425: FB Financial Secures Final Regulatory Approvals for Southern States Merger, Targets July 1st Close

FB Financial Corporation has received all necessary regulatory approvals for its merger with Southern States Bancshares, Inc., with the transaction now expected to close on July 1, 2025, pending shareholder approval.

Summary

• FB Financial Corporation (FBK) has obtained all required regulatory approvals for its previously announced merger with Southern States Bancshares, Inc. (SSBK).
• The merger is anticipated to close on July 1, 2025, contingent upon satisfaction of customary closing conditions, including a shareholder vote scheduled for June 26, 2025.
• As of March 31, 2025, FB Financial reported total assets of $13.1 billion, loans of $9.9 billion, and deposits of $11.2 billion.
• Southern States Bancshares, Inc. reported total assets of $2.9 billion, loans of $2.3 billion, and deposits of $2.4 billion as of March 31, 2025.
• The combined entity is projected to have approximately $13.6 billion in deposits.
• For Q1 2025, FB Financial reported an adjusted return on average assets (ROAA) of 1.23% and an adjusted return on average tangible common equity (ROATCE) of 12.3%.
• Net interest income (NII) for Q1 2025 was $108.4 million, a slight decrease from $109.0 million in Q4 2024, attributed to fewer days in the quarter, lower yields on earning assets, and lower cash balances.
• Loans held for investment (HFI) ending balances grew by $169 million, or 7.14% on an annualized basis, in Q1 2025.
• The company's capital ratios remain strong, with a Common Equity Tier 1 (CET1) ratio of 12.8% and a Total Risk-Based Capital (RBC) ratio of 15.2% as of March 31, 2025.
• The Allowance for Credit Losses (ACL) coverage ratio stood at 1.54%, and nonperforming loans (NPLs) to total loans HFI were 0.79% in Q1 2025.
• The mortgage segment achieved a pre-tax net contribution of $1.5 million in Q1 2025, marking five consecutive quarters of positive pre-tax net contribution.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the successful receipt of regulatory approvals for a significant strategic merger, which is a key de-risking event. While there are minor Q1 financial headwinds (slight NII decrease, expense increase), the overall focus and outlook presented are on the strategic growth and anticipated benefits of the merger, indicating confidence in future performance.

Positives

• Receipt of all required regulatory approvals for the merger with Southern States Bancshares, Inc., clearing a significant hurdle for the transaction.
• The merger is strategically compelling, expanding FB Financial's presence into high-value contiguous markets in the Southeast and creating a larger, more competitive banking franchise.
• Strong capital foundation with a CET1 ratio of 12.8% and a Total Risk-Based Capital ratio of 15.2% as of March 31, 2025.
• Consistent organic loan growth, with Loans HFI ending balances increasing by $169 million (7.14% annualized) in Q1 2025.
• Stabilized profitability in the mortgage segment, delivering positive pre-tax net contribution for five consecutive quarters, reaching $1.5 million in Q1 2025.
• Improved cost of deposits in Q1 2025 due to active management of brokered and higher-cost non-relationship deposit portfolios.
• Diversified loan portfolio with office loans representing only ~4% of total Loans HFI, with ~98% being pass-rated and current.

Negatives

• Net Interest Income (NII) decreased slightly to $108.4 million in Q1 2025 from $109.0 million in Q4 2024, primarily due to two fewer days in the quarter, lower yields on earning assets, and lower cash balances.
• Noninterest expense increased by approximately $6 million quarter-over-quarter, driven by higher performance-based incentives and seasonal HR-related compensation expenses.

