June 6, 2017

M&A Best Practices:Maximizing the success and minimizing the risk of a bank acquisition, sale, or merger

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Olsen Palmer LLC: Firm Introduction and Credentials

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$76.5mm Sale to:Simmons First National Corporation

$84.9mm Sale to:F&M Bancorp, Inc.

$15.4mm Sale to:Hamilton Bancorp, Inc.

$196.9mm Sale to:Pinnacle Financial Partners, Inc.

$32.2mm Acquisition of:Southern Heritage Bank

Section 363 Bankruptcy Acquisition of: Independent Bankers Bank of Florida

$10.8mm Acquisition of:DeSoto County Bank

Acquisition of:Newton County Bank

Acquisition of 3 Branches from:Atlantic Capital Bank, N.A.

Acquisition of 4 Branches from:Atlantic Capital Bank, N.A.

Acquisition of 1 Branch from:Community First Bank

Merger-of-Equals With:Bank of the South

*Includes transactions executed by Olsen Palmer professionals while at other firms.

Who We Are How We Are Different

Selected Recent Assignments

Sell-Side Buy-Side Branch Transactions, Merger-of-Equals

Advising Clients is Our Only Business

Specialization in Banking Institutions

Elite M&A Expertise

• We do not sell products• No investing, trading, underwriting, or lending conflicts

Client-Centric Approach

• Solely-focused on financial institutions• Industry focus and proprietary market intel yields

advice that maximizes value and minimizes risks

• Principals have advised on over 75 M&A transactions with deal values ranging from $2mm to $4 billion

• Total deal value in excess of $600mm over past 3 years

• Relentless dedication to achieving client objectives• Aggressive, energetic, high-touch approach

$46.6mm Acquisition of:Piedmont Bancshares, Inc.

Model Independent investment banking firm

Focus Advising financial institutions across Mergers & Acquisitions

Credentials • SEC-Registered Broker / Dealer• FINRA-Member

Locations • Headquartered in Washington, DC• Regional office in Chicago, IL

Services • Sell-side / buy-side whole-bank M&A• Branch sale / acquisition• Fairness opinions• Valuations• Board-level strategic planning• Section 363 bankruptcy transactions• FDIC-assisted acquisitions

Olsen Palmer LLCIndependent, truly client-centric approach to merger & acquisition advisory

$319.8mm Sale to:FirstBank

Merger-of-Mutuals with:First Mutual Holding Co.

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Advised Seller

February 8, 2017

Has agreed to be acquired by

Advised Acquirer

May 13, 2016

Has acquired3 branches from

Advised Acquirer

April 1, 2016

Has acquired4 branches from

Advised Seller

November 6, 2015

F&M Bancorp, Inc.

Has been acquired by

Advised Acquirer

September 25, 2015

Has acquired

September 11, 2015

Advised Seller

Has been acquired by

Advised Acquirer

August 31, 2015

Has acquired

Advised Acquirer

April 30, 2015

Has acquired

March 6, 2015

Advised Seller

Has been acquired by

October 1, 2014

Advised Acquirer

Has acquired

November 9, 2012

Advised Acquirer

Has acquired 4 branches from

December 14, 2012

Advised Seller

Has been acquired by

December 7, 2012

Advised Acquirer

Has acquired1 branch from

June 30, 2012

Advised Seller

Has been acquired by

November 30, 2007

Advised Seller

Has been acquired by

July 1, 2007

Advised Seller

Has been acquired by

December 13, 2006

Advised Acquirer

Has acquired

August 1, 2006

Advised Seller

Has been acquired by

March 15, 2006

Advised Seller

Has been acquired by

December 31, 2004

Advised Seller

Has been acquired by

Premier Bank of Brentwood

Advised Seller

December 2, 2017

Has been acquired by

September 1, 2006

Has merged with

Advised Merger-of-Equals

Advised Seller

May 11, 2017

Has agreed to merge with

Advised Seller

May 15, 2017

Has beenacquired by

Denotes Tennessee transaction

KEY:

#1 Tennessee Bank M&A AdvisorOlsen Palmer is the #1 M&A Advisor to Tennessee Banks

Note: #1 ranking based on number of Tennessee whole-bank and branch M&A transactions since 2014. Source: SNL Financial. Transactions illustrated include those executed by Olsen Palmer professionals while at other firm.

