,272

Securities
12,941

 
2,587

 
156

(c)
15,684

Other
103

 
29

 
—

 
132

Total interest income
110,935

 
35,687

 
5,466

 
152,088

Interest expense
 
 
 
 
 
 
 
Deposits
6,608

 
2,569

 
(1,008
)
(m)
8,169

Borrowings
3,815

 
(1,110
)
 
—

 
2,705

Total interest expense
10,423

 
1,459

 
(1,008
)
 
10,874

Net interest income
100,512

 
34,228

 
6,474

 
141,214

Provision for loan losses
2,250

 
300

 
—

 
2,550

Net interest income after provision for loan losses
98,262

 
33,928

 
6,474

 
138,664

Noninterest income(1)
 
 
 
 
 
 
 
Service charges on deposit accounts
12,025

 
2,848

 
—

 
14,873

Fees and commissions
10,278

 
8,195

 
—

 
18,473

Insurance commissions
4,086

 
—

 
—

 
4,086

Wealth management revenue
4,438

 
1,239

 
—

 
5,677

Gains on sales of securities
96

 
(769
)
 
—

 
(673
)
BOLI income
1,558

 
366

 
—

 
1,924

Gains on sales of mortgage loans held for sale
10,040

 
14,847

 
—

 
24,887

Other
2,300

 
235

 
—

 
2,535

Total noninterest income
44,821

 
26,961

 
—

 
71,782

Noninterest expense(1)
 
 
 
 
 
 
 
Salaries and employee benefits
58,654

 
32,999

 
—

 
91,653

Data processing
6,333

 
2,756

 
—

 
9,089

Net occupancy and equipment
11,083

 
5,240

 
(21
)
(g)
16,302

Other real estate owned
1,486

 
416

 
—

 
1,902

Professional fees
1,996

 
469

 
—

 
2,465

Advertising and public relations
2,784

 
744

 
—

 
3,528

Intangible amortization
2,514

 
612

 
1,069

(j)
4,195

Merger-related expenses
1,945

 
14,479

 
—

 
16,424

Other
11,795

 
5,488

 
—

 
17,283

Total noninterest expense
98,590

 
63,203

 
1,048

 
162,841

Income before income taxes
44,493

 
(2,314
)
 
5,426

 
47,605

Income taxes
13,859

 
(921
)
 
2,062

(q)
15,000

Net income
$
30,634

 
$
(1,393
)
 
$
3,364

 
$
32,605

 
 
 
 
 
 
 
 
Earnings per common share:


 
 
 
 
 
 
Basic
$
0.97

 
 
 
 
 
$
0.81

Diluted
$
0.96

 
 
 
 
 
$
0.81

Dividends per common share
$
0.34

 
 
 
 
 
$
0.34

Weighted-average common shares outstanding
 
 
 
 
 
 
 
Basic
31,626,059

 
 
 
8,635,879

(r)
40,261,938

Diluted
31,865,172

 
 
 
8,635,879

(r)
40,501,051

(1)Certain historical amounts for Renasant and Heritage have been reclassified to ensure consistency and comparability of pro forma amounts.
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)
Termination of Employee Stock Ownership Plan – Cash and stockholders’ equity were adjusted for the repayment of the term loan from Heritage’s Employee Stock Ownership Plan ("ESOP"). Goodwill was adjusted for the recognition of compensation expense for the allocation of remaining shares to participants.
(b)
Purchase Accounting Adjustments – Cash was adjusted to reflect the settlement of all outstanding options according to the terms set forth in the merger agreement.
(c)
Purchase Accounting Adjustments – A net discount was recorded to reflect the par value of acquired investment securities over the purchase price of the investment securities. The net discount will be recognized over the estimated remaining life of the related investment securities. The impact was to increase interest income related to securities by $311 and $156 for the year ended December 31, 2014, and the six months ended June 30, 2015, respectively.
(d)
Purchase Accounting Adjustments - Based on Renasant's evaluation of the acquired portfolio of mortgage loans held for sale, a discount of $2,481 was recorded. The adjustment is derived from quotes on sales of similar loans by current market participants. The adjustment has no impact on the Unaudited Pro Forma Condensed Combined Income Statements.
(e)
Purchase Accounting Adjustments – Based on Renasant’s evaluation of the acquired loan portfolio, a discount was applied to Heritage’s loans and leases resulting in a fair value adjustment of $26,157. The adjustment is primarily related to credit deterioration identified in the portfolio with the remainder, the accretable yield, 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 $10,620 and $5,310 for the year ended December 31, 2014, and the six months ended June 30, 2015, respectively.
(f)
Purchase Accounting Adjustments – The allowance for loan losses was adjusted to reflect the reversal of Heritage’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 Heritage’s provision has been recorded in the Unaudited Pro Forma Condensed Combined Income Statements.
(g)
Purchase Accounting Adjustments – Based on Renasant’s evaluation of the acquired fixed assets, a mark of $7,254 was recorded to account for obsolete assets and adjust the remaining assets to fair value. The impact of the adjustment was to decrease depreciation expense by $41 and $21 for the year ended December 31, 2014, and the six months ended June 30, 2015, respectively.
(h)
Purchase Accounting Adjustments – Based on Renasant’s evaluation of the acquired portfolio of OREO, a mark of $3,135 was applied to Heritage’s OREO resulting in an increase of $1,390 after reversing Heritage's existing fair value marks. The adjustment has no impact on the Unaudited Pro Forma Condensed Combined Income Statements.


