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FB Financial to buy Franklin Financial in $611M deal

FB Financial in Nashville, Tenn., has agreed to buy Franklin Financial Network in Franklin, Tenn.

The $6.1 billion-asset FB Financial said in a press release Tuesday that it will pay $611 million in cash and stock for the $3.9 billion-asset Franklin. The deal, which is expected to close in the third quarter, priced Franklin at 150% of its tangible book value.

Franklin has 15 branches, $2.8 billion in loans and $3.2 billion in deposits.

"Franklin is a well-known, high-service community bank with a leading position in Williamson and Rutherford counties,” Christopher Holmes, FB Financial’s president and CEO, said in the release. “We are joining forces with the leading community bank in two of the most attractive counties in our market area.”

FB Financial agreed to establish a primary operations center and its mortgage headquarters at Franklin’s corporate office.

Three Franklin directors will join FB Financial’s board.

The transaction is expected to be 10% accretive to FB Financial’s earnings per share and neutral to tangible book value. FB Financial plans to cut about 30% of Franklin’s annual noninterest expenses, including the closure of seven overlapping branches. The company expects to incur $50 million in merger-related expenses.

FB Financial said it plans to reduce the risk of Franklin’s balance sheet by exiting about $430 million of shared national credits and nonstrategic health care and corporate loans. It also plans to use the net proceeds to pay down noncore funding. The moves are expected to reduce FB Financial's 2021 earnings by about $10 million.

The company said it expects to lose $6 million in annual interchange fee revenue in 2022 as a result of crossing the $10 billion-asset threshold outlined in the Durbin Amendment.

Substandard and special mention loans at Franklin jumped by nearly 30% in the third quarter from a year earlier, to $83.3 million. During that quarter, Franklin finished charging off nearly all of a $9.7 million shared national credit to a health care company.

J.P. Morgan Securities and Wachtell, Lipton, Rosen & Katz advised FB Financial. Evercore and Alston & Bird advised Franklin.

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