425: FB Financial to Acquire Southern States Bancshares in $380 Million Deal

FB Financial Corporation announces its acquisition of Southern States Bancshares in an all-stock transaction valued at approximately $380 million, aimed at expanding its footprint and enhancing shareholder value.

Summary

• FB Financial Corporation (FB Financial) and Southern States Bancshares (Southern States) have announced a definitive agreement for FB Financial to acquire Southern States in an all-stock transaction.
• The deal is valued at approximately $380 million, with an exchange ratio of 0.8 shares of FB Financial common stock for each share of Southern States common stock.
• FB Financial anticipates the merger will result in 12% EPS accretion, less than 4% tangible book value dilution, and a tangible book value earn back period of less than two years.
• The combined company expects to achieve a return on average assets of 1.41%, a return on average tangible common equity of 14.5%, and an efficiency ratio of 50% by 2026.
• The transaction is expected to close in Q3 or early Q4 of 2025, subject to regulatory and shareholder approvals.
• Southern States CEO Mark Chambers and CFO Lynn Joyce will remain with the company after the merger.
• The combined entity will have a strong capital position, with a pro forma common equity tier-one ratio of 12.1% and a total capital ratio of 14.8%.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the merger, highlighting the expected financial benefits, strategic alignment, and growth opportunities. Management expresses confidence in achieving the projected results, contributing to a favorable sentiment.

Positives

• The acquisition is expected to be accretive to FB Financial's earnings per share by 12%.
• Tangible book value dilution is limited to less than 4% with a quick earn back period.
• The merger expands FB Financial's footprint into new markets in East Alabama and West Georgia.
• Southern States has a strong credit culture, evidenced by limited loss history in its loan portfolio.
• The combined company will have a strong capital position, enabling further capital deployment.
• The transaction is expected to improve FB Financial's return and efficiency ratios.
• Southern States' management team will remain with the company after the merger.

Negatives

• The transaction involves tangible book value dilution, although it is expected to be less than 4%.
• There are pre-tax transaction costs of approximately $38 million associated with the merger.
• The integration of the two companies could present challenges and require management's attention.
• The deal is subject to regulatory and shareholder approvals, which could delay or prevent the closing.

Risks

• The risk that cost savings and revenue synergies from the merger are less than expected.
• Potential disruption from the merger affecting customer, supplier, or employee relationships.
• The occurrence of events that could lead to the termination of the merger agreement.
• Failure to obtain necessary regulatory approvals for the merger.
• Failure to obtain shareholder approval from FB Financial and Southern States.
• Costs, fees, and expenses related to the merger being greater than anticipated.
• Risks related to the integration of the combined businesses, including delays or higher costs.
• Diversion of management time on merger-related issues.
• The ability of FB Financial to effectively manage the larger and more complex operations of the combined company.
• Reputational risk and the reaction of customers to the merger.
• Potential litigation or regulatory action related to the merger.
• General competitive, economic, political, and market conditions.

Future Outlook

FB Financial anticipates strong returns from the transaction, with improvements in return and efficiency ratios. The company plans to capitalize on growth opportunities across the Southeast and leverage its strong capital position to improve shareholder value.

Management Comments

• Chris Holmes: 'We're proud to announce the combination of FB Financial Corporation and Southern States Bancshares.'
• Chris Holmes: 'We believe that Southern States and FirstBank's customer focus, community style of banking and value systems are uniquely aligned.'
• Michael Mettee: 'We are very pleased with the financial profile of this deal as it builds scale, expands our geography, improves returns, and adds franchise value.'
• Chris Holmes: 'We do look forward to combining our companies into a bigger and better company than either of us could be on our own.'

Industry Context

This merger reflects the ongoing consolidation trend in the banking industry, where institutions are seeking to gain scale, expand their geographic footprint, and improve efficiency. The deal positions FB Financial to better compete in the Southeast market and capitalize on growth opportunities.

Comparison to Industry Standards

• The pro forma returns on average assets and tangible common equity are expected to be above the peer group median.
• The efficiency ratio is also projected to be an improvement over FB Financial's standalone metrics.
• The capital ratios of the combined entity are well above regulatory thresholds, indicating a strong financial position.
• Comparable transactions in the banking sector often target similar accretion levels and earn back periods, suggesting this deal is within industry norms.

Management Changes

Stakeholder Impact

• Shareholders of both FB Financial and Southern States are expected to benefit from the increased scale, improved returns, and enhanced shareholder value.
• Employees of both companies will have opportunities within the larger combined organization.
• Customers will benefit from a broader range of products and services and an expanded geographic footprint.
• The merger is expected to have a positive impact on the communities served by both banks.

Next Steps

• FB Financial will file a Registration Statement on Form S-4 with the SEC.
• The definitive joint proxy statement/prospectus will be sent to shareholders of FB Financial and Southern States.
• Regulatory applications will be submitted and the approval process will be worked through.
• The transaction is expected to close in Q3 or early Q4 of 2025.
• The integration of the two companies will commence after the closing.

Key Dates

Keywords

merger, acquisition, FB Financial, Southern States Bancshares, accretion, dilution, EPS, shareholder value, bank, financial