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EX-23.2 - EX-23.2 - FB Financial Corpd383652dex232.htm
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Table of Contents
Index to Financial Statements

As Filed with the Securities and Exchange Commission on June 21, 2017

Registration No. 333-      

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

FB Financial Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Tennessee   6022   62-1216058
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

211 Commerce Street, Suite 300,

Nashville, Tennessee 37201

(615) 313-0080

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Christopher T. Holmes

Chief Executive Officer and President

FB Financial Corporation

211 Commerce Street, Suite 300,

Nashville, Tennessee 37201

(615) 313-0080

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

Copies to:

Mark Kanaly

Kyle Healy

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, GA 30309

(404) 881-7000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer     (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act .  

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title Of Each Class Of

Securities To Be Registered

  Amount
To Be
Registered(1)
  Proposed
Maximum
Offering Price
Per Unit(2)
  Proposed
Maximum
Aggregate
Offering Price(2)
  Amount Of
Registration Fee

Common Stock, par value $1.00 per share

  4,806,710 Shares   $35.97   $172,897,358.70   $20,038.80

 

 

(1)   Represents shares of common stock, par value $1.00 per share, of the registrant being registered for resale by the selling shareholders named in this Registration Statement or any permitted transferee, assignee or successor-in-interest thereof.
(2)   Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low prices of the registrant’s common stock as reported by the NYSE on June 15, 2017 which is within five business days of the filing of this registration statement.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Index to Financial Statements

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

 

Subject to completion, dated June 21, 2017

Prospectus

4,806,710 Shares

 

LOGO

Common stock

This prospectus relates to the offer for sale of 4,806,710 shares of common stock, par value $1.00, of FB Financial Corporation, a bank holding company headquartered in Nashville, Tennessee, by the selling shareholders identified below in this prospectus or in any supplement to this prospectus or any transferee, assignee or successor-in-interest of any selling shareholder. For a more detailed description of the selling shareholders, see “Selling Shareholders” below.

We are not selling any of the shares described in this prospectus, and, accordingly, we will not receive any proceeds from the sale of any of the shares by the selling shareholders hereunder. The selling shareholders will receive all of the net proceeds from the sale of the shares.

The shares may be offered from time to time by one or more of the selling shareholders for their own account as described under “Plan of Distribution” below. The selling shareholders may offer the shares for sale to or through underwriters, broker-dealers or agents, who may receive compensation in the form of commissions, discounts or concessions. The selling shareholders may sell the shares at any time at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices, at varying prices determined at the time of sale or at prices otherwise negotiated. This prospectus describes the general manner in which the shares may be offered and sold by the selling shareholders. If necessary, the specific manner in which the shares may be offered or sold will be described in a supplement to this prospectus.

Our common stock is listed on the New York Stock Exchange under the symbol “FBK.” The last reported sale price of our common stock on June 19, 2017 was $36.20 per share.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as a result, are subject to reduced public company disclosure standards. See “Implications of being an emerging growth company.”

Investing in our common stock involves risks. See “Risk factors” to read about factors you should consider before investing in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

These securities are not deposits, savings accounts or other obligations of any bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

This prospectus is not an offer to sell any securities other than the shares of our common stock offered hereby. This prospectus is not an offer to sell securities in any jurisdictions or in any circumstances in which such offer is unlawful.

The date of this prospectus is June     , 2017.


Table of Contents
Index to Financial Statements

Table of Contents

 

     Page  

About this prospectus

     ii  

Implications of being an emerging growth company

     ii  

Cautionary note regarding forward-looking statements

     1  

Prospectus summary

     4  

The Offering

     7  

Unaudited pro forma financial information

     8  

Risk factors

     18  

Use of proceeds

     21  

Dividend policy

     22  

Description of our capital stock

     23  

Selling Shareholders

     29  

Plan of Distribution

     33  

Legal matters

     36  

Experts

     36  

Where you can find more information

     36  

Incorporation of certain information by reference

     36  

Index to combined financial statements of the Clayton Banks

     F-1  


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Index to Financial Statements

About this prospectus

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different or additional information. We take no responsibility for, and can provide no assurance as to the reliability of, any different or additional information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it.

The selling shareholders are not making an offer to sell these shares in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and growth prospects may have changed since that date. Information contained on, or accessible through, our website is not part of this prospectus.

In this prospectus, “we,” “our,” “us,” “FB Financial” or “the Company” refers to FB Financial Corporation, a Tennessee corporation, and our consolidated banking subsidiary, FirstBank, a Tennessee state chartered bank, unless the context indicates that we refer only to the parent company, FB Financial Corporation. In this prospectus, “Bank” or “FirstBank” refers to FirstBank, our consolidated banking subsidiary. In this prospectus, “CBT” refers to Clayton Bank and Trust, a Tennessee state bank, “ACB” refers to American City Bank, a Tennessee state bank, “Clayton Banks” refer to CBT and ACB, “Clayton HC” refers to Clayton HC, Inc., a Tennessee Corporation and sole shareholder of the Clayton Banks, and “Mr. Clayton” refers to James L. Clayton, the primary shareholder of Clayton HC. In this prospectus, the “Acquisition” refers to the acquisition of all of the issued and outstanding shares of capital stock of the Clayton Banks pursuant to the Purchase Agreement, the “Purchase Agreement” refers to that certain Purchase Agreement, dated as of February 8, 2017 and as amended on May 26, 2017, by and among FB Financial, FirstBank, Clayton HC, the Clayton Banks and Mr. Clayton and the “Amendment” refers to the first amendment, dated as of May 26, 2017, to the Purchase Agreement.

Implications of being an emerging growth company

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to other public companies. As an emerging growth company:

 

 

we are exempt from the requirement to provide an auditor attestation from our auditors on management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act;

 

 

we may choose not to comply with any new requirements adopted by the Public Company Accounting Oversight Board, or PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and our audited financial statements;

 

 

we are permitted to provide less extensive disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosure regarding our executive compensation in this prospectus; and

 

 

we are not required to hold nonbinding advisory votes on executive compensation or golden parachute arrangements.

 

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We may take advantage of these provisions for up to five years from the completion of our initial public offering in September 2016 unless we earlier cease to be an emerging growth company. We will cease to be an emerging growth company if we have more than $1.0 billion in annual gross revenues, have more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt in a three-year period. We have elected to adopt the reduced disclosure requirements described above regarding our executive compensation arrangements for purposes of the registration statement of which this prospectus is a part. In addition, we expect to take advantage of certain of the reduced reporting and other requirements of the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our shareholders.

The JOBS Act also permits us an extended transition period for complying with new or revised financial accounting standards affecting public companies until they would apply to private companies. However, we have elected not to take advantage of this extended transition period, which means that the financial statements included or incorporated by reference in this prospectus, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.

 

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Cautionary note regarding forward-looking statements

This prospectus, including the information included or incorporated by reference in this prospectus, contains statements which are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include statements relating to the proposed Acquisition, the anticipated benefits and financial impact thereof, the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. These statements, which are based on certain assumptions and estimates and describe our future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection” and other variations of such words and phrases and similar expressions.

We have made the forward-looking statements included or incorporated by reference in this prospectus based on assumptions and estimates that we believe to be reasonable in light of the information available to us at the time of such statements. However, these forward-looking statements are subject to significant risks and uncertainties, and could be affected by many factors. Factors that could have a material adverse effect on our business, financial condition, results of operations and future growth prospects can be found in the “Risk factors” section of this prospectus, elsewhere in this prospectus and in the documents incorporated by reference in this prospectus. These factors include, but are not limited to, the following:

 

 

business and economic conditions nationally, regionally and in our target markets, particularly in Tennessee and the geographic areas in which we operate;

 

 

concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate;

 

 

the concentration of our business within our geographic areas of operation in Tennessee and neighboring markets;

 

 

credit and lending risks associated with our commercial real estate, commercial and industrial, and construction portfolios;

 

 

increased competition in the banking and mortgage banking industry, nationally, regionally or locally;

 

 

our ability to execute our business strategy to achieve profitable growth;

 

 

the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets;

 

 

risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits;

 

 

our ability to increase our operating efficiency;

 

 

failure to keep pace with technological change or difficulties when implementing new technologies;

 

 

risks related to the recent conversion of our core operating platform;

 

 

the risk that the required regulatory approvals for the Acquisition of the Clayton Banks will not be obtained or the other conditions to closing of the proposed Acquisition may not be satisfied;

 

 

the length of time necessary to consummate the Acquisition;

 

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Index to Financial Statements
 

the risk that the anticipated benefits of the Acquisition, including any accretive impact to the Company’s earnings per share, may not be fully realized or may take longer to realize than expected;

 

 

the risk that the Clayton Banks may not be successfully integrated in the Company’s business and that the costs associated with the integration are higher than expected;

 

 

the significant dilution caused by the issuance of the shares in the Private Placement and the risk that, if the Acquisition is not consummated, we may not be able to deploy such capital in a manner that results in an attractive return to us;

 

 

negative impact in our mortgage banking services, including declines in our mortgage originations or profitability due to rising interest rates and increased competition and regulation, the Bank’s or third party’s failure to satisfy mortgage servicing obligations, and the possibility of the Bank being required to repurchase mortgage loans or indemnify buyers;

 

 

our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas;

 

 

our ability to attract sufficient loans that meet prudent credit standards, including in our commercial and industrial and owner-occupied commercial real estate loan categories;

 

 

failure to maintain adequate liquidity and regulatory capital and comply with evolving federal and state banking regulations;

 

 

inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk, strategic risk and reputational risk;

 

 

develop new, and grow our existing, streams of noninterest income;

 

 

oversee the performance of third party service providers that provide material services to our business;

 

 

maintain expenses in line with their current projections;

 

 

our dependence on our management team and our ability to motivate and retain our management team;

 

 

risks related to any future acquisitions, including failure to realize anticipated benefits from future acquisitions;

 

 

inability to find acquisition candidates that will be accretive to our financial condition and results of operations;

 

 

system failures, data security breaches, including as a result of cyber-attacks, or failures to prevent breaches of our network security;

 

 

data processing system failures and errors;

 

 

fraudulent and negligent acts by our clients, employees or vendors;

 

 

fluctuations in the market value and its impact in the securities held in our securities portfolio;

 

 

the adequacy of our reserves (including allowance for loan losses) and the appropriateness of our methodology for calculating such reserves;

 

 

the makeup of our asset mix and investments;

 

 

our focus on small and mid-sized businesses;

 

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an inability to raise necessary capital to fund our growth strategy, operations or to meet increased minimum regulatory capital levels;

 

 

the sufficiency of our capital, including sources of such capital and the extent to which capital may be used or required;

 

 

interest rate shifts and its impact on our financial condition and results of operation;

 

 

the expenses that we will incur to operate as a public company and our inexperience complying with the requirements of being a public company;

 

 

the institution and outcome of litigation and other legal proceeding against us or to which we become subject;

 

 

changes in our accounting standards;

 

 

the impact of recent and future legislative and regulatory changes;

 

 

governmental monetary and fiscal policies;

 

 

changes in the scope and cost of Federal Deposit Insurance Corporation, or FDIC, insurance and other coverage;

 

 

future equity issuances under our 2016 Incentive Plan and our Employee Stock Purchase Plan and future sales of our common stock by us, our controlling shareholder or our executive officers or directors; and

 

 

other factors and risks described under the “Risk Factors” section of this prospectus and in Part II, Item 1A of our most recently filed Annual Report on Form 10-K under the caption “Risk Factors.”

Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this prospectus. Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. We qualify all of our forward-looking statements by these cautionary statements.

 

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Prospectus summary

This summary highlights selected information contained elsewhere or incorporated by reference in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should read the entire prospectus and the documents incorporated by reference in this prospectus carefully.

The Company

We are a bank holding company, headquartered in Nashville, Tennessee. Our wholly-owned bank subsidiary, FirstBank, is the third largest Tennessee-headquartered bank, based on total assets. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, North Alabama and North Georgia. Our footprint includes 45 full-service bank branches serving the Tennessee metropolitan markets of Nashville, Chattanooga, Knoxville, Memphis, Jackson, and Huntsville (AL) in addition to 12 community markets. FirstBank also provides mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States in addition to a national internet delivery channel.

As of March 31, 2017, we had total assets of $3.17 billion, total loans held for investment of $1.90 billion, deposits of $2.7 billion, and shareholder’s equity of $342.1 million.

Our principal executive office is located at 211 Commerce Street, Suite 300, Nashville, Tennessee 37201, and our telephone number is (615) 313-0080. Through FirstBank, we maintain an Internet website at www.firstbankonline.com. The information contained on or accessible from our website does not constitute a part of this prospectus and is not incorporated by reference herein.

The Private Placement and Clayton Banks Acquisition

Clayton Banks Acquisition

On February 8, 2017, we, along with our wholly-owned banking subsidiary FirstBank, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Clayton HC, Inc., a Tennessee Corporation (“Clayton HC”), Clayton Bank and Trust, a Tennessee state bank and wholly-owned subsidiary of Clayton HC (“CBT”), American City Bank, a Tennessee state bank and wholly-owned subsidiary of Clayton HC (“ACB,” and together with CBT, the “Clayton Banks”), and James L. Clayton, the principal shareholder of Clayton HC (“Mr. Clayton”). On the terms and subject to the conditions set forth in the Purchase Agreement, we have committed to purchase from Clayton HC all of the issued and outstanding shares of the Clayton Banks. Following the Acquisition, the Clayton Banks will merge with and into FirstBank, with FirstBank continuing as the surviving banking corporation.

The Clayton Banks are Tennessee state chartered community banks, with CBT headquartered in Knoxville, Tennessee and ACB headquartered in Tullahoma, Tennessee. The Clayton Banks operate a total of 18 branches and, as of March 31, 2017, had combined total assets of $1.2 billion, combined total loans of $1.1 billion and combined total deposits of $928.7 million. Combined historical financial statements for the Clayton Banks as of December 31, 2016 and 2015 and for each of the three years ended December 31, 2016 and as of March 31, 2017 and 2016 and for each of the three months ended March 31, 2017 and 2016 are included elsewhere in this prospectus beginning on page F-1.

The Company expects to close the Acquisition in the third quarter of 2017, the closing of the Acquisition remains subject to the satisfaction of numerous closing conditions, including without limitation, (i) receipt of all required

 

 

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regulatory approvals from the Federal Reserve, FDIC and the Tennessee Department of Financial Institutions, (ii) approval by our shareholders of the issuance of the Stock Consideration (as defined below) and (iii) the absence of any law, order, injunction, decree, judgment or ruling prohibiting the Acquisition.

