S-1 1 d383652ds1.htm S-1 S-1
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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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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.


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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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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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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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans with no related
allowance recorded

     20,398        24,922               26,689        1,241  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 28,784      $ 33,532      $ 2,669      $ 35,549      $ 1,406  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-15


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, 2016 were as follows:

 

March 31, 2016

 

Loan Class

   Average
recorded
investment
     Interest
income
recognized
 

Impaired loans with related allowance recorded

     

Construction and land

   $      $  

Commercial real estate

     6,888        47  

Commercial & agriculture

     1,037        9  

Consumer real estate

     1,012        14  

Consumer

     33         

Manufactured homes

     2,438         
  

 

 

    

 

 

 

Total loans with related allowance recorded

   $ 11,408      $ 70  

 

  

 

 

    

 

 

 

 

Loan Class    Average
recorded
investment
     Interest
income
recognized
 

Impaired loans with no related allowance recorded

     

Construction and land

   $ 1,445      $ 1  

Commercial real estate

     6,037        62  

Commercial & agriculture

     1,931        20  

Consumer real estate

     2,505        33  

Consumer

     439        3  

Manufactured homes

     1,711        8  
  

 

 

    

 

 

 

Total loans with no related allowance recorded

     14,068        127  
  

 

 

    

 

 

 

Total impaired loans

   $ 25,476      $ 197  

 

  

 

 

    

 

 

 

Non-performing loans were as follows at March 31, 2017 and December 31, 2016:

 

      March 31,
2017
     December 31,
2016
 

Loans past due over 90 days still on accrual

   $ 2,164      $ 1,270  

Non-accrual loans

     8,163        10,169  
  

 

 

 
   $ 10,327      $ 11,439  

 

  

 

 

    

 

 

 

Non-performing loans and impaired loans are defined differently. All non-performing loans were loans past due 90 days or greater and still on accrual or loans on non-accrual status as of March 31, 2017 and December 31, 2016. Impaired loans are loans for which, based on current information and events, it is considered probable that the Bank will be unable to collect all amounts of contractual interest and principal as scheduled in the loan agreement. Some loans may be included in both categories, whereas other loans may only be included in one category.

 

F-16


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Age analysis of past due loans disaggregated by class as of March 31, 2017:

 

March 31, 2017    30-89 days
past due
     Greater
than
90 days
     Non-accruals      Current
and accruing
interest
    

Total

loans

 

Loan Class

              

Construction and land

   $ 109      $      $ 207      $ 116,512      $ 116,828  

Commercial real estate

            580        6,355        332,336        339,271  

Commercial & agriculture

     166        274        551        167,966        168,957  

Consumer real estate

     792        347        616        99,735        101,490  

Consumer

     225        124        163        21,093        21,605  

Manufactured homes

     4,203        839        271        312,729        318,042  
  

 

 

 

Total loans

   $ 5,495      $ 2,164      $ 8,163      $ 1,050,371      $ 1,066,193  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Age analysis of past due loans disaggregated by class as of December 31, 2016:

 

December 31, 2016    30-89 days
past due
     Greater
than
90 days
     Non-accruals      Current
and accruing
interest
    

Total

loans

 

Loan Class

              

Construction and land

   $ 1,264      $ 1      $ 1,668      $ 144,249      $ 147,182  

Commercial real estate

     178               6,441        292,440        299,059  

Commercial & agriculture

     1,017               627        154,127        155,771  

Consumer real estate

     2,074        291        821        100,482        103,668  

Consumer

     491        69        277        22,512        23,349  

Manufactured homes

     14,362        909        335        307,935        323,541  
  

 

 

 

Total loans

   $ 19,386      $ 1,270      $ 10,169      $ 1,021,745      $ 1,052,570  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Troubled debt restructurings (TDR)—as part of the Banks’ ongoing risk management practices, the Banks attempt to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Banks consider regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as TDR if the borrower is experiencing financial difficulty and it is determined that the Banks have granted a concession to the borrower. The Banks may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that the borrower may default in the foreseeable future without a modification of its debt. Generally, a concession is granted when the Banks no longer expect to collect all amounts due at the original contractual rate subsequent to modification.

 

F-17


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Banks also consider whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Banks for the restructured terms. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management judgment is required when determining whether a modification is classified as TDR. The Banks’ determination whether a TDR is placed on nonaccrual status generally follows the same internal policies and procedures as for the other portfolio loans.

As of March 31, 2017 and December 31, 2016, the Company has a recorded investment in troubled debt restructurings of $23,211 and $21,755, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate. The Company has allocated $708 and $677 of specific reserves for those loans at March 31, 2017 and December 31, 2016, respectively, and has committed to lend additional amounts totaling up to $1,233 and $1,167, respectively to these customers. Of these loans, $4,369 and $4,574 were classified as non-accrual loans as of March 31, 2017 and December 31, 2016, respectively.

There were no TDR’s that occurred during the three months ended March 31, 2017, additionally there were no payment defaults during the three months ended March 31, 2017 and 2016.

The following table reflects TDR occurring during the three months ended March 31, 2016 by class:

 

March 31, 2016

 

Loan Class

   Number of
contracts
    

Pre-modification

outstanding
recorded
investment

    

Post-modification

outstanding
recorded
investment

     Charge-offs
to specific
reserves
 

Consumer real estate

     1      $ 93      $ 93      $  
  

 

 

 

Total loans

     1      $ 93      $ 93      $  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

Note 4—Regulatory capital matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. As of March 31, 2017 and December 31, 2016, the most recent regulatory notifications categorized Clayton Bank and Trust, and American City Bank (the “Banks”) as

 

F-18


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Banks’ categories.

Actual and required capital amounts and ratios are presented below as of March 31, 2017 and December 31, 2016:

 

      Actual      For capital adequacy
purposes
     To be well capitalized
under prompt
corrective action
provisions
 
March 31, 2017    Amount      Ratio      Amount      Ratio      Amount      Ratio  

Total Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 165,595        18.34%      $ 72,220        8.00%      $ 90,275        10.00%  

American City Bank

     52,456        17.26%        24,311        8.00%        30,389        10.00%  

Tier 1 (Core) Capital to risk weighted assets

                 

Clayton Bank and Trust

     154,232        17.08%        54,165        6.00%        54,165        6.00%  

American City Bank

     49,625        16.33%        18,233        6.00%        18,233        6.00%  

Tier 1 (Core) Capital to average assets

                 

Clayton Bank and Trust

     154,232        17.54%        35,167        4.00%        43,959        5.00%  

American City Bank

     49,625        16.23%        12,234        4.00%        15,293        5.00%  

Tier 1 (Common) Capital to risk weighted assets

                 

Clayton Bank and Trust

     154,232        17.08%        40,624        4.50%        58,678        6.50%  

American City Bank

     49,625        16.33%        13,675        4.50%        19,753        6.50%  

 

 

 

      Actual      For capital
adequacy purposes
     To be well
capitalized under
prompt corrective
 
December 31, 2016    Amount      Ratio      Amount      Ratio      Amount      Ratio  

Total Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 167,513        18.86%      $ 71,038        8.00%      $ 88,797        10.00%  

American City Bank

     50,454        16.87%        23,927        8.00%        29,909        10.00%  

Tier 1 (Core) Capital to risk weighted assets

                 

Clayton Bank and Trust

     156,332        17.61%        53,278        6.00%        53,278        6.00%  

American City Bank

     47,736        15.96%        17,945        6.00%        17,945        6.00%  

Tier 1 (Core) Capital to average assets

                 

Clayton Bank and Trust

     156,332        18.10%        34,557        4.00%        43,196        5.00%  

American City Bank

     47,736        16.48%        11,585        4.00%        14,481        5.00%  

Tier 1 (Common) Capital to risk weighted assets

                 

Clayton Bank and Trust

     156,332        17.61%        39,959        4.50%        57,718        6.50%  

American City Bank

     47,736        15.96%        13,459        4.50%        19,441        6.50%  

 

 

 

F-19


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Note 5—Loan commitments, contingencies and other related activities

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet credit loss risk exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as the ones used for loans, including obtaining collateral at exercise of the commitment.

The contractual amount of financial instruments with off-balance-sheet risk was as follows at year-end:

 

      March 31,
2017
     December 31,
2016
 

Commitments to make Loans

   $ 278,299      $ 243,068  

Lines of Credit

     2,127        1,653  

Letters of Credit

     6,532        6,878  

 

 

In the normal course of business, the Banks are subject to various claims and litigation arising out of claims or other disputes. Because litigation is subject to many uncertainties and the outcome of individual litigated matters is not predictable with assurance, it is reasonably possible that some of the legal actions and claims could be filed and decided as unfavorable to the Banks. Although the amount of ultimate liabilities with respect to such matters cannot be ascertained, management, after evaluating current ongoing litigation or claims, believes that any resulting liability should not materially affect the financial position of the Banks.

Note 6—Fair value of financial instruments

ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The statement emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, the fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements.

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Significant unobservable inputs based on the Banks’ assumptions used to measure assets and liabilities at fair value.

The Banks utilize fair value measurements to record fair value adjustments to certain assets and liabilities. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

 

F-20


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Securities Available for Sale—Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and certain other products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Level 2 securities include mortgage-backed securities and municipal bonds. In certain cases, where there is limited activity or fair values are estimated using discounted cash flow models, securities are classified within Level 3 of the valuation hierarchy.

Impaired Loans—A loan is considered to be impaired when it is probable the Banks will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance may be established as a component of the allowance for loan losses or the expense is recognized as a charge-off. Impaired loans are classified within Level 3 of the hierarchy.

