FIRST HORIZON CORP.
Bank name: First Tennessee Bank
Assets: $29 billion
No. of bank offices: 170 branches
Staff: 4,300 employees
2016 net income: $220.8 million
Local presence: First Tennesee is the biggest bank in Chattanooga with over $2.2 billion in local offices
CAPITAL BANK FINANCIAL
Headquarters: Charlotte, N.C.
Bank name: Capital Bank
Assets: $9.9 billion
2016 net income: $58.2 million
No. of branches: 193
Local presence: Capital Bank operates 58 branches in East and Middle Tennessee, including an office in Athens and Niota, Tenn.
1. Bank of America, Charlotte, N.C.
2. BB& T, Winsston-Salem, N.C.
3. SunTrust, Atlanta
4. Regions, Birmingham, Ala.
5. First Horizon*, Memphis
* Following the merger with Capital Bank Financial
Source: FDIC ranking by assets
Tennessee's biggest bank is buying a North Carolina chartered bank to grow into one of the biggest regional banks in the Southeast with offices across five states.
First Horizon Corp., the parent company of First Tennessee Bank, announced Thursday it will pay $2.2 billion to acquire Capital Bank Financial Corp., headquartered in Charlotte, N.C., to create the fifth biggest bank headquartered in the Southeast.
Following the merger, which is expected to be completed in the fourth quarter of 2017, First Tennessee bank will retain its brand in Tennessee, but branches outside Tennessee will use the Capital Bank name.
The purchase is the biggest in the 153-year history of First Tennessee. The combined organization will have $40 billion in assets, $32 billion in deposits, $27 billion in loans and more than 300 bank branches.
"Together with the accomplished team at Capital Bank we will be able to leverage the strengths of both banks and capitalize on growth opportunities in attractive, high-growth Southeast markets and enhance our strong presence in our Tennessee markets," Bryan Jordan, chairman and CEO of First Horizon, said in a statement Thursday.
William "BJ" Losch, chief financial officer for First Horizon, said 43 percent of the income for First Horizon comes from fees, compared with only about 15 percent for Capital Bank "so there are real opportunities" to add treasury managemnt services for commercial business and to add other fee generating income in the combined bank.
The stock prices of both banking companies fell Thursday in trading after the merger announcement, however.
Shares of Capital Bank Financial fell by 5.35 percent, or $2.25 per share, to close at $39.80, the lowest price in nearly three months. First Horizon fell by nearly 1.6 percent, or 30 cents per share, to close at $18.52 per share.
After the merger is competed, Capital Bank shareholders collectively will own approximately 29 percent of First Horizon's common shares and will have received approximately $411 million in cash.
Losch said there is some overlap in the branch network of the two banks, especially in East Tennessee, and the combined bank expects to close 26 branches in 2018. Capital Bank, which has more branches but fewer deposits than First Tennessee, already had plans to shutter 18 branch locations this year.
First Tennessee is the biggest bank in Chattanooga with more than $2.3 billion in deposits in metro Chattanooga, according to deposit data reported by the Federal Deposit Insurance Corp. for June 30, 2016.
The closest Capital Bank to Chattanooga is in Athens, Tenn.
Under the merger agreement, each holder of Capital Bank common stock will receive cash or stock with a value equivalent to 1.750 First Horizon shares and $7.90 in cash for each Capital Bank share held. In the aggregate, Capital Bank shareholders will receive a mix of approximately 80 percent stock and 20 percent cash.
The agreement calls for two members of Capital Bank's board of directors to join the First Horizon board, including Gene Taylor, Capital Bank chairman and CEO, who will become vice chairman of First Horizon.
"The strategic fit between the two organizations is compelling, especially for our valued customers who will benefit from the enhanced balance sheet strength and broader array of products and services offered by a $40 billion Southeastern bank," Taylor said.
Contact Dave Flessner at email@example.com or at 423-757-6340.
This story was updated May 4 at 10:50 p.m. with more information.