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Amended FB Financial-Clayton deal terms cut stock consideration

Nashville, Tenn.-based FB Financial Corp and Clayton HC Inc. have entered into an amended stock purchase agreement which reduces the stock portion of the consideration to be received by Clayton HC, effectively making Clayton HC hold less than a 5% stake in FB Financial once FB Financial's deal to acquire Clayton HC units Clayton Bank and Trust and American City Bank closes.

The amendment provides for reducing the stock consideration from 5,860,000 shares to 1,521,200 shares and for a cash payment to Clayton HC of $124.2 million at closing as consideration for the reduced stock consideration. Besides the cash and share parts, the consideration is also comprised of $60 million of FirstBank 5.50% five-year non-callable fixed-to-floating subordinated debt due 2027 (which FB Financial can reduce or eliminate by paying cash for all or a portion of the principal amount of the note) and $79.5 million of cash that represents return of excess capital.

In a May 26 news release, FB Financial President and CEO Chris Holmes said that because of the amended deal terms, FB Financial now expects incremental earnings per share accretion in 2018 and 2019, reaching approximately 20% annually, as opposed to the previous expectation of 15%-plus accretion. Holmes added that the revised terms are also expected to have a better effect on FB Financial's pro forma capital ratios relative to the terms of the original structure while also materially reducing the projected tangible book value dilution at closing. He said that in addition, the earnback on capital dilution is now estimated to be completed by the end of the year.

Also in connection with the amendment, FB Financial entered into securities purchase agreements with accredited investors where it will sell an aggregate of 4,806,710 of its common shares at $33.00 apiece in a private offering. Estimated proceeds from the offering are $152 million, which in part will fund the $124.2 million cash consideration. The rest will go to general corporate purposes, which may be used to reduce the amount of the subordinated note that will be issued to Clayton HC. The private offering is set to close on or around June 1 and is not conditioned on the closing of the acquisition. Should the deal fail, proceeds from the offering will be used for general corporate purposes which may include funding future acquisitions and strengthening FB Financial's and FirstBank's capital position.

The deal is still set to close in the third quarter and among other things is subject to regulatory approvals, as well as approval by FB Financial shareholders — if required by the New York Stock Exchange.

The amendment was made to address competitive concerns raised by the Federal Reserve Board with respect to Clayton HC's post-closing ownership of FB Financial's shares and continued ownership of 50% of Camden, Tenn.-based Apex Bancorp Inc.

Keefe Bruyette & Woods Inc. and Stephens Inc. are joint book-running managers for the private placement, and Raymond James & Associates Inc. and Sandler O'Neill & Partners LP are co-managers. Stephens Inc. also served as FB Financial's exclusive financial adviser on the proposed acquisition of the Clayton HC units. Alston & Bird LLP is legal adviser to FB Financial and Covington & Burling LLP served as legal adviser to the placement agents.