Amendment to the Purchase Agreement

On May 26, 2017, we entered into an amendment (the “Amendment”) to the Purchase Agreement to address competitive effects concerns raised by the Federal Reserve Board (the “FRB”) related to Clayton HC’s contemplated ownership of our shares and its continued ownership of 50% of Apex Bancorp, Inc., the bank holding company for Apex Bank, a bank headquartered in Camden, Tennessee, and the overlapping market share between Apex Bank and FirstBank in two Federal Reserve banking markets. The Amendment (i) reduces the number of shares of the Company’s common stock to be received by Clayton HC as partial consideration for the Clayton Banks Acquisition from 5,860,000 shares to 1,521,200 shares (the “Stock Consideration”), and (ii) provides for a cash payment by the Company to Clayton HC equal to $124,200,000 (the “Cash Consideration”).

As a result of the reduction of the Stock Consideration and after giving effect to the issuance of the Stock Consideration and the sale of the Private Placement Shares (as described and defined below), Clayton HC will own approximately 4.99% of the Company’s outstanding shares of common stock, which we believe will result in a finding by the FRB that Apex Bank and FirstBank would not be deemed to be under common control following the closing. As a result, the overlapping market share between Apex Bank and FirstBank should no longer be a consideration by the FRB. However, the Acquisition remains subject to approval by the FRB and there is no guarantee that we will be able to obtain such approval. See “Risk Factors: The consummation of our proposed Acquisition is contingent upon the satisfaction of a number of conditions, including regulatory approvals, that are outside of our control and that we may be unable to obtain or may delay the consummation of the Acquisition or result in the imposition of conditions that could reduce the anticipated benefits from the proposed Acquisition or cause the parties to abandon the proposed transaction.”

The Amendment also permits FirstBank to reduce the principal amount of the $60 million subordinated note to be issued to Clayton HC at the closing by paying all or a portion of such principal amount in cash at FirstBank’s discretion. FirstBank has not made a determination of whether to issue the Subordinated Note in the full $60 million principal amount or to reduce the principal amount of the Subordinated Note by paying cash in lieu of principal at the closing.

The Amendment does not change the pre-closing distributions to be made from the Clayton Banks to Clayton HC under the Purchase Agreement, which include (i) the distribution of excess capital of the Clayton Banks in the amount of $79,500,000 to Clayton HC at the closing (the “Excess Capital Payment”), with FirstBank paying any shortfall in the event that the Clayton Banks are restricted from making the entire Excess Capital Payment to Clayton HC due to regulatory restrictions or applicable liquidity policies, (ii) the distribution of certain specified assets, with a book value of approximately $4.8 million, and (iii) cash distributions in amounts intended to cover Clayton HC’s S corporation tax liabilities attributable to the earnings of the Clayton Banks for the period prior to the closing.

Private Placement

On May 26, 2017 and concurrently with the entry into the Amendment, the Company entered into Securities Purchase Agreements (the “Securities Purchase Agreements”) with accredited investors pursuant to which the Company agreed to sell an aggregate of 4,806,710 shares of the Company’s common stock in a private

 

 

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placement (the “Private Placement”) at a purchase price of $33.00 per share. The Private Placement was conducted to fund the cash consideration of $124.2 million payable to Clayton HC under the amended terms of the Acquisition. The Private Placement closed on June 1, 2017 resulting in gross proceeds to the Company of approximately $158.6 million and net proceeds of approximately $152 million, after deducting offering expenses and placement agent fees.

The net proceeds from the Private Placement will be used to fund the payment of the $124.2 million Cash Consideration to be paid to Clayton HC at the closing and the remaining net proceeds will be used for general corporate purposes, which may include paying down the $60 million Subordinated Note. In the event that the Acquisition is not consummated, the proceeds from the Private Placement will be used for general corporate purposes, which may include funding future acquisitions and strengthening the Company’s and FirstBank’s capital position.

The foregoing summaries of the Securities Purchase Agreements, the Amendment and the Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the complete text of the Securities Purchase Agreements, the Amendment and the Purchase Agreement, which are included as exhibits to this prospectus.

 

 

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The Offering

The following summary contains basic information about the shares common stock and is not intended to be complete and does not contain all the information that is important to you. For a more complete understanding of our common stock, please refer to the section of this prospectus entitled “Description of our capital stock.”

 

Issuer

FB Financial Corporation

 

Maximum number of shares of common stock offered by Selling Shareholders

4,806,710 shares of common stock, as described in “The Private Placement” section above

 

Shares Outstanding as of June 15, 2017

28,937,050

 

  Unless otherwise noted, references in this prospectus to the number of shares of our common stock outstanding after this offering are based on 28,937,050 shares of our common stock issued and outstanding as of June 15, 2017 and exclude the 323,990 shares of our common stock underlying our converted EBI Units to restricted stock units, the 944,983 shares of our common stock underlying our outstanding restricted stock units and deferred stock units and the additional 1,876,147 shares of our common stock reserved for future issuance under our 2016 Incentive Plan and the 2,479,623 shares of our common stock reserved for future issuance under our Employee Stock Purchase Plan.

 

Use of Proceeds

All of the shares of common stock sold pursuant to this prospectus will be sold by the Selling Shareholders. We will not receive any of the proceeds from such sales.

 

Risk factors

An investment in shares of our common stock involves a high degree of risk. You should carefully read and consider the risks discussed in the “Risk factors” and “Cautionary note regarding forward-looking statements” sections of this prospectus and in Part II, Item 1A of our most recently filed Annual Report on Form 10-K under the caption “Risk Factors,” which is incorporated by reference in this prospectus, and all other information included or incorporated by reference in this prospectus before making a decision to invest in shares of our common stock.

 

New York Stock Exchange (NYSE) Market Symbol

Our common stock is listed and traded on the NYSE under the symbol “FBK.”

 

 

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Unaudited pro forma financial information

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the Acquisition based on the historical financial statements and accounting records of FB Financial and the Clayton Banks after giving effect to the Acquisition and the acquisition-related pro forma adjustments as described in the notes below (including the issuance of our shares of common stock in the Private Placement as described in the notes below).

The unaudited pro forma condensed combined balance sheet combines the historical consolidated and combined balance sheets of FB Financial and the Clayton Banks, giving effect to the Acquisition as if it had been consummated on March 31, 2017. The unaudited pro forma condensed combined statements of income for the three months ended March 31, 2017 and for year ended December 31, 2016 combine the historical consolidated and combined statements of income of FB Financial and the Clayton Banks, giving effect to the Acquisition as if it had been consummated on January 1, 2016, the beginning of the earliest period presented. The historical combined financial statements of Clayton Banks have been adjusted to reflect certain reclassifications in order to conform with FB Financial’s financial statement presentation.

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting for business combinations pursuant to the provisions of Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), with FirstBank the acquirer of the Clayton Banks for accounting purposes. Accordingly, consideration given by FirstBank to complete the Acquisition will be allocated to the assets and liabilities of the Clayton Banks based upon their estimated fair values as of the date of completion of the Acquisition. As of the date of this prospectus, FB Financial has not completed the detailed valuation studies necessary to arrive at the required estimates of the fair value of the Clayton Banks assets to be acquired and the liabilities to be assumed and the related allocations of the acquisition consideration, nor has it identified all adjustments necessary to conform the accounting policies of the Clayton Banks to FB Financial’s accounting policies. A final determination of the fair value of the assets and liabilities of the Clayton Banks will be based on the actual net tangible and intangible assets and liabilities of the Clayton Banks that exist as of the date of completion of the Acquisition and therefore cannot be made prior to the completion of the transaction. Additionally, the value of the stock consideration given by FB Financial to complete the Acquisition will be determined based on the trading price of FB Financial’s common stock at the time of the completion of the Acquisition. Accordingly, the pro forma purchase price allocation and adjustments are preliminary and are subject to further adjustments as additional information becomes available and as additional analyses are performed. The preliminary pro forma purchase price allocation and adjustments have been made solely for the purpose of providing the unaudited pro forma combined financial statements presented below. FB Financial estimated the fair value of the assets and liabilities of the Clayton Banks based on discussions with management of the Clayton Banks, preliminary valuation studies and due diligence. Upon completion of the Acquisition, final valuations will be performed. Increases or decreases in the fair value of relevant balance sheet amounts will result in adjustments to the balance sheet and/or statements of income until the allocation of acquisition consideration is finalized. There can be no assurance that such finalization will not result in material changes.

These unaudited pro forma combined financial statements have been developed from and should be read in conjunction with (i) the unaudited interim consolidated and combined financial statements of each of FB Financial and the Clayton Banks for the quarterly period ended March 31, 2017 and (ii) the audited consolidated and combined financial statements of each of FB Financial and the Clayton Banks for the year ended December 31, 2016, in each case contained in or incorporated by reference into this prospectus. The unaudited pro forma combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual combined results of operations or the combined financial position of FB Financial

 

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would have been had the Acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.

Pro forma adjustments are included only to the extent they are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) with respect to the unaudited pro forma combined statement of income, expected to have a continuing impact on the combined results. FB Financial expects to incur significant costs associated with integrating the operations of the Clayton Banks. The unaudited pro forma combined financial statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the Acquisition.

 

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FB Financial Corporation and subsidiaries

Unaudited pro forma condensed combined balance sheet

(in thousands)

 

      As of March 31, 2017  
      FB Financial
Corporation
(as reported)
    Combined
Clayton Banks
(as reported)
     Stock
Issuance
    Pro Forma
Adjustments
    Pro forma
Company
(Combined)
 

ASSETS

           

Cash and cash equivalents

   $ 129,552     $ 37,856      $ 152,583 (r)    $ (190,056 )(a)    $ 129,935  

Available-for-sale securities

     567,886       51,133              (33,788 )(a)      585,231  

Held-to-maturity securities

           13,601              (13,601 )(b)       

Loans held for sale, at fair value

     365,173                          365,173  

Loans

     1,900,995       1,066,193              (20,567 )(c)      2,946,621  

Less: allowance for loan losses

     22,898       20,519              (20,519 )(d)      22,898  
  

 

 

 

Net loans

     1,878,097       1,045,674              (48     2,923,723  

Premises and equipment

     66,108       22,570              (3,107 )(e)      85,571  

Foreclosed real estate, net

     6,811       3,207              (802 )(f)      9,216  

Interest receivable

     7,247       4,922              (1,500 )(g)      10,669  

Mortgage servicing rights, net

     47,593                          47,593  

Goodwill

     46,867       8,425              108,624  (h)      163,916  

Core deposit intangible, net

     4,171                    9,810  (i)      13,981  

Other assets

     46,954       11,856                    58,810  
  

 

 

 

Total assets

   $ 3,166,459     $ 1,199,244      $ 152,583     $ (124,468   $ 4,393,818  
  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

        

Liabilities:

           

Demand deposits

           

Non-interest bearing

   $ 696,112     $ 205,133      $     $     $ 901,245  

Interest bearing

     2,005,087       723,526              1,172  (j)      2,729,785  
  

 

 

 

Total deposits

     2,701,199       928,659              1,172       3,631,030  
  

 

 

 

Securities sold under agreements to repurchase

     18,130       695                    18,825  

Borrowings

     44,552       49,399              30,971  (k)      124,922  

Accrued expenses and other liabilities

     60,436       6,901              5,000  (l)      72,337  
  

 

 

 

Total liabilities

     2,824,317       985,654              37,143       3,847,114  
  

 

 

 

Common stock

     24,155       4,202        4,807 (s)      (2,681 )(m)      30,483  

Additional paid in capital

     214,160       89,902        147,776 (s)      (39,444 )(n)      412,394  

Retained earnings

     104,152       118,178              (118,178 )(n)      104,152  

Accumulated other comprehensive income

     (325     1,308              (1,308 )(n)      (325
  

 

 

 

Total shareholders’ equity

     342,142       213,590        152,583       (161,611     546,704  
  

 

 

 

Total liabilities and shareholders’ equity

   $ 3,166,459     $ 1,199,244      $ 152,583     $ (124,468   $ 4,393,818  

 

 

 

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FB Financial Corporation and subsidiaries

Unaudited pro forma condensed combined statement of income

(in thousands, except share data)

 

      Three Months Ended March 31, 2017  
      FB Financial
Corporation
(as reported)
    Combined
Clayton
Banks
(as reported)
     Pro Forma
Adjustments
    Pro forma
Company
(Combined)
 

Interest income:

         

Interest and fees on loans

   $ 29,006     $ 16,659      $ 270  (c)    $ 45,935  

Interest on securities

     3,607       532        (324 )(a),(b)      3,815  

Other

     276       85        (224 )(a)      137  
  

 

 

 

Total interest income

     32,889       17,276        (278     49,887  
  

 

 

 

Interest expense:

         

Deposits

     2,114       1,439        (195 )(j)      3,358  

Borrowings

     524       329        291  (k)      1,144  
  

 

 

 

Total interest expense

     2,638       1,768        96       4,502  
  

 

 

 

Net interest income

     30,251       15,508        (374     45,385  

Provision for loan losses

     (257     230         (d)      (27
  

 

 

 

Net interest income after provision for loan losses

     30,508       15,278        (374     45,412  
  

 

 

 

Noninterest income:

         

Mortgage banking income

     25,080                    25,080  

Service charges on deposit accounts

     1,766       200              1,966  

Other income

     4,241       1,343              5,584  
  

 

 

 

Total noninterest income

     31,087       1,543              32,630  
  

 

 

 

Noninterest expenses:

         

Salaries, commissions and employee benefits

     29,006       3,624              32,630  

Occupancy and equipment expense

     3,109       678              3,787  

Legal and professional fees

     1,428       176              1,604  

Amortization of core deposit intangibles

     392              245  (i)      637  

Other expense

     12,482       1,233              13,715  
  

 

 

 

Total noninterest expense

     46,417       5,711        245       52,373  
  

 

 

 

Income before income taxes

     15,178       11,110        (619     25,669  

Income tax expense

     5,425       871        (243 )(o)      6,053  
  

 

 

 

Net income

   $ 9,753     $ 10,239      $ (376   $ 19,616  
  

 

 

 

Per share information:

         

Basic

     24,138,437          6,327,910  (p)      30,466,347  

Fully diluted

     24,610,991          6,327,910  (p)      30,938,901  

Earnings per share

         

Basic

   $ 0.40          $ 0.64  

Fully diluted

     0.40          $ 0.63  
  

 

 

        

Pro Forma (C Corporation basis):

         

Income tax expense

   $ 5,425        $ 3,487  (q)    $ 9,540  
  

 

 

        

 

 

 

Net income

   $ 9,753          $ 16,129  
  

 

 

        

 

 

 

Earnings per share (C-Corporation basis)

         

Basic

   $ 0.40          $ 0.53  

Fully diluted

     0.40          $ 0.52  

 

 

 

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FB Financial Corporation and subsidiaries

Unaudited pro forma condensed combined statement of income

(in thousands, except share data)

 

