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FB Financial to buy Franklin Financial Network in $611M deal

Nashville, Tenn.-based FB Financial Corp. is acquiring Franklin, Tenn.-based Franklin Financial Network Inc. in a $611 million deal to solidify its operations in the Nashville region.

FB Financial unit FirstBank will absorb Franklin Financial subsidiary Franklin Synergy Bank. The transaction will make FirstBank the No. 6 bank by deposits in the Nashville metropolitan statistical area, according to the companies.

Franklin Financial Network and its banking unit reported about $3.9 billion in assets, $2.8 billion in loans and $3.2 billion in deposits as of Dec. 31, 2019. FB Financial reported about $6.09 billion in assets as of Sept. 30, 2019.

The $611 million aggregate deal value reflects a per-share implied transaction value of about $39.44 per Franklin Financial Network share. The company's stockholders will receive 0.9650 of an FB Financial share plus $2.00 in cash for each share held.

On a per-share basis, S&P Global Market Intelligence calculates that the deal value is 141.43% of book, 148.25% of tangible book and 25.78x earnings. The deal value is also 16.23% of assets and 20.24% of deposits, and the tangible book premium to core deposits ratio is 8.81%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Southeast region between Jan. 21, 2019, and Jan. 21, 2020, averaged 152.99% of book and 165.78% of tangible book and had a median of 17.64x last-12-months earnings, on a per-share basis.

The deal is expected to be 10% accretive to FB Financial's earnings per share once fully phased in. FB Financial plans to lower the risk of Franklin Financial Network's balance sheet by exiting about $430 million of shared national credits and what it called "non-strategic healthcare and corporate loans" and by paying down noncore funding with net proceeds from those sales.

FB Financial management is assuming a 3.9% mark to loans and 30% cost savings, despite "significant overlap" in the banks' branch footprints, FB Financial President and CEO Christopher Holmes said in a statement.

Key Franklin Financial Network executives have agreed to remain with the combined company after the deal closes. Three Franklin Financial Network board members will become directors at the combined company.

FB Financial will operate a primary operations center and its mortgage headquarters for the combined bank at Franklin's existing headquarters in downtown Franklin.

Based on S&P Global Market Intelligence data, FB Financial will expand in Williamson County, Tenn., by eight branches to be ranked first with a 26.55% share of about $10.34 billion in total market deposits. The company will also expand in Rutherford County, Tenn., by six branches to be ranked second with a 14.93% share of approximately $4.79 billion in total market deposits and in Davidson County, Tenn., by one branch to be ranked 10th with a 2.36% share of roughly $36.94 billion in total market deposits.

The deal is expected to close in the third quarter. FB Financial Executive Chairman James Ayers and other members of the company's board have agreed to support the transaction.

J.P. Morgan Securities LLC was financial adviser to FB Financial, and Wachtell Lipton Rosen & Katz was legal adviser. Evercore served as financial adviser to Franklin Financial Network, and Alston & Bird LLP was legal adviser.

To use S&P Global Market Intelligence's branch analytics tools to compare market overlap, click here. To create custom maps, click here.

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