• #1 – Sell-Side Transactions

• #1 – Buy-Side Transactions

• #1 – Total Transactions

• $1.3 Billion in Total Tennessee Bank M&A Deal Value

#1 Tennessee BankM&A Advisor

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Update: The Tennessee Bank M&A Landscape

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169

274

357

451

524

435

442

450 47

5

334

254

250

211 26

0

270

271 29

6

288

142

118 17

3

148

230

226 28

5

284

243 260

1.1%

1.9%

2.6%

3.4%

4.2%

3.6%

3.9%

4.1%

4.5%

3.3%

2.6% 2.6%

2.2%

2.9% 3.

0% 3.1%

3.5%

3.3%

1.7%

1.4%

2.4%

2.0%

3.1%

3.3%

4.4%

4.6%

3.9%

4.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0

100

200

300

400

500

600

% o

f U.S

. Ins

titut

ions

Num

ber o

f Tra

nsac

tions

Number of Announced Transactions by Year - left axis Total U.S. Institutions Acquired (%) - right axis

U.S. M&A EnvironmentBank merger activity has picked up sharply in recent years; rate of consolidation is near 25-year high

Source: SNL Financial.

Community Bank M&A VolumeNo. of Announced Transactions & Percentage of Institutions Acquired Since 1990

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The Value of ScaleThere is a clear and significant correlation between bank size and profitability

Note: ROAA is adjusted to account for Subchapter-S elections.Source: SNL Financial.

0.61%0.66%

0.80% 0.79%

0.90%0.93%

0.00%

0.25%

0.50%

0.75%

1.00%

$50M-$200M

$200M-$500M

$500M-$1B $1B-$3B $3B-$5B $5B-$10B

Return on Average AssetsAll U.S. Institutions – Median 2016

79.9%

76.5%

68.9%

66.0%64.3%

61.9%

50%

55%

60%

65%

70%

75%

80%

85%

$50M-$200M

$200M-$500M

$500M-$1B $1B-$3B $3B-$5B $5B-$10B

Efficiency Ratio All U.S. Institutions – Median 2016

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Source: SNL Financial.

Recent Tennessee Bank M&A TransactionsTennessee bank M&A transactions announced since January 1, 2016

National Bank of Tennessee

Farmers Bank

Tennessee M&A EnvironmentTennessee has seen significant bank M&A deal activity since the beginning of 2016

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3

3

3

3

4

4

4

4

5

8

25

0 6 12 18 24 30

First Citizens

Simmons

NCB

Greene CountyBank

Trans Financial

Regions

First Tennessee

BancorpSouth

Pinnacle

First American

Union Planters

12

12

12

14

15

15

15

17

18

21

23

25

0 4 8 12 16 20 24 28

VA

OH

TN

NE

MO

MN

KS

CA

FL

WI

TX

IL

Tennessee M&A EnvironmentTennessee ranks among top 10 most active states, though the acquirer landscape has evolved

Most Active Acquirers of Tennessee BanksRanked by Number # of Tennessee Banks Acquired since 1990

KeyGoing concern

Acquired

TN is Among Top 15 Most Active States for Bank M&ARanked by whole-bank transactions since 2016

Source: SNL Financial.

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Tennessee Competitive LandscapeThe Tennessee landscape has shifted dramatically over the years

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

1998 2016

Top 10 Players in Tennessee: 1998 vs. 2016Ranked by statewide deposit market share

201 203198

194 191 188184

179174

168160

150

160

170

180

190

200

210

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2016 vs. 2006- 20%

Number of Tennessee-Based InstitutionsAll Tennessee-Based FDIC-Insured Institutions

Note: Deposit data as of June 30, 2016; assets data as of December 31, 2016. Sources: SNL Financial, FDIC.