Risks

• Current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates.
• Changes or lack of changes in government interest rate policies and their impact on the Company’s business, net interest margin, and mortgage operations.
• Increased competition for deposits.
• Changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or repayment ability, or the impact of interest rates on investment securities portfolio value.
• Any deterioration in commercial real estate market fundamentals.
• Risks associated with the Proposed Merger, including the possibility that cost savings and revenue synergies are less than expected, disruption to customer, supplier, or employee relationships, termination of the merger agreement, failure to obtain shareholder approval, higher than anticipated costs/fees/expenses, failure of closing conditions, integration delays or difficulties, diversion of management time, challenges in managing larger combined operations, risks of future acquisitions, expansion into new markets, reputational risk, and potential litigation or regulatory action.
• Ability to manage unexpected outflows of uninsured deposits and avoid selling investment securities or other assets at an unfavorable time or at a loss.
• Effectiveness of controls and procedures to detect, prevent, mitigate, and manage fraud or misconduct, including physical-security and cybersecurity attacks.
• Dependence on information technology systems of third-party service providers and the risk of system failures, interruptions, or security breaches.
• Impact, extent, and timing of technological changes.
• Concentrations of credit or deposit exposure.
• Impact of natural disasters, pandemics, acts of war or terrorism, or other catastrophic events.
• Events giving rise to international or regional political instability and their broader impacts on financial markets and/or global macroeconomic environments.

Future Outlook

The company anticipates the merger with Southern States Bancshares, Inc. to close on July 1, 2025, which is expected to result in compelling earnings accretion, achieving low double-digit accretion with fully realized cost savings, and positioning the combined entity for top-quartile profitability among peers. The tangible book value dilution from the merger is projected to be earned back in under two years. The company also plans for systems conversion during the third quarter of 2025.

Management Comments

• Christopher T. Holmes, President and CEO of FB Financial, stated: "We're pleased to have received swift regulatory approval for the merger between FB Financial and Southern States. Both institutions share a deep commitment to community banking, and we're excited about bringing our teams together to continue delivering long-term value for our customers, associates, shareholders, and communities."

Industry Context

This announcement reflects a continued trend of consolidation within the regional banking sector, particularly in the high-growth Southeast U.S. markets. The merger allows FB Financial to expand its geographic footprint into contiguous, desirable markets in Alabama and Georgia, enhancing its market share and creating a larger, more diversified regional bank. This strategic move positions the combined entity to leverage economies of scale and potentially improve competitive standing against larger national banks and other regional players.

Comparison to Industry Standards

• FB Financial positions itself as a 'Top-quartile performer' in the industry, with an adjusted ROAA of 1.23% and an adjusted ROATCE of 12.3% in Q1 2025.
• The combined entity with Southern States is projected to achieve 'Top quartile profitability amongst peers', indicating an expectation of strong performance relative to other banking institutions.
• The document highlights that the merger is expected to have 'manageable tangible book value dilution, earned back in under two years', which is a common metric used to assess the financial attractiveness of bank mergers against industry benchmarks for accretion and dilution.

Legal Proceedings

• The document mentions the risk of potential litigation or regulatory action related to the Proposed Merger as a forward-looking risk factor, but no specific ongoing legal proceedings are detailed.

Stakeholder Impact

• Shareholders: Expected to benefit from compelling earnings accretion and top-quartile profitability post-merger, with manageable tangible book value dilution earned back in under two years.
• Employees: The merger involves bringing together teams from both institutions, implying potential integration efforts and cultural alignment initiatives.
• Customers: The combined entity aims to continue delivering long-term value and expand its service footprint across the Southeast.
• Communities: The merger is framed as a commitment to community banking, suggesting continued local presence and support.

Next Steps

• Shareholder vote on the merger scheduled for June 26, 2025.
• Legal close of the merger transaction expected on July 1, 2025, pending shareholder approval and customary closing conditions.
• Systems conversion for the combined entity is expected to follow during the third quarter of 2025.
• Management team will be presenting at the KBW Investor Conference on June 17, 2025.

Key Dates

Recommendation

Keywords

FB Financial Corporation, Southern States Bancshares, Merger, Acquisition, Regulatory Approval, Banking, Financial Services, SEC Filing, Form 8-K, Investor Presentation, Regional Bank, Tennessee, Alabama, Georgia, Kentucky, Financial Performance, Net Interest Income, Capital Ratios, Loan Growth, Mortgage Banking, Asset Quality