RENASANT CORP 10-Q

Item 1A. RISK FACTORS When evaluating the risk of an investment in the Company’s common stock, potential investors should carefully consider the risk factors appearing in Part I, Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. On July 29, 2024, the Company announced that it had entered into a definitive merger agreement (the “Merger Agreement”) with The First Bancshares, Inc. (“The First”) under which the Company will acquire The First in an all-stock transaction (the “Merger”). The following represents material changes in the Company’s risk factors from the risk factors set forth in our Annual Report on Form 10-K. Risks Relating to the Merger Failure to complete the Merger could negatively affect our share price, future business and financial results. Although we anticipate closing the Merger in the first half of 2025, we cannot guarantee when, or whether, the Merger will be completed. The completion of the Merger is subject to a number of customary conditions which must be fulfilled in order to complete the merger. If the Merger is not completed for any reason, our ongoing business and financial results may be adversely affected and we will be subject to several risks, including: • having to pay significant transaction costs without realizing any of the anticipated benefits of completing the Merger; • failing to pursue other beneficial opportunities due to the focus of our management on the Merger, without realizing any of the anticipated benefits of completing the Merger; • declines in our share price to the extent that the current market prices reflect an assumption by the market that the Merger will be completed; and • becoming subject to litigation related to any failure to complete the Merger. Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated, cannot be met, or that could have an adverse effect on the combined company following the consummation of the Merger. Before the Merger may be completed, various approvals, consents and/or non-objections must be obtained from bank regulatory authorities, including the Federal Reserve, FDIC, and the DBCF. Additionally, the U.S. Department of Justice has between 15 and 30 days following approval of the Merger by the Federal Reserve and FDIC, respectively, to challenge the approval on antitrust grounds. In determining whether to grant their approvals, the regulatory agencies consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to an adverse development in either party’s regulatory standing or in any other factors considered by regulators in granting such approvals; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political or regulatory environment generally. The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the Merger. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the Merger, imposing additional material costs on or materially limiting the revenues of the combined company following the Merger or otherwise reduce the anticipated benefits of the Merger if the Merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Merger. The completion of the Merger is conditioned on the receipt of the requisite regulatory approvals without the imposition of any materially financially burdensome regulatory condition and the expiration of all statutory waiting periods. Additionally, the completion of the Merger is conditioned on the absence of certain laws, orders, injunctions or decrees issued by any court or governmental entity of competent jurisdiction that would prevent, prohibit or make illegal the completion of the Merger or any of the other transactions contemplated by the Merger Agreement. 74 Table of Contents The federal banking agencies are in the process of revising their merger policies. In September 2024, the FDIC approved revisions to its Statement of Policy on Bank Merger Transactions, which updates the FDIC’s process for evaluating mergers and the principles that guide the FDIC’s review of proposed mergers. While the Federal Reserve has not issued a similar proposal, Federal Reserve Vice Chair for Supervision Michael Barr has stated that the Federal Reserve is working with the Department of Justice to update guidelines setting forth standards for the review of the competitive impact of a transaction. In addition, in September 2024 the Department of Justice withdrew from the 1995 Bank Merger Guidelines that it previously had used to review bank mergers, stating that its 2023 Merger Guidelines will apply to its review of bank mergers going forward. These regulatory revisions create uncertainty regarding how the agencies will review bank mergers and may make it more difficult and/or costly to obtain regulatory approval or otherwise result in more burdensome conditions in approval orders than the agencies have previously imposed. Our ongoing business and financial results may be adversely affected by a delay in receipt of necessary regulatory approvals, a denial of a regulatory application, or the imposition of a burdensome regulatory condition. Shareholder litigation could prevent or delay the completion of the Merger or otherwise negatively impact our business, financial condition and results of operations. Shareholders of The First have filed lawsuits against The First and its directors in connection with the Merger and Renasant shareholders may do the same. One of the conditions to the closing of the Merger is that no law, order, injunction or decree issued by any court or governmental entity of competent jurisdiction that would restrict, prohibit or make illegal the completion of the Merger or any of the other transactions contemplated by the Merger Agreement be in effect. While Renasant believes that the suits filed against The First and its directors are without merit, if any plaintiff were successful in obtaining an injunction prohibiting Renasant or The First from completing the Merger or any of the other transactions contemplated by the Merger Agreement, then such injunction may delay or prevent the effectiveness of the Merger and could result in significant costs to us, including any cost associated with the indemnification of our directors and officers. We may incur costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the Merger. Shareholder lawsuits may divert management attention from management of our business or operations. Such litigation could have an adverse effect on our business, financial condition and results of operations and could prevent or delay the completion of the Merger. We and The First will be subject to various uncertainties while the Merger is pending that could adversely affect our financial results or the anticipated benefits of the Merger. Uncertainty about the effect of the Merger on counterparties to contracts, employees and other parties may have an adverse effect on us or the anticipated benefits of the Merger. These uncertainties could cause contract counterparties and others who deal with us or The First to seek to change existing business relationships with us or The First, and may impair our and The First’s ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter. Employee retention and recruitment may be particularly challenging prior to completion of the Merger, as our employees and prospective employees, and the employees and prospective employees of The First, may experience uncertainty about their future roles with us following the