8-K: FB Financial Completes Acquisition of Southern States Bancshares, Expanding Footprint and Assuming $92.7 Million in Subordinated Debt

FB Financial Corporation has successfully completed its merger with Southern States Bancshares, Inc., significantly expanding its asset base to approximately $16 billion and assuming $92.7 million in subordinated notes.

Summary

• FB Financial Corporation completed its merger with Southern States Bancshares, Inc. on July 1, 2025, with Southern States merging into FB Financial and Southern States Bank merging into FirstBank.
• Southern States shareholders received 0.800 shares of FB Financial common stock for each Southern States share, implying a total transaction value of approximately $368.4 million based on FB Financial's June 30, 2025 closing stock price of $45.30 per share.
• All outstanding Southern States Stock Options were cancelled and exchanged for cash payments, while Restricted Stock Awards and Seller RSU Awards were converted into the right to receive the merger consideration.
• FB Financial assumed $92.7 million in aggregate principal amount of subordinated notes from Southern States, comprising three series: $48.0 million of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2032, $40.0 million of 7.00% Fixed-to-Floating Rate Subordinated Notes due 2032, and $4.7 million of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2031.
• The 2032 3.50% Notes bear a fixed annual rate of 3.50% until February 7, 2027, then reset quarterly to three-month Term SOFR plus 205 basis points.
• The 2032 7.00% Notes bear a fixed annual rate of 7.00% until October 26, 2027, then reset quarterly to three-month Term SOFR plus 306 basis points.
• The 2031 Notes bear a fixed annual rate of 3.50% until December 22, 2026, then reset quarterly to three-month Term SOFR plus 242 basis points.
• As of March 31, 2025, Southern States reported total assets of $2.9 billion, loans of $2.3 billion, and deposits of $2.4 billion.
• Post-merger, FB Financial now operates 93 full-service bank branches and has approximately $16 billion in total assets.
• Southern States' Bank maintained strong capital ratios as of March 31, 2025, with Tier 1 capital at 11.99% (required 4.00%), CET 1 capital at 13.35% (required 7.00%), and Total capital at 14.55% (required 10.50%).
• Southern States' net income for the three months ended March 31, 2025, was $10.351 million, up from $8.119 million for the same period in 2024.
• Southern States' net income for the year ended December 31, 2024, was $34.868 million, up from $31.952 million in 2023.

Sentiment

Score: 8

Explanation: The completion of the merger is a positive strategic move for FB Financial, significantly expanding its asset base and market presence. The acquired entity, Southern States, demonstrated strong financial health and growth prior to the acquisition. While the assumption of debt and integration risks are present, the overall tone and financial metrics suggest a favorable outlook for the combined entity's growth and stability.

Positives

• The acquisition significantly expands FB Financial's total assets to approximately $16 billion and increases its branch network to 93 full-service locations, suggesting strategic growth and market expansion.
• Southern States Bank, the acquired subsidiary, maintained strong regulatory capital ratios well above minimum requirements as of March 31, 2025, indicating a healthy financial position prior to the merger.
• Southern States reported an increase in net income for the three months ended March 31, 2025 ($10.351 million) compared to the same period in 2024 ($8.119 million), and for the full year 2024 ($34.868 million) compared to 2023 ($31.952 million), demonstrating positive financial performance.
• The appointment of J. Henry Smith IV, a former Southern States director with extensive business management and bank governance experience, to FB Financial's board strengthens the combined entity's leadership.

Negatives

• FB Financial will incur increased debt service obligations due to the assumption of $92.7 million in subordinated notes.
• The integration of the combined businesses carries inherent risks, including potential delays, higher costs, and disruption to customer, supplier, or employee relationships.
• The subordinated notes are unsecured and effectively subordinated to secured lenders and the liabilities of the bank subsidiary, meaning holders may face significant losses in the event of bankruptcy or liquidation.
• The subordinated notes offer limited covenant protection, with no acceleration rights for payment defaults other than bankruptcy, and do not restrict the company from incurring additional senior debt.

