The merger agreement contemplates the merger of Entegra with and into SmartFinancial and the subsequent merger of Entegra Bank with and into SmartBank. The combination, an all-stock transaction, will create an approximate $4 billion-asset bank holding company with 47 branches across Tennessee, North Carolina, Alabama, Georgia, South Carolina and Florida, serving a number of key Southeastern growth markets. 

Knoxville, Tennessee-based SmartFinancial has approximately $2.3 billion in total assets following its most recent acquisition of Foothills Bancorp, Inc. that was completed on Nov. 1, 2018. Franklin, North Carolina-based Entegra had approximately $1.7 billion in total assets as of Sept. 30, 2018. The combined company will be headquartered in Knoxville, Tennessee, with a significant portion of the combined bank’s operations to be based in Franklin, NC.

Billy Carroll and Miller Welborn will continue to lead the combined company as President & CEO and Chairman, respectively. Additionally, the combined company is expected to benefit from the integration of key management and directors from Entegra into the SmartFinancial executive team and board of directors. Entegra President & CEO Roger D. Plemens is expected to join the combined bank as President of the Carolinas. Entegra Chief Financial Officer David Bright and Chief Operating Officer Ryan Scaggs are expected to assume the same roles with the combined company.

Five Entegra directors are expected to join the pro forma boards of directors of the combined company and the combined bank, each of which would have 17 members upon completion of the merger. Additionally, current Entegra directors not joining the SmartFinancial and SmartBank boards will be invited to become members of a newly formed Carolina Advisory Board. SmartFinancial has agreed to make a $1 million contribution to the SmartBank Foundation, a 501(c)(3) charitable organization, upon completion of the transaction, with the allocation of these funds to be directed by recommendation of the Carolina Advisory Board (in consultation with the President of the Carolinas for SmartBank) to charities in the communities served by Entegra.

“This is a historic milestone for both companies, one which we believe lays the foundation for the Southeast’s next great community banking franchise,” said SmartFinancial President & CEO, Billy Carroll. “This partnership strengthens both organizations in all key areas and presents a compelling value proposition for each of our constituents.”

“We are thrilled to be joining forces with the SmartBank team and to combine these two strong, growing institutions,” said Entegra’s President & CEO Plemens. “We believe this is going to be an outstanding combination for our shareholders, customers, and employees and the communities we serve.” 

SmartFinancial Chairman Miller Welborn added, “The clear common vision of these two management teams and boards of directors has been evident since our first discussion. This combination will result in an exceptional company and present a tremendous amount of new growth opportunities moving forward.”

Under the terms of the merger agreement, each share of Entegra common stock outstanding immediately prior to the merger will be converted into the right to receive 1.215 shares of SmartFinancial common stock. Outstanding options to purchase shares of Entegra common stock will be converted into options to purchase shares of SmartFinancial common stock, with the exercise price of and number of shares underlying each option to be adjusted to reflect the exchange ratio of 1.215. Outstanding Entegra restricted stock units will fully vest upon consummation of the merger and the holders thereof will become entitled to receive the consideration payable to holders of Entegra common stock generally in respect of the Entegra common stock subject to the restricted stock units.

The transaction is valued at approximately $22.36 per share of Entegra common stock, or approximately $158.2 million in the aggregate, based on the closing price of SmartFinancial’s common stock of $18.40 on Jan. 14, 2019. The transaction is projected to generate more than 20 percent earnings per share accretion in the first full year and tangible book value dilution is expected to be earned back in less than 2.5 years.

In addition to the stated merger consideration, Entegra shareholders will receive one non-transferrable contingent value right (“CVR”) for each share of Entegra common stock held immediately prior to the merger in the event that a certain ongoing dispute between Entegra and certain unrelated third-parties has not been resolved, and the proceeds, if any, from the resolution of the dispute have not been paid out to Entegra’s shareholders, prior to the merger in accordance with the terms of the merger agreement. The CVRs, which will be subject to a separate agreement provided for by the merger agreement, will provide the holders thereof the opportunity, for a limited period of time after the merger, to participate in the after-tax net proceeds, if any, obtained as a result of the resolution of the dispute.

SmartBank and Entegra Bank have entered into a separate bank merger agreement providing for the merger of Entegra Bank with and into SmartBank following the merger of SmartFinancial and Entegra.
The merger agreement has been approved by the board of directors of each company. The transaction is expected to close mid-year 2019, subject to customary closing conditions, including the approval of both companies’ shareholders and the receipt of all required regulatory approvals.

Banks Street Partners, LLC served as financial advisor and Butler Snow LLP provided legal counsel to SmartFinancial. Sandler O’Neill + Partners, L.P. served as financial advisor and Hunton Andrews Kurth LLP provided legal counsel to Entegra.