FB Financial in Nashville has agreed to pay $381 million in stock to acquire the $2.8 billion-asset Southern States Bancshares in Anniston, Alabama.
The deal, announced Monday, marks the $13.2 billion-asset FB's first foray into the mergers-and-acquisitions market since August 2020, when it closed a
FB CEO Christopher Holmes said his company observed the market closely and held discussions with potential partners throughout its nearly five-year dry spell. FB is targeting a third-quarter close for the Southern States acquisition. Holmes pointedly declined to rule out the possibility of additional deals in the interval.
"We're going to continue to have conversations and be reactive," Holmes said on a conference call with analysts. "We don't ever take the opportunity to improve our company, improve our value proposition, our return on capital — we don't ever take that off the table."
FB, the corporate parent of FirstBank, has experience pursuing multiple acquisitions simultaneously. It announced the Franklin purchase in January 2020, while it was still in the process of closing a transaction for the $255 million-asset FNB Financial in Scottsville, Kentucky.
Holmes said he believes banking has entered a period of disruption, creating opportunities to pursue M&A, as well as to hire talented veteran bankers.
"All of us who've been really focused on the business are watching how this industry is evolving," Holmes said. "Some [banks] have a great foundation to move forward. Others have questions about exactly what that looks like."
The uncertainty is prompting bankers "who haven't changed jobs in 15 years" to test the market, Holmes said. "We're seeing a few more recruiting opportunities than we've seen in a long, long time. That didn't just happen this week. That's been happening over a series of months now."
Circling Atlanta
Southern States operates a loan production office in Atlanta, and it has a number of branches in communities surrounding Georgia's capital city. Holmes acknowledged Atlanta's allure as the Southeast's largest city, but he said FB is in no hurry to get there.
Besides its loan production office in the city, Southern States operates branches in a number of growing but less-populous counties situated on Atlanta's fringes, such as Paulding, Bartow and Carroll. Holmes termed them "collar" counties.
"Those communities have solid growth profiles," Holmes said. "Someday we might be in the center of Atlanta, but not today."
Along with Atlanta, acquiring Southern States would give FB entree to Columbus, Georgia, and the cities of Huntsville, Birmingham and Auburn in Alabama.
'Well priced' deal
Acquiring the 17-year-old Southern States and its bank subsidiary, Southern State Bank, fits with FB's broader strategy of expanding in the Southeast, Holmes said.
The transaction's $381 million price tag works out to $37.64 per Southern States share, or about 157% of the company's tangible book value per share. Southern States' history of conservative underwriting gives FB "a high level of confidence" that it can achieve its targets of double-digit earnings accretion, as well as cost savings totaling 25% of the acquiree's operating expenses, FB Chief Financial Officer Michael Mettee said on the conference call.
The combined company would have $16 billion of assets and deposits totaling $13.6 billion. It would also have a common equity tier 1 capital ratio north of 12%, giving it plenty of wherewithal to pursue balance-sheet optimization and growth opportunities. "Having such a strong position allows us to be bullish about capital deployment," Mettee said.
Stephen Scouten, a managing director and senior research analyst at Piper Sandler, characterized the deal as "well-priced" on Monday's conference call, predicting that investors would respond positively.
"We see this as an attractive and digestible transaction for the franchise," Scouten added in a research note.
FB shares were trading down about 1% on Monday afternoon at $46.25.
Holmes said FB was introduced to Southern States' management team about three years ago. "We've watched them closely over that time period," he said. The relationship between the two banks began to deepen a year ago, with talks about a combination beginning in earnest late in 2024.
FB is optimistic about closing the deal in the third quarter, according to Holmes. "We're encouraged by the pace of approvals we've seen with other [deals] in our asset class," he said.
Mark Chambers, Southern States' CEO, and Lynn Joyce, its chief financial officer, have agreed to work for the merged company. "We look forward to their leadership," Holmes said.