      Year Ended December 31, 2016  
      FB Financial
Corporation
(as reported)
    Combined
Clayton
Banks
(as reported)
     Pro Forma
Adjustments
    Pro forma
Company
(Combined)
 

Interest income:

         

Interest and fees on loans

   $ 105,865     $ 60,331      $ 1,079  (c)    $ 167,275  

Interest on securities

     14,018       2,293        (1,109 )(a),(b)      15,202  

Other

     611       341        (1,240 )(a)      (288
  

 

 

 

Total interest income

     120,494       62,965        (1,270     182,189  
  

 

 

 

Interest expense:

         

Deposits

     7,342       5,483        (781 )(j)      12,044  

Borrowings

     2,202       1,272        1,165  (k)      4,639  
  

 

 

 

Total interest expense

     9,544       6,755        383       16,682  
  

 

 

 

Net interest income

     110,950       56,210        (1,653     165,507  

Provision for loan losses

     (1,479     978         (d)      (501
  

 

 

 

Net interest income after provision for loan losses

     112,429       55,232        (1,653     166,008  
  

 

 

 

Noninterest income:

         

Mortgage banking income

     117,751       1,970              119,721  

Service charges on deposit accounts

     8,009       872              8,881  

Other income

     18,925       3,636              22,561  
  

 

 

 

Total noninterest income

     144,685       6,478              151,163  
  

 

 

 

Noninterest expenses:

         

Salaries, commissions and employee benefits

     113,992       14,792              128,784  

Occupancy and equipment expense

     12,611       2,383              14,994  

Legal and professional fees

     3,514       331              3,845  

Amortization of core deposit intangibles

     2,132       29        981  (i)      3,142  

Other expense

     62,541       5,159              67,700  
  

 

 

 

Total noninterest expense

     194,790       22,694        981       218,465  
  

 

 

 

Income before income taxes

     62,324       39,016        (2,634     98,706  

Income tax expense

     21,733       2,638        (1,033 )(o)      23,338  
  

 

 

 

Net income

   $ 40,591     $ 36,378      $ (1,601   $ 75,368  
  

 

 

 

Per share information:

         

Basic

     19,165,182          6,327,910  (p)      25,493,092  

Fully diluted

     19,312,174          6,327,910  (p)      25,640,084  

Earnings per share

         

Basic

   $ 2.12          $ 2.96  

Fully diluted

     2.10          $ 2.94  
  

 

 

        

Pro Forma (C Corporation basis):

         

Income tax expense

   $ 22,902        $ 12,666  (q)    $ 37,173  
  

 

 

        

 

 

 

Net income

   $ 39,422          $ 61,533  
  

 

 

        

 

 

 

Earnings per share

         

Basic

   $ 2.06          $ 2.41  

Fully diluted

     2.04          $ 2.40  

 

 

 

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Note 1. Basis of Presentation

The unaudited pro forma condensed combined balance sheet as of March 31, 2017 and the unaudited pro forma condensed combined income statement for the three months ended March 31, 2017 and year ended December 31, 2016 are based on the historical financial statements of FB Financial Corporation and the combined Clayton Banks after giving effect to the completion of the Acquisition and the assumptions and adjustments described in the accompanying notes. The statements of income gives effect to the transaction at January 1, 2016. Such financial statements do not include estimated cost savings, revenue synergies expected to result from the Acquisition, or the costs to achieve these cost savings or revenue synergies, or any anticipated disposition of assets that may result from the integration of operations.

The transaction will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). In business combination transactions in which the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement of the acquisition consideration is based on the fair value of the consideration given or the fair value of the asset (or net assets) acquired, whichever is more clearly evident and, thus, a more reliable measure.

Under ASC 805, all of the assets acquired and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. For income tax purposes, the Acquisition will be treated as an asset purchase. As an asset purchase for income tax purposes, the carrying value of assets and liabilities for the Clayton Banks are the same for both financial reporting and income tax purposes; therefore no deferred taxes will be recorded at the date of the acquisition. Subsequent to the completion of the Acquisition, FB Financial Corporation will finalize an integration plan, which may affect how the assets acquired, including intangible assets, will be utilized by the combined company. For those assets in the combined company that will be phased out or disposed of, additional amortization, depreciation and possibly impairment charges will be recorded after management completes the integration plan.

The unaudited pro forma financial information has been compiled in a manner consistent with the accounting policies adopted by FB Financial. Certain balances from the consolidated financial statements of the Clayton Banks were reclassified to conform presentation to that of FB Financial Corporation.

The unaudited pro forma information is presented solely for information purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the period, nor is it necessarily indicative of the future results of the combined company.

Note 2. Preliminary Estimated Allocation of Purchase Price

Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of the combined Clayton banks based on the estimated fair values as of the closing of the Acquisition. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

The allocation of the estimated acquisition consideration with regard to the combined Clayton banks is preliminary because the proposed Acquisition has not yet been completed. The preliminary allocation is based on estimates, assumptions, valuations, and other studies which have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the acquisition consideration allocation unaudited pro forma adjustments will remain preliminary until FB Financial Corporation management

 

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determines the final acquisition consideration and the fair values of assets acquired and liabilities assumed. The final determination of the acquisition consideration allocation is anticipated to be completed as soon as practicable after the completion of the Acquisition and will be based on the value of the FB Financial Corporation common stock in accordance with the Purchase Agreement. The final amounts allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the unaudited pro forma combined consolidated financial statements.

The following table shows a preliminary pro forma allocation of purchase price to net assets acquired and the pro forma goodwill generated from the transaction.

 

Pro Forma Allocations of Purchase Price                
(in thousands, except share data)              

Purchase Price:

     

FB Financial Corporation shares to be issued

     1,521,200     

Price per share, based on FB Financial Corporation price of $34.17 as of
May 31, 2017 (1)

   $ 34.17     
  

 

 

    

Pro forma value of FB Financial Corporation stock to be issued

        51,979  

Cash consideration

        154,200  

Subordinated Note issued as consideration

        30,000  
     

 

 

 

Total pro forma purchase price

      $ 236,179  

Net Assets Acquired:

     

Cash and due from banks

     2,000     

Securities

     17,345     

Loans, net of unearned income

     1,045,626     

Premises and equipment

     19,463     

Other real estate owned

     2,405     

Other intangible assets

     9,810     

Other assets

     15,278     
  

 

 

    

Total Assets

     1,111,927     

Deposits:

     

Non-interest bearing

     205,133     

Interest bearing

     724,698     
  

 

 

    

Total deposits

     929,831     

Securities sold under agreements to repurchase

     695     

Long-term debt

     50,370     

Other liabilities

     11,901     
  

 

 

    

Total Liabilities

     992,797     

Net Assets

        119,130  
     

 

 

 

Goodwill

      $ 117,049  

 

  

 

 

    

 

 

 

 

(1)   Price will be fixed upon the price of FB Financial stock at the close of the Acquisition. Each $1.00 increase or decrease in share price will result in a corresponding $1,521 increase or decrease to the total pro forma purchase price and goodwill recorded.

 

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Note 3. Unaudited Pro Forma Adjustments

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information for the announced acquisition of the combined Clayton Banks. All adjustments are based on current valuations and assumptions which are subject to change.

 

a)   Cash and available for sale securities were adjusted to reflect the dividend of $79.5 million ($31.6 million in cash and $47.9 in available for sale securities) and cash dividend for $4.2 million related to S-Corporation tax liability for the first quarter of 2017 from Clayton Bank and Trust to Clayton HC. Available for sale securities was also adjusted to reflect the reclassification of held-to-maturity securities and the associated unrealized gain in (b) below. The resulting reduction in cash and available for sale securities is estimated to decrease interest income by 2.5% of funds utilized or $2.3 million ($1.1 million interest from available for sale securities and $1.2 million on interest earning cash accounts) and $0.5 million ($0.3 million interest from available for sale securities and $0.2 million on interest earning cash accounts) for the year ended December 31, 2016 and three months ended March 31, 2017, respectively.

 

b)   Held-to-maturity securities were adjusted to record the unrealized gain of $0.5 million on the Clayton Banks’ held-to-maturity securities, which were carried at cost and to reclassify the securities to available for sale. The amortization associated with the premium is $0.1 million and $0.0 for the year ended December 31, 2016 and three months ended March 31, 2017, respectively.

 

c)   Loans were adjusted based upon FB Financial Corporation’s initial evaluation of the acquired portfolio. The adjustment reflects both a discount for credit deterioration and accretable yield, recognized as an adjustment to reflect the difference between actual interest rates and current market rates offered by FB Financial Corporation on similar loans. The adjustment also includes reversal of deferred loan fees and existing credit discounts. The accretable yield adjustment will be recognized over the remaining life of the loan portfolio. The adjustment to loans also reflects a dividend of certain loans to Clayton HC of $1.7 million per the stock purchase agreement. The impact of this adjustment was to increase loan interest income by $1.1 million and $0.3 million for the year ended December 31, 2016 and three months ended March 31, 2017, respectively.

 

d)   The allowance for loan losses was adjusted to reflect the reversal of the combined Clayton Banks’ recorded allowance. Purchased loans acquired in a business combination are required to be recorded at fair value, and the recorded allowance for loan losses may not be carried over. While FB Financial Corporation anticipates significantly reducing the provision for loan losses as a result of the acquired loans being recorded at fair value, no adjustment to the historic amounts of the combined Clayton Banks’ provision for loan losses has been recorded in the Unaudited pro forma condensed combined statement of income.

 

e)   Premises and equipment was adjusted to record the dividend of property to Clayton HC per the Stock Purchase Agreement. The adjustment has no impact on the Unaudited Pro Forma Condensed Consolidated Statement of Income. While FB Financial Corporation anticipates adjusting acquired property to appraised value, the Company has not yet determined the fair value and therefore, carrying value has been used in the preliminary purchase price allocation and in the pro forma financial statements.

 

f)   Foreclosed real estate was adjusted based on FB Financial Corporation’s initial evaluation of the acquired portfolio from the combined Clayton Banks. A mark of approximately 25% was applied to the Clayton Banks’ foreclosed real estate resulting in a fair value adjustment of $0.8 million. The adjustment has no impact on the Unaudited Pro Forma Condensed Consolidated Statement of Income.

 

g)   Accrued interest receivable has been reclassified for the estimated combined Clayton Banks’ accrued interest receivable into the loan mark reflected in (c) above.

 

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h)   Goodwill has been adjusted to reverse the combined Clayton Banks’ existing goodwill of $8.4 million and recognize $117.0 million in goodwill generated as a result of the purchase price and fair value of liabilities assumed exceeding the fair value of assets purchased. The adjustment has no impact on the Unaudited Pro Forma Condensed Consolidated Statement of Income.

 

i)   Core deposit intangible was adjusted to recognize the core deposit intangible of $9.8 million. The core deposit intangible is amortized over an estimated useful life of ten years on a straight line basis. The amortization expense associated with the core deposit intangible increased noninterest expense by $1.0 million and $0.2 million for the year ended December 31, 2016 and three months ended March 31, 2017, respectively.

 

j)   Time deposits was adjusted to reflect the fair value adjustment to fixed-rate deposit liabilities based on current interest rates offered by FB Financial Corporation for similar instruments. The adjustment will be recognized over an estimated remaining term of the deposit liability, which is expected to be approximately 1.5 years. The impact of the adjustment was to decrease deposit interest expense for the year ended December 31, 2016 and three months ended March 31, 2017 by $0.8 million and $0.2 million, respectively.

 

k)   Long term debt was adjusted to reflect a fair value adjustment to the Clayton Banks’ FHLB advances of $1.0 million and the issuance of $30 million in subordinated debt to Clayton HC pursuant to the Purchase Agreement, which reflects the mid-point between the entire $60.0 million in subordinated debt that Clayton HC is entitled to receive at closing if FirstBank does not reduce the principal amount of such debt at closing and $0.0 in subordinated debt if FirstBank reduces the principal amount of such debt at closing to $0.0 by paying $60.0 million in cash at closing. FirstBank has the option to reduce the principal amount of the $60 million subordinated debt to be issued to Clayton HC at the closing by paying all or a portion of the principal amount of such subordinated debt in cash at closing. The impact of the adjustment to FHLB advances was to decrease interest expense by $0.5 million and $0.1 million for the year ended December 31, 2016 and three months ended March 31, 2017, respectively. The impact of the adjustment to issue subordinated debt was to increase interest expense by $1.7 million and $0.4 million, respectively.

 

l)   Accrued expenses and other liabilities were adjusted to accrue for an estimated $5 million in pre-tax transaction expenses. Anticipated acquisition related expenses to be incurred by FB Financial Corporation of $15.0 million are not included in the pro forma statement of income but will be expensed in the period prior to and after the Acquisition is completed. Anticipated acquisition related expenses consist of investment banking fees, legal fees, accounting fees, registration fees, contract termination fees, printing costs and additional fees and expenses.

 

m)   Common stock was adjusted to reverse the combined Clayton Banks’ common stock outstanding and to recognize the $1.00 par value of FB Financial Corporation shares to be issued to effect the transaction. The adjustment has no impact on the Unaudited Pro Forma Condensed Consolidated Statement of Income.

 

n)   Other stockholders’ equity accounts were adjusted to reverse the combined Clayton Banks’ historical stockholders’ equity balances and to reflect the net impact of all purchase accounting adjustments. The adjustment has no impact on the Unaudited Pro Forma Condensed Consolidated Statement of Income.

 

o)   Income taxes were adjusted to reflect the tax effects of purchase accounting adjustments using FB Financial Corporation’s combined federal and state statutory rate of 39.225%.

 

p)   Weighted average basic and diluted shares outstanding were adjusted to record shares of FB Financial Corporation stock issued to effect the transaction.

 

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q)   Income tax expense on a pro forma C corporation basis was adjusted to record the incremental impact to income tax expense of converting the combined Clayton Banks’ to a C corporation using a combined federal and state income tax rate of 39.225%.

 

r)   Adjustment to cash and cash equivalents to reflect net proceeds from FB Financial Corporation’s common stock offering closed on June 1, 2017, after deducting underwriting discounts and commissions and the estimated expenses payable by FB Financial Corporation in connection with the offering.

 

s)   Adjustment to FBK common stock and additional paid in capital to record 4,806,710 shares of FBK common stock issued in the Private Placement.

 

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Risk factors

An investment in our common stock involves certain risks. Before making an investment decision, you should carefully read and consider the risk factors set forth in Part II, Item 1A of our most recently filed Annual Report on Form 10-K under the heading “Risk Factors” as well as any updated or additional disclosure about risk factors included in any of our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or other filings that we have made with the SEC since the date of our most recently filed Annual Report on Form 10-K that are incorporated by reference into this prospectus. Additional risks and uncertainties of which we are not aware or that we believe are not material at the time could also materially and adversely affect our business, financial condition, results of operations or liquidity. In any case, the value of the shares offered by means of this prospectus and any applicable prospectus supplement could decline and you could lose all or part of your investment in those shares. Moreover, an investment in our shares is subject to the following additional risks associated with the pending Acquisition.