Institution Headquarters Total Assets ($Bn)

Memphis $28.4

Nashville $11.1

Nashville $3.3

Franklin $2.9

Chattanooga $2.7

Lebanon $2.1

Dyersburg $1.6

Nashville $1.3

Columbia $1.3

Farragut $1.3

Top 10 Largest Tennessee-Based BanksRanked by total assets

Indicates new entrant into thetop 10 over the past 20 years

/

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M&A Strategic Alternatives & Best Practices

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StrategicAlternative

Description Merits Disadvantages

• Acquisition of:

o Whole bank

o Branch(es)

o Non-bank

• Consideration paid in the form of either cash and/or stock

• Achieve greater operating scale

• Exploit significant expense synergies

• Balance sheet and loan portfolio diversification

• Unlock incremental Earnings per Share (“EPS”) growth

• Enter new market and/or achieve greater share in existing market

• Likely requires paying premium price

• Requires significant amount of capital

• Potential long-term dilution to tangible book value per share

• Requires regulatory approval

• Incorporates significant execution risks

• Strategic Merger with similarly-sized institution

• Low-to-No Premium Stock-for-Stock Combination

• Achieve greater operating scale

• Exploit significant expense synergies

• Balance sheet and loan portfolio diversification

• Unlock incremental Earnings per Share (“EPS”) growth

• Enter new market and/or achieve greater share in existing market

• Retain partial autonomy

• Conflicting cultures can impede / erode value creation

• “Social issues” commonly prevent agreement: o Ownership % of each bank in combined entity?o Allocation of Board seats to each party?o CEO? CFO?o Chairman?o Name of combined company?o Headquarters location?

• Sale of institution

• Existing shares exchanged for consideration in form of either cash and/or acquirer’s stock

• Depending on outlook of other strategic options, may maximize shareholder value

• In stock-based deals, allows for incremental value appreciation and/or “double dip” if / when buyer subsequently acquired

• Pre-empts erosion in M&A valuation due to increasing supply of sellers and decreasing supply of buyers

• Cedes control

• Cash transaction allows no upside valuation potential

• Appeal of stock-based consideration based on acquirer's liquidity, trading volume, strategic prospects, dividend yield, etc.

• Value maximization likely entails expense synergies

Overview of M&A-Related Strategic AlternativesEach alternative has its own merits and potential disadvantages

Strategic Merger /

Merger-of-Equals

Acquisitions

Sale

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Best Practices: Acquisition(s)

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Action Description

Define • Strategy and rationale for acquisitions

Establish • Clear strategic and financial criteria

Analyze • Financial implications of any potential transaction, especially EPS, IRR, Book Value Earnback & Capital

Assess • Capital capacity to consummate an acquisition: cash, common stock, preferred stock, debt, etc.

Apprise • Regulators of potential M&A plans

Understand • Legal and fiduciary implications of M&A

Educate • Board and key constituents on M&A landscape, valuation, deal process, fiduciary duties, and risks

Identify • Broad list of potential targets

Initiate • Relationships with potential targets

Engage • Expert advisors –investment banker, legal, accounting – well before any potential deal

Acquisition Best PracticesDefining a clear strategy will increase the success and minimize risk of pursuing acquisitions

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Operating Scale

Diversification

Enhanced Fee Income

Cultural Compatibility

Market Share

Maintain Brand / Identity

Minimize Ownership Dilution

Human Capital

Enhance Overall Franchise Value

Deposit Funding and/or Loan Growth

Strategic ConsiderationsStrategic Rationale for an Acquisition

Criteria:Earnings per Share (“EPS”)

Accretion

Internal Rateof Return

(“IRR”)

Tangible Book Value Dilution

Earnback(in Years)

Regulatory Capital

(Leverage Ratio)Description:

Customary > 0 - 5% 10 - 15% 3-5 years > 9 - 10%

Exceptional > 5 - 10% > 15 - 20% < 3 years > 10%

Sub-Optimal < 0% < 10% > 6 years < 9%

Financial ConsiderationsFinancial Rationale for an Acquisition

Acquisition RationaleAny acquisition should satisfy previously-established financial and strategic criteria

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Best Practices: Merger / Combination / Merger-of-Equals

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Merger Characteristics and Best PracticesStrategic mergers have unique elements to be considered