Other Real Estate Owned—Other real estate owned, consisting of properties obtained through foreclosure or in satisfaction of loans, is initially recorded at lower of carrying value or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. Other real estate owned is included in Level 3 of the valuation hierarchy.

The Banks had no liabilities measured at fair value on a recurring or non-recurring basis at March 31, 2017 and December 31, 2016.

Assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 are as follows:

 

March 31, 2017    Level 1      Level 2      Level 3      Total  

Investment securities available for sale

           

Mortgage-backed securities

   $      $ 33,032      $      $ 33,032  

State and municipal securities

            18,101               18,101  
  

 

 

 

Total

   $      $ 51,133      $      $ 51,133  

 

 

 

December 31, 2016    Level 1      Level 2      Level 3      Total  

Investment securities available for sale

           

Mortgage-backed securities

   $      $ 34,996      $      $ 34,996  

State and municipal securities

            17,985               17,985  
  

 

 

 

Total

   $      $ 52,981      $      $ 52,981  

 

 

 

F-21


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Assets measured at fair value on a non-recurring basis as of March 31, 2017 and December 31, 2016 are as follows:

 

March 31, 2017    Level 1      Level 2      Level 3      Total  

Other real estate owned

   $      $      $ 27      $ 27  

Impaired loans, net

                   9,883        9,883  
  

 

 

 

Total assets at fair value

   $      $      $ 9,910      $ 9,910  

 

 

 

December 31, 2016    Level 1      Level 2      Level 3      Total  

Other real estate owned

   $      $      $ 1,315      $ 1,315  

Impaired loans, net

                   16,471        16,471  
  

 

 

 

Total assets at fair value

   $      $      $ 17,786      $ 17,786  

 

 

There were no transfers between Level 1, 2 or 3 during the periods presented.

The following methods and assumptions were used in estimating its fair value disclosure for financial instruments that are not measured at fair value.

Cash and Cash Equivalents—The carrying amounts of cash, due from banks, and federal funds sold approximate their fair value.

Loans—For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality.

Deposits, Federal Home Loan Bank Advances and Other Borrowed Funds—The carrying amounts of demand deposits, savings deposits and floating rate advances from the Federal Home Loan Bank approximate their fair values. Fair values for certificates of deposit, fixed rate advances from the Federal Home Loan Bank are estimated using discounted cash flow models using current market interest rates offered on certificates, advances and other borrowings.

Federal Funds Purchased—The carrying amounts of federal funds purchased approximate their fair value.

 

F-22


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

Carrying amount and estimated fair values of financial instruments were as follows at March 31, 2017 and December 31, 2016:

 

March 31, 2017    Carrying
amount
     Level 1      Level 2      Level 3      Fair value  

Financial Assets

              

Cash and cash equivalent

   $ 37,856      $ 37,856                    $ 37,856  

Securities available for sale

     51,133               51,133               51,133  

Securities held to maturity

     13,601               14,090               14,090  

Loans, net

     1,045,674               1,014,078        9,883        1,023,961  

FHLB stock and securities

     3,370                      3,370        3,370  

Accrued interest receivable

     4,922               4,922               4,922  

Financial Liabilities

              

Non maturing deposits

     601,922        601,922                      601,922  

Time deposits

     326,737               324,974               324,974  

FHLB advances

     49,399               50,451               50,451  

Fed funds purchased

     695        695                      695  

Accrued interest payable

     600               600               600  

 

 

 

December 31, 2016    Carrying
amount
     Level 1      Level 2      Level 3      Fair value  

Financial Assets

              

Cash and cash equivalent

   $ 49,592      $ 49,592                    $ 49,592  

Securities available for sale

     52,981               52,981               52,981  

Securities held to maturity

     13,691               14,200               14,200  

Loans, net

     1,032,175               1,005,310        16,471        1,021,781  

FHLB stock and securities

     3,370                      3,370        3,370  

Accrued interest receivable

     5,050               5,050               5,050  

Financial Liabilities

              

Non maturing deposits

     583,048        583,048                      583,048  

Time deposits

     335,326               333,634               333,634  

FHLB advances

     52,414               52,780               52,780  

Fed funds purchased

     308        308                      308  

Accrued interest payable

     553               553               553  

 

 

Note 7—Related party transactions

The Banks offer loans in the ordinary course of business to our insiders, including our executive officers and directors, their related interests and immediate family members and other employees. Applicable law and our written credit policies require that loans to insiders be on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties, and must not involve more than the normal risk of repayment or present other unfavorable features. Loans to non-insider

 

F-23


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements (unaudited)

March 31, 2017

(dollars in thousands)

 

employees and other non-insiders are subject to the same requirements and underwriting standards and meet our normal lending guidelines, except that non-insider employees and other non-insiders may receive preferential interest rates and fees as an employee benefit. Loans to individual employees, directors and executive officers must also comply with the Banks’ statutory lending limits and regulatory requirements regarding lending limits and collateral. All extensions of credit to the related parties must be reviewed and approved by the Banks’ Boards of Directors. Directors with a personal interest in any loan application are excluded from the consideration of such loan application. The Banks have made loans to directors and executive officers.

Such loans amounted to $46,007 (representing 36 loans) and $46,107 (representing 38 loans) at March 31, 2017 and December 31, 2016, respectively.

Deposits from principal officers, directors and their affiliates were $87,444 and $42,894 at March 31, 2017 and December 31, 2016, respectively.

At March 31, 2017 and December 31, 2016, Clayton HC, Inc. had cash balances on deposit with Clayton Bank and Trust totaling $41,322 and $28,170, respectively, for ongoing corporate needs.

The Banks also have available lines of credit (or the equivalent thereof) with the majority shareholder totaling approximately $52,000 as of March 31, 2017 and December 31, 2016. There was no balance outstanding on those lines at March 31, 2017 or December 31, 2016.

The Banks entered into aircraft time sharing agreement, dated July 2015, with companies controlled by the majority shareholder, (CFA Holdings LLC and CF Services LLC), pursuant to which the Banks have the right to use, from time to time, an aircraft leased and operated by CFA Holdings. This replaces the previous agreement entered into during 2007. CFA Holdings and CF Services LLC bill the Banks for usage of the aircraft based on hours of use and operating costs. During the three months ended March 31, 2017 and 2016 the banks paid CFA Holdings and CF Services $61 and $15, respectively, under the aviation timesharing agreement for the use of the aircraft.

Clayton Bank and Trust leases branch space from Clayton HC, Inc. Annual lease for space is $6 per year. Clayton HC has a management agreement with Clayton Bank and Trust to provide support for collection of debts, management of ORE, accounting and other management duties, amounting to $46 and $46 during the three months ended March 31, 2017 and 2016, respectively.

Apex Bank, 50% owned by Clayton HC, has a management agreement with Clayton Bank and Trust to provide support for IT and other management duties, amounting to $5 and $5 during the three months ended March 31, 2017 and 2016, respectively.

 

F-24


Table of Contents
Index to Financial Statements

Independent Auditors’ Report

To the Board of Directors

Clayton HC, Inc.

Knoxville, Tennessee

Report on the Combined Financial Statements

We have audited the accompanying combined financial statements of Clayton Bank and Trust and American City Bank (wholly-owned subsidiaries of Clayton HC, Inc.) (the “Banks”), which comprise the combined balance sheets as of December 31, 2016 and 2015, and the related combined statements of comprehensive income, changes in shareholder’s equity, and cash flows for the three years ended December 31, 2016, 2015 and 2014, and the related notes to the combined financial statements.

Management’s Responsibility for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Banks’ preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Banks’ internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating of the overall presentation of the combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Banks as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the three years ended December 31, 2016, 2015 and 2014 in accordance with accounting principles generally accepted in the United States of America.

/s/ Rodefer Moss & Co, PLLC

Knoxville, Tennessee

June 15, 2017

 

F-25


Table of Contents
Index to Financial Statements

Clayton Banks

Combined balance sheets

December 31, 2016 and 2015

(dollars in thousands, except for per share amounts)

 

      2016      2015  

ASSETS

     

Cash and cash equivalents

     

Cash and due from banks

   $ 37,735      $ 42,045  

Federal funds sold

     11,857        2,414  
  

 

 

 

Total cash and cash equivalents

     49,592        44,459  
  

 

 

 

Securities

     

Securities available for sale, at fair value

     52,981        64,146  

Securities held to maturity, at cost

     13,691        15,336  
  

 

 

 

Total securities

     66,672        79,482  
  

 

 

 

Loans, net of discounts and unearned income

     1,052,570        911,778  

Less: allowance for loan losses

     20,395        21,780  
  

 

 

 

Net loans

     1,032,175        889,998  
  

 

 

 

Other assets

     

Premises and equipment, net of accumulated depreciation

     22,662        23,014  

Goodwill

     8,425        8,425  

Core deposit intangible assets, net of accumulated amortization

            29  

Federal Home Loan Bank stock, at cost

     3,370        3,370  

Accrued interest receivable

     5,050        4,373  

Other real estate owned

     3,103        4,095  

Cash surrender value of life insurance

     464        457  

Other

     3,303        3,422  
  

 

 

 

Total other assets

     46,377        47,185  
  

 

 

 

Total assets

   $ 1,194,816      $ 1,061,124  
  

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Liabilities

     

Deposits

     

Non-interest bearing

   $ 193,525      $ 146,876  

Interest bearing

     724,849        654,613  
  

 

 

 

Total deposits

     918,374        801,489  
  

 

 

 

Federal funds purchased

     308        10,587  

Federal Home Loan Bank advances

     52,414        44,477  

Accrued interest payable

     553        467  

Other liabilities

     9,590        6,672  
  

 

 

 

Total liabilities

     981,239        863,692  
  

 

 

 

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

     118,389        101,242  

Accumulated other comprehensive income, net of applicable taxes

     1,084        2,086  
  

 

 

 

Total shareholder’s equity

     213,577        197,432  
  

 

 

 

Total liabilities and shareholder’s equity

   $ 1,194,816      $ 1,061,124  

 

 

See accompanying notes to combined financial statements.