The consummation of our proposed Acquisition is contingent upon the satisfaction of a number of conditions, including regulatory approvals, that are outside of our control and that we may be unable to obtain or may delay the consummation of the Acquisition or result in the imposition of conditions that could reduce the anticipated benefits from the proposed Acquisition or cause the parties to abandon the proposed transaction.

Consummation of the Acquisition of the Clayton Banks is conditioned upon customary closing conditions, including without limitation, (i) receipt of all required regulatory approvals from the Federal Reserve, FDIC and the TDFI, (ii) approval by our shareholders of the issuance of the shares of our common stock to be issued to Clayton HC as partial consideration for the Acquisition, and (iii) the absence of any law, order, injunction, decree, judgment or ruling prohibiting the Acquisition. We may be unable to obtain the regulatory approvals required for the Acquisition, or the required regulatory approvals may delay the Acquisition or result in the imposition of conditions that could reduce the anticipated benefits from the proposed Acquisition or cause the parties to abandon the proposed transaction.

While the proposed Acquisition of the Clayton Banks is pending, we may be subject to business uncertainties that could adversely affect our business and operations.

Uncertainty about the effect of the proposed Acquisition of the Clayton Banks on employees, customers and other persons with whom we or the Clayton Banks have a business relationship may have an adverse effect on our business, operations and stock price. In connection with the pendency of the Acquisition, existing customers of the Clayton Banks could decide to no longer do business with the Clayton Banks, reducing the anticipated benefits of the Acquisition. In addition, certain other projects may be delayed or ceased and business decisions could be deferred. Employee retention at the Clayton Banks may be challenging during the pendency of the Acquisition, as certain employees may experience uncertainty about their future roles. If key employees depart, the benefits of the Acquisition could be materially diminished.

We may fail to realize all of the anticipated benefits of the proposed Acquisition of the Clayton Banks, or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the Clayton Banks.

Our ability to realize the anticipated benefits of the Acquisition of the Clayton Banks will depend, to a large extent, on our ability to successfully integrate the acquired businesses. The integration and combination of the acquired businesses is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating their business practices and operations. The integration process may disrupt our business and the business of the Clayton Banks and, if implemented ineffectively, would restrict the full realization of the anticipated benefits of the Acquisition. The failure to meet the challenges involved in integrating the acquired businesses and to realize the anticipated benefits of the

 

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Acquisition could cause an interruption of, or a loss of momentum in, our business activities or those of the Clayton Banks and could adversely impact our business, financial condition and results of operations. In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, loss of customers and diversion of our management’s and employees’ attention. The challenges of combining the operations of the companies include, among others:

 

 

difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the Acquisition;

 

 

difficulties in the integration of operations and systems;

 

 

difficulties in the assimilation of employees;

 

 

difficulties in managing the expanded operations of a larger and more complex company;

 

 

challenges in keeping existing customers and obtaining new customers;

 

 

challenges in attracting and retaining key personnel, including personnel that are considered key to the future success of the businesses of the Clayton Banks; and

 

 

challenges in keeping key business relationships in place.

Many of these factors will be outside of our control and any one of them could result in increased costs and liabilities, decreases in the amount of expected income and diversion of management’s time and energy, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, even if the operations of the Clayton Banks are integrated successfully with our business, the full benefits of the transaction may not be realized, including the synergies, cost savings, growth opportunities or earnings accretion that are expected. These benefits may not be achieved within the anticipated time frame, or at all, and additional unanticipated costs may be incurred in the integration of the businesses. Furthermore, the Clayton Banks may have unknown or contingent liabilities that we would assume in the Acquisition and that were not discovered during the course of our due diligence. These liabilities could include exposure to unexpected asset quality problems, compliance and regulatory violations, key employee and client retention problems and other problems that could result in significant costs to us.

All of these factors could cause dilution to our earnings per share, decrease or delay the expected accretive effect of the transaction, negatively impact the price of our common stock, or have a material adverse effect on our business, financial condition and results of operations.

Failure to complete the Acquisition could have a material adverse effect on our business, future operations and stock price.

Completion of the Acquisition is not assured. If the Acquisition is not completed, our ongoing businesses and financial results may be adversely affected and we will be subject to several risks, including the following:

 

 

the price of our common stock may decline to the extent that its current market prices reflect a market assumption that the Acquisition will be completed;

 

 

having to pay significant costs relating to the Acquisition without receiving the benefits of the Acquisition;

 

 

negative reactions from customers, shareholders and market analysts;

 

 

the diversion of the focus of our management to the Acquisition instead of on pursuing other opportunities that could have been beneficial to our business; and

 

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the significant dilution to our shareholders resulting from the Private Placement without receiving the incremental earnings from the Clayton Banks.

If the Acquisition is not completed, these risks may have a materially adverse effect on our business, financial results and stock price. In addition, if the Acquisition is not consummated, we will have broad discretion in the use of the net proceeds from the Private Placement and there is no guarantee that we will be able to deploy such capital in a manner that results in an attractive return to us, which could have a material adverse effect on the Company’s financial performance and stock price.

We expect to incur substantial transaction-related costs in connection with the Acquisition.

We have incurred, and expect to incur additional costs, expenses and fees for professional services and other transaction costs in connection with the Acquisition. The substantial majority of these costs will be non-recurring expenses relating to the Acquisition, including costs relating to integration planning. These costs could materially and adversely affect our results of operation.

The issuance of the stock consideration to Clayton HC and the issuance of the shares in the Private Placement may decrease the market price of our common stock.

As part of the consideration for the Acquisition, we will issue new shares of our common stock to Clayton HC. The issuance of the 1,521,200 new shares to Clayton HC and the issuance of 4,806,710 shares in the Private Placement will result in our shareholders’ existing share ownership being diluted by an aggregate of 6,327,910 new shares, which represent 26.2% of our outstanding common stock immediately prior to the closing of the Private Placement. The dilution associated with the issuance of new shares of common stock in the Acquisition may result in fluctuations in the market price of our common stock, including a stock price decrease, and could materially impair our earnings per share and other per share financial metrics.

The unaudited pro forma combined financial information included in this prospectus may not be indicative of what our actual financial positions or results of operation would have been.

The unaudited pro forma combined financial information included in this prospectus is presented solely for illustrative purposes and is not necessarily indicative of what our actual financial position or results of operations would have been had the Acquisition been completed on the dates indicated. This unaudited pro forma combined financial information reflects adjustments that were developed using preliminary estimates based on available information and various assumptions and may be revised as additional information becomes available. Accordingly, the final Acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statement. In addition, if the Acquisition is consummated it may result in the historical financial statements and results of operations of the Company that are incorporated by reference in this prospectus to not be indicative of the future financial condition and results of operations of the Company following the closing of the Acquisition

The future results of our company will suffer if we do not effectively manage our expanded operations following the Acquisition.

Following the Acquisition, the size of our business will increase significantly beyond its current size. Our business’s future success depends, in part, upon our ability to manage the acquired businesses, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the businesses of the Clayton Banks will be successful or that we will realize the expected benefits currently anticipated from the Acquisition.

 

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Use of proceeds

We are not selling any shares of our common stock or other securities in this offering, and we will not receive any proceeds from the sale of any of the shares by any selling shareholder. All proceeds from the sale of any of the shares by selling shareholders will be for the account of the selling shareholders.

Market price of our common stock

Our common stock has been listed on the NYSE under the symbol FBK since September 16, 2016. Prior to that time, there was no public market for our common stock. The following table sets forth for the periods indicated the high and low sales prices per share of our common stock as reported on the NYSE:

 

       High      Low  

2016:

     

Third quarter(1)

   $ 21.27      $ 20.00  

Fourth quarter

   $ 26.45      $ 19.81  

2017:

     

First quarter

   $ 35.50      $ 23.71  

Second quarter(2)

   $ 38.59      $ 32.50  

 

 

 

(1)   Represents the period from September 16, 2016, the date of our initial listing on the NYSE, through September 30, 2016, the end of our 2016 third fiscal quarter.

 

(2)   Represents the period from April 1, 2017 through June 19, 2017.

A recent reported closing price for our common stock is set forth on the cover page of this prospectus. As of June 15, 2017, there were 662 holders of record of our common stock. This shareholder figure does not include a substantially greater number of holders whose shares are held of record by banks, brokers and other financial institutions.

 

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Dividend policy

Dividends

Prior to our initial public offering, we were an S corporation for U.S. federal income tax purposes. As an S Corporation, we historically made distributions to our sole shareholder to provide him with funds to pay U.S. federal income tax on our taxable income that was “passed through” to him. We also historically paid additional dividends to our shareholder as a return on his investment from time to time. Following our initial public offering and after conversion to a C corporation, our dividend policy and practice changed and we no longer pay distributions to provide our shareholders with funds to pay U.S. federal income tax on their pro rata portion of our taxable income.

We currently intend to retain our future earnings, if any, to fund the development and growth of our business and we do not anticipate paying any dividends to the holders of our common stock in the foreseeable future. Any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors, including general and economic conditions, industry standards, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, banking regulations, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our shareholders or by the Bank to us, and such other factors as our board of directors may deem relevant.

The following table shows the dividends that have been declared on our common stock with respect to the periods indicated below. Per share amounts are presented to the nearest cent.

 

(dollars in thousands, except share amounts and per share data)                
Quarterly period   

Amount

per share

    

Total cash

dividend

 

First Quarter 2015

   $ 0.40      $ 6,900  

Second Quarter 2015

   $ 0.20      $ 3,500  

Third Quarter 2015

   $ 0.62      $ 10,700  

Fourth Quarter 2015

   $ 0.15      $ 2,500  

First Quarter 2016

   $ 0.29      $ 5,000  

Second Quarter 2016

   $ 0.25      $ 4,300  

Third Quarter 2016

   $ 3.49      $ 60,000  

Fourth Quarter 2016

   $      $  

First Quarter 2017

   $      $  

Second Quarter 2017 (through June 21, 2017)

   $      $  

 

 

As a bank holding company, any dividends paid by us are subject to various federal and state regulatory limitations and also may be subject to the ability of the Bank to make distributions or pay dividends to us. The Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to us. Our ability to pay dividends is limited by minimum capital and other requirements prescribed by law and regulation. Furthermore, we are generally prohibited under Tennessee corporate law from making a distribution to a shareholder to the extent that, at the time of the distribution, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of its total liabilities plus (unless the charter permits otherwise) the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any shareholders who may have preferential rights superior to those receiving the distribution. In addition, financing arrangements that we may enter into in the future may include restrictive covenants that may limit our ability to pay dividends.

 

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Description of our capital stock

The following is a description of our capital stock and the material provisions of our amended and restated charter and amended and restated bylaws and other agreements to which we and our shareholders are parties. The following is only a summary and is qualified by applicable law and by the provisions of the amended and restated certificate of incorporation and amended and restated bylaws and other agreements, copies of which are available as set forth under the caption entitled “Where you can find more information.”

General

Our authorized capital stock consists of 75,000,000 shares of common stock, par value $1.00 per share, and 7,500,000 shares of preferred stock, no par value.

Common stock

Common stock outstanding.    As of June 15, 2017 there were 28,937,050 shares of common stock outstanding. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and non-assessable.

Voting rights.    The holders of common stock are entitled to one vote per share on all matters to be voted upon by the shareholders, and are not entitled to cumulative voting in the election of directors. At any meeting of the shareholders, the holders of a majority of the outstanding stock of the Company then having voting rights, present in person or by proxy, shall constitute a quorum for all purposes. If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceeds the votes cast opposing the action, unless otherwise provided by the charter or bylaws.

Dividend rights.    Subject to the rights that may be applicable to any outstanding preferred stock and all other classes of stock at the time outstanding having prior rights as to dividends, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. See “Dividend policy.”

Rights upon liquidation.    In the event of liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.

Other rights.    The holders of our common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of our preferred stock.

Preferred stock

Our Board of Directors has the authority to issue preferred stock from time to time in one or more series and to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences, and relative rights of the shares of each such series and the qualifications, or restrictions thereof. At present, the Company has no shares of preferred stock outstanding.

The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the shareholders and may adversely affect the voting and other rights of

 

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the holders of common stock. The authority of the Board of Directors with respect to each such series includes, among others:

 

 

the number of shares constituting the series;

 

 

general or specific voting rights;

 

 

preferential liquidation rights;

 

 

preferential cumulative or noncumulative dividend rights;

 

 

redemption or put rights; and

 

 

conversion rights.

We may issue shares of, or rights to purchase shares of, one or more series of our preferred stock that have been designated from time to time, the terms of which might:

 

 

adversely affect the voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock or other series of preferred stock;

 

 

discourage an unsolicited proposal to acquire us; or

 

 

facilitate a particular business combination involving us.

Election and removal of directors

Our board of directors will consist of between one and fifteen directors. Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. The exact number of directors will be fixed from time to time by resolution of our board of directors. Our bylaws provide that shareholders may remove any director, with cause only, by the affirmative vote of the holders of a majority of the issued and outstanding stock of the Company then having voting rights at a shareholder meeting called for that purpose.

Pursuant to the shareholder’s agreement that we entered into with Mr. Ayers in connection with our initial public offering, Mr. Ayers has certain rights to designate directors to our board of directors. See the “Shareholder’s Agreement and Board Designation Rights” section of our proxy statement on Schedule 14A filed with the SEC on April 21, 2017, which section is incorporated by reference in this prospectus.

Advance notice for shareholder proposals or making nominations at meetings

Our bylaws establish an advance notice procedure for shareholder proposals to be brought before a meeting of our shareholders and for nominations by shareholders of candidates for election as directors at an annual meeting or a special meeting at which directors are to be elected. Subject to any other applicable requirements, only such business may be conducted at a meeting of shareholders as has been brought before the meeting by, or at the direction of, our board of directors or an authorized committee thereof, the Chairman of our board of directors, our Chief Executive Officer, or by a shareholder who has given to our Secretary timely written notice in proper form, of the shareholder’s intention to bring that business before the meeting. The presiding officer at such meeting has the authority to make such determinations. Only persons who are selected and recommended by our board of directors, or the committee of our board of directors designated to make nominations, or who are nominated by a shareholder who has given timely written notice, in proper form, to the Secretary prior to a meeting at which directors are to be elected will be eligible for election as directors.

 

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To be timely, notice of nominations or other business to be brought before any meeting must be delivered to our principal executive offices and within the following time periods:

(i) in the case of an annual meeting of shareholders, not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by us; and

(ii) in the case of a special meeting of shareholders called for the purpose of electing directors, not earlier that the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

In no event shall any adjournment or postponement of an annual meeting, or the announcement thereof, commence a new time period for the giving of a shareholder’s notice as described above.