Risks

• SOFR (Secured Overnight Financing Rate) may be more volatile than other benchmark rates, and its future performance is uncertain, potentially affecting interest payments on the floating-rate subordinated notes.
• Changes in the calculation or discontinuation of SOFR could adversely affect the interest accrual and trading prices of SOFR-linked subordinated notes.
• The market for SOFR-linked subordinated notes may be illiquid or unpredictable, potentially limiting the ability to resell notes at favorable prices.
• Implementation of Benchmark Replacement Conforming Changes could adversely affect interest accrual and trading prices of subordinated notes.
• The company acting as the initial calculation agent for the floating rate period may have economic interests adverse to the interests of subordinated noteholders.
• Changes or downgrades in the company's credit ratings could adversely affect the market value and liquidity of the subordinated notes and increase borrowing costs.
• Early redemption of subordinated notes by the company may force investors to reinvest principal at a lower rate of return.
• Subordinated noteholders have no rights with respect to the company's capital stock, including voting rights or rights to dividends.
• Payments on subordinated notes are effectively subordinated to secured lenders and structurally subordinated to the indebtedness of the bank subsidiary.
• Increased debt service obligations from the assumed notes could limit funds available for dividends and distributions to shareholders and restrict future financing options.
• Regulatory guidelines, including those requiring the bank holding company to act as a source of financial strength to its banking subsidiaries, may restrict the ability to pay principal and interest on subordinated notes.
• The Dodd-Frank Act's orderly liquidation authority could result in subordinated noteholders being fully subordinated to U.S. government interests in the event of receivership or insolvency.
• The subordinated notes do not contain financial ratios, covenants, or specified liquidity levels, nor do they require repurchase or modification upon adverse creditworthiness events.

Future Outlook

FB Financial Corporation plans to release its second quarter 2025 results of operations on Monday, July 14, 2025, after market close, and will host a conference call on Tuesday, July 15, 2025, to discuss these results.

Management Comments

• Christopher T. Holmes, President and CEO of FB Financial, stated, 'Today marks a significant milestone in the histories of our two companies. We are excited about joining forces with Southern States and look forward to continuing their history of exemplary service in their communities. We are confident that this combination will deliver long-term value for our customers, associates, shareholders, and communities.'
• Holmes also commented on the new board appointment, 'We are thrilled to have Hank Smith join our board. His extensive business management experience and bank governance experience will serve FB Financial well as we grow and expand our footprint.'

Industry Context

This acquisition represents a strategic consolidation within the regional banking sector, allowing FB Financial to expand its geographic footprint across Tennessee, Alabama, Kentucky, and Georgia. The merger aligns with broader industry trends of consolidation among community and regional banks seeking to achieve economies of scale, enhance market share, and leverage diversified revenue streams in a competitive and evolving financial landscape. The assumption of subordinated debt is a common financing mechanism for such expansions, contributing to the acquiring entity's capital structure.

Comparison to Industry Standards

• Southern States Bank's capital ratios (Tier 1 at 11.99%, CET 1 at 13.35%, Total Capital at 14.55% as of March 31, 2025) significantly exceed the 'well capitalized' minimums set by regulatory frameworks (Tier 1: 4.00%, CET 1: 7.00%, Total Capital: 10.50%). This indicates Southern States was in a very strong financial position relative to regulatory benchmarks prior to the merger.
• The fixed-to-floating rate structure of the assumed subordinated notes, transitioning to a spread over Three-Month Term SOFR, is consistent with current market practices for bank subordinated debt, reflecting the industry's shift away from LIBOR and towards SOFR as a benchmark rate.

Management Changes

Corporate Governance

Legal Proceedings

• No material legal proceedings are currently pending or threatened against Southern States Bancshares, Inc. or its subsidiaries that would have a material effect on the company's financial statements.

Related Party Transactions

• Deposits from related parties totaled $12,494 thousand at December 31, 2024, and $11,446 thousand at December 31, 2023.
• Related party loans totaled $13,222 thousand at December 31, 2024, and $13,614 thousand at December 31, 2023. These transactions are conducted in the ordinary course of business on substantially the same terms as comparable loans and deposits to other persons.

Stakeholder Impact

• Shareholders of Southern States Bancshares, Inc. received 0.800 shares of FB Financial common stock for each of their shares, representing the merger consideration.
• Employees of Southern States Bancshares, Inc. and Southern States Bank will be integrated into the larger FB Financial and FirstBank organization, with potential impacts on roles and corporate culture.
• Customers of Southern States Bank will benefit from an expanded banking footprint and potentially broader services under FirstBank.
• Creditors of Southern States Bancshares, Inc. will now have FB Financial Corporation as the obligor for the assumed subordinated notes, subject to the terms and subordination provisions outlined in the indentures.

Next Steps

• FB Financial Corporation will release its second quarter 2025 results of operations on July 14, 2025.
• A conference call to discuss the second quarter results will be held on July 15, 2025.

Key Dates

Recommendation

Keywords

Merger, Acquisition, Subordinated Notes, Fixed-to-Floating Rate, SOFR, Bank Holding Company, Financial Services, Debt Assumption, Corporate Governance, Regulatory Capital, SEC Filing, Banking Industry, Financial Performance