FB Financial Corporation Reports 2017 Fourth Quarter and Year End Results

FB Financial Corporation (the “Company”) (NYSE: FBK), parent company of FirstBank, reported net income of $23.0 million, or $0.74 per diluted common share, compared to $0.37 per diluted common share for the fourth quarter of 2016. Core net income was $18.7 million, or $0.60 per diluted common share, excluding the tax benefit, merger-related charges and other items discussed below, reflecting growth of 39.4% in core earnings per diluted common share from the fourth quarter of 2016.

Additionally, for the year ended December 31, 2017, the Company reported net income of $52.4 million, or $1.86 per diluted common share. Core net income was $60.4 million, or $2.14 per diluted common share, excluding the tax benefit, merger-related charges and other items.

President and CEO Christopher T. Holmes stated, “We are extremely pleased with our operating results for the fourth quarter, capping another record year for FB Financial. As expected, the combination with the Clayton Banks in the third quarter was a real positive for our operating results and has significantly enhanced the franchise. The outstanding efforts and strong results send us into 2018 with a positive outlook across all of our markets.”

Fourth Quarter Key Highlights

• Return on average assets (ROAA) of 1.96% and core ROAA of 1.59%
• Return on average equity (ROAE) of 15.8% and core ROAE of 12.8%
• Return on average tangible common equity (ROATCE) of 21.4% and core ROATCE of 17.4%
• Loans held for investment (HFI) grew to a record $3.17 billion, up 71.3% over December 31, 2016
• Total deposits grew to $3.66 billion, up 37.2% over December 31, 2016
• Total revenues of $86.0 million, up 42.5% from the fourth quarter of 2016
• Net interest margin-tax-equivalent basis (NIM) rose to 4.63% in the fourth quarter of 2017, up 0.64% from 3.99% in the fourth quarter of 2016; NIM was 4.35%, excluding accretion on purchased loans and collection of nonaccrual interest in the fourth quarter of 2017
• Loan loss provision of $1.0 million with net charge-offs of 0.05% of average loans
• Efficiency ratio was 66.9% and core efficiency ratio was 63.6%, reflecting positive operating leverage
• Tangible book value (TBV) per share increased to $14.56, up 25.7% from $11.58 at December 31, 2016, driving our tangible equity to tangible asset ratio to 9.72% at December 31, 2017, up 107 basis points from December 31, 2016

Holmes further commented, “During the last twelve months, we have made significant progress on our goals and continue to improve both in operational and revenue-generating parts of the Company. We are particularly excited with our stellar performance, delivering strong growth in tangible book value per share for our shareholders.”

Performance Summary

Effective July 31, 2017, the Company completed its merger with Clayton Bank and Trust in Knoxville, Tennessee and American City Bank in Tullahoma, Tennessee (collectively, the “Clayton Banks” or the “Merger”). Accordingly, the Clayton Banks results are included for the entire fourth quarter.

Holmes continued, “Our focused execution on growing customer loan and deposit relationships versus wholesale business continues to produce a healthy net interest margin. Through our recent merger, we continue to drive positive operating leverage in our Banking Segment. Additionally, our mortgage team had outstanding results for the year given the environment of increasing interest rates.”

During the fourth quarter of 2017 and 2016, as adjusted for in the above table, the Company recorded certain items impacting comparability between periods, as follows:

• $5.9 million income tax benefit in the fourth quarter of 2017 from the recently enacted federal corporate tax rate reduction, reducing our recorded deferred tax liabilities (based upon current information and estimates);
• $2.1 million pre-tax merger-related charges in the fourth quarter of 2017 associated with the merger;
• $0.2 million net pre-tax charge related to the decrease in the fair value of mortgage servicing rights (MSRs), net of hedging gains, during the fourth quarter of 2017, compared to impairment recoveries and the loss on sale of MSRs resulting in a net pre-tax charge of $1.0 million for the fourth quarter of 2016; and
• $0.4 million net pre-tax losses on other real estate owned, other assets, and investments compared to a $0.3 million net pre-tax charge in the fourth quarter of 2016.

Continued Execution of Strategy Drives Net Interest Income Growth and Peer-Leading NIM

“As we have set annual goals for ourselves in recent years, we have set organic loan growth rates at 10% to 12%. While this quarter was below that, mostly due to some large pay downs and pay-offs, the annual growth rate for 2017 of 13.9% is above our target. We continue to have healthy demand and our pipelines continue to reflect good, balanced growth,” Holmes said.