 

F-26


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of income

December 31, 2016, 2015 and 2014

(dollars in thousands, except for per share amounts)

 

      2016     2015      2014  

Interest income

       

Loans, including fees

   $ 60,331     $ 54,637      $ 50,688  

Securities

     2,293       2,657        2,961  

Other

     341       252        267  
  

 

 

 

Total interest income

     62,965       57,546        53,916  
  

 

 

 

Interest expense

       

Deposits

     5,483       4,815        4,662  

Other borrowings

     1,272       1,253        1,064  
  

 

 

 

Total interest expense

     6,755       6,068        5,726  
  

 

 

 

Net interest income

     56,210       51,478        48,190  

Provision for loan losses

     978       419        160  
  

 

 

 

Net interest income after provision for loan losses

     55,232       51,059        48,030  
  

 

 

 

Non-interest income (loss)

       

Service charges on deposit accounts

     872       943        1,018  

Trust fee income

     777       733        706  

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

     (290     439        (219

Loan servicing income

     1,970       1,649        1,510  

Other non-interest income

     3,149       2,026        1,883  
  

 

 

 

Total non-interest income, net

     6,478       5,790        4,898  
  

 

 

 

Non-interest expense

       

Salaries and employee benefits

     14,792       14,703        14,908  

Occupancy and equipment

     2,383       2,329        2,364  

FDIC and state banking fees

     642       609        618  

Collection expense

     305       312        601  

Amortization of intangible assets

     29       58        138  

Professional fees

     331       416        417  

Other non-interest expense

     4,212       3,793        3,525  
  

 

 

 

Total non-interest expense

     22,694       22,220        22,571  
  

 

 

 

Income before income taxes

     39,016       34,629        30,357  

Income tax expense

     2,638       2,580        2,253  
  

 

 

 

Net income

   $ 36,378     $ 32,049      $ 28,104  

 

 

See accompanying notes to Combined financial statements.

 

F-27


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of comprehensive income

December 31, 2016, 2015 and 2014

(dollars in thousands)

 

      2016     2015     2014  

Net Income

   $ 36,378     $ 32,049     $ 28,104  

Other comprehensive (loss) income, net of income taxes

      

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

     (978     (421     1,529  

Reclassification adjustment for gain on sale of securities included in net income, net of tax expense of $2, $0 and $2

     (24     (1     (27
  

 

 

 

Total comprehensive income

   $ 35,376     $ 31,627     $ 29,606  

 

 

See accompanying notes to Combined financial statements.

 

F-28


Table of Contents
Index to Financial Statements

Clayton Banks

Combined statements of change in shareholder’s equity

December 31, 2016, 2015 and 2014

(dollars in thousands)

 

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

Balance, December 31, 2013

   $ 4,202      $ 89,902      $ 53,186     $ 1,006     $ 148,296  

Net income

                   28,104             28,104  

Dividends declared

                   (12,097           (12,097

Other comprehensive income

                         1,502       1,502  
  

 

 

 

Balance, December 31, 2014

   $ 4,202      $ 89,902      $ 69,193     $ 2,508     $ 165,805  

Net income

                   32,049             32,049  

Other comprehensive loss

                         (422     (422
  

 

 

 

Balance, December 31, 2015

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

Net income

                   36,378             36,378  

Dividends declared

                   (19,231           (19,231

Other comprehensive loss

                         (1,002     (1,002
  

 

 

 

Balance, December 31, 2016

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

 

  

 

 

 

See accompanying notes to Combined financial statements.

 

F-29


Table of Contents
Index to Financial Statements

CLAYTON BANKS

Combined statements of cash flows

December 31, 2016, 2015 and 2014

(dollars in thousands)

 

      2016     2015     2014  

Cash flows from operating activities

      

Net income

   $ 36,378     $ 32,049     $ 28,104  

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

      

Depreciation and amortization

     576       616       694  

Provision for loan losses

     978       419       160  

Net accretion of discounts and amortization of premiums on securities

     227       250       274  

Net gains on sales of securities

     (26     (1     (29

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

     290       (439     219  

Net change in:

      

Accrued interest receivable

     (677     (211     174  

Accrued interest payable

     86       29       (74

Other, net

     1,397       682       (11,922
  

 

 

 

Net cash flows from operating activities

     39,229       33,394       17,600  
  

 

 

 

Cash flows from investing activities

      

Available-for-sale securities

      

Sales

     537             401  

Maturities, prepayments and calls

     9,373       10,236       13,009  

Purchases

           (3,836     (9,282

Held-to-maturity securities

      

Maturities, prepayments and calls

     1,627       2,273       1,658  

Purchase of FHLB Stock

                 (7

Net change in loans

     (150,342     (139,019     (33,208

Purchases of premises and equipment

     (195     (221     34  

Proceeds from the sales of foreclosed real estate owned

     1,361       5,081       2,251  
  

 

 

 

Net cash flows used in investing activities

     (137,639     (125,486     (25,144
  

 

 

 

Cash flows from financing activities

      

Net change in deposits

     116,885       45,471       21,031  

Proceeds from FHLB advances

     8,500       2,000       30,000  

Repayments of FHLB advances

     (563     (255     (31,314

Proceeds (repayments) of Federal funds purchased

     (10,279     10,587       (1

Dividends paid

     (11,000           (12,097
  

 

 

 

Net cash flows from financing activities

     103,543       57,803       7,619  
  

 

 

 

Net change in cash and cash equivalents

     5,133       (34,289     75  

Cash and cash equivalents at the beginning of the year

     44,459       78,748       78,673  
  

 

 

 

Cash and cash equivalents at the end of the year

   $ 49,592     $ 44,459     $ 78,748  
  

 

 

 

Supplemental disclosures of cash flow information

      

Cash paid during year for:

      

Interest

   $ 6,669     $ 6,039     $ 6,138  

Income taxes, net of refunds

     3,250       1,939       3,254  

Supplemental schedule of non-cash activities

      

Transfers from loans to foreclosed real estate owned

   $ 490     $ 1,546     $ 4,921  

Transfers from foreclosed real estate owed to loans

     291       152       70  

Non-cash dividend of loan receivable

     5,829              

 

 

See accompanying notes to Combined financial statements.

 

F-30


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

December 31, 2016, 2015 and 2014

(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 Bank” 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.

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.

Cash and Cash Equivalents—For purposes of balance sheet classification and reporting cash flows, cash and cash equivalents include cash on hand, deposits with other financial institutions with original maturities less than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased.

Securities - Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchased premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities, where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Declines in the fair value of the securities below their cost that are other than temporary are reflected as realized losses. In estimating other than temporary impairment (“OTTI”), management considers the length of time and extent that fair value has been less than cost, the financial condition and near term prospects of the issuer, and the Banks’ ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value. The banks recorded no OTTI for the years ended December 31, 2016, 2015 and 2014.

Federal Home Loan Bank (FHLB) Stock—The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on asset size, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans—Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, purchased discount, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income. Net deferred loan origination fees and purchased discount on manufactured home loans are accreted using methods that approximate the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Consumer loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses—The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected. Commercial and commercial real estate loans meeting certain size and performance characteristics are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is recorded at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Foreclosed Assets—Assets acquired through or instead of loan foreclosure are initially recorded at lower of carrying value or fair value, less costs to sell, when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Premises and Equipment—Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from five to forty years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from three to ten years.

Bank Owned Life Insurance—The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other changes or other amounts due that are probable at settlement.

Goodwill—Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified. Based on our assessment completed as of December 31, 2016 and 2015, no goodwill impairment was indicated.

Core Deposit Intangible Assets—Core deposit intangible assets arise from whole bank and branch acquisitions. They are initially measured at fair value and then are amortized over their estimated useful lives.

Long-Term Assets—Premises and equipment, core deposits and other intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Retirement Plans—Employee 401(k) and profit sharing expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service. Employee stock ownership plan related compensation expense was recorded based on a fair market valuation of the shares allocated to participant accounts.

Income Taxes—The Banks have elected to be treated as an S Corporation under Section 1362 of the Internal Revenue Code of 1986, as amended. As a result, the Banks will generally not be subject to federal income tax. The Banks will continue to be subject to taxation by the State of Tennessee.

Pursuant to ASC 740, Income Taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Although the tax years ending after December 31, 2013 through December 31, 2016 remain open for examination for various taxing authorities, it is management’s opinion that resolution of any significant uncertain tax positions that remain open at December 31, 2016 will not have a material effect on the Banks’ financial statements.

The Banks’ policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Off Balance Sheet Financial Instruments—Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Comprehensive Income—Consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, which are also recognized as separate components of equity.

Loss Contingencies—Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the financial statements.

Dividend Restriction—Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to the shareholders.

Fair Value of Financial Instruments—Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Subsequent Events—Subsequent to year end, in February 2017, the Banks entered into stock purchase agreement with FirstBank, a wholly owned subsidiary of FB Financial Corporation, whereby the Banks will be merged with and into FirstBank. The transaction is expected to close in the third quarter of 2017.

Clayton Bank and Trust paid a dividend to Clayton HC in January 2017 in the amount of $10,450 for the purpose of paying taxes on previous earnings of the Banks.