The notice of any shareholder proposal or nomination for election as director must set forth various information required under the bylaws. The person submitting the notice of nomination and any person acting in concert with such person must provide, among other things, the name and address under which they appear on our books (if they so appear) and the class and number of shares of our capital stock that are beneficially owned by them.

Amendment of charter and bylaws

Under the Tennessee Business Corporation Act (“TBCA”), our charter generally may not be amended without shareholder approval. Except as provided in the charter and subject to the voting rights, any amendment to our charter submitted for shareholder approval at a shareholders’ meeting is generally approved if the number of votes cast in favor of the amendment exceeds the number of votes cast against the amendment. Our charter provides that certain provisions of our charter may only be amended upon the affirmative vote of the holders of at least eighty percent (80%) of our issued and outstanding voting stock.

Our shareholders may amend our bylaws only upon the affirmative vote of the holders of at least eighty percent (80%) of our issued and outstanding voting stock. Additionally, our Board of Directors may amend our bylaws upon the affirmative vote of a majority of the directors then in office, unless a bylaw provision approved by our shareholders expressly provides that any such bylaw may not be amended or repealed by our Board of Directors or unless the TBCA or our charter provides otherwise.

Ownership limitation

The Company is a bank holding company. A holder of common stock (or group of holders acting in concert) that (i) directly or indirectly owns, controls or has the power to vote more than 5% of the total voting power of the Company, (ii) directly or indirectly owns, controls or has the power to vote 10% or more of any class of voting securities of the Company, if certain presumptions are not rebutted, (iii) directly or indirectly owns, controls or has the power to vote 25% or more of any class of voting securities, (iv) owns a combination of voting and non-voting securities representing one-third or more of the total equity of the Company, or (vi) is otherwise deemed

 

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to “control” the Company under applicable regulatory standards may be subject to important restrictions, such as prior regulatory notice or approval requirements and applicable provisions of the FDIC Policy Statement.

Special meetings

Under our bylaws, only the Chairman of our board of directors, our Chief Executive Officer, or a majority of directors then in office may call special meetings of the shareholders. Our shareholders are not permitted to call special meetings of the shareholders.

Limitation of liability of directors and officers

The TBCA provides that a corporation may indemnify any of its directors and officers against liability incurred in connection with a proceeding if: (a) such person acted in good faith; (b) in the case of conduct in an official capacity with the corporation, he reasonably believed such conduct was in the corporation’s best interests; (c) in all other cases, he reasonably believed that his conduct was at least not opposed to the best interests of the corporation; and (d) in connection with any criminal proceeding, such person had no reasonable cause to believe his conduct was unlawful. In actions brought by or in the right of the corporation, however, the TBCA provides that no indemnification may be made if the director or officer was adjudged to be liable to the corporation. The TBCA also provides that in connection with any proceeding charging improper personal benefit to an officer or director, no indemnification may be made if such officer or director is adjudged liable on the basis that such personal benefit was improperly received. In cases where the director or officer is wholly successful, on the merits or otherwise, in the defense of any proceeding instigated because of his or her status as a director or officer of a corporation, the TBCA mandates that the corporation indemnify the director or officer against reasonable expenses incurred in the proceeding. The TBCA provides that a court of competent jurisdiction, unless the corporation’s charter provides otherwise, upon application, may order that an officer or director be indemnified for reasonable expenses if, in consideration of all relevant circumstances, the court determines that such individual is fairly and reasonably entitled to indemnification, notwithstanding the fact that (a) such officer or director was adjudged liable to the corporation in a proceeding by or in the right of the corporation; (b) such officer or director was adjudged liable on the basis that personal benefit was improperly received by him; or (c) such officer or director breached his duty of care to the corporation. Our charter provides that the Company shall, to the fullest extent permitted by the TBCA, indemnify its directors and officers, and may indemnify all other person whom it has the power to indemnify under the TBCA. The right of any director or officer of the Company to indemnification conferred in our charter shall also include the right to be paid by the Company the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Tennessee law.

Anti-takeover effects of some provisions

Some provisions of our charter and bylaws could make more difficult the removal of our incumbent officers and directors. These provisions, as well as our ability to issue preferred stock, are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that the benefits of this increased protection outweigh the disadvantages of discouraging those proposals, because negotiation of those proposals could result in an improvement of their terms.

Our charter provides that our Board of Directors may issue “blank check” preferred stock without shareholder approval. Some of the rights and preferences of these shares of preferred stock would be superior to the rights

 

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and preferences of shares of our common stock. Accordingly, the issuance of new shares of preferred stock may adversely affect the rights of the holders of shares of our common stock.

Anti-takeover provisions in the TBCA

In addition to certain of the provisions in our charter discussed above, the State of Tennessee has adopted statutes that can have an anti-takeover effect and may delay or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for shares of our common stock.

The Tennessee Control Share Acquisition Act generally provides that, except as stated below, “control shares” will not have any voting rights. Control shares are shares acquired by a person under certain circumstances which, when added to their shares owned, would give such person effective control over one-fifth or more, or a majority of all voting power (to the extent such acquired shares cause such a person to exceed one-fifth or one-third of all voting power) in the election of a Tennessee corporation’s directors. However, voting rights will be restored to control shares by resolutions approved by the affirmative vote of the holders of a majority of the corporation’s voting stock, other than shares held by the owner of the control shares. If voting rights are granted to control shares which give the holder a majority of all voting power in the election of the corporation’s directors, then the corporation’s other shareholders may require the corporation to redeem their shares at fair value.

The Tennessee Control Share Acquisition Act is not applicable to us because our charter does not contain a specific provision “opting in” to the act, as is required.

The Tennessee Investor Protection Act provides that unless a Tennessee corporation’s board of directors has recommended a takeover offer to shareholders, no offeror beneficially owning 5% or more of any class of equity securities of the offeree company, any of which was purchased within the preceding year, may make a takeover offer for any class of equity security of the offeree company if after completion the offeror would be a beneficial owner of more than 10% of any class of outstanding equity securities of the company unless the offeror, before making such purchase: (1) makes a public announcement of his or her intention with respect to changing or influencing the management or control of the offeree company; (2) makes a full, fair and effective disclosure of such intention to the person from whom he or she intends to acquire such securities; and (3) files with the Tennessee Commissioner of Commerce and Insurance, or Commissioner, and the offeree company a statement signifying such intentions and containing such additional information as may be prescribed by the Commissioner.

The offeror must provide that any equity securities of an offeree company deposited or tendered pursuant to a takeover offer may be withdrawn by an offeree at any time within seven days from the date the offer has become effective following filing with the Commissioner and the offeree company and public announcement of the terms or after 60 days from the date the offer has become effective. If the takeover offer is for less than all the outstanding equity securities of any class, such an offer must also provide for acceptance of securities pro rata if the number of securities tendered is greater than the number the offeror has offered to accept and pay for. If such an offeror varies the terms of the takeover offer before its expiration date by increasing the consideration offered to offerees, the offeror must pay the increased consideration for all equity securities accepted, whether accepted before or after the variation in the terms of the offer.

The Tennessee Investor Protection Act does not apply to us, as it does not apply to bank holding companies subject to regulation by a federal agency and does not apply to any offer involving a vote by holders of equity securities of the offeree company.

 

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The Tennessee Business Combination Act, generally prohibits a “business combination” by a company or any of our subsidiaries with an “interested shareholder” within five years after the shareholder becomes an interested shareholder. The company or any of its subsidiaries can, however, enter into a business combination within that period if, before the interested shareholder became such, the company’s board of directors approved the business combination or the transaction in which the interested shareholder became an interested shareholder. After that five-year moratorium, the business combination with the interested shareholder can be consummated only if it satisfies certain fair price criteria or is approved by two-thirds (2/3) of the other shareholders.

For purposes of these provisions of the Tennessee Business Combination Act, a “business combination” includes mergers, share exchanges, sales and leases of assets, issuances of securities, and similar transactions. An “interested shareholder” is generally any person or entity that beneficially owns 10% or more of the voting power of any outstanding class or series of our stock.

The Tennessee Greenmail Act applies to a Tennessee corporation that has a class of voting stock registered or traded on a national securities exchange or registered with the SEC pursuant to Section 12(g) of the Exchange Act. Under the Tennessee Greenmail Act, a company may not purchase any of its shares at a price above the market value of such shares from any person who holds more than 3% of the class of securities to be purchased if such person has held such shares for less than two years, unless the purchase has been approved by the affirmative vote of a majority of the outstanding shares of each class of voting stock issued by the company or the company makes an offer, or at least equal value per share, to all shareholders of such class.

Listing and trading market for common stock

Our common stock is listed on the NYSE under the symbol FBK.

Transfer agent and registrar

The transfer agent and registrar for the common stock is Computershare Trust Company, N.A.

 

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Selling Shareholders

As previously discussed, we issued and sold 4,806,710 shares of our common stock in the Private Placement. The offer and sale of these shares did not involve a public offering of the shares offered hereby and were exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act and Regulation D of the SEC promulgated thereunder.

Pursuant to the terms of the Securities Purchase Agreements, we were required to file the registration statement of which this prospectus is part with the SEC and are required to maintain its effectiveness for specified periods in order to register the offers and sales by the selling shareholders of the shares offered hereby. The Securities Purchase Agreements to which we and the selling shareholders are parties contain certain indemnity provisions under which the selling shareholders have agreed to indemnify us and our controlling persons (other than a selling shareholder) against certain liabilities, including liabilities arising under the Securities Act relating to a shareholder’s untrue statement or omission of a material fact contained in this Registration Statement.

The following table sets forth information regarding the selling shareholders and the number of shares of common stock each selling shareholder is offering. The information included in the table as to the selling shareholders has been furnished to us by or on behalf of the selling shareholders for inclusion in this prospectus. The selling shareholders identified below may have sold, transferred, or otherwise disposed of some or all of their shares since the date as of which the information in the following table is presented in transactions exempt from or not subject to the registration requirements of the Securities Act and of which we are not aware. The term “Selling shareholder” includes donees, pledgees, transferees, or other successors-in-interest selling securities received from the named selling shareholders as a gift, pledge, shareholder distribution, or other non-sale related transfer after the date of this prospectus. Beneficial ownership of the shares has been and will be determined in accordance with the rules of the SEC. Under the rules of the SEC, beneficial ownership includes shares over which the indicated beneficial owner exercises voting or investment power. Unless otherwise indicated, based on information furnished by such selling shareholders, management of our Company believes that each person has sole voting and dispositive power over the shares indicated as beneficially owned by such person.

 

      Shares of common
stock beneficially
owned
before offering
     Shares of
common
stock
offered
in the
offering
     Shares of common stock
to be beneficially
owned after offering
 
Name of Selling Shareholder    Number      Percent(1)      Number      Number      Percent(1)(2)  

T. Rowe Price Small-Cap Stock Fund, Inc.(3)

     970,948        3.36%        345,320        625,628        2.16%  

T. Rowe Price Institutional Small-Cap Stock Fund(3)

     384,600        1.33%        135,200        249,400        *  

T. Rowe Price Personal Strategy Income Fund(3)

     5,800        *        2,000        3,800        *  

T. Rowe Price Personal Strategy Balanced Fund(3)

     10,500        *        3,500        7,000     

T. Rowe Price Personal Strategy Growth Fund(3)

     12,600        *        4,100        8,500        *  

T. Rowe Price Personal Strategy Balanced Portfolio(3)

     830        *        280        550        *  

T. Rowe Price U.S. Small-Cap Core Equity Trust(3)

     104,600        *        37,100        67,500        *  

T. Rowe Price Small-Cap Value Fund, Inc.(3)

     968,739        3.35%        357,420        611,319        2.11%  

 

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      Shares of common
stock beneficially
owned
before offering
     Shares of
common
stock
offered
in the
offering
     Shares of common stock
to be beneficially
owned after offering
 
Name of Selling Shareholder    Number      Percent(1)      Number      Number      Percent(1)(2)  

T. Rowe Price U.S. Small-Cap Value Equity Trust(3)

     121,369        *        43,900        77,469        *  

T. Rowe Price U.S. Equities Trust(3)

     10,353        *        3,380        6,973        *  

T. Rowe Price Financial Services Fund, Inc.(3)

     69,385        *        25,600        43,785        *  

U.S. Small-Cap Stock Trust(3)

     35,800        *        12,500        23,300        *  

VALIC Company I — Small Cap Fund(3)

     10,300        *        3,600        6,700        *  

TD Mutual Funds — TD U.S. Small-Cap Equity Fund(3)

     28,200        *        10,000        18,200        *  

Minnesota Life Insurance Company(3)

     9,800        *        3,500        6,300        *  

Costco 401(k) Retirement Plan(3)

     35,900        *        12,600        23,300        *  

Mendon Capital Master Fund Ltd.(4)

     294,220        1.01%        294,220        0        0  

Mendon Capital QP LP(4)

     250,088        *        250,088        0        0  

Iron Road Multi-Strategy Fund LP(4)

     41,910        *        41,910        0        0  

Monashee Capital Master Fund LP

     125,000        *        125,000        0        0  

CVI Investments, Inc.(5)

     40,000        *        40,000        0        0  

Forest Hill Strategic Value Fund, L.P.

     195,500        *        195,000        0        0  

Forest Hill Select Fund, L.P.

     80,000        *        80,000        0        0  

Zweig-DiMenna Partners, L.P.(6)

     19,000        *        19,000        0        0  

Zweig-DiMenna International Ltd.(6)

     81,000        *        81,000        0        0  

Stieven Financial Investors, L.P.(7)

     145,200        *        145,200        0        0  

Stieven Financial Offshore Investors, Ltd.(7)

     29,800        *        29,800        0        0  

Hudson Bay Master Fund Ltd.(8)

     150,000        *        150,000        0        0  

Malta Hedge Fund, L.P.(9)

     13,100        *        13,100        0        0  

Malta Hedge Fund II, L.P.(9)

     158,800        *        158,800        0        0  

Malta Offshore, Ltd.(9)

     94,700        *        94,700        0        0  

Malta Market Neutral Master Fund, Ltd.(9)

     33,800        *        33,800        0        0  

Malta MLC Fund, L.P.(9)

     54,200        *        54,200        0        0  

Malta MLC Offshore, Ltd.(9)

     5,400        *        5,400        0        0  

Malta Titan Fund, L.P.(9)

     90,000        *        90,000        0        0  

JAM Partners, L.P.(10)

     415,000        1.43%        300,000        115,000        *  

Financial Opportunity Fund LLC

     300,000        1.04%        300,000        0        0  

Schonfeld Strategic 460 Fund LLC

     150,000        *        150,000        0        0  

Banc Fund VIII L.P.

     90,000        *        10,000        80,000        *  

Banc Fund IX L.P.