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


(i)
Purchase Accounting Adjustments – Goodwill of $177,333 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 Unaudited Pro Forma Condensed Combined Income Statements.
(j)
Purchase Accounting Adjustments – Heritage’s existing other intangible assets were reversed, and an identified core deposit intangible of $12,256 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 $2,319 and $1,069 for the year ended December 31, 2014, and the six months ended June 30, 2015, respectively.
(k)
Purchase Accounting Adjustments - A fair value adjustment of $15,247 was recorded to the FDIC indemnification asset reflecting the balance of expected reimbursement from the FDIC on covered loans during the remaining periods under each of Heritage's loss-share agreement with the FDIC. The adjustment has no impact on the Unaudited Pro Forma Condensed Combined Income Statements.
(l)
Purchase Accounting Adjustments – Deferred taxes associated with the adjustments to record the assets and liabilities of Heritage at fair value were recognized using Renasant’s statutory rate of 38%. Furthermore, a fair value adjustment of $1,945 was recorded to Heritage's mortgage servicing rights based on quotes for similar assets by current market participants.
(m)
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 deposit liability, which is approximately 2.5 years. The adjustment decreased deposit interest expense by $2,470 and $1,008 for the year ended December 31, 2014, and the six months ended June 30, 2015, respectively.
(n)
Purchase Accounting Adjustments – Other liabilities were adjusted to reflect the accrual of anticipated merger related expenses to be incurred by Heritage. 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, costs incurred to terminate employee benefit plans, printing costs and additional related fees and expenses. The adjustment has no impact on the Unaudited Pro Forma Condensed Combined Income Statements.
(o)
Purchase Accounting Adjustments – Common stock was adjusted to reverse Heritage’s common stock 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 Unaudited Pro Forma Condensed Combined Income Statements but only affects the number of shares outstanding used in the calculation of earnings per common share.
(p)
Purchase Accounting Adjustments – Other stockholders’ equity accounts were adjusted to reverse Heritage’s historical stockholders’ equity balances and to reflect the net impact of all purchase accounting adjustments. The adjustments had no impact on the Unaudited Pro Forma Condensed Combined Income Statements.
(q)
Pro Forma Adjustments – Income taxes were adjusted to reflect the tax effects of purchase accounting adjustments using Renasant’s statutory tax rate of 38%.


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


(r)
Pro Forma Adjustments – Weighted-average basic and diluted shares outstanding were adjusted to reverse Heritage basic and diluted shares outstanding and to record shares of Renasant common stock issued to effect the transaction.
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:
 
 
Shares issued to common shareholders
8,635,879

 
Purchase price per share (closing price of Renasant stock on 6/30/2015)
$
32.60

 
Value of stock paid
 
$
281,530

Cash settlement for stock options
 
5,915

Cash received for ESOP term loan repayment
 
2,839

Compensation expense incurred from the termination of Heritage's ESOP
 
4,930

  Total Purchase Price
 
$
295,214

Heritage Net assets at market value:
 
 
Assets:
 
 
Cash and cash equivalents
$
38,633

 
Securities
177,849

 
Mortgage loans held for sale
348,505

 
Net loans
1,111,617

 
Premises and equipment
42,080

 
Other real estate owned
9,972

 
Other intangible assets
12,256

 
FDIC loss-share indemnification asset
2,673

 
Other assets
99,829

 
Total assets
1,843,414

 
Liabilities:
 
 
  Deposits
1,375,354

 
Short-term borrowings
14,656

 
Long-term debt
300,000

 
  Other liabilities
35,523

 
Total liabilities
1,725,533

 
     Total Net Assets Acquired
 
117,881

Goodwill resulting from merger
 
$
177,333






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