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 the report, which is the date these financial statements were available to be issued. There were no other subsequent events, other than what has been disclosed above that occurred after December 31 2016, but prior to the issuance of these financial statements that would have a material impact on the Banks’ combined financial statements.

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 the years ended December 31, 2016 and 2015:

 

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  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

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

 

  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

2015    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
    Fair
value
 

Mortgage-backed securities

   $ 43,947      $ 1,280      $ (134   $ 45,093  

State and municipal

     17,962        1,091              19,053  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 61,909      $ 2,371      $ (134   $ 64,146  

 

  

 

 

    

 

 

    

 

 

   

 

 

 

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

 

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  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

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

 

  

 

 

    

 

 

    

 

 

   

 

 

 

 

2015    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair
value
 

Mortgage-backed securities

   $ 1,240      $ 54      $      $ 1,294  

State and municipal

     14,096        958               15,054  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,336      $ 1,012      $      $ 16,348  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

The amortized cost and fair value of debt securities at December 31, 2016, 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      $ 304  

Due in one to five years

     5,355        3,425        4,024        4,176  

Due in five to ten years

     6,841        9,219        5,582        5,787  

Due in greater than ten years

     5,248        5,341        3,008        3,125  

Mortgage-backed securities

     34,378        34,996        777        808  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 51,822      $ 52,981      $ 13,691      $ 14,200  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

There was one security sold and three securities redeemed during 2016 for a net gain of $26 and there were no securities sold and seven securities redeemed during 2015 for a net gain of $1. There was one security sold and one security redeemed during 2014 for a net gain of $29. Securities carried at $55,560 and $65,930 at December 31, 2016 and 2015, respectively, were pledged to secure deposits and for other purposes as required or permitted by law.

At December 31, 2016 and 2015, 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.

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

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 December 31, 2016 and 2015.

 

      Less than 12 Months     12 Months or More     Total  
Description of Securities    Fair
value
     Unrealized
loss
    Fair
value
     Unrealized
loss
    Fair
value
     Unrealized
loss
 

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
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

2015

               

Mortgage-backed securities

   $ 4,809      $ (22   $ 3,803      $ (112   $ 8,612      $ (134
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired

   $ 4,809      $ (22   $ 3,803      $ (112   $ 8,612      $ (134

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

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.

Note 3—Loans

A summary of loans outstanding by category at December 31, 2016 and 2015 follows:

 

      2016     2015  

Construction and land

   $ 147,182     $ 107,163  

Commercial real estate

     299,059       251,428  

Commercial and agriculture

     155,771       149,409  

Consumer real estate

     103,668       94,249  

Consumer

     23,349       34,785  

Manufactured homes

     323,541       274,744  
  

 

 

 
     1,052,570       911,778  

Less: Allowance for loan losses

     (20,395     (21,780
  

 

 

 

Loans, net of unearned fees

   $ 1,032,175     $ 889,998  

 

  

 

 

   

 

 

 

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 has 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.

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

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.

During the year ended December 31, 2016 the Banks sold the credit card class portfolio (included in consumer loans above) which had a book value of $2,527 for a gain of $147.

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 uses 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 payments 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).

Summary in the allowance for loan losses was as follows:

 

      2016     2015     2014  

Beginning balance

   $ 21,780     $ 23,108     $ 24,614  

Provision for loan losses

     978       419       160  

Loans charged off

     (2,745     (2,198     (2,228

Recoveries

     382       451       562  
  

 

 

   

 

 

 

Ending balance

   $ 20,395     $ 21,780     $ 23,108  

 

  

 

 

   

 

 

   

 

 

 

The following tables provides a detailed rollforward of the allowance for loan losses for the years ended December 31, 2016, 2015 and 2014 by portfolio segment:

 

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

    (66     (50     (543     (373     (577     (1,136     (2,745

Recoveries

    10       31       105       45       73       118       382  

Provision

    (1,845     (1,210     1,527       281       125       2,100       978  
 

 

 

 

Ending balance

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

 

 

 

Ending balance—individually evaluated for impairment

  $     $ 1,275     $ 1,315     $ 17     $ 40     $ 22     $ 2,669  
 

 

 

 

Ending balance—collectively evaluated for impairment

  $ 1,660     $ 4,078     $ 1,585     $ 1,382     $ 440     $ 8,581     $ 17,726  
 

 

 

 

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  

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

2016  

Construction
and

land

   

Commercial
real

estate

    Commercial
and
agriculture
   

Consumer
real

estate

    Consumer     Manufactured
homes
    Total  

Allowance for loan loss

             

Beginning balance

  $ 4,237     $ 6,981     $ 2,823     $ 1,856     $ 1,004     $ 6,207     $ 23,108  

Charge-offs

    (341     (166     (34     (374     (473     (810     (2,198

Recoveries

    12       30       85       45       138       141       451  

Provision

    (347     (263     (1,063     (81     190       1,983       419  
 

 

 

 

Ending balance

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

 

 

 

Ending balance—individually evaluated for impairment

  $ 1,798     $ 1,272     $ 383     $ 300     $ 64     $ 25     $ 3,842  
 

 

 

 

Ending balance—collectively evaluated for impairment

  $ 1,763     $ 5,310     $ 1,428     $ 1,146     $ 795     $ 7,496     $ 17,938  
 

 

 

 

Loans

             

Ending balance—individually evaluated for impairment

  $ 3,370     $ 9,287     $ 2,846     $ 3,140     $ 446     $ 4,237     $ 23,326  

Ending balance—collectively evaluated for impairment

    103,793       242,141       146,563       91,109       34,339       270,507       888,452  
 

 

 

 

Ending balance total loans

  $ 107,163     $ 251,428     $ 149,409     $ 94,249     $ 34,785     $ 274,744     $ 911,778  

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

2014    Construction
and
land
   

Commercial
real

estate

    Commercial
and
agriculture
    Consumer
real
estate
    Consumer     Manufactured
homes
    Total  

Allowance for loan loss

              

Beginning balance

     5,192       7,505       2,912       2,059       1,067       5,879     $ 24,614  

Charge-offs

     (220     (432     (199     (266     (610     (501   $ (2,228

Recoveries

     131       150       56       25       90       110     $ 562  

Provision

     (866     (242     54       38       457       719       160  
  

 

 

 

Ending balance

   $ 4,237     $ 6,981     $ 2,823     $ 1,856     $ 1,004     $ 6,207     $ 23,108  
  

 

 

 

Ending balance—individually evaluated for impairment

   $ 753     $ 1,356     $ 922     $ 509     $ 122     $ 30     $ 3,692  
  

 

 

 

Ending balance—collectively evaluated for impairment

   $ 3,484     $ 5,625     $ 1,901     $ 1,347     $ 882     $ 6,177     $ 19,416  
  

 

 

 

Loans

              

Ending balance—individually evaluated for impairment

   $ 3,123     $ 9,752     $ 1,381     $ 4,487     $ 118     $ 2,963     $ 21,824  

Ending balance—collectively evaluated for impairment

     73,991       210,152       125,293       92,910       31,843       221,763       755,952  
  

 

 

 

Ending balance total loans

   $ 77,114     $ 219,904     $ 126,674     $ 97,397     $ 31,961     $ 224,726     $ 777,776  

 

 

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

Pass grade loans are considered 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 grade loans are considered loans with 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 grade loans are considered 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

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

in the aggregate amount of the Substandard grade loans, does not have to exist in the individual loans classified as Substandard.

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

 

      Loan grade          
Loan Class    Pass     

Special

mention

     Substandard      Total  

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  

 

 

The following table provides the balances of loans by loan classes disaggregated based on credit quality indicator—internally assigned loan grades as of December 31, 2015:

 

      Loan grade          
Loan Class    Pass     

Special

mention

     Substandard      Total  

Construction and land

   $ 95,299      $ 7,934      $ 3,930      $ 107,163  

Commercial real estate

     220,515        12,801        18,112        251,428  

Commercial & agriculture

     143,539        2,811        3,059        149,409  

Consumer real estate

     84,820        5,172        4,257        94,249  

Consumer

     32,303        1,964        518        34,785  

Manufactured homes

     255,285        12,679        6,780        274,744  
  

 

 

 

Total loans

   $ 831,761      $ 43,361      $ 36,656      $ 911,778  

 

 

Impaired loans individually evaluated for impairment in accordance with ASC 310 at December 31, 2016 and 2015 were as follows:

 

      2016      2015  

Carrying value of total impaired loans

   $ 28,784      $ 23,326  

Amount of the direct allowance for loan losses allocated

     2,669        3,842  

Average of impaired loans during the year

     35,549        40,598  

Interest income recognized during impairment

     1,406        2,019  

 

 

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

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

 

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  
 

 

 

 

Total loans with no related allowance recorded

    20,398       24,922             26,689       1,241  
 

 

 

 

Total impaired loans

  $ 28,784     $ 33,532     $ 2,669     $ 35,549     $ 1,406  

 

 

Impaired loans individually evaluated for impairment in accordance with ASC 310 disaggregated by class as of December 31, 2015 were as follows:

 

Loan Class   

Recorded

investment

    

Unpaid

principal

balance

    

Related

allowance

    

Average

recorded

investment

    

Interest

income
recognized

 

Impaired loans with related allowance recorded

              

Construction and land

   $ 3,089      $ 2,042      $ 1,798      $ 2,059      $ (1

Commercial real estate

     2,967        2,957        1,272        2,975        66  

Commercial & agriculture

     446        497        383        459        2  

Consumer real estate

     912        993        300        1,010        19  

Consumer

     64        64        64        67        (1

Manufactured homes

     2,507        2,507        25                
  

 

 

 

Total loans with related allowance recorded

   $ 9,985      $ 9,060      $ 3,842      $ 6,570      $ 85  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-40