     90,000        *        10,000        80,000        *  

EJF Financial Services Fund LP(11)

     450,000        1.56%        450,000        0        0  

Financial Stocks Limited Partnership(12)

     185,000        *        125,000        60,000        *  

Hutchin Hill Capital Primary Fund, Ltd.

     175,000        *        175,000        0        0  

Consector Partners LP(13)

     55,000        *        55,000        0        0  

Gordon E. Inman(14)

     231,219        *        180,303        50,916        *  

Joseph Russell

     90,000        *        60,000        30,000        *  

James A. McPherson

     30,303        *        30,303        0        0  

Daniel G. Crockett

     30,303        *        30,303        0        0  

Gary Sasser

     30,303        *        30,303        0        0  

 

 

 

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(1)   Percentages are calculated based on an aggregate of 28,937,050 shares of our common stock issued and outstanding as of June 15, 2017.

 

(2)   Assumes all shares offered are sold.

 

(3)   T. Rowe Price Small-Cap Stock Fund, Inc., T. Rowe Price Institutional Small-Cap Stock Fund, T. Rowe Price Personal Strategy Income Fund, T. Rowe Price Personal Strategy Balanced Fund, T. Rowe Price Personal Strategy Growth Fund, T. Rowe Price Personal Strategy Balanced Portfolio, T. Rowe Price U.S. Small-Cap Core Equity Trust, T. Rowe Price Small-Cap Value Fund, Inc., T. Rowe Price U.S. Small-Cap Value Equity Trust, T. Rowe Price U.S. Equities Trust, T. Rowe Price Financial Services Fund, Inc., U.S. Small-Cap Stock Trust, VALIC Company I – Small Cap Fund, TD Mutual Funds – TD U.S. Small-Cap Equity Fund, Minnesota Life Insurance Company and Costco 401(k) Retirement Plan are managed by T. Rowe Price Associates, Inc., a registered investment adviser (“Fund Manager” or “TRPA”). Fund Manager is affiliated with a registered broker-dealer, T. Rowe Price Investment Services, Inc. (“TRPIS”). TRPIS is a subsidiary of the Fund Manager and was formed primarily for the limited purpose of acting as the principal underwriter and distributor of shares of funds in the T. Rowe Price fund family. T. Rowe Price Associates, Inc. serves as investment adviser with power to direct investments and/or sole power to vote the securities owned by the funds listed in this table. For purposes of reporting requirements of the Securities Exchange Act of 1934, TRPA may be deemed to be the beneficial owner of all of the shares listed in this table; however, TRPA expressly disclaims that it is, in fact, the beneficial owner of such securities. TRPA is the wholly owned subsidiary of T. Rowe Price Group, Inc., which is a publicly traded financial services holding company. Common Stock registered in this offering are presently held in the funds’ nominee names.

 

(4)   RMB Capital Management LLC (“RMB Capital”) is the investment manager of Mendon Capital QP LP and Iron Road Multi-Strategy Fund LP and is the sub-advisor of Mendon Capital Master Fund Ltd. RMB Capital Holdings LLC (“RMB Holdings”) is the ultimate parent company of RMB Capital. The managers of RMB Holdings are Richard M. Burridge, Jr., Frederick Paulman and Walter Clark along with Christopher Graff, a member of RMB Holdings and the Managing Director of Asset Management for RMB Capital, are the natural persons with voting and dispositive power over the shares

 

(5)   Heights Capital Management, Inc., the authorized agent of CVI Investments, Inc., has discretionary authority to vote and dispose of the shares held by CVI Investments, Inc. and may be deemed to be the beneficial holder of these shares. Martin Kobinger, in his capacity as Investment Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting power over the shares held by CVI Investments, Inc. Mr. Kobinger disclaims any such beneficial ownership of the shares.

 

(6)   Joseph A. DiMenna may be deemed to have investment power and voting control over the shares held by both of these selling shareholders.

 

(7)   Stieven Capital GP, LLC is the general partner of Stieven Financial Investors, L.P., and in such capacity has voting and investment control over the shares held by this selling stockholder. Stieven Capital Advisors, L.P. is the investment manager of Stieven Financial Investors, L.P. and Stieven Financial Offshore Investors, Ltd., and in such capacity has voting and investment control over the shares held by both of these selling stockholders. Joseph A. Stieven, Stephen L. Covington, Daniel M. Ellefson and Mark J. Ross are members of the general partner and managing directors of the investment manager, and as a result, they may each be deemed to have voting and investment control over shares held by both of these selling stockholders

 

(8)   Hudson Bay Capital Management LP, the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power over these shares. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Each of Hudson Bay Master Fund Ltd. and Sander Gerber disclaims beneficial ownership over these shares.

 

(9)   Maltese Capital Management LLC is the investment manager of each of Malta Hedge Fund, L.P., Malta Hedge Fund II, L.P., Malta Offshore, Ltd., Malta Market Neutral Master Fund, Ltd., Malta MLC Fund, L.P., Malta MLC Offshore, Ltd. and Malta Titan Fund, L.P. Terry Maltese is the managing member of Maltese Capital Management LLC. In such capacities, each of Maltese Capital Management LLC and Mr. Maltese may be deemed to have voting and dispositive power over the shares held by Malta Hedge Fund, L.P., Malta Hedge Fund II, L.P., Malta Offshore, Ltd., Malta Market Neutral Master Fund, Ltd., Malta MLC Fund, L.P., Malta MLC Offshore, Ltd. and Malta Titan Fund, L.P. Each of Maltese Capital Management LLC and Mr. Maltese disclaims beneficial ownership of these shares except to the extent of its pecuniary interest therein

 

(10)   Jacobs Asset Management, LLC (“JAM”) is the investment manager of JAM Partners, L.P., and in such capacity has voting and investment control over these shares. Sy Jacobs is the managing member of both JAM and JAM Managers, LLC, which is the general partner of JAM Partners, L.P., and as a result, each may also be deemed to have voting and investment control over shares held by this selling stockholder. Each of JAM, JAM Managers, LLC and Sy Jacobs disclaim beneficial ownership over the shares held by JAM Partners, L.P., except to the extent of their pecuniary interest therein.

 

(11)   EJF Financial Services GP, LLC is the general partner of EJF Financial Services Fund, LP. EJF Capital LLC is the sole member of EJF Financial Services GP, LLC. Emmanuel J. Friedman, the Chief Executive Officer of EJF Capital LLC, is deemed to have voting power over the securities beneficially owned by EJF Financial Services Fund, LP.

 

(12)    FSI Group, LLC is controlled by John M. Stein and Steven N. Stein and is the general partner of Financial Stocks Limited Partnership, which is the record owner of the common stock and over which FSI Group, LLC has trading discretion. Therefore, FSI Group, LLC, John M. Stein and Steven N. Stein share with Financial Stocks Limited Partnership the power to vote and dispose of such shares, and, accordingly, may be deemed the beneficial owners of such shares. FSI Group, LLC, Steven N. Stein and John M. Stein disclaim beneficial ownership of the shares owned by Financial Stocks Limited Partnership, except to the extent of their pecuniary interest therein.

 

(13)    Consector Advisors, LLC is the general partner of Consector Partners, LP. William J. Black is the natural person with voting and dispositive power over the shares held by Consector Partners, LP.

 

(14)    Gordon Inman is an emeritus director of FB Financial and serves in a non-executive officer capacity as Chairman of Middle Tennessee of FirstBank.

 

*   Ownership less than 1%.

To our knowledge, none of the selling shareholders listed in the table above is a broker-dealer registered under Section 15 of the Exchange Act.

Information with respect to the beneficial ownership of all or any part of the shares appearing in this prospectus, any supplement to this prospectus, any post-effective amendment to the registration statement of

 

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which this prospectus is a part or any report that we file with the SEC relating to any selling shareholder or to a particular offer of any of the shares will be based on our records, information filed with the SEC or information furnished to us by one or more of the selling shareholders.

The selling shareholders will offer and sell the shares in reliance on our effective registration statement on Form S-1 by which we have registered under the Securities Act, the offer and sale of shares of our common stock and other securities. That registration statement contemplates as part of the plan of distribution of the shares that selling shareholders may offer and sell shares of our common stock through underwriters in reliance on that registration statement from time to time. Those persons who purchase the shares in any offering made hereby and who are not affiliates of our Company may freely trade the shares they purchase.

We have not agreed to register or otherwise qualify any of the shares for offer and sale in any country other than the United States or seek to have the shares admitted to trading on any foreign securities exchange. Further, we have not agreed to become a party to an underwriting agreement relating to the offer and sale of the shares by the selling shareholders.

 

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Plan of Distribution

As of the date of this prospectus, we have not been advised by the selling shareholders as to any plan of distribution for the shares being offered by this prospectus. The selling shareholders may choose not to sell any of those shares. Those shares may, from time to time, be offered for sale by the selling shareholders, or by their permitted pledgees, donees, transferees, assignees or other successors in interest, either directly by such selling shareholder or other person, or through underwriters, dealers or agents or on any exchange on which the shares may from time to time be traded, in the over-the-counter market, in independently negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices, at varying prices determined at the time of sale or at prices otherwise negotiated. The methods by which the shares may be sold include:

 

 

underwritten transactions through underwriting syndicates represented by one or more managing underwriters or directly by one or more underwriters;

 

 

privately negotiated transactions;

 

 

exchange distributions and/or secondary distributions;

 

 

sales in the over-the-counter market;

 

 

ordinary brokerage transactions and transactions in which the broker solicits purchasers;

 

 

sales of a specified number of shares at a stipulated price per share pursuant to agreements with broker-dealers;

 

 

a block trade (which may involve crosses) in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

 

purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus;

 

 

offerings at other than a fixed price on or through the facilities of any stock exchange on which the shares are then listed for trading or to or through a market maker other than on a stock exchange;

 

 

in short sales;

 

 

through the writing of options on the shares (including the issuance by the selling shareholders of derivative securities), whether or not the options are listed on an options exchange;

 

 

through the distributions of the shares by any selling shareholder to its shareholders, members, partners, unit holders or other security holders;

 

 

a combination of any such methods of sale; and

 

 

any other method permitted pursuant to applicable law.

The selling shareholders may offer and sell some or all of the shares being offered by this prospectus by or through broker-dealers, who may act as their agents or may purchase such shares as principal for their own account and thereafter resell the shares from time to time:

 

 

in or through one or more transactions (which may involve crosses and block transactions, negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale.) or distributions;

 

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on the NYSE;

 

 

in the over-the-counter market; or

 

 

in a private transaction.

Broker-dealers or underwriters may receive compensation for their involvement in the sale of shares in the form of underwriting discounts or commissions and may receive commissions from purchasers of the shares being offered hereby for whom they may act as agents. If any broker-dealer purchases any of such shares as principal, it may affect resales of such shares from time to time to or through other broker-dealers, and other broker-dealers may receive compensation in the form of concessions or commissions from the purchasers of such shares for whom they may act as agents. To the extent required, the names of the specific managing underwriter or underwriters, if any, as well as other important information, such as the discounts and commissions the selling shareholders will allow or pay to the underwriters, if any, and the discounts and commissions the underwriters may allow or pay to dealers or agents, if any, will be set forth in, or may be calculated from, the prospectus supplements.

Any underwriters, brokers, dealers and agents who participate in any sale of the shares may also engage in transactions with, or perform services for, us or our affiliates in the ordinary course of their businesses.

In connection with sales of the shares under this prospectus, the selling shareholders may enter into hedging transactions with broker-dealers, who may in turn engage in short sales of the shares in the course of hedging the positions they assume. The selling shareholders also may sell shares short and deliver them to close out the short positions or loan or pledge the shares to broker-dealers that in turn may sell them.

The selling shareholders or their respective underwriters, broker-dealers or agents may make sales of the shares offered hereby that are deemed to be an at-the-market offering as defined in Rule 415 of the SEC’s rules and regulations promulgated under the Securities Act, which includes sales of shares made directly on or through the stock exchange on which the shares are then listed for trading, in the over-the-counter market or otherwise.

The selling shareholders and any underwriters, broker-dealers or agents who participate in the distribution of the shares offered hereby may be deemed to be “underwriters” within the meaning of the Securities Act. To the extent any of the selling shareholders are, or are affiliates of, broker-dealers, they are, according to the SEC’s interpretation, “underwriters” within the meaning of the Securities Act. Underwriters are subject to the prospectus delivery requirements under the Securities Act. If the selling shareholders are deemed to be underwriters, the selling shareholders may be subject to certain statutory liabilities under the Securities Act and the Exchange Act.

We have agreed to pay the costs and expenses of the registration of the shares offered hereby. We will not pay any underwriting fees, discounts and selling commissions or similar fees or arrangements allocable to the selling shareholders’ sale of shares, which will be paid by the selling shareholders.

We have agreed to indemnify, in certain circumstances, the selling shareholders against certain liabilities to which they may become subject in connection with the sale of the shares included in this prospectus, including liabilities arising under the Securities Act. The selling shareholders have agreed to indemnify us in certain circumstances against certain liabilities to which we may become subject in connection with the sale of such shares, including liabilities arising under the Securities Act. We and the selling shareholders may agree to indemnify underwriters, brokers, dealers and agents who participate in the distribution of the shares included in this prospectus against certain liabilities to which they may become subject in connection with the sale of such shares, including liabilities arising under the Securities Act.

 

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Any shares covered by this prospectus may be resold by a selling shareholder under Rule 144 or Rule 144A under the Securities Act rather than pursuant to this prospectus if the selling shareholder satisfies the conditions to reliance on Rule 144 or Rule 144A with respect to such resale. The shares covered by this prospectus may also be sold to non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act rather than pursuant to this prospectus. The shares may be sold in some states only through registered or licensed brokers or dealers.

The selling shareholders and other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including Regulation M. Regulation M may limit the timing of purchases and sales of any of the shares by the selling shareholders and any other person. The anti-manipulation rules under the Exchange Act may apply to sales of shares in the market and to the activities of the selling shareholders and their affiliates. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the shares to engage in market-making activities with respect to the particular shares being distributed for a period of up to five business days before the distribution. These restrictions may affect the marketability of the shares and the ability of any person or entity to engage in market-making activities with respect to the shares.

This prospectus and any required prospectus supplement relating to this prospectus may be made available in electronic form on the websites maintained by the underwriters of a particular offering of shares. The underwriters may agree to allocate a number of shares offered hereby for sale to their online brokerage account holders. Such allocations of shares for internet distributions will be made on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell securities to online brokerage account holders.

To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. The place and time of delivery for the securities in respect of which this prospectus is delivered will be set forth in the accompanying prospectus supplement.