Advantages and Risks

Advantages:

• Leverage fixed costs over larger asset base

• Solve succession issues

• Increase shareholder base / stock liquidity / price multiples

• Diversify markets / loan portfolio

• Create greater lending potential lending limits

Risks:

• Perceived loss of control (board/ management/ shareholders)

• Disagreements over relative value contribution

• Personalities / egos

• No premium – no pressure to do the deal

• If private, may trigger SEC registration

Non-Financial Issues Determining Ownership Split Best Practices

•Company and bank name

o Surviving name / charter

•Company and bank headquarters

•Resulting board of directors:

o # of seats each / titles

•Resulting CEO and transition plan, if applicable

•Senior management structure

o All C-level positions

•Employment contracts / severance / stay bonuses

•Resulting benefit plans

•Registration or exemption of securities being issued

•Balance sheet contribution:

o Loans

o Core deposits

o Nonperforming assets

•Equity Contribution:

o Tangible common equity

o Adjusted tangible common equity (w/ fair value adjustments)

•Earnings Contribution:

o Net Income

o Normalized Net Income (for nonrecurring items)

o Pre-Tax Pre-Provision Income (core earnings)

•Market Capitalization

•Evaluate rationale for a combination…i.e., unlocking value by realizing greater operating scale

•Remain flexible and approach negotiations collaboratively

• Identify potential counterparties with complementary social issues

“Secret Sauce” of a successful merger:Complementary management succession

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Merger Key Issues and QuestionsA discussion of tactical and strategic perspectives is recommended

Board Dynamics • Role and involvement of Board in decision-making?• Meeting frequency and committee structures?

“Best Athlete” • Confirmation of shared perspective on selecting “best athlete” for all relevant positions

• Confirm timing and expectations of CEO transitionCEO Transition

• Shared long-term strategic vision? Long-Term Vision

• Comfort with evolving toward a growth-oriented strategic bias?• Philosophy on follow-on acquisition(s) of smaller institutions?

Growth Outlook

Credit Culture • Compatible perspectives on loan growth, asset classes, lending limits, credit quality, etc.

Technology • Outlook on technology, systems, products, functionality, etc.

Regulatory • Views on and status of relationship with relevant regulators

Geography • Discussion of any relevant geographic implications

Synergies • Timing and scope of post-combination expense reduction

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Best Practices: Sale

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Action Description

Understand • M&A environment, deal drivers, and valuation implications

Educate • Board and key executives on M&A landscape, valuation, deal process, fiduciary duties, and risks

Review • All potential strategic options periodically (e.g., quarterly, semi-annually, annually)

Determine • Your bank’s estimated actual market value before initiating a sale

Identify • (And actively monitor) list of potential acquirers

Initiate • (And maintain) relationships with potential acquirers

Evaluate • Best option for approaching sale: 1) one-off, 2) discreet process, 3) broad auction

Revisit • Term and penalties of any long-term commitments, especially data processing

Refresh • Employment agreements and affiliated documents

Avoid • Window Dressing

Engage • Expert advisors –investment banker, legal, accounting – well before any potential deal

Sale Best PracticesObserving several key best practices in pursuing a sale will maximize value

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Options for Exploring a SaleThere are generally 3 options for conducting a sale, each with implications on confidentiality and valuation

1. Unilateral Discussions 2. Discreet Marketing Process 3. Broad Auction

Description Discreet negotiations w/ only one party Simultaneous discussions w/ several parties Formal auction among multiple parties

No. of Parties Involved 1 2 - 10 > 10

Benefits• Maximizes discretion• Greater diligence on prospective acquirer• Enhanced relationship with acquirer may

correlate to higher value

• Avoids “all eggs in one basket” approach of unilateral discussions

• Allows for leveraging multiple parties• Utilizes proprietary market intelligence

to exclude irrelevant parties

• Typically maximizes value• Maximizes negotiating leverage• Minimizes the duration to closing

Limitations • Value may be lower than broad auction• Longer duration to closing

• Less discreet than unilateral discussions• Value may be lower than broad auction