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

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

   $ 281      $ 3,223      $      $ 2,480      $ 115  

Commercial real estate

     6,320        7,909               17,370        759  

Commercial & agriculture

     2,400        2,469               2,719        126  

Consumer real estate

     2,228        2,628               3,857        272  

Consumer

     382        397               584        44  

Manufactured homes

     1,730        2,573               7,018        618  
  

 

 

 

Total loans with no related allowance recorded

     13,341        19,199               34,028        1,934  
  

 

 

 

Total impaired loans

   $ 23,326      $ 28,259      $ 3,842      $ 40,598      $ 2,019  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans individually evaluated for impairment in accordance with ASC 310 disaggregated by class as of December 31, 2014 were as follows:

 

Loan Class   

Average

recorded

investment

    

Interest

income

recognized

 

Impaired loans with related allowance recorded

     

Construction and land

   $ 1,550      $ 27  

Commercial real estate

     3,835        96  

Commercial & agriculture

     246        3  

Consumer real estate

     2,470        79  

Consumer

     123        6  

Manufactured homes

     900        27  
  

 

 

 

Total loans with related allowance recorded

   $ 9,124      $ 238  

 

  

 

 

    

 

 

 

 

Loan Class   

Average

recorded

investment

    

Interest

income

recognized

 

Impaired loans with no related allowance recorded

     

Construction and land

   $ 3,300      $ 53  

Commercial real estate

     11,086        356  

Commercial & agriculture

     437        3  

Consumer real estate

     5,715        304  

Consumer

     3,250        163  

Manufactured homes

     2        2  
  

 

 

 

Total loans with no related allowance recorded

     23,790        881  
  

 

 

 

Total impaired loans

   $ 32,914      $ 1,119  

 

  

 

 

    

 

 

 

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Non-performing loans were as follows at December 31, 2016 and 2015:

 

      2016      2015  

Loans past due over 90 days still on accrual

   $ 1,270      $ 1,114  

Non-accrual loans

     10,169        10,000  
  

 

 

 
   $ 11,439      $ 11,114  

 

  

 

 

    

 

 

 

Non-performing loans and impaired loans are defined differently. All non-performing loans were loans past due 90 days or greater and still on accrual or loans on non-accrual status as of December 31, 2016 and 2015. Impaired loans are loans for which, based on current information and events, it is considered probable that the Bank will be unable to collect all amounts of contractual interest and principal as scheduled in the loan agreement. Some loans may be included in both categories, whereas other loans may only be included in one category.

Age analysis of past due loans disaggregated by class as of December 31, 2016:

 

Loan Class    30-89 days
past due
    

Greater
than

90 days

     Non-accruals     

Current

and accruing
interest

    

Total

loans

 

Construction and land

   $ 1,264      $ 1      $ 1,668      $ 144,249      $ 147,182  

Commercial real estate

     178               6,441        292,440        299,059  

Commercial & agriculture

     1,017               627        154,127        155,771  

Consumer real estate

     2,074        291        821        100,482        103,668  

Consumer

     491        69        277        22,512        23,349  

Manufactured homes

     14,362        909        335        307,935        323,541  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 19,386      $ 1,270      $ 10,169      $ 1,021,745      $ 1,052,570  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Age analysis of past due loans disaggregated by class as of December 31, 2015:

 

Loan Class    30-89 days
past due
    

Greater
than

90 days

     Non-accruals     

Current

and accruing
interest

    

Total

loans

 

Construction and land

   $ 177      $      $ 3,567      $ 103,419      $ 107,163  

Commercial real estate

     491               3,351        247,586        251,428  

Commercial & agriculture

     839        33        776        147,761        149,409  

Consumer real estate

     1,506        514        1,481        90,748        94,249  

Consumer

     451        55        228        34,051        34,785  

Manufactured homes

     4,697        512        597        268,938        274,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 8,161      $ 1,114      $ 10,000      $ 892,503      $ 911,778  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Troubled debt restructurings (TDR)—as part of the Banks’ ongoing risk management practices, the Banks attempt to work with borrowers when necessary to extend or modify loan terms to better align with their current ability to repay. Extensions and modifications to loans are made in accordance with internal policies

 

F-42


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Banks consider regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as TDR if the borrower is experiencing financial difficulty and it is determined that the Banks have granted a concession to the borrower. The Banks may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that the borrower may default in the foreseeable future without a modification of its debt. Generally, a concession is granted when the Banks no longer expect to collect all amounts due at the original contractual rate subsequent to modification.

Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Banks also consider whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Banks for the restructured terms. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management judgment is required when determining whether a modification is classified as TDR. The Banks’ determination whether a TDR is placed on nonaccrual status generally follows the same internal policies and procedures as for the other portfolio loans.

As of December 31, 2016 and 2015, the Company has a recorded investment in troubled debt restructurings of $21,755 and $16,222, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate. The Company has allocated $677 and $1,268 of specific reserves for those loans at December 31, 2016 and 2015, respectively, and has committed to lend additional amounts totaling up to $1,167 and $327, respectively to these customers. Of these loans, $4,574 and $4,434 were classified as non-accrual loans as of December 31, 2016 and 2015, respectively.

The following table reflects TDR occurring during the year ended December 31, 2016 by class:

 

Loan Class    Number of
contracts
    

Pre-

modification
outstanding
recorded
investment

    

Post-

modification
outstanding
recorded
investment

     Charge-offs
to specific
reserves
 

Commercial Real Estate

     1      $ 46      $ 46      $  

Consumer Real Estate

     7        363        366         

Commercial & Agriculture

     1        17        17         

Consumer

     6        6,968        6,968         
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     15      $ 7,394      $ 7,397      $  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

There were no TDRs within the previous 12 months for which there was a payment default during the year ended December 31, 2016.

 

F-43


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

The following table reflects TDR occurring during the year ended December 31, 2015 by class:

 

Loan Class    Number of
contracts
    

Pre-

modification
outstanding
recorded
investment

    

Post-

modification
outstanding
recorded
investment

     Charge-offs
to specific
reserves
 

Commercial Real Estate

     1      $ 1,391      $ 1,391      $  

Consumer real estate

     5        222        222         

Consumer

     2        56        55         
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     8      $ 1,669      $ 1,668      $  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

The following table reflects TDRs within the previous 12 months for which there was a payment default during the year ended December 31, 2015 by class:

 

Loan Class    Number of
contracts
     Defaulted
principal
balance
 

Commercial & Agriculture

     2      $ 35  

Consumer

     1      $ 8  
  

 

 

    

 

 

 

Total loans

     3      $ 43  

 

  

 

 

    

 

 

 

The following table reflects TDR occurring during the year ended December 31, 2014 by class:

 

Loan Class    Number of
contracts
    

Pre-

modification
outstanding
recorded
investment

    

Post-

modification
outstanding
recorded
investment

     Charge-offs
to specific
reserves
 

Commercial Real Estate

     2      $ 57      $ 57      $  

Commercial & Agriculture

     2        26        26         

Consumer real estate

     9        719        722         

Consumer

     2        48        50         
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     15      $ 850      $ 855      $  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

The following table reflects TDRs within the previous 12 months for which there was a payment default during the year ended December 31, 2014 by class:

 

Loan Class   

Number of

contracts

     Defaulted
principal
balance
 

Consumer

     2      $ 180  
  

 

 

    

 

 

 

Total loans

     2      $ 180  

 

  

 

 

    

 

 

 

 

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Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Note 4—Premises and equipment

Premises and equipment were as follows as of December 31, 2016 and 2015:

 

      2016     2015  

Land

   $ 10,562     $ 10,562  

Buildings

     15,293       15,088  

Furniture, fixtures and equipment

     3,092       3,035  

Vehicles

     55       55  

Computer & equipment

     997       984  

Construction in Progress

     1,652       1,732  
  

 

 

   

 

 

 
     31,651       31,456  

Less: Accumulated depreciation

     (8,989     (8,442
  

 

 

   

 

 

 
   $ 22,662     $ 23,014  

 

  

 

 

   

 

 

 

Depreciation expense was $547, $558 and $556 for the years ended December 31, 2016, 2015 and 2014, respectively.

Note 5—Deposits

Interest bearing deposits were as follows as of December 31, 2016 and 2015:

 

      2016      2015  

Demand deposits

   $ 64,584      $ 59,191  

Savings and money market accounts

     324,939        292,275  

Certificates of deposits

     335,326        303,147  
  

 

 

    

 

 

 
     

 

   $ 724,849      $ 654,613  

Interest expense on the above deposits totaled $5,483, $4,815, and $4,662 for the years ended December 31, 2016, 2015 and 2014, respectively.

The amount up to which deposits in the Bank are insured by the FDIC in aggregate is $250 as part of the Dodd-Frank Act.

Total deposits of $250 or more were $421,556 and $403,354 at December 31, 2016 and 2015, respectively.

Included in certificates of deposits above were internet and brokered deposits of $96,319 and $42,558 and $90,445 and $31, 385 as of December 31, 2016 and 2015, respectively.

Scheduled maturities of time deposits were as follows:

 

2017

   $ 176,881  

2018

     77,703  

2019

     36,889  

2020

     19,390  

2021

     18,979  

After 2021

     5,484  
  

 

 

 
   $ 335,326  

 

  

 

 

 

 

F-45


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Note 6—Federal home loan bank advances

The Banks are currently participating in a program with the Federal Home Loan Bank (FHLB) of Cincinnati to provide funds to the public for affordable housing. The FHLB advances are secured by qualifying loans, the majority being home mortgages (1-4 family residential). To participate in this program, the Banks are required to be a member and own stock in the FHLB. The Banks had $3,370 of such stock at December 31, 2016 and 2015, to satisfy this requirement.

