After FB Financial Corp. outlined criteria for dozens of potential M&A targets, S&P Global Market Intelligence used those parameters to identify more than 60 possible targets. Analysts believe the bank could announce a deal this year.
Nashville, Tenn.-based FB Financial has $4.73 billion in assets. Unit FirstBank operates nearly 60 branches across Tennessee, North Alabama and North Georgia, plus mortgage offices across the Southeast.
In recent investor presentations, the bank said there are 40 potential M&A targets with between $400 million and $3 billion in assets located in its current footprint. It also identified dozens of potential targets in expansion markets like Atlanta, Asheville, N.C., Greenville, S.C., and Birmingham and Tuscaloosa in Alabama.
FB Financial CFO James Gordon said the bank decided to list its M&A parameters following investor questions, and cautioned that the details in investor presentations do not represent a "wish list." He said many banks that fall within those parameters would not be a good fit, and that FB Financial would consider institutions outside the asset thresholds it described. He said the bank is looking to partner with a "good, quality" management team that wants to continue at the pro forma company, plus strong core deposits in a solid community, and a transaction that creates "a win-win" for both sets of shareholders.

One reason that FB Financial went public in late 2016 was to gain the currency to do deals, said Keefe Bruyette & Woods analyst Catherine Mealor. The bank acquired two banking units from Clayton HC Inc. for $241 million in 2017.
Mealor said the bank's capital position allows it to consider acquisition targets with up to $3 billion in assets. Although a $3 billion target would mark a sizable deal for FB Financial, she pointed out that the executive team has run larger banks in the past.
FB Financial's interest in deals comes as broader M&A conversations have become "extremely robust," said Banks Street Partners managing director Jeff Adams, who focuses on the Southeast.
"Deals beget deals. A lot of that is driven by the fact that valuations have strengthened stock prices, and those valuations really drive deal values," he said. "There's a very positive mood among potential sellers in the Southeast right now who are looking to find an exit solution via a merger."
Adams said demand has been highest for potential sellers that have reasonable scale, of at least $400 million in assets, in strong growth markets. He added that a seller's funding base has becoming increasingly important for buyers operating in high-growth markets, and sellers in more rural markets may find greater interest as interest rates rise.
FB Financial's business model gives it flexibility to do deals in both rural and metropolitan markets across the south and its performance has strengthened its currency, Mealor said. A rural market could provide strong profitability and attractive funding, while an urban deal could offer greater growth.
Sandler O'Neill analyst Peter Ruiz pointed out that several areas outside of the bank's footprint have experienced increased M&A activity over the last several quarters, including Atlanta and parts of North Carolina, leading to a potential increase in pricing for the remaining banks. He said acquiring a $1 billion franchise in a new market would give FB Financial a significant presence quickly.
"They're certainly in pursuit of deals," Ruiz said. "I would expect something in 2018 and the next three months sounds honestly very likely, but it all comes down to the discipline and whether or not the seller's expectations can be met."

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