In connection with offerings of the shareholders under the registration statement of which this prospectus forms a part and in compliance with applicable law, underwriters, brokers or dealers may engage in transactions that stabilize or maintain the market price of the securities at levels above those that might otherwise prevail in the open market. Specifically, underwriters, brokers or dealers may over-allot shares in connection with offerings, creating a short position in the securities for their own accounts. For the purpose of covering a syndicate short position or stabilizing the price of the securities, the underwriters, brokers or dealers may place bids for the securities or effect purchases of the securities in the open market. Finally, the underwriters may impose a penalty whereby selling concessions allowed to syndicate members or other brokers or dealers for distribution of the securities in offerings may be reclaimed by the syndicate if the syndicate repurchases previously distributed securities in transactions to cover short positions, in stabilization transactions or otherwise. These activities may stabilize, maintain or otherwise affect the market price of the securities, which may be higher than the price that might otherwise prevail in the open market, and, if commenced, may be discontinued at any time. These transactions may be effected on or through the stock exchange on which the shares are then listed for trading, in the over-the-counter market or otherwise.

 

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Legal matters

Unless otherwise stated in an applicable prospectus supplement, the validity of our securities offered pursuant to this prospectus and related prospectus supplements will be pass upon for us by Alston & Bird LLP.

Experts

The consolidated financial statements of FB Financial Corporation as of December 31, 2016 and 2015 and for each of the years in the three-year period ended December 31, 2016 incorporated in this Prospectus by reference from the FB Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2016 have been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report thereon, incorporated herein by reference, and have been incorporated in this Prospectus and Registration Statement in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

The combined financial statements of Clayton Banks appearing in this Prospectus and Registration Statement for the years ended December 31, 2016, 2015 and 2014 have been audited by Rodefer Moss & Co, PLLC, an independent public accounting firm, as stated in their report appearing elsewhere herein and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

Where you can find more information

We are subject to the informational requirements of the Exchange Act, and file with the SEC proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. You may read and copy any document we file at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s web site at www.sec.gov or on our website at www.firstbankonline.com under the “Investor Relations” tab. Information on, or that can be accessible through, our website does not constitute a part of, and is not incorporated by reference in, this prospectus.

This prospectus, which is a part of a registration statement on Form S-1 that we have filed with the SEC under the Securities Act, omits certain information set forth in the registration statement. Accordingly, for further information, you should refer to the registration statement and its exhibits on file with the SEC. Furthermore, statements contained in this prospectus concerning any document filed as an exhibit are not necessarily complete and, in each instance, we refer you to the copy of such document filed as an exhibit to the registration statement.

Incorporation of certain information by reference

The SEC allows us to “incorporate by reference” in this prospectus information we file with the SEC in other documents. This means that we can disclose important information to you by referring to another document we have filed with the SEC. The information relating to us contained in this prospectus should be read together with the information in the documents incorporated by reference.

We incorporate by reference, as of their respective dates of filing, the documents listed below (excluding any portions of such documents that have been “furnished” but not “filed” for purposes of the Exchange Act);

 

 

our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017, including the information in our proxy statement on Schedule 14A filed with the SEC on April 21, 2017 that is incorporated by reference in that Annual Report on Form 10-K;

 

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our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 12, 2017; and

 

 

our Current Reports on Form 8-K filed with the SEC on February 8, 2017, February 9, 2017 (and as amended on February 13, 2017), February 21, 2017, April 6, 2017, May 5, 2017, May 19, 2017, and May 26, 2017.

Any statement incorporated by reference in this prospectus from an earlier dated document that is inconsistent with a statement contained in this prospectus or in any other document filed after the date of the earlier dated document, but prior to the date hereof, which also is incorporated by reference in this prospectus, shall be deemed to be modified or superseded for purposes of this prospectus by such statement contained in this prospectus or in any other document filed after the date of the earlier dated document, but prior to the date hereof, which also is incorporated by reference in this prospectus.

Any person, including any beneficial owner, to whom this prospectus is delivered may request copies of any of the documents incorporated by reference in this prospectus, without charge, by written or oral request as directed to FB Financial Corporation, c/o Investor Relations, 211 Commerce Street, Suite 300, Nashville, Tennessee 37201 or by phone at (615) 564-1212 or our website at www.firstbankonline.com under the “Investor Relations” tab or from the SEC through the SEC’s Internet website at the address provided under “Where You Can Find More Information.” All other information contained on our website is not part of this prospectus. Documents incorporated by reference in this prospectus are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into those documents.

 

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Table of Contents
Index to Financial Statements

Index to combined financial statements of the Clayton Banks

 

     Page  

Interim Combined Financial Statements

  

Combined Balance Sheets (unaudited)

     F-2  

Combined Statements of Income (unaudited)

     F-3  

Combined Statements of Comprehensive Income (unaudited)

     F-4  

Combined Statements of Changes in Shareholder’s Equity (unaudited)

     F-5  

Combined Statements of Cash Flows (unaudited)

     F-6  

Notes to Combined Financial Statements (unaudited)

     F-7  

2016, 2015 and 2014 combined annual financial statements

  

Independent Auditor’s Report

     F-25  

Audited Financial Statements

  

Combined Balance Sheets

     F-26  

Combined Statements of Income

     F-27  

Combined Statements of Comprehensive Income

     F-28  

Combined Statements of Changes in Shareholder’s Equity

     F-29  

Combined Statements of Cash Flows

     F-30  

Notes to Combined Financial Statements

     F-31  

 

F-1


Table of Contents
Index to Financial Statements

Clayton Banks

Combined balance sheets

(unaudited)

(dollars in thousands, except for per share amounts)

 

      March 31,
2017
     December 31,
2016
 

ASSETS

     

Cash and cash equivalents

     

Cash and due from banks

   $ 37,856      $ 37,735  

Federal funds sold

            11,857  
  

 

 

 

Total cash and cash equivalents

     37,856        49,592  
  

 

 

    

 

 

 

Securities

     

Securities available for sale, at fair value

     51,133        52,981  

Securities held to maturity, at cost

     13,601        13,691  
  

 

 

    

 

 

 

Total securities

     64,734        66,672  
  

 

 

    

 

 

 

Loans, net of discounts and unearned income

     1,066,193        1,052,570  

Less: allowance for loan losses

     20,519        20,395  
  

 

 

    

 

 

 

Net loans

     1,045,674        1,032,175  
  

 

 

    

 

 

 

Other assets

     

Premises and equipment, net of accumulated depreciation

     22,570        22,662  

Goodwill

     8,425        8,425  

Federal Home Loan Bank stock, at cost

     3,370        3,370  

Accrued interest receivable

     4,922        5,050  

Other real estate owned

     3,207        3,103  

Cash surrender value of life insurance

     466        464  

Repossessed assets

     3,674        263  

Other

     4,346        3,040  
  

 

 

    

 

 

 

Total other assets

     50,980        46,377  
  

 

 

    

 

 

 

Total assets

   $ 1,199,244      $ 1,194,816  
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Liabilities

     

Deposits

     

Non-interest bearing

   $ 205,133      $ 193,525  

Interest bearing

     723,526        724,849  
  

 

 

    

 

 

 

Total deposits

     928,659        918,374  

Federal funds purchased

     695        308  

Federal Home Loan Bank advances

     49,399        52,414  

Accrued interest payable

     600        553  

Other liabilities

     6,301        9,590  
  

 

 

    

 

 

 

Total liabilities

     985,654        981,239  
  

 

 

    

 

 

 

Shareholder’s Equity

     

CBT Common stock, $25 par value; authorized 200,000 shares; 153,600 shares issued and outstanding and ACB Common stock $362.09 par value; authorized 105,000; 1,000 shares issued and outstanding

     4,202        4,202  

Additional paid in capital

     89,902        89,902  

Retained earnings

     118,178        118,389  

Accumulated other comprehensive income, net of applicable taxes

     1,308        1,084  
  

 

 

    

 

 

 

Total shareholder’s equity

     213,590        213,577  
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 1,199,244      $ 1,194,816  

 

  

 

 

    

 

 

 

See accompanying notes to unaudited combined financial statements.

 

F-2


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of income

(unaudited)

(dollars in thousands)

 

      Three Months Ended
March 31,
 
      2017     2016  

Interest income

    

Loans, including fees

   $ 16,659     $ 14,555  

Securities

     532       610  

Other

     85       80  
  

 

 

   

 

 

 

Total interest income

     17,276       15,245  
  

 

 

   

 

 

 

Interest expense

    

Deposits

     1,439       1,319  

Other borrowings

     329       314  
  

 

 

   

 

 

 

Total interest expense

     1,768       1,633  
  

 

 

   

 

 

 

Net interest income

     15,508       13,612  

Provision for loan losses

     230        
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     15,278       13,612  
  

 

 

   

 

 

 

Non-interest income

    

Service charges on deposit accounts

     200       198  

Trust fee income

     221       172  

Net loss on sales of foreclosed real estate owned and fixed assets

     (51     (117

Loan servicing income

     549       475  

Other non-interest income

     624       543  
  

 

 

   

 

 

 

Total non-interest income

     1,543       1,271  
  

 

 

   

 

 

 

Non-interest expense

    

Salaries and employee benefits

     3,624       3,754  

Occupancy and equipment

     678       600  

FDIC and state banking fees

     108       154  

Collection expense

     77       84  

Amortization of intangible assets

           14  

Professional fees

     176       76  

Other non-interest expense

     1,048       911  
  

 

 

   

 

 

 

Total non-interest expense

     5,711       5,593  
  

 

 

   

 

 

 

Income before income taxes

     11,110       9,290  

State income tax expense

     871       663  
  

 

 

   

 

 

 

Net income

   $ 10,239     $ 8,627  

 

  

 

 

   

 

 

 

See accompanying notes to unaudited combined financial statements.

 

F-3


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of comprehensive income

(unaudited)

(dollars in thousands)

 

      Three Months Ended
March 31,
 
      2017      2016  

Net Income

   $ 10,239      $ 8,627  

Other comprehensive income, net of income taxes

     

Net change in unrealized gains on securities available for sale, net of tax effect

     224        320  
  

 

 

    

 

 

 

Total comprehensive income

   $ 10,463      $ 8,947  

 

  

 

 

    

 

 

 

 

 

 

See accompanying notes to unaudited combined financial statements.

 

F-4


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of changes in shareholder’s equity

(unaudited)

(dollars in thousands)

 

      Common
stock
     Additional
paid in
capital
     Retained
earnings
    Accumulated
other
comprehensive
income
     Total
shareholder’s
equity
 

Balance, December 31, 2015

   $ 4,202      $ 89,902      $ 101,242     $ 2,086      $ 197,432  

Net income

                   8,627              8,627  

Dividends declared

                   (11,000            (11,000

Other comprehensive income

                         320        320  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance, March 31, 2016

   $ 4,202      $ 89,902      $ 98,869     $ 2,406      $ 195,379  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance, December 31, 2016

   $ 4,202      $ 89,902      $ 118,389     $ 1,084      $ 213,577  

Net income

                   10,239              10,239  

Dividends declared

                   (10,450            (10,450

Other comprehensive income

                         224        224  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance, March 31, 2017

   $ 4,202      $ 89,902      $ 118,178     $ 1,308      $ 213,590  

 

  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

 

 

See accompanying notes to unaudited combined financial statements.

 

F-5


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of cash flows

(unaudited)

(dollars in thousands)

 

      Three Months Ended
March 31,
 
      2017     2016  

Cash flows from operating activities:

    

Net income

   $ 10,239     $ 8,627  

Adjustments to reconcile net income to net cash flows from operating activities:

    

Depreciation and amortization

     134       154  

Provision for loan losses

     230        

Net accretion of discounts and amortization of premiums on securities

     39       61  

Net gains on sales of securities

           (1

Net loss on sales of foreclosed real estate owned and fixed assets

     51       117  

Net change in:

    

Accrued interest receivable

     128       (159

Accrued interest payable

     47       109  

Other, net

     (1,966     609  
  

 

 

   

 

 

 

Net cash flows from operating activities

     8,902       9,517  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Available-for-sale securities

    

Maturities, prepayments and calls

     2,053       2,006  

Held-to-maturity securities

    

Maturities, prepayments and calls

     86       917  

Net change in loans

     (17,580     5,738  

Purchases of premises and equipment

     (78     (4

Proceeds from the sales of other real estate owned

     76       523  
  

 

 

   

 

 

 

Net cash from (used in) investing activities

     (15,443     9,180  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net change in deposits

     10,285       20,423  

Proceeds from FHLB advances

     5,500        

Repayments of FHLB advances

     (8,515     (15

Proceeds (repayments) from federal funds purchased

     387       (10,587

Dividends paid

     (12,852     (11,000
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (5,195     (1,179
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (11,736     17,518  

Cash and cash equivalents at the beginning of the year

     49,592       44,459  
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the year

   $ 37,856     $ 61,977  

Supplemental disclosures of cash flow information

    

Cash paid during year for:

    

Interest

   $ 1,721     $ 1,524  

Income taxes, net of refunds

     869       576  

Supplemental schedule of non-cash activities

    

Transfers from loans to other real estate owned

   $ 3,528     $ 358  

Transfers from loans to repossessed assets

     3,333        

 

  

 

 

   

 

 

 

See accompanying notes to unaudited combined financial statements.

 

F-6


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

Note 1—Summary of significant accounting policies

Nature of Operations and Principles of Combination—The combined financial statements include Clayton Bank and Trust and American City Bank, together referred to as “Clayton Banks” or “the Banks.” Intercompany transactions and balances are eliminated in consolidation. The Banks are wholly-owned by Clayton HC Inc.

The Banks provide financial services through its branches in the counties of Chester, Blount, Knox, Madison, Tipton, Crockett, Henderson, Putnam, Franklin, Coffee, Moore, and Fayette, Tennessee. Their primary deposit products are checking, savings, and term certificate accounts, and their primary lending products are residential mortgage including Manufactured Housing, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. However, the customers’ ability to repay their loans is dependent on the cash flow of borrowers, which can be impacted by the general economic conditions in the area.

Basis of Presentation—The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices of the banking industry. The Combined Balance Sheet at December 31, 2016 has been derived from the audited combined financial statements included elsewhere within this prospectus. Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or shareholders’ equity.

Use of Estimates—The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan loss, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the determination of the fair value of financial instruments, and the realization of deferred tax assets. In connection with the determination of the allowance for loan loss and the estimated fair value of real estate owned, management obtains independent appraisals for significant properties.

There are currently no new accounting policies that were not disclosed in the Bank’s December 31, 2016 audited financial statements included elsewhere within this prospectus except as described below.

Repossessed assets- includes other non-real estate, including notes receivable, vehicles and mobile homes carried at their estimated fair value.

Date of Management’s Review—Management has evaluated events and transactions occurring subsequent to the balance sheet date for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through the date of this registration statement, which is the date these financial statements were available to be issued. There were no other subsequent events that occurred after March 31, 2017, but prior to the issuance of these financial statements that would have a material impact on the Banks’ combined financial statements.

