Exhibit 99.3
Selected Unaudited Condensed Consolidated Pro Forma Financial Data
The following unaudited condensed consolidated pro forma statement of financial condition as of December 31, 2005, and the unaudited condensed consolidated pro forma statements of operations for the year ended December 31, 2005, have been prepared to reflect the merger of Pinnacle Financial Partners, Inc. (“Pinnacle”) and Cavalry Bancorp, Inc. (“Cavalry”). The unaudited condensed consolidated pro forma statement of financial condition is presented as if the merger occurred on December 31, 2005, while the unaudited condensed consolidated pro forma statements of operations are presented as if the merger occurred on January 1, 2005. The unaudited pro forma acquisition adjustments, including those to adjust Cavalry’s net assets to fair value, are preliminary and subject to change as additional analyses are performed and as additional information becomes available.
The unaudited condensed consolidated pro forma financial data set forth below is not necessarily indicative of results that would have actually been achieved if the merger transaction had been consummated as of the date indicated, or that may be achieved in the future. This information should be read in conjunction with the historical consolidated financial statements of each of Pinnacle and Cavalry (and the notes to them), which for Pinnacle are included in Pinnacle’s Annual Report on Form 10-K for the year ended December 31, 2005 and which for Cavalry are filed herewith as Exhibit 99.2.
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of December 31, 2005
Pinnacle Financial Partners, Inc. | Cavalry Bancorp, Inc. | Pro Forma Acquisition Adjustments | Pro Forma Combined | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 58,655 | $ | 49,623 | A | (7,230 | ) | $ | 100,923 | |||||||
E | (125 | ) | ||||||||||||||
Investment securities: | ||||||||||||||||
Held to maturity | 27,331 | -- | -- | 27,331 | ||||||||||||
Available for sale | 251,749 | 41,008 | -- | 292,757 | ||||||||||||
Loans held for sale | 4,874 | 1,170 | -- | 6,044 | ||||||||||||
Loans | 648,024 | 511,081 | D | (1,093 | ) | 1,153,257 | ||||||||||
B | (4,755 | ) | ||||||||||||||
Allowance for loan losses | (7,858 | ) | (5,247 | ) | D | 1,093 | (12,012 | ) | ||||||||
Loans, net | 640,166 | 505,834 | 1,141,245 | |||||||||||||
Goodwill | -- | 1,772 | B | 113,318 | 115,090 | |||||||||||
Core deposit intangible | -- | -- | B | 13,168 | 13,168 | |||||||||||
Premises and equipment | 12,916 | 16,316 | B | 4,567 | 33,799 | |||||||||||
Other assets | 21,081 | 22,601 | E | 125 | 43,807 | |||||||||||
Total assets | $ | 1,016,772 | $ | 638,324 | $ | 119,068 | $ | 1,774,164 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Deposits | $ | 810,151 | $ | 572,820 | B | 2,600 | $ | 1,385,571 | ||||||||
Advances from Federal Home Loan Bank | 41,500 | 2,780 | -- | 44,280 | ||||||||||||
Securities purchased under agreements to resell | 65,834 | -- | -- | 65,834 | ||||||||||||
Subordinated debentures | 30,929 | -- | -- | 30,929 | ||||||||||||
Accrued expenses and other liabilities | 4,922 | 4,181 | A | (3,373 | ) | 13,895 | ||||||||||
A | 2,797 | |||||||||||||||
C | 177 | |||||||||||||||
B | 1,119 | |||||||||||||||
B | 4,072 | |||||||||||||||
Total liabilities | 953,336 | 579,781 | 1,540,509 | |||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock | 8,427 | 19,354 | B | (19,354 | ) | 15,284 | ||||||||||
B | 6,857 | |||||||||||||||
Additional paid in capital | 44,891 | -- | B | 163,539 | 208,253 | |||||||||||
C | (177 | ) | ||||||||||||||
Unearned compensation | (170 | ) | -- | -- | (170 | ) | ||||||||||
Retained earnings | 13,182 | 39,766 | A | (6,654 | ) | 13,182 | ||||||||||
B | (33,112 | ) | ||||||||||||||
Accumulated other comprehensive (loss) | (2,894 | ) | (577 | ) | B | 577 | (2,894 | ) | ||||||||
Total stockholders’ equity | 63,436 | 58,543 | 233,655 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 1,016,772 | $ | 638,324 | $ | 119,068 | $ | 1,774,164 |
(A) | To reflect the impact to Cavalry’s consolidated statement of financial condition for the impact of merger related charges recognized by Cavalry in 2006 and prior to consummation of the merger. It is estimated that $1.5 million of the cash payments made to certain Cavalry employees will not be tax deductible. |
Retained earnings $ 6,654
Taxes payable 3,373
Cash $ 7,230
Accrued expenses 2,797
(B) | To reflect the impact of the issuance of Pinnacle common stock for outstanding common stock of Cavalry at the 0.95 exchange ratio. As the exchange ratio is fixed pursuant to the merger agreement, the value of the shares issued by Pinnacle to Cavalry shareholders upon consummation of the merger were valued in accordance with EITF 99-12, “Determination of the Measurement Date for the Market Price of Acquiror Securities Issued in a Purchase Business Combination.” Other components of the purchase price consideration are estimated costs directly attributable to the merger to be incurred by Pinnacle of $1,119,000 and the estimated fair value of options to acquire Pinnacle common stock issued to holders of options to acquire Cavalry common stock pursuant to the merger agreement. The fair value of the exchange options was estimated using the Black-Scholes method. |