Holmes continued, “Deposits have been and will continue to be a key focus for the Company. We grew deposits by 37% for the year, but most of that growth came through the Clayton Banks merger. One of our goals for the merger was to replace wholesale deposits with customer deposits, which limited deposit growth this quarter and likely will have the same effect in some future quarters. However, we feel we are enhancing funding stability, controlling our long-term funding costs and ultimately enhancing shareholder value through this process.”

The Company’s NIM was 4.63% for the fourth quarter of 2017, compared to 4.61% and 3.99% for the third quarter of 2017 and the fourth quarter of 2016, respectively, reflecting additional accretion, collection of nonaccrual interest, and the benefit of the merger. Excluding accretion related to purchased loans and collections of nonaccrual interest, the Company’s NIM was 4.35% compared to 4.33% and 3.90% for the third quarter of 2017 and the fourth quarter of 2016, respectively. “Our adjusted NIM of 4.35% remains at the top-end of our 4.20% to 4.40% target range, meeting our desire to maintain a balance between growth and profitability,” Holmes commented.

Holmes continued, “Our banking teams continue to perform at a very high level, delivering excellent results this quarter and for the year. The impact of the merger continues to positively impact our results, and we are confident in our ability to deliver future profitability.”

Noninterest Income Continues Strength and Stability

Noninterest income was $37.0 million for the fourth quarter of 2017, compared to $37.8 million for the third quarter of 2017 and $31.3 million for the fourth quarter of 2016. Mortgage banking incoming was $30.3 million for the fourth quarter of 2017 and $31.3 million for the third quarter of 2017, compared to $26.2 million for the fourth quarter of 2016.

Holmes commented, “The fourth quarter of 2017 completed an outstanding year for our mortgage team, producing mortgage loan sales of $1.7 billion, compared to $1.5 billion in the fourth quarter of 2016, driving a 15.7% increase in mortgage banking income for the fourth quarter of 2017 compared to the fourth quarter of 2016. Similar to our outlook at the end of 2016, we expect a slightly higher pre-tax contribution from mortgage in 2018 with volumes continuing to increase.”

Positive Operating Leverage Increases, Continuing to Improve Efficiency Ratio

Noninterest expense was $57.5 million for the fourth quarter of 2017, compared to $69.2 million for the third quarter of 2017 and $47.3 million for the fourth quarter of 2016. Excluding the merger-related charges and other items discussed above, core noninterest expense was $55.5 million for the fourth quarter of 2017, compared to $53.5 million for the third quarter of 2017 and $45.2 million for the fourth quarter of 2016. The primary drivers of this increase were mortgage and the impact of the merger.

“The merger accelerated improvements in the Company’s operating leverage as the realization of expected synergies continues into the first quarter. Our core efficiency ratio was 63.6% for the quarter, a decline of 10 percentage points from a year ago. Further illustrating the sustained operating leverage improvements that began with our core system conversion in mid-2016, our Banking Segment core efficiency ratio was 55.6% for the quarter, down 7 percentage points in the last year. Heading into 2018, we believe our consolidated and Banking Segment efficiency will continue to improve as we recognize the full benefit of the Clayton Banks synergies,” commented James R. Gordon, Chief Financial Officer.

Strong Asset Quality

During the fourth quarter of 2017, we recognized provision for loan losses of $1.0 million, reflecting new loan growth, stable fundamental credit metrics and net charge-offs of 0.05% of average loans. Our nonperforming assets increased to $71.9 million, or 1.52% of total assets, driven by an increase in other real estate owned of $2.3 million related to the transfer of five closed branches and facilities from the merger and a $29.5 million increase in GNMA rebooked loans over the previous quarter, which total $43.0 million at December 31, 2017. Nonperforming loans remained steady at 0.32% for loans held for investment at December 31, 2017, compared to 0.57% at December 31, 2016.

Capital Strength for Future Growth

“At year end, our tangible common equity ratio reached 9.72%, an increase of over 100 basis points from a year ago, driving our tangible book value per common share growth of $2.98 in 2017 to $14.56 at year end, demonstrating the strength and performance of our franchise. We have continued to build our capital base through positive operating leverage, consistent growth and strong margins, which have resulted in robust, sustained earnings power. This positions us well for both organic and acquired growth in coming periods,” commented Gordon.

Summary

“I want to thank each of our nearly 1,400 associates across the organization for serving our customers daily and delivering outstanding results for our shareholders. To our valued investors, we appreciate your support and confidence as we execute our strategy, and we look forward to continuing to earn your trust and partnership,” Holmes concluded.

