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Franklin deal to boost FB Financial's Nashville, Tenn., market share

FB Financial Corp. executives said the opportunity to grow the bank's branch footprint in the Nashville, Tenn., metro area was a primary motivator in its purchase of Franklin Financial Network Inc.

On a Jan. 21 deal call, executives highlighted the growing Nashville market as a primary driver of the deal, which they said will push the company to the No. 6 market share from No. 12 in the metro area.

Other catalysts for the deal were the earnings benefits and the ability to expand the bank's talent base. The Nashville-based company projects 5% EPS accretion in 2020 and 10% in 2021, and there is no tangible book value dilution. FB Financial's stock was up about 2% in after-hours trading.

The deal came together in just a few months, with management saying talks began in the 2019 fourth quarter. Executives project the deal will close in the third quarter of this year.

Looking ahead, FB Financial's management said it plans to focus on the execution of the deal and pause any additional transactions. Further, executives said there would likely be a pause in share repurchases.

At close, the combined bank will be close to or above the $10 billion asset threshold that subjects banks to stricter regulation, notably a cap on interchange revenue known as the Durbin amendment. While executives said they might be able to limit asset growth to stay below the threshold at year-end, they modeled the transaction to include the cost. They project a pretax annual impact of $6 million, which would be 50% phased in during 2021, assuming the bank exceeds $10 billion at year-end 2020.

FB Financial executives said they hope to retain all revenue producers. Top executives from Franklin Financial are also committed to joining the combined company, although their exact roles were not disclosed.

"Our target is to retain 100%. We want to retain all of them," said FB Financial CEO Christopher Holmes when asked about revenue producers. "There are some really good bankers on both sides."

One analyst asked about the projected $50 million in transaction costs on the premise that it seemed high. FB Financial's management said about one-third would be dedicated to employment costs, one-third to contract buyouts and technology issues and the final third to branch closing costs and other transaction fees such as payments for investment bankers and lawyers.

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