Interest expense on the above advances total $1,265, $1,247, and $1,056 for years ended December 31, 2016, 2015, and 2014, respectively.

At December 31, 2016 and 2015, advances from the Federal Home Loan Bank were as follows:

 

      2016      2015  

Maturities January 2017 through September 2027 fixed rates at rates from 0.25% to 6.07%, average 2.45%

   $ 52,414      $  
  

 

 

 

Maturities January 2016 through September 2027 fixed rates at rates from 0.25% to 6.07%, average 2.86%

   $      $ 44,477  

 

 

Qualifying loans totaling $165,325 and $112,268 were pledged as security under a blanket pledge agreement with the FHLB at December 31, 2016 and 2015, respectively.

As of December 31, 2016, scheduled maturities were as follows:

 

2017

   $ 19,068  

2018

     12,551  

2019

     5,524  

2020

     133  

2021

     5,019  

Thereafter

     10,119  
  

 

 

 
   $ 52,414  

 

  

 

 

 

Note 7—Other borrowed funds

The Banks have available federal funds lines (or the equivalent thereof) with correspondent banks totaling approximately $62,500 and $52,500 as of December 31, 2016 and 2015 respectively. Fed funds purchased were $308 and $10,587 as of December 31, 2016 and 2015, respectively.

Note 8—Income taxes

Income tax expense (benefit) for the years ended December 31, 2016, 2015 and 2014 was as follows:

 

      2016     2015     2014  

Current state

   $ 2,707     $ 2,609     $ 2,235  

Deferred state

     (69     (29     18  
  

 

 

   

 

 

 
   $ 2,638     $ 2,580     $ 2,253  

 

  

 

 

   

 

 

   

 

 

 

 

F-46


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

A reconciliation of the amount computed by applying the statutory tax rate of 6.5 percent to pretax income with income tax expense follows:

 

      2016      2015      2014  

Income tax expense at statutory rate

   $ 2,536      $ 2,540      $ 2,060  

Other

     102        40        193  
  

 

 

    

 

 

    

 

 

 
   $ 2,638      $ 2,580      $ 2,253  

 

  

 

 

    

 

 

    

 

 

 

Deferred tax assets and liabilities as of December 31, 2016 and 2015 were due to the following:

 

      2016     2015  

Deferred tax assets:

    

Allowance for loan losses

   $ 623     $ 807  

Book versus tax basis of fixed assets depreciation

           47  

Deferred loan fees and costs

     288       7  
  

 

 

   

 

 

 

Total deferred tax assets

   $ 911     $ 861  
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Book versus tax basis of accounting

   $ (23   $ 28  

Unrealized gain on securities

     (76     (147
  

 

 

   

 

 

 

Total deferred tax liabilities

   $ (99   $ (119
  

 

 

   

 

 

 

Net deferred tax asset

   $ 812     $ 742  

 

 

Note 9—Regulatory capital matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. As of December 31, 2016 and 2015, the most recent regulatory notifications categorized Clayton Bank and Trust, and American City Bank (the “Banks”) as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Banks’ categories.

 

F-47


Table of Contents
Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Actual and required capital amounts and ratios are presented below as of December 31, 2016:

 

      Actual      For capital
adequacy  purposes
     To be well
capitalized under
prompt corrective
action provisions
 
      Amount      Ratio      Amount      Ratio      Amount      Ratio  

2016

                 

Total Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 167,513        18.86%      $ 71,038        8.00%      $ 88,797        10.00%  

American City Bank

     50,454        16.87%        23,927        8.00%        29,909        10.00%  

Tier 1 (Core) Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 156,332        17.61%      $ 53,278        6.00%      $ 53,278        6.00%  

American City Bank

     47,736        15.96%        17,945        6.00%        17,945        6.00%  

Tier 1 (Core) Capital to average assets

                 

Clayton Bank and Trust

   $ 156,332        18.10%      $ 34,557        4.00%      $ 43,196        5.00%  

American City Bank

     47,736        16.48%        11,585        4.00%        14,481        5.00%  

Tier 1 (Common) Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 156,332        17.61%      $ 39,959        4.50%      $ 57,718        6.50%  

American City Bank

     47,736        15.96%        13,459        4.50%        19,441        6.50%  

 

 

Actual and required capital amounts and ratios are presented below as of December 31, 2015:

 

      Actual      For capital
adequacy purposes
     To be well
capitalized under
prompt corrective
action provisions
 
      Amount      Ratio      Amount      Ratio      Amount      Ratio  

2015

                 

Total Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 153,469        19.75%      $ 62,151        8.00%      $ 77,689        10.00%  

American City Bank

     45,625        18.60%        19,624        8.00%        24,531        10.00%  

Tier 1 (Core) Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 143,638        18.49%      $ 46,613        6.00%      $ 46,613        6.00%  

American City Bank

     43,272        17.64%        14,718        6.00%        14,718        6.00%  

Tier 1 (Core) Capital to average assets

                 

Clayton Bank and Trust

   $ 143,638        19.07%      $ 30,122        4.00%      $ 37,652        5.00%  

American City Bank

     43,272        16.72%        10,352        4.00%        12,940        5.00%  

Tier 1 (Common) Capital to risk weighted assets

                 

Clayton Bank and Trust

   $ 143,638        18.49%      $ 34,960        4.50%      $ 50,498        6.50%  

American City Bank

     43,272        17.64%        11,039        4.50%        15,945        6.50%  

 

 

Note 10—Loan commitments, contingencies and other related activities

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet credit loss risk exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as the ones used for loans, including obtaining collateral at exercise of the commitment.

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

The contractual amount of financial instruments with off-balance-sheet risk was as follows at year-end.

 

      2016      2015  

Commitments to make Loans

   $ 243,068      $ 203,730  

Lines of Credit

   $ 1,653      $ 1,013  

Letters of Credit

   $ 6,878      $ 4,726  

Credit Cards

   $      $ 8,921  

 

  

 

 

    

 

 

 

In the normal course of business, the Banks are subject to various claims and litigation arising out of claims or other disputes. Because litigation is subject to many uncertainties and the outcome of individual litigated matters is not predictable with assurance, it is reasonably possible that some of the legal actions and claims could be filed and decided as unfavorable to the Banks. Although the amount of ultimate liabilities with respect to such matters cannot be ascertained, management, after evaluating current ongoing litigation or claims, believes that any resulting liability should not materially affect the financial position of the Banks.

NOTE 11—Fair value of financial instruments

ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The statement emphasizes that fair value is a market-based measurement: not an entity-specific measurement. Therefore, the fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements.

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Significant unobservable inputs based on the Banks’ assumptions used to measure assets and liabilities at fair value.

The Banks utilize fair value measurements to record fair value adjustments to certain assets and liabilities. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Securities Available for Sale—Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and certain other products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Level 2 securities include mortgage-backed securities and municipal bonds. In certain cases, where there is limited activity or fair values are estimated using discounted cash flow models, securities are classified within Level 3 of the valuation hierarchy.

Impaired Loans—A loan is considered to be impaired when it is probable the Banks will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

loans are measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance may be established as a component of the allowance for loan losses or the expense is recognized as a charge-off. Impaired loans are classified within Level 3 of the hierarchy.

Other Real Estate Owned—Other real estate owned, consisting of properties obtained through foreclosure or in satisfaction of loans, is initially recorded at lower of carrying value or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. Other real estate owned is included in Level 3 of the valuation hierarchy.

The Banks had no liabilities measured at fair value on a recurring or non-recurring basis at December 31, 2016 and 2015.

Assets measured at fair value on a recurring basis as of December 31, 2016 and 2015:

 

2016    Level 1      Level 2      Level 3      Total  

Investment securities available for sale

           

Mortgage-backed securities

   $      $ 34,996      $      $ 34,996  

State and municipal securities

            17,985               17,985  
  

 

 

 

Total

   $      $ 52,981      $      $ 52,981  

 

2015    Level 1      Level 2      Level 3      Total  

Investment securities available for sale

           

Mortgage-backed securities

   $      $ 45,093      $      $ 45,093  

State and municipal securities

            19,053               19,053  
  

 

 

 

Total

   $      $ 64,146      $      $ 64,146  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

Assets measured at fair value on a non-recurring basis as of December 31, 2016 and 2015:

 

2016    Level 1      Level 2      Level 3      Total  

Other real estate owned

   $      $      $ 1,315      $ 1,315  

Impaired loans, net

                   16,471        16,471  
  

 

 

 

Total assets at fair value

   $      $      $ 17,786      $ 17,786  

 

2015    Level 1      Level 2      Level 3      Total  

Other real estate owned

   $      $      $ 2,105      $ 2,105  

Impaired loans, net

                   5,408        5,408  
  

 

 

 

Total assets at fair value

   $      $      $ 7,513      $ 7,513  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1, 2 or 3 during the periods presented.

The following methods and assumptions were used in estimating its fair value disclosure for financial instruments that are not measured at fair value.

Cash and Cash Equivalents—The carrying amounts of cash, due from banks, and federal funds sold approximate their fair value.

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Loans—For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality.

Deposits, Federal Home Loan Bank Advances and Other Borrowed Funds—The carrying amounts of demand deposits, savings deposits and floating rate advances from the Federal Home Loan Bank approximate their fair values. Fair values for certificates of deposit, fixed rate advances from the Federal Home Loan Bank are estimated using discounted cash flow models using current market interest rates offered on certificates, advances and other borrowings.

Federal Funds Purchased—The carrying amounts of federal funds purchased approximate their fair value.