 

F-7


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Note 2—Securities

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows for March 31, 2017 and December 31, 2016:

 

March 31, 2017    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
    Fair
value
 

Mortgage-backed securities

   $ 32,284      $ 817      $ (69   $ 33,032  

State and municipal

     17,440        664        (3     18,101  
  

 

 

 
   $ 49,724      $ 1,481      $ (72   $ 51,133  
  

 

 

 

 

  

 

 

    

 

 

    

 

 

   

 

 

 

 

December 31, 2016    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
    Fair
value
 

Mortgage-backed securities

   $ 34,378      $ 791      $ (173   $ 34,996  

State and municipal

     17,444        583        (42     17,985  
  

 

 

 
   $ 51,822      $ 1,374      $ (215   $ 52,981  
  

 

 

 

 

  

 

 

    

 

 

    

 

 

   

 

 

 

The amortized cost, unrecognized gains and losses, and fair value of securities held to maturity were as follows:

 

March 31, 2017    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
 

Mortgage-backed securities

   $ 691      $ 27      $      $ 718  

State and municipal

     12,910        462               13,372  
  

 

 

 
   $ 13,601      $ 489      $      $ 14,090  
  

 

 

 

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

December 31, 2016    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
    Fair
value
 

Mortgage-backed securities

   $ 777      $ 31      $     $ 808  

State and municipal

     12,914        482        (4     13,392  
  

 

 

 
   $ 13,691      $ 513      $ (4   $ 14,200  
  

 

 

 

 

  

 

 

    

 

 

    

 

 

   

 

 

 

 

F-8


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

The amortized cost and fair value of debt securities at March 31, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations.

 

      Available for sale      Held to maturity  
      Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
 

Due in one year

   $      $      $ 300      $ 303  

Due in one to five years

     6,053        6,412        2,436        2,524  

Due in five to ten years

     6,140        6,304        7,168        7,424  

Due in greater than ten years

     5,247        5,385        3,006        3,121  

Mortgage-backed securities

     32,284        33,032        691        718  
  

 

 

 
   $ 49,724      $ 51,133      $ 13,601      $ 14,090  
  

 

 

 

 

 

There were no securities sold or redeemed during the first quarter of 2017. Securities carried at $53,498 and $55,560 at March 31, 2017 and December 31, 2016, respectively, were pledged to secure deposits and for other purposes as required or permitted by law.

At March 31, 2017 and December 31, 2016 there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholder’s equity.

The following table shows securities with unrealized losses and their fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2017 and December 31, 2016:

 

      Less than 12 months     12 months or more     Total  
Description of Securities    Fair
value
     Unrealized
loss
    Fair
value
     Unrealized
loss
    Fair
value
     Unrealized
loss
 
March 31, 2017       

Mortgage-backed securities

   $ 1,103      $ (49   $ 4,406      $ (20   $ 5,509      $ (69

State and municipal

                  476        (3   $ 476      $ (3
  

 

 

 

Total temporarily impaired

   $ 1,103      $ (49   $ 4,882      $ (23   $ 5,985      $ (72
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
December 31, 2016        

Mortgage-backed securities

   $ 9,242      $ (97   $ 2,059      $ (76   $ 11,301      $ (173

State and municipal

     4,197        (46                $ 4,197      $ (46
  

 

 

 

Total temporarily impaired

   $ 13,439      $ (143   $ 2,059      $ (76   $ 15,498      $ (219

 

 

Unrealized losses on debt securities have not been recognized into income because the issuers are of high credit quality (rated AA or higher), management has the intent and ability to hold for the foreseeable future, and the decline in fair value is largely due to changes in market interest rates. The fair value is expected to recover as the investments approach their maturity date.

 

F-9


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Note 3—Loans

A summary of loans outstanding by category at March 31, 2017 and December 31, 2016 follows:

 

      March 31,
2017
    December 31,
2016
 

Construction and land

   $ 116,828     $ 147,182  

Commercial real estate

     339,271       299,059  

Commercial and agriculture

     168,957       155,771  

Consumer real estate

     101,490       103,668  

Consumer

     21,605       23,349  

Manufactured homes

     318,042       323,541  
  

 

 

 
     1,066,193       1,052,570  

Less: Allowance for loan losses

     (20,519     (20,395
  

 

 

 

Loans, net of unearned fees

   $ 1,045,674     $ 1,032,175  

 

 

For purposes of the disclosures required pursuant to the Banks’ adoption of ASU 2010-20, the Banks’ loan portfolio is disaggregated into portfolio segments and then further disaggregated into classes. A portfolio segment is defined as the level at which management develops and documents a systematic method for determining its allowance for loan losses. The Banks had the following loan portfolio segments—Construction and land; Commercial real estate; Commercial and agriculture; Consumer real estate; Consumer; and Manufactured homes loans. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and the Banks’ method for monitoring and assessing credit risk. Classes within the Construction and land segment are Land acquisition, Commercial construction, and Residential construction. Classes within the Commercial real estate segment are Rental, Business and industrial, and Other. Classes within the Consumer segment are Auto, Credit cards and Other consumer.

The allowance for loan losses (ALLL) includes the following components—reserves for loans collectively evaluated for impairment (determined in accordance with FASB ASC 450-20 Contingencies) and reserves for loans individually evaluated for impairment (determined in accordance with FASB ASC 310-10 Receivables).

The reserves for loans collectively evaluated for impairment are determined based on an application of average historical charge-off percentages by loan portfolio segment, adjusted for loans internally assigned loan grades, and also adjusted for management’s evaluation of current economic events, trends, and conditions in accordance with FASB ASC 450-20 Contingencies. The Banks used a three-year average historical charge-off percentages.

The reserves for loans individually evaluated for impairment are determined based on the present value of the expected future repayments discounted at the loan’s effective interest rate, or for loans that are mainly dependent on the collateral for repayment, the estimated fair value of the collateral less estimated selling costs (net realizable value).

 

F-10


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

A summary of the allowance for loan losses was as follows:

 

      March 31,  
      2017     2016  

Beginning balance

   $ 20,395     $ 21,780  

Provision for loan losses

     230        

Loans charged off

     (364     (437

Recoveries

     258       82  
  

 

 

 

Ending balance

   $ 20,519     $ 21,425  

 

 

The following tables provide a detailed roll forward of the allowance for loan losses for the three months ended March 31, 2017 and 2016 by portfolio segment:

 

Three Months Ended March 31, 2017   Construction
and land
    Commercial
real estate
    Commercial
and
agriculture
    Consumer
real
estate
    Consumer     Manufactured
homes
    Total  

Allowance for loan loss

             

Beginning balance

  $ 1,660     $ 5,353     $ 2,900     $ 1,399     $ 480     $ 8,603     $ 20,395  

Charge-offs

          (16     (63           (78     (207     (364

Recoveries

    1       8       16       192       12       29       258  

Provision

    (110     40       231       80       (11           230  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 1,551     $ 5,385     $ 3,084     $ 1,671     $ 403     $ 8,425     $ 20,519  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance—individually evaluated for impairment

  $     $ 1,376     $ 1,456     $ 18     $ 41     $ 19     $ 2,910  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance—collectively evaluated for impairment

  $ 1,551     $ 4,009     $ 1,628     $ 1,653     $ 362     $ 8,406     $ 17,609  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
March 31, 2017                                                 

Loans

             

Ending balance—individually evaluated for impairment

  $ 207     $ 10,430     $ 2,804     $ 1,880     $ 320     $ 14,342     $ 29,983  

Ending balance—collectively evaluated for impairment

    116,621       328,841       166,153       99,610       21,285       303,700       1,036,210  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance total loans

  $ 116,828     $ 339,271     $ 168,957     $ 101,490     $ 21,605     $ 318,042     $ 1,066,193  

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-11


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Three Months Ended March 31, 2016   Construction
and land
    Commercial
real estate
    Commercial
and
agriculture
    Consumer
real
estate
    Consumer     Manufactured
homes
    Total  

Allowance for loan loss

             

Beginning balance

  $ 3,561     $ 6,582     $ 1,811     $ 1,446     $ 859     $ 7,521     $ 21,780  

Charge-offs

    (42           (75     (173     (76     (71     (437

Recoveries

    3       8       11       8       21       31       82  

Provision

                                         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 3,522     $ 6,590     $ 1,747     $ 1,281     $ 804     $ 7,481     $ 21,425  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance—individually evaluated for impairment

  $     $ 2,402     $ 359     $ 344     $ 33     $     $ 3,138  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance—collectively evaluated for impairment

  $ 3,522     $ 4,188     $ 1,388     $ 937     $ 771     $ 7,481     $ 18,287  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
December 31, 2016                                                 

Loans

             

Ending balance—individually evaluated for impairment

  $ 1,668     $ 7,471     $ 2,816     $ 1,597     $ 440     $ 14,792     $ 28,784  

Ending balance—collectively evaluated for impairment

    145,514       291,588       152,955       102,071       22,909       308,749       1,023,786  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance total loans

  $ 147,182     $ 299,059     $ 155,771     $ 103,668     $ 23,349     $ 323,541     $ 1,052,570  

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Banks use internally assigned loan grades as credit quality indicator. Loans are graded as Pass, Special Mention, or Substandard.

Pass—Loans considered to have a normal credit risk. The borrower has the apparent ability to satisfy its obligations to the Banks, and therefore no loss in ultimate collection is anticipated based on current facts and circumstances. Pass grade loans have reasonable collateral and low to normal loan to value ratios.

Special Mention—Loans considered to have a slightly above normal credit risk. These loans have potential weaknesses that deserve management’s close attention, and if left uncorrected, such potential weaknesses may result in an increased risk of loss in the future. Special Mention grade loans do not expose the Banks to sufficient risk to warrant adverse classification.

Substandard—Loans considered to be inadequately protected by the current net worth and financial capacity of the borrower or the collateral pledged, if any. These loans are characterized by the distinct possibility that the Bank will sustain some loss in the future, if the weaknesses are not corrected. Loss potential, while existing in the aggregate amount of the Substandard grade loans, does not have to exist in the individual loans classified as Substandard.

 

F-12


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

The following table provides the balances of loans by loan classes disaggregated based on credit quality indicator—internally assigned loan grades as of March 31, 2017 and December 31, 2016:

 

March 31, 2017    Loan Grade      Total  
Loan Class    Pass      Special
mention
     Substandard     

Construction and land

   $ 115,772      $ 841      $ 215      $ 116,828  

Commercial real estate

     307,041        19,233        12,997        339,271  

Commercial & agriculture

     165,814        201        2,942        168,957  

Consumer real estate

     97,439        1,852        2,199        101,490  

Consumer

     20,806        421        378        21,605  

Manufactured homes

     284,694        16,863        16,485        318,042  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 991,566      $ 39,411      $ 35,216      $ 1,066,193  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

December 31, 2016    Loan Grade      Total  
Loan Class    Pass      Special
mention
     Substandard     

Construction and land

   $ 144,654      $ 852      $ 1,676      $ 147,182  

Commercial real estate

     265,044        20,854        13,161        299,059  

Commercial & agriculture

     152,063        716        2,992        155,771  

Consumer real estate

     97,988        3,614        2,066        103,668  

Consumer

     22,326        523        500        23,349  

Manufactured homes

     287,601        18,971        16,969        323,541  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 969,676      $ 45,530      $ 37,364      $ 1,052,570  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans individually evaluated for impairment in accordance with ASC 310 at March 31, 2017 and December 31, 2016 were as follows:

 

      March 31,
2017
     December 31,
2016
 

Carrying value of total impaired loans

   $ 29,983      $ 28,784  

Amount of the direct allowance for loan losses allocated

     2,910        2,669  

Average of impaired loans during the period

     29,384        35,549  

Interest income recognized during impairment

     347        1,406  

 

  

 

 

    

 

 

 

 

F-13


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Impaired loans individually evaluated for impairment in accordance with ASC 310 disaggregated by class as of March 31, 2017 were as follows:

 

March 31, 2017

 

Loan Class

   Recorded
investment
     Unpaid
principal
balance
     Related
allowance
     Average
recorded
investment
     Interest
income
recognized
 

Impaired loans with related
allowance recorded

              

Construction and land

   $      $      $      $      $  

Commercial real estate

     4,791        4,898        1,376        4,571        10  

Commercial & agriculture

     1,755        1,810        1,456        1,733        21  

Consumer real estate

     234        242        18        218        4  

Consumer

     46        46        41        46        1  

Manufactured homes

     1,919        1,919        19        1,999         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans with related
allowance recorded

   $ 8,745      $ 8,915      $ 2,910      $ 8,566      $ 36  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Loan Class    Recorded
investment
     Unpaid
principal
balance
     Related
allowance
     Average
recorded
investment
     Interest
income
recognized
 

Impaired loans with no related
allowance recorded

              

Construction and land

   $ 207      $ 1,381      $      $ 938      $ 60  

Commercial real estate

     5,639        6,764               4,380        54  

Commercial & agriculture

     1,049        1,837               1,078        15  

Consumer real estate

     1,646        1,834               1,521        28  

Consumer

     274        496               335        6  

Manufactured homes

     12,423        13,393               12,568        148  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans with no related
allowance recorded

     21,238        25,705               20,818        311  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 29,983      $ 34,620      $ 2,910      $ 29,384      $ 347  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-14


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Impaired loans individually evaluated for impairment in accordance with ASC 310 disaggregated by class as of December 31, 2016 were as follows:

 

December 31, 2016

 

Loan Class

   Recorded
investment
     Unpaid
principal
balance
     Related
allowance
     Average
recorded
investment
     Interest
income
recognized
 

Impaired loans with related
allowance recorded

              

Construction and land

   $      $      $      $      $  

Commercial real estate

     4,350        4,518        1,275        4,627        86  

Commercial & agriculture

     1,710        1,766        1,315        1,829        69  

Consumer real estate

     202        203        17        204        10  

Consumer

     45        45        40        2         

Manufactured homes

     2,079        2,078        22        2,198         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans with related
allowance recorded

   $ 8,386      $ 8,610      $ 2,669      $ 8,860      $ 165  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Loan Class    Recorded
investment
     Unpaid
principal
balance
     Related
allowance
     Average
recorded
investment
     Interest
income
recognized
 

Impaired loans with no related
allowance recorded

              

Construction and land

   $ 1,668      $ 2,842      $      $ 2,861      $ 8  

Commercial real estate

     3,121        4,200               4,485        125  

Commercial & agriculture

     1,106        1,860               2,949        82  

Consumer real estate

     1,395        1,648               1,930        63  

Consumer

     395        628               536        29  

Manufactured homes

     12,713        13,744               13,928        934  
  

 

 

    

 

 

    

 

 

    

 

 

    

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