Number of Cavalry shares outstanding | 7,217,565 | ||||||
Exchange ratio to Pinnacle shares | 95 | % | |||||
Number of Pinnacle shares to exchange | 6,856,687 | ||||||
Average price of Pinnacle shares used for merger | $ | 24.53 | |||||
Fair Value of Pinnacle Consideration Shares | $ | 168,181 | |||||
Total fair value of Pinnacle options | 2,907 | ||||||
Acquisition costs incurred by Pinnacle | 1,119 | ||||||
Total estimated consideration | $ | 172,207 | |||||
Less: Cavalry stockholders’ equity at December 31, 2005 | (58,543 | ) | |||||
Cavalry merger costs incurred post-December 31, 2005 | (6,654 | ) | |||||
Estimated fair value adjustments to Cavalry’s net assets: | |||||||
Eliminate Cavalry goodwill | 1,772 | ||||||
Loans | (4,755 | ) | |||||
Property and equipment | 4,567 | ||||||
Deposits | (2,600 | ) | |||||
Core deposit intangible | 13,168 | ||||||
Deferred income taxes | (4,072 | ) | |||||
Estimated Goodwill | $ | 115,090 | |||||
Goodwill | $ | 113,318 | |||||
Common stock of Cavalry | 19,354 | ||||||
Retained earnings of Cavalry | 33,112 | ||||||
Property and equipment | 4,567 | ||||||
Core deposit intangible asset | 13,168 | ||||||
Other comprehensive loss of Cavalry | $ | 577 | |||||
Loans | 4,755 | ||||||
Deposits | 2,600 | ||||||
Deferred income tax liabilities | 4,072 | ||||||
Accrued liabilities (acquisition costs) | 1,119 | ||||||
Common stock of Pinnacle | 6,857 | ||||||
Additional paid-in capital for Pinnacle | 163,539 |
(C) | To reflect the costs associated with the joint proxy/registration statement. |
Additional paid-in capital | $ | 177 | |||||
Accrued liabilities | $ | 177 |
(D) | To adjust Cavalry’s loan portfolio and allowance for loan losses for those loans which Pinnacle does not expect to collect all contractually required payments on the loan, in accordance with AICPA Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer.” |
Allowance for loan losses | $ | 1,093 | |||||
Loans | $ | 1,093 |
(E) | To reflect a $125,000 cash payment and related prepaid asset associated with the one-year consulting contract between Pinnacle and a current Cavalry employee which was effective upon consummation of the merger. |
Other assets | $ | 125 | |||||
Cash | $ | 125 |
Unaudited Condensed Consolidated Pro Forma Statement of Operations for the Year Ended December 31, 2005
Pinnacle Financial Partners, Inc. | Cavalry Bancorp, Inc. | Pro Forma Acquisition Adjustments | Pro Forma Combined | |||||||||||||
(In thousands except per share information) | ||||||||||||||||
Interest income | $ | 46,308 | $ | 32,905 | A | $ | 3,250 | $ | 82,463 | |||||||
Interest expense | 17,270 | 9,286 | A | (1,163 | ) | 25,393 | ||||||||||
29,038 | 23,619 | 4,413 | 57,070 | |||||||||||||
Provision for loan losses | 2,152 | 728 | -- | 2,880 | ||||||||||||
Net interest income after provision for loan losses | 26,886 | 22,891 | 4,413 | 54,190 | ||||||||||||
Noninterest income | 5,394 | 12,332 | -- | 17,726 | ||||||||||||
Noninterest expense | 21,032 | 24,167 | A | 136 | 43,727 | |||||||||||
B | 125 | |||||||||||||||
C | (1,733 | ) | ||||||||||||||
Amortization of intangible assets | -- | -- | D | 2,127 | 2,127 | |||||||||||
Income before income taxes | 11,248 | 11,056 | 3,758 | 26,062 | ||||||||||||
Income taxes | 3,193 | 3,723 | E | 1,474 | 8,390 | |||||||||||
Net income | $ | 8,055 | $ | 7,333 | $ | 2,284 | $ | 17,672 | ||||||||
Per share information: | ||||||||||||||||
Basic net income per common share | $ | 0.96 | $ | 1.02 | $ | 1.16 | ||||||||||
Diluted net income per common share | $ | 0.85 | $ | 1.00 | $ | 1.08 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 8,408,663 | 7,217,565 | 15,265,350 | |||||||||||||
Diluted | 9,464,500 | 7,328,744 | 16,426,792 |
Year | ||||
Ended | ||||
December 31, 2005 | ||||
(A) Amortization of fair value adjustments for the following items: | ||||
Increase in interest income - Accretion of loan discount | $ | 3,250 | ||
Decrease in interest expense - Amortization of deposit premium | 1,163 | |||
Increase in noninterest expense - Depreciation related to premises and equipment write-up | 136 | |||
(B) Increase in noninterest expense - Compensation related to consulting contract | 125 | |||
(C) Decrease in noninterest expense - Salaried Executive Retirement Plan | 1,733 | |||
(D) Increase in amortization of intangible assets - Amortization of core deposit intangible over seven year life using an accelerated amortization method | 2,127 | |||
(E) Increase in tax expense due to tax impact of above items | 1,474 |
Note to Unaudited Condensed Consolidated Pro Forma Statement of Operations for the Year Ended December 31, 2005
During the three months ended March 31, 2006, Cavalry recorded approximately $10.0 million in merger related charges which are not reflected in the above pro forma results for the year ended December 31, 2005. These merger related charges are more fully described as pro forma entry A on the accompanying unaudited condensed consolidated pro forma balance sheet as of December 31, 2005.
Additionally, the Company recorded approximately $443,000 in merger related charges during the first quarter ended March 31, 2006 which have not been considered in the above pro forma results.