Carrying amount and estimated fair values of financial instruments were as follows at December 31, 2016 and 2015:

 

      2016  
     

Carrying

amount

     Level 1      Level 2      Level 3      Fair value  

Financial Assets

              

Cash and cash equivalent

   $ 49,592      $ 49,592      $      $      $ 49,592  

Securities available for sale

     52,981               52,981               52,981  

Securities held to maturity

     13,691               14,200               14,200  

Loans, net

     1,032,175               1,005,310        16,471        1,021,781  

FHLB stock and securities

     3,370                      3,370        3,370  

Accrued interest receivable

     5,050               5,050               5,050  

Financial Liabilities

              

Non maturing deposits

     583,048        583,048                      583,048  

Time deposits

     335,326               333,634               333,634  

FHLB advances

     52,414               52,780               52,780  

Fed funds purchased

     308        308                      308  

Accrued interest payable

     553               553               553  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

      2015  
     

Carrying

amount

     Level 1      Level 2      Level 3      Fair value  

Financial Assets

              

Cash and cash equivalent

   $ 44,459      $ 44,459      $      $      $ 44,459  

Securities available for sale

     64,146               64,146               64,146  

Securities held to maturity

     15,336               16,348               16,348  

Loans, net

     889,998               867,965        5,408        873,373  

FHLB stock and securities

     3,370                      3,370        3,370  

Accrued interest receivable

     4,095               4,095               4,095  

Financial Liabilities

              

Non maturing deposits

     498,342        498,342                      498,342  

Time deposits

     303,147               301,823               301,823  

FHLB advances

     44,477               50,673               50,673  

Fed funds purchased

     10,587        10,587                      10,587  

Accrued interest payable

     467               467               467  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note 12—Investment in life insurance policies and compensation plans

American City Bank has a deferred compensation plan for certain former and active directors. The cash surrender value of life insurance policies related to this deferred compensation plan was $122, $119 and $116 at December 31, 2016, 2015 and 2014, respectively. The liability related to the plan was $54, $72 and $90 at December 31, 2016, 2015 and 2014, respectively. Income recognized for this plan was $2, $3 and $8 during the years ended December 31, 2016, 2015 and 2014, respectively.

American City Bank also has approved an Executive Supplemental Retirement (ESR) plan for key officers. This plan offers death benefits to the officers’ beneficiaries during their employment with the Bank. In addition, the plan offers retirement benefits to these officers based upon the earnings of specific life insurance policies. The liability related to the ESR plan was $61, $69 and $76 at December 31, 2016, 2015 and 2014, respectively. The cash surrender value of the life insurance policies related to the ESR plan was $342, $338 and $332 at December 31, 2016, 2015 and 2014, respectively. Expense recognized related to this plan was $5, $5 and $5 during the years ended December 31, 2016, 2015 and 2014, respectively.

The Banks employees participate in a 401(k) defined contribution plan sponsored by Clayton HC, Inc. covering all employees who have completed three months of service as the quarterly entry date and who are age 18 or older. The Banks may, at their discretion, contribute up to 6% matching funds. For the years ended December 31, 2016, 2015 and 2014, the Banks’ matching contributions to the plan totaled $297, $235 and $224, respectively.

Clayton HC, Inc. sponsors an employee stock ownership plan (ESOP)—see Note 15 for further discussion.

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

Note 13—Intangible and other assets

Intangible assets

Intangible assets were as follows as of December 31, 2016 and 2015:

 

      2016      2015  
     

Gross

carrying

amount

    

Accumulated

amortization

    

Gross

carrying

amount

    

Accumulated

amortization

 

Amortized intangible assets:

           

Core deposit intangibles

   $ 5,530      $ 5,530      $ 5,530      $ 5,501  

 

  

 

 

    

 

 

    

 

 

    

 

 

 

Aggregate amortization expense was $29, $58, and $138 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, the core deposit intangible asset was fully amortized.

Other Assets

Other assets were as follows as of December 31, 2016 and 2015:

 

      2016      2015  

Accounts receivable

   $ 208      $ 751  

Prepaid expenses—other

     852        558  

Repossessed assets

     263        428  

Investment property

     365        365  

Deferred tax assets

     911        861  

Other assets

     704        459  
  

 

 

    

 

 

 

Total other assets

   $ 3,303      $ 3,422  

 

  

 

 

    

 

 

 

Note 14—Other liabilities

Other liabilities were as follows as of December 31, 2016 and 2015:

 

      2016      2015  

Loan escrow

   $ 2,521      $ 1,717  

Accrued expenses

     3,797        1,599  

Accounts payable

     724        766  

Long term incentive payable

     873        713  

Accrued ESOP

     672        541  

Other liabilities

     1,003        1,336  
  

 

 

 
   $ 9,590      $ 6,672  

 

  

 

 

    

 

 

 

Note 15—Employee stock ownership plan

Clayton HC, Inc. adopted an employee stock ownership plan (ESOP) in January 2013. The ESOP is an additional retirement benefit plan where all eligible employees are included in pro rata distribution of Clayton HC, Inc.’s

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

stock which vests over a period of six years. All employees of the Clayton Bank and Trust and American City Bank subsidiaries are entered into the plan once certain eligibility requirements are met. Employees who had been employed for one year and have completed 1,000 hours of service are eligible to participate in the ESOP. Additional allocations of stock can be made annually at the discretion of the shareholder and the trustees of the ESOP. The ESOP purchased 96,552, 107,705 and 114,286 shares of the Clayton HC, Inc. stock during the years ended December 31, 2016, 2015 and 2014, respectively. All the shares were released and allocated to participant accounts. There was no unearned compensation related to the ESOP as of December 31, 2016 and 2015. The Banks’ expense related to the ESOP was $28, $16 and $16 for the years ended December 31, 2016, 2015, and 2014 respectively.

Note 16—Related party transactions

The Banks offer loans in the ordinary course of business to our insiders, including our executive officers and directors, their related interests and immediate family members and other employees. Applicable law and our written credit policies require that loans to insiders be on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties, and must not involve more than the normal risk of repayment or present other unfavorable features. Loans to non-insider employees and other non-insiders are subject to the same requirements and underwriting standards and meet our normal lending guidelines, except that non-insider employees and other non-insiders may receive preferential interest rates and fees as an employee benefit. Loans to individual employees, directors and executive officers must also comply with the Banks’ statutory lending limits and regulatory requirements regarding lending limits and collateral. All extensions of credit to the related parties must be reviewed and approved by the Banks’ boards of directors with a personal interest in any loan application are excluded from the consideration of such loan application. The Banks have made loans to directors and executive officers.

Such loans amounted to $46,107 (representing 38 loans) and $25,587 (representing 23 loans) at December 31, 2016 and 2015 respectively.

Deposits from principal officers, directors and their affiliates were $42,894 and $34,415 at December 31, 2016 and 2015, respectively.

At December 31, 2016 and 2015, Clayton HC, Inc. had cash balances on deposit with the Clayton Bank and Trust totaling $28,170 and $1,003, respectively, for ongoing corporate needs.

The Banks also have available lines of credit (or the equivalent thereof) with the majority shareholder totaling approximately $52,000 as of December 31, 2016 and 2015. There was no balance outstanding on those lines at December 31, 2016 and 2015.

The Banks entered into aircraft time sharing agreement, dated July 2015, with CFA Holdings LLC and CF Services LLC, pursuant to which the Banks have the right to use, from time to time, an aircraft leased and operated by CFA Holdings. This replaces the previous agreement entered into during 2007. CFA Holdings and CF Services LLC bill the Banks for usage of the aircraft based on hours of use and operating costs. During the year end December 31, 2016, 2015, and 2014 the banks paid CFA Holdings and CF Services $240 and $198 and $54 respectively, under the aviation timesharing agreement for the use of the aircraft.

Clayton Bank and Trust leases branch space from Clayton HC, Inc. Annual lease for space is $6 per year. Clayton HC has a management agreement with Clayton Bank and Trust to provide support for collection of debts,

 

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Index to Financial Statements

Clayton Banks

Notes to combined financial statements

 

management of ORE, accounting and other management duties, amounting to $186, $200, and $198 during the years ended December 31, 2016, 2015 and 2014, respectively.

Apex Bank, 50% owned by Clayton HC, Inc., has a management agreement with Clayton Bank and Trust to provide support for IT and other management duties, amounting to $20, $24, and $14 during the years ended December 31, 2016, 2015 and 2014, respectively.

 

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Part II

Information not required in prospectus

Item 13. Other expenses and issuance and distribution.

Estimated fees and expenses payable by our Company in connection with the offer and sale by the selling shareholders and of the shares of common stock registered hereby are as follows:

 

Expense category    Amount  

SEC registration fee

   $ 20,039  

Legal fees and expenses

     250,000  

Accounting fees and expenses

     25,000  

Printing fees and expenses

     25,000  

Miscellaneous expenses

     179,961  
  

 

 

 

Total

   $ 500,000  

Item 14. Indemnification 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 (i) the director or officer acted in good faith, (ii) in the case of conduct in his or her official capacity with the corporation, the director or officer reasonably believed such conduct was in the corporation’s best interest, (iii) in all other cases, the director or officer reasonably believed that his or her conduct was not opposed to the best interest of the corporation and (iv) in connection with any criminal proceeding, the director or officer had no reasonable cause to believe that his or her 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. 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 an officer or director of a corporation, the TBCA mandates that the corporation indemnify the director or officer against reasonable expenses incurred in the proceeding. 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 personal benefit was improperly received. Notwithstanding the foregoing, the TBCA provides that a court of competent jurisdiction, 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 (i) such officer or director was adjudged liable to the corporation in a proceeding by or in right of the corporation, (ii) such officer or director was adjudged liable on the basis that personal benefit was improperly received by him, or (iii) such officer or director breached his duty of care to the corporation.