Merger. The pursuit of the Merger and the preparation for the integration of the two companies may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect our financial results prior to and/or following the completion of the Merger and could limit us from pursuing attractive business opportunities and making other changes to our business prior to completion of the Merger or termination of the Merger Agreement. The First may have liabilities that are not known to us. In connection with the Merger, we will assume all of The First’s liabilities by operation of law. There may be liabilities that we failed or were unable to discover in the course of performing due diligence investigations into The First, or we may not have correctly assessed the significance of certain liabilities of The First identified in the course of our due diligence. Any such liabilities, individually or in the aggregate, could have an adverse effect on our business, financial condition and results of operations. The Merger may be completed on different terms from those contained in the Merger Agreement. Prior to the completion of the Merger, we and The First may, by mutual agreement, amend or alter the terms of the Merger Agreement, including with respect to, among other things, the merger consideration or any covenants or agreements with respect to the parties’ respective operations during the pendency of the Merger Agreement. Any such amendments or alterations may have negative consequences to us. 75 Table of Contents Risks Relating to the Combined Company’s Business Following the Merger The market price of the common stock of the combined company after the Merger may be affected by factors different from those currently affecting the shares of Renasant common stock. Upon the completion of the Merger, Renasant shareholders and The First shareholders will become shareholders of the combined company. Renasant’s business differs from that of The First, and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of each of The First and Renasant. Sales of substantial amounts of Renasant common stock in the open market by former shareholders of The First could depress Renasant’s stock price. Shares of Renasant common stock that are issued to The First shareholders in the Merger will be freely tradable without restrictions or further registration under the Securities Act of 1933, as amended. Based on the number of shares of The First common stock that are outstanding (which includes the shares of The First common stock underlying The First restricted stock awards), Renasant currently expects to issue approximately 31,782,668 shares of Renasant common stock in connection with the Merger. If the Merger is completed and if The First’s former shareholders sell substantial amounts of Renasant common stock in the public market following completion of the Merger, the market price of Renasant common stock may decrease. These sales might also make it more difficult for Renasant to sell equity or equity-related securities at a time and price that it otherwise would deem appropriate. Combining Renasant and The First may be more difficult, costly or time consuming than expected, and we may fail to realize the anticipated benefits of the Merger. The success of the Merger will depend on, among other things, our ability to integrate The First into our business in a manner that facilitates growth opportunities and achieves the anticipated benefits of the Merger. If we are not able to successfully achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the Merger could be less than anticipated, and integration may result in additional unforeseen expenses. Renasant and The First have operated and, until the completion of the Merger, will continue to operate, independently. The success of the Merger, including anticipated benefits and cost savings, will depend, in part, on the successful combination of the businesses of Renasant and The First. To realize these anticipated benefits and cost savings, after the completion of the Merger, Renasant expects to integrate The First’s business into its own. It is possible that the integration process could result in the loss of key employees, the disruption of the combined company’s ongoing businesses or inconsistencies in technologies, standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the Merger. The loss of key employees could have an adverse effect on the combined company’s financial results and the value of Renasant common stock. If Renasant experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause The First or Renasant to lose current customers or cause current customers to remove their accounts from The First or Renasant and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of The First and Renasant during this transition period and for an undetermined period after consummation of the Merger. We expect to incur substantial transaction costs in connection with the Merger. We expect to incur a significant amount of non-recurring expenses in connection with the Merger, including legal, accounting, consulting and other expenses. In general, these expenses are payable by us whether or not the Merger is completed. Additional unanticipated costs may be incurred following consummation of the Merger in the course of the integration of our business and the business of The First. We cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the transaction and integration costs in the near term, or at all. The Merger will result in changes to the board of directors of the combined company and the surviving bank. Upon completion of the Merger, the composition of the combined company boards of directors will be different than the current Renasant and Renasant Bank boards of directors. The Renasant board of directors and the Renasant Bank board of directors will consist of: (1) the current members of the Renasant board of directors and four current members of The First board of directors and (2) the current members of the Renasant Bank board of directors and six current members of The First Bank board of 76 Table of Contents directors, respectively. This new composition of the combined company boards of directors may affect the future decisions of the combined company. The unaudited pro forma financial information included as an exhibit to our Current Report on Form 8-K filed on July 29, 2024, is presented for illustrative purposes only and does not purport to be indicative of our financial condition or results of operations following the completion of the Merger. The unaudited pro forma financial information included as an exhibit to our Current Report on Form 8-K filed on July 29, 2024, is presented for illustrative purposes only, is based on various adjustments, assumptions and preliminary estimates and may not be an indication of our financial condition or results of operations following the consummation of the Merger for several reasons. Our actual financial condition and results of operations following the consummation of the Merger may not be consistent with, or evident from, the pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations following the consummation of the Merger. Our potential for future business success and operating profitability must be considered in light of the risks, uncertainties, expenses and difficulties typically encountered by recently combined companies.