• Least discreet options• Arms-length process may dissuade

certain buyers

Summary: DiscretionValue MaximizationSpeed to Closing

Low

High

Low

High

Low

High

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M&A Case Study: Sale of Clayton Banks to FirstBank

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M&A Case StudyIn largest TN deal in over 15 years, Olsen Palmer advised Clayton Banks in sale to FirstBank

Transaction Profile

Branch Footprint Transaction Summary and Valuation Multiples

Branch Key:

Financial and Operating Summary

February 8, 2017

Advised Seller

The undersigned served as financial advisor to Clayton HC, Inc., parent company ofClayton Bank & Trust and American City Bank

Have agreed to be acquired by

(13)

(45)

(5)

Original As-AmendedTransaction Date February 8, 2017 May 26, 2017Anticipated Closing Date Q3 2017 Q3 2017Form of Consideration:

Stock 5,860,000 shares 1,521,200 sharesCash N/A $124.2 mmSpecial Dividend $79.5 mm $79.5 mmDebt $60.0 mm $60 mmTerms of Debt 5.5% fixed-to-floating, due 2027 5.5% fixed-to-floating, due 2027

Note: Value reflects FBK’s close on 2/7/17. Clayton Banks’ financial information is as of Q4 2016 and has been tax-effected to reflect “S” tax election. Source: SNL Financial

Location Knoxville, TN Tullahoma, TNYear Established 1889 1974CEO Travis Edmondson Troy MartinBranches 13 5FTE 200 59Assets ($mm) $886.9 $307.9ROAA (LTM) 2.5% 1.7%Efficiency Ratio (LTM) 34.1% 42.8%NPAs / Assets 2.6% 1.6%

Type Acquisition of 2 bank subsidiaries from 1 parent holding company

Acquirer • Parent: FB Financial Corporation (NYSE: FBK)• Bank Subsidiary: FirstBank

Seller • Parent: Clayton HC, Inc. • Bank Subsidiaries: Clayton Bank & Trust, American City Bank

Transaction Value:

• Original: $284.2 million (at agreement date 2/2/17)• As-Amended: $319.8 million (at amendment date 5/26/17)

Rationale• Knoxville scale & management• Market extension in Tennessee• Compelling financial returns

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-20%

0%

20%

40%

60%

80%

100%

120%

Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17

FirstBank (FBK)

SNL U.S. Bank Index

Source: SNL Financial.

FirstBank vs. SNL U.S. Bank IndexPercentage Change – Since FirstBank Initial Public Offering

U.S. Presidential Election 11/8/2016Share Price: $20.84FBK Initial Public

Offering 9/15/2016Share Price: $19.00

Earnings Release 1/26/2017

Share Price: $24.99

Earnings Release 10/27/2016

Share Price: $21.64

Announcement of Clayton Banks Acquisition 2/8/2017

Share Price: $24.21

M&A Case StudyFirstBank’s stock price has increased 43% since announcing the acquisition of the Clayton Banks

Earnings Release 4/24/2017

Share Price: $35.71

Christopher OlsenManaging Partner

O: 202.627.2043M: 202.215.2568colsen@olsenpalmer.com

2020 K Street NWSuite 450Washington, DC 20006

www.olsenpalmer.com

This presentation, and any oral or video presentation that supplements it, have been developed by and are proprietary to Olsen Palmer LLC (“Olsen Palmer”) and were prepared exclusively for the benefit and internal use of the recipient.Neither this printed presentation, nor any oral or video presentation that supplements it, nor any of their contents, may be used, reproduced, disseminated, quoted or referred to for any other purpose without the prior written consent ofOlsen Palmer.

The analyses contained herein rely upon information obtained from public sources, the accuracy of which has not been independently verified, and cannot be assured by, Olsen Palmer. Neither Olsen Palmer nor any other party makes anyrepresentation or warranty regarding the information contained herein and no party may rely on such information.

The information contained herein will not be updated or corrected based on any additional information. This information should not be construed as, and Olsen Palmer is not undertaking to provide any legal, regulatory, accounting,insurance, tax, investment or similar professional advice. This presentation is protected under applicable copyright laws and does not carry any rights of publication or disclosure.

General Information and Limitations