Franklin Financial, Civic delay deal for third time

Franklin Financial Network in Franklin, Tenn., and Civic Bank & Trust in Nashville are once again delaying their planned merger.

The deal’s termination deadline was extended to July 1, 2018, according to a regulatory filing on Thursday.

This is the deal’s third delay. The merger was originally expected to close in 2016.

Under newly revised terms, the merger can be terminated if Franklin has not provided evidence to the $165 million-asset Civic that a merger approval application has been submitted by Nov. 15, 2017. The deal can also be terminated if Franklin does not file the application within 10 days of receiving notification from the Federal Reserve that it may proceed with the filing.

The $3.4 billion-asset Franklin has been unable to file the application due to an outstanding issue with its commercial real estate portfolio.

Franklin agreed to buy Civic in December 2015 for $30 million. In November 2016, Franklin entered into a memorandum of understanding with regulators to improve its underwriting, internal controls, risk management policies and portfolio stress testing. The problems mainly stem from growth and exposure in Franklin’s commercial real estate book.

Regulators began Franklin’s safety and soundness examination last month, which could help clarify the deal’s timeline and approval, Stephen Scouten, an analyst at Sandler O’Neill, wrote in a research note.

Also last month, Franklin received regulatory approval to open a new branch, which is “an incremental positive” for the company, though more clarity is still needed around Franklin’s regulatory issues, Scouten said.