WEBCAST AND CONFERENCE CALL INFORMATION

The live broadcast of FB Financial Corporation’s conference call will begin at 8:00 a.m. CST on Tuesday, January 23, 2018, and the earnings conference call will be broadcast live over the Internet at https://services.choruscall.com/links/fbk180123AWsp51Nq.html. An online replay will be available for ninety days approximately an hour following the conclusion of the live broadcast.

ABOUT FB FINANCIAL CORPORATION

FB Financial Corporation (NYSE: FBK) is a bank holding company headquartered in Nashville, Tennessee. FB Financial operates through its wholly owned banking subsidiary, FirstBank, the third largest Tennessee-headquartered community bank, with 58 full-service bank branches across Tennessee, North Alabama and North Georgia, and a national mortgage business with offices across the Southeast. FirstBank serves five of the largest metropolitan markets in Tennessee and has approximately $4.7 billion in total assets.

SUPPLEMENTARY FINANCIAL INFORMATION AND EARNINGS PRESENTATION

Investors are encouraged to review this Earnings Release in conjunction with the Supplementary Financial Data and Earnings Presentation posted on the Company’s website, which can be found at https://investors.firstbankonline.com. This Earnings Release and the Supplementary Financial Data and Earnings Presentation are also included with a Current Report on Form 8-K that the Company furnished to the U.S. Securities and Exchange Commission (SEC) on January 22, 2018.

BUSINESS SEGMENT RESULTS

The Company has included its business segment financial tables as part of this Earnings Release. A detailed discussion of the business segment results is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, and investors are encouraged to review that discussion in conjunction with this Earnings Release.

FORWARD-LOOKING STATEMENTS

This Earnings Release contains “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through the Company’s use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential,” “confident,” “future” and other similar words and expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance, including, without limitation, the impact of the 2017 Tax Cuts and Jobs Act on the Company and its operations and financial results, the performance of the banking and mortgage industry and the economy in general and the benefits, cost, synergies and financial impact of the Company’s acquisition of the Clayton Banks. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this Earnings Release including, without limitation, the risks and other factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017 under the captions “Cautionary note regarding forward-looking statements” and “Risk factors.” Many of these factors are beyond the Company’s ability to control or predict. The Company believes the forward-looking statements contained herein are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. The Company does not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as otherwise may be required by law.

GAAP RECONCILIATION AND USE OF NON-GAAP FINANCIAL MEASURES

This Earnings Release contains certain financial measures that are not measures recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered non-GAAP financial measures. These non‐GAAP financial measures include, without limitation, pro forma core net income, pro forma core income tax expense, pro forma core diluted earnings per share, core noninterest expense and core noninterest income, core efficiency ratio (tax equivalent basis), Banking segment core efficiency ratio (tax equivalent basis), Mortgage segment core efficiency ratio (tax equivalent basis), pro forma core return on average assets and equity and pro forma core total revenue. Each of these non-GAAP metrics excludes certain income and expense items that the Company’s management considers to be non‐core in nature. The Company refers to these non‐GAAP measures as core measures. This Earnings Release also presents tangible assets, tangible common equity, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity, pro forma return on average tangible common equity and pro forma core return on average tangible common equity. Each of these non-GAAP metrics excludes the impact of goodwill and other intangibles.

The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance, financial condition and the efficiency of its operations as management believes such measures facilitate period-to-period comparisons and provide meaningful indications of its operating performance as they eliminate both gains and charges that management views as non-recurring or not indicative of operating performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant non-core gains and charges in the current and prior periods. The Company’s management also believes that investors find these non-GAAP financial measures useful as they assist investors in understanding the Company’s underlying operating performance and in the analysis of ongoing operating trends. In addition, because intangible assets such as goodwill and other intangibles, and the other items excluded each vary extensively from company to company, the Company believes that the presentation of this information allows investors to more easily compare the Company’s results to the results of other companies. However, the non-GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which the Company calculates the non-GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures the Company has discussed herein when comparing such non-GAAP financial measures. The following tables provide a reconciliation of these measures to the most directly comparable GAAP financial measures.

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FB Financial Corporation
Media Contact:
Jeanie M. Rittenberry, 615-313-8328
[email protected]
www.firstbankonline.com
or
Financial Contact:
James R. Gordon, 615-564-1212
[email protected]
[email protected]