Miller Welborn
SmartFinancial, Inc., parent company of SmartBank, and Cornerstone Bancshares, Inc. (OTCBB: CSBQ, CSBQP), parent company of Cornerstone Community Bank, jointly announced on Monday the signing of a definitive agreement to merge, creating a combined company that will operate under the name SmartFinancial, Inc. While the two holding companies will be combined, the banks will initially remain independent and continue to operate under their respective names in their respective markets. The company plans to merge the banks in the future, combining them under the SmartBank name. Headquartered in Pigeon Forge, Tn., SmartBank operates seven branch locations throughout East Tennessee and Northwest Florida. Based in Chattanooga, Cornerstone Community Bank currently has five branch locations throughout the Chattanooga MSA.
On a pro forma basis, based on financial results as of Sept. 30, the combined holding company would have approximately $945 million in total assets, $790 million in total deposits and $650 million in total loans, with 13 branch locations in the East Tennessee and the Florida Panhandle markets. After the banks are merged, the combined bank is expected to become the twelfth largest bank chartered in Tennessee.
“I am very excited to announce this new partnership and merger of equals,” said Cornerstone’s Chairman Miller Welborn, who will serve as chairman of the combined company. “There are a lot of natural synergies between our two organizations, which made this partnership so attractive. Our institutions share similar cultures, core values and goals,” he said. “We believe our complementary strengths will allow us to better serve our clients and communities, while our expanded footprint will position us favorably for future growth opportunities.”
“This partnership is a natural fit,” echoed SmartFinancial’s President and CEO Billy Carroll. “Cornerstone has a solid reputation as one of the leading commercial lenders and most respected financial institutions in the booming Chattanooga market. SmartBank is a rapidly growing bank that has created a sound business model, dynamic culture and exceptional client service,” he said. “Joining the two outstanding organizations will only strengthen both banks’ positions and add greater value to all of our stakeholders.”
Under the terms of the agreement, each outstanding share of common stock of SmartFinancial will be converted into 4.20 shares of Cornerstone common stock, subject to adjustment based on an anticipated reverse stock split of Cornerstone’s common stock, which is expected to adjust the ratio to 1.05 shares of Cornerstone common stock for each share of SmartFinancial stock. Additionally, each outstanding share of SmartFinancial preferred stock will be converted into a share of Cornerstone preferred stock with similar rights and preferences. Current holders of Cornerstone’s preferred stock will be asked to vote on an amendment to Cornerstone’s charter to allow Cornerstone to redeem its outstanding preferred stock prior to the completion of the merger.
The definitive agreement has been unanimously approved by the boards of directors of SmartFinancial and Cornerstone. The merger is subject to regulatory approvals, approval by both companies’ shareholders, and certain other closing conditions, and is expected to close in the first half of 2015.
The surviving company’s board will include the current seven members of the SmartFinancial board and four current members of the Cornerstone board, under the following leadership structure: Miller Welborn, chairman; Bill Carroll, vice-chairman; and Billy Carroll, president and chief executive officer.
SmartFinancial was advised by Hovde Financial and the law firm of Butler Snow LLP. Cornerstone was advised by Raymond James & Associates, Inc. and the law firm of Miller & Martin PLLC.
Billy Carroll