One of Nashville's biggest and fastest growing banks plans to acquire Chattanooga's fastest growing bank to create a $7 billion combined bank with strong market positions in the Chattanooga, Knoxville and Nashville markets.
Pinnacle Financial Partners, Inc., a 15-year-old bank holding company with assets of nearly $6 billion in Nashville, announced Tuesday it will buy CapitalMark Bank & Trust in a stock and cash deal valued at $187 million.
CapitalMark Bank & Trust
* Headquarters: Chattanooga
* Founded: 2007
* No. of offices: Four (in Chattanooga, Knoxville, Cleveland and Oak Ridge)
* CEO: R. Craig Holley
* Assets: $968 million
* 2014 income: $7.4 million
* Market position: The fourth biggest bank in Chattanooga
* Headquarters: Nashville
* Founded: 2000
* No. of offices: 34 (in metro Nashville and Knoxville)
* CEO: M. Terry Turner
* Assets: $6 billion
* 2014 income: $73.6 million
* Market position: The fourth biggest bank in Nashville
The sale of CapitalMark, which is expected later this year after expected regulatory and shareholder approval, will be the third sale announced of a Chattanooga-based bank in the past four months.
Last month, Atlantic Capital Bancshares in Atlanta announced plans to acquire FSG Bank for $160 million. In December, SmartFinancial, the parent company SmartBank in Pigeon Forge, Tenn., said it will merge with Cornerstone Bank in Chattanooga by the middle of 2015.
Since its founding in 2007, CapitalMark has quickly grown into a bank with $968 million in assets. CapitalMark has been a top-rated bank by BauerFinancial Inc., which evaluates the financial health of financial institutions.
CapitalMark operates only four branches -- one each in Chattanooga, Knoxville, Cleveland and Oak Ridge -- and relies upon mobile bank services and electronic banking for much of its business-oriented banking.
R. Craig Holley, one of the primary founders and CEO of CapitalMark, will be named Chattanooga chairman for Pinnacle after the acquisition is consummated. He will serve on Pinnacle's 10-member Senior Leadership Team and will report to Pinnacle's president and chief executive officer, M. Terry Turner.
"I strongly believe that, collectively, the two franchises can accomplish more, grow more efficiently and realize more value for our shareholders together than independently," Holley said in a statement late Tuesday.
Turner, who will be CEO of the combined banks, said the purchase "is consistent with Pinnacle's strategy to grow rapidly while operating in all of Tennessee's four urban markets.
"In addition to accelerating the rapid growth we had already projected for Pinnacle, this acquisition brings together two institutions with strong records of performance, credit quality, client satisfaction and a highly complementary geographic footprint," Turner said.
With $7 billion in assets, the combined institution will have the No. 4 market share in metropolitan Nashville, the No. 4 market share in metropolitan Chattanooga, and the No. 6 share position in metropolitan Knoxville.
Pinnacle plans to consolidate CapitalMark's Knoxville office into nearby Pinnacle locations in Knox County and to redeploy the staff from these offices to other nearby offices.
Upon consummation of the merger, CapitalMark director Charles E. Brock, president and CEO of Launch Tennessee, is expected to become a director of Pinnacle's board. Additionally, Kenneth C. Dyer III, CapitalMark's banking group president, will become Pinnacle's Chattanooga president and a member of its Leadership Team. R. Ryan Murphy III, CapitalMark's business unit group head, will be responsible for Pinnacle's client services group in Chattanooga and also will join its Leadership Team.
Under the terms of the merger agreement, CapitalMark shareholders will have the option to either convert their outstanding shares of common stock into 0.50 shares of Pinnacle's common stock plus cash in lieu of any fractional shares, or to convert their shares into a cash payment equal to the product of 0.50 multiplied by the average trading price for Pinnacle's common stock on the Nasdaq Global Select Market for a 10-day period prior to the closing of the transaction, provided that 90 percent of the consideration paid to the CapitalMark common shareholders shall be paid in shares of Pinnacle's common stock.
Additionally, CapitalMark's outstanding stock options will be converted into approximately 860,000 Pinnacle options and will be fully vested upon consummation of the merger pursuant to CapitalMark' s stock option plan. At closing, CapitalMark shareholders will own approximately 9.7 percent of the combined firm on a fully diluted basis.