Pinnacle Financial Partners in Nashville, Tenn., has agreed to buy Avenue Financial Holdings in Nashville.

The $8.7 billion-asset Pinnacle said in a press release Thursday that it will pay $201.4 million in cash and stock for the $1.2 billion-asset Avenue. Pinnacle will also assume $20 million of subordinated debt previously issued by Avenue. The deal, which is expected to close in the second or third quarter, values Avenue at 219% of its tangible book value.

"We have said for some time that we would be seeking in-market merger opportunities," Terry Turner, Pinnacle's president and chief executive, said in the release. "This merger is consistent with Pinnacle's strategy to grow rapidly and become the dominant bank in the commercial banking and affluent consumer segments in Nashville."

Ron Samuels, Avenue's chairman and chief executive, will become Pinnacle's vice chairman and serve on the company's senior leadership team. Samuels, who will report to Turner, will be responsible for continuing Avenue's development of a national franchise focused on the music industry.

"By joining forces, Pinnacle and Avenue can grow faster and more efficiently, realize more value for our shareholders and provide a broader array of banking services to the client base than we could as independent firms," Samuels said.

Pinnacle said in a presentation that it should have $10.8 billion in assets by the time the deal closes. As a result, the company said that by 2018 it should lose nearly $8 million in annual revenue tied to caps on interchange fees and have more than $2 million in added compliance costs tied to stress testing and FDIC assessments.

Pinnacle said the deal should be modestly accretive to its 2016 earnings per share, excluding merger-related expenses, and 4.2% accretive to 2017 results. Pinnacle said it should be able to earn back any tangible book dilution within two years.

Pinnacle said it expects to cut about 40% of Avenue's expenses. The company expects to incur $12 million in after-tax merger-related charges.

Sandler O'Neill and Bass, Berry & Sims advised Pinnacle. Keefe, Bruyette & Woods and Bradley Arant Boult Cummings advised Avenue.

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