FB Financial Corporation Reports First Quarter 2021 Results

Reports Q1 net income of $52.9 million, diluted EPS of $1.10, ROAA of 1.86%, and ROAE of 16.5%

Adjusted Q1 net income* of $53.5 million, diluted EPS* of $1.12, ROAA* of 1.89%, and ROAE* of 16.6%

FB Financial Corporation (the “Company”) (NYSE: FBK), parent company of FirstBank, reported net income of $52.9 million, or $1.10 per diluted common share, for the first quarter of 2021, compared to net income of $0.7 million, or $0.02 per diluted common share, for the first quarter of 2020. Adjusting net income to exclude non-operating activity, net income was $53.5 million, or $1.12 per diluted common share for the three months ended March 31, 2021, compared to $5.3 million, or $0.17 per diluted common share, for the three months ended March 31, 2020.

For the three months ended March 31, 2021, the company reported net income of $52.9 million, or $1.10 per diluted common share, compared to net income of $45.6 million, or $0.95 per diluted common share, for the three months ended December 31, 2020. Adjusting net income to exclude non-operating items, net income was $53.5 million, or $1.12 per diluted common share, for the three months ended March 31, 2021, compared to adjusted net income of $54.5 million, or $1.14 per diluted common share, for the three months ended December 31, 2020. The Company’s book value per share increased at quarter end over the comparable value at December 31, 2020, by $0.73, or 10.9% annualized, to $28.08. The Company's tangible book value per share increased by $0.78, or 14.6% annualized, over the prior quarter, and the return on tangible common equity was 20.6% for the current quarter.

President and Chief Executive Officer, Christopher T. Holmes stated, “Our team has spent the first part of 2021 focusing on deepening and expanding customer relationships. Our efforts were rewarded as we delivered adjusted ROAA of 1.89% and adjusted ROATCE of 20.9% for the quarter. These strong financial results demonstrate the strength of our franchise as well as the ongoing recovery of our markets.”

Holmes commented further, “We also added value for our shareholders by increasing our tangible book value per share by $0.78 during the quarter to $22.51. Our credit metrics remained strong, resulting in a release from our allowance for credit losses and unfunded commitments of $13.9 million during the quarter. The allowance for credit losses to loans held for investment ratio was a healthy 2.24% at quarter end after the release.”

Performance Summary

Balance Sheet Growth

The Company reported loan balances (HFI) of $7.05 billion, a decrease of $35.6 million, or 2.0% annualized, from the three months ended December 31, 2020. Excluding Paycheck Protection Program ("PPP") loans, adjusted loans (HFI) were $6.90 billion, an increase of $31.3 million, or 1.85% annualized, from the three months ended December 31, 2020. The contractual yield on loans remained consistent at 4.39% in both the first quarter of 2021 and the fourth quarter of 2020. Excluding PPP loans, the contractual yield was 4.48% in the first quarter of 2021, compared to 4.53% in the fourth quarter of 2020.

During the first quarter of 2021, the Company grew customer deposits by $822.7 million to $10.22 billion, reflecting annualized linked quarter growth of 35.5%. Included in this growth is an increase of $22.9 million in mortgage servicing related deposits. The Company's total cost of deposits declined by five basis points to 0.41% and the cost of interest-bearing deposits decreased on a linked quarter basis to 0.53% from 0.63%.

Additionally, during the quarter, on balance sheet liquidity increased to $2.26 billion, or 19.3% of tangible assets, from $1.69 billion, or 15.4% of tangible assets at the end of the fourth quarter of 2020. During the first quarter of 2021, investment securities increased by $52.9 million from the previous quarter to $1.23 billion, or 10.3% of total assets, while cash and cash equivalents increased by $577.2 million compared with the end of the fourth quarter of 2020 to $1.90 billion.

The Company's net interest income for the first quarter of 2021 was $82.6 million, a decrease from $85.2 million from the previous quarter and an increase from $56.2 million in the first quarter of 2020. The Company's net interest margin (“NIM”) was 3.19% for the first quarter, compared to 3.32% and 3.92% for the fourth quarter of 2020 and the first quarter of 2020, respectively. Accretion related to purchased loans contributed 0 basis points to the NIM in the first quarter of 2021 compared to 3 and 11 basis points for the fourth quarter of 2020 and the first quarter of 2020, respectively. The NIM for the first quarter of 2021 was impacted by a 16 basis point decline in the yield on interest-earning assets and an 8 basis point decline in the cost of interest-bearing liabilities on a linked quarter basis. As of March 31, 2021, $164.2 million in PPP loans had been forgiven, which accounts for 52.2% of originated PPP loans. For the first quarter of 2021, the average yield on PPP loans was 4.77%, inclusive of $1.6 million in loan fees recognized during the quarter.

Holmes commented, “We had adjusted annualized loan growth of 1.85% during the quarter as we started to see some momentum in March in our markets. We also saw a robust increase in our deposits driven by our public fund relationships.”

Seasonal Impact of Noninterest Income

Noninterest income was $66.7 million for the first quarter of 2021, compared to $80.6 million for the fourth quarter of 2020 and $42.7 million for the first quarter of 2020. Mortgage banking income was $55.3 million for the first quarter of 2021, compared to $65.7 million for the fourth quarter of 2020 and $32.7 million for the first quarter of 2020.

During the quarter, the Company achieved strong first quarter results from its mortgage business, capitalizing on the early quarter rate environment. Interest rate lock commitment volume totaled $1.89 billion in the first quarter of 2021 compared to $2.19 billion in the fourth quarter of 2020 and $2.09 billion in the first quarter of 2020.

During the first quarter of 2021, the Company's total mortgage banking pre-tax direct contribution was $16.3 million, compared to $22.2 million in the fourth quarter of 2020 and $8.0 million in the first quarter of 2020.

Chief Financial Officer Michael Mettee stated, “The mortgage market and originations held up nicely through most of the first quarter, leading to a strong first quarter contribution. The swift rise in mortgage interest rates slowed refinance volume later in the quarter.”

Noninterest Expenses Seasonably High

Noninterest expenses were $94.7 million for the first quarter of 2021, compared to $109.9 million for the fourth quarter of 2020 and $68.6 million for the first quarter of 2020. Core noninterest expense was $94.7 million for the first quarter of 2021, $95.8 million for the fourth quarter of 2020, and $65.5 million for the first quarter of 2020.

During the first quarter of 2021, the Company achieved a core efficiency ratio of 63.0%, compared to 58.5% in the fourth quarter of 2020 and 65.7% for the first quarter of 2020. The banking segment experienced a core efficiency ratio of 58.6% for the first quarter of 2021, compared to 54.0% in the fourth quarter of 2020 and 60.9% in the first quarter of 2020. The mortgage segment experienced a core efficiency ratio of 70.4% for the first quarter of 2021, compared to 65.2% in the fourth quarter of 2020 and 75.6% in the first quarter of 2020.

Mettee noted, “The mortgage efficiency ratio the past two quarters has been moving back towards the 80% range as the historic margins of the second and third quarters of 2020 are quickly returning to pre-pandemic levels. In the banking segment, expenses were seasonally elevated during the quarter as a result of payroll taxes and 401(k) contributions related to annual incentive compensation. We are focused on growing earning assets, bringing down funding