Our amended and restated charter and amended and restated bylaws require us to indemnify our directors and officers to the fullest extent permitted by law with respect to all liability and loss suffered and expenses reasonably incurred by such person in any action, suit or proceeding in which such person was or is made, or threatened to be made, a party, or is otherwise involved by reason of the fact that such person is or was a director or officer of the Company. In addition, we have a directors’ and officers’ liability insurance policy which provides coverage sufficiently broad to permit indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act.

 

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Index to Financial Statements

In addition, our amended and restated charter provides that our directors shall not be personally liable to us or our shareholders for monetary damages for breach of any fiduciary duty as a director of the Company, except to the extent such exemption from liability or limitation thereof is not permitted under the TBCA. Under the TBCA, this provision does not relieve our directors from personal liability to us or our shareholders for monetary damages for breach of fiduciary duty as a director, to the extent such liability arises from a judgment or other final adjudication establishing: (a) any breach of the director’s duty of loyalty; (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or (c) any unlawful distributions. Nor does this provision eliminate the duty of care and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Tennessee law. Finally, this provision does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under any of the foregoing provisions, in the opinion of the Securities and Exchange Commission, that indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Finally, our ability to provide indemnification to our directors and officers is limited by federal banking laws and regulations, including, but not limited to, 12 U.S.C. §1828(k).

Item 15. Recent sales of unregistered securities.

On May 26, 2017, the Company entered into 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 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 to be issued to Clayton HC. In the event that the Clayton Banks 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.

 

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Index to Financial Statements

Item 16. Exhibits and financial statement schedules.

 

(a)   Exhibits

 

Exhibit

number

     Description
    2.1      Stock Purchase Agreement by and among FB Financial Corporation, FirstBank, Clayton HC, Inc. Clayton Bank and Trust, American City Bank, and James L. Clayton, dated February 8, 2017 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 8, 2017)
    2.2      First Amendment, dated as of May 26, 2107, to that certain Stock Purchase Agreement, dated as of February 8, 2017, by and among the Company, FirstBank, Clayton HC, the Clayton Banks and Mr. Clayton (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 26, 2017)
    3.1      Amended and Restated Certificate of Incorporation of FB Financial Corporation (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
    3.2      Amended and Restated Bylaws of FB Financial Corporation (incorporated by reference to Company’s Form 10-Q for the quarter ended September 30, 2016)
    4.1      Registration Rights Agreement (incorporated by reference to Company’s Form 10-Q for the quarter ended September 30, 2016)
    5.1      Opinion of Alston & Bird LLP
  10.1      Deferred Compensation Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.2      Amendment to Deferred Compensation Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.3      Employment Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.4      FB Corporation 2016 Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.5      Form of Restricted Stock Unit Award Certificate pursuant to the FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.6      Form of Restricted Stock Unit Award Certificate (2017) pursuant to the FB Financial Corporation 2016 Incentive Plan (incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)
  10.7      Form of Nonstatutory Stock Option Award Certificate pursuant to FB Financial Corporation 2016 Incentive Plan (incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.8      Form of Restricted Stock Award Certificate pursuant to the FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

 

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Index to Financial Statements

Exhibit

number

     Description
  10.9      FB Financial Corporation 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.10      FirstBank 2012 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement Form S-1 (File No. 333-213210), filed on August 19, 2016)
  10.11      Amendment to FirstBank 2012 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.12      EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes granted under the FirstBank 2012 Equity Based Incentive Plan (Fully-Vested) (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.13      EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes granted under the FirstBank 2012 Equity Based Incentive Plan (Ratable Vesting) (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.14      FirstBank Preferred Equity Based Incentive Plan, as amended (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed August 19, 2016)
  10.15      Amendment to FirstBank Preferred Equity Based Incentive Plan (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.16      Second Amendment to FirstBank Preferred Equity Based Incentive Plan (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)
  10.17      First Bank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.15 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.18      Amendment to FirstBank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
  10.19      Second Amendment to FirstBank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)
  10.20      Tax Sharing Agreement (incorporated by reference to Company’s Form 10-Q for the quarter ended September 30, 2016)
  10.21      Shareholders’ Agreement (incorporated by reference to the Company’s Form 10-Q for the quarter ended September 30, 2016)
  10.22      Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 26, 2017)
  21      Subsidiaries of FB Financial Corporation (incorporated by reference to Exhibit 21 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)
  23.1      Consent of Independent Registered Public Accounting Firm (RSM US LLP)
  23.2      Consent of Independent Public Accounting Firm (Rodefer Moss & Co, PLLC)
  23.3      Consent of Alston & Bird LLP (included in Exhibit 5.1)
  24.1      Powers of Attorney contained on the signature pages incorporated herein by reference

 

 

 

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Index to Financial Statements

Item 17. Undertakings.

 

(a)   The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs in contained in reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i) Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement

 

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Index to Financial Statements

relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date,

(5) That, for the purpose of determining liability of a Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, that the Registrant will, unless in the opinion of its counsel the has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

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Index to Financial Statements

Signatures

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Nashville, State of Tennessee, on the 21 day of June, 2017.

 

FB Financial Corporation
By:  

/s/ Christopher T. Holmes

  Name:     Christopher T. Holmes
  Title:       President and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Christopher T. Holmes and James R. Gordon, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. This power of attorney may be signed in several counterparts.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature    Title   Date
/s/    Christopher T. Holmes              June 21, 2017
Christopher T. Holmes    President, Chief Executive Officer and Director (Principal Executive Officer)  
/s/    James R. Gordon              June 21, 2017
James R. Gordon    Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)  
/s/    James W. Ayers              June 21, 2017
James W. Ayers    Executive Chairman and Director  
/s/    William F. Andrews              June 21, 2017
William F. Andrews    Director  
/s/    J. Jonathan Ayers              June 21, 2017
J. Jonathan Ayers    Director  
/s/    Agenia W. Clark              June 21, 2017
Agenia W. Clark    Director  

 

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Index to Financial Statements
Signature    Title   Date
      

June 21, 2017

James L. Exum    Director  
/s/    Orrin H. Ingram              June 21, 2017
Orrin H. Ingram    Director  
/s/    Stuart C. McWhorter              June 21, 2017
Stuart C. McWhorter    Director  
/s/    Emily J. Reynolds              June 21, 2017
Emily J. Reynolds    Director  

 

 

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Index to Financial Statements

Exhibit index

 

Exhibit

number

     Description
  2.1     

Stock Purchase Agreement by and among FB Financial Corporation, FirstBank, Clayton HC, Inc. Clayton Bank and Trust, American City Bank, and James L. Clayton, dated February 8, 2017 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 8, 2017)

  2.2     

First Amendment, dated as of May 26, 2107, to that certain Stock Purchase Agreement, dated as of February 8, 2017, by and among the Company, FirstBank, Clayton HC, the Clayton Banks and Mr. Clayton (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 26, 2017)

  3.1     

Amended and Restated Certificate of Incorporation of FB Financial Corporation (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  3.2     

Amended and Restated Bylaws of FB Financial Corporation (incorporated by reference to Company’s Form 10-Q for the quarter ended September 30, 2016)

  4.1     

Registration Rights Agreement (incorporated by reference to Company’s Form 10-Q for the quarter ended September 30, 2016)

  5.1     

Opinion of Alston & Bird LLP

  10.1     

Deferred Compensation Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.2     

Amendment to Deferred Compensation Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.3     

Employment Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.4     

FB Corporation 2016 Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.5     

Form of Restricted Stock Unit Award Certificate pursuant to the FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.6     

Form of Restricted Stock Unit Award Certificate (2017) pursuant to the FB Financial Corporation 2016 Incentive Plan (incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)

  10.7     

Form of Nonstatutory Stock Option Award Certificate pursuant to FB Financial Corporation 2016 Incentive Plan (incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.8     

Form of Restricted Stock Award Certificate pursuant to the FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.9     

FB Financial Corporation 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

 

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Index to Financial Statements

Exhibit

number

     Description
  10.10     

FirstBank 2012 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement Form S-1 (File No. 333-213210), filed on August 19, 2016)

  10.11     

Amendment to FirstBank 2012 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.12     

EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes granted under the FirstBank 2012 Equity Based Incentive Plan (Fully-Vested) (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.13     

EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes granted under the FirstBank 2012 Equity Based Incentive Plan (Ratable Vesting) (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.14     

FirstBank Preferred Equity Based Incentive Plan, as amended (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed August 19, 2016)

  10.15     

Amendment to FirstBank Preferred Equity Based Incentive Plan (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.16     

Second Amendment to FirstBank Preferred Equity Based Incentive Plan (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)

  10.17     

First Bank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.15 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.18     

Amendment to FirstBank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)

  10.19     

Second Amendment to FirstBank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)

  10.20     

Tax Sharing Agreement (incorporated by reference to Company’s Form 10-Q for the quarter ended September 30, 2016)

  10.21     

Shareholders’ Agreement (incorporated by reference to the Company’s Form 10-Q for the quarter ended September 30, 2016)

  10.22     

Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 26, 2017)

  21     

Subsidiaries of FB Financial Corporation (incorporated by reference to Exhibit 21 to the Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 31, 2017)

  23.1     

Consent of Independent Registered Public Accounting Firm (RSM US LLP)

  23.2     

Consent of Independent Public Accounting Firm (Rodefer Moss & Co, PLLC)

  23.3     

Consent of Alston & Bird LLP (included in Exhibit 5.1)

  24.1     

Powers of Attorney contained on the signature pages incorporated herein by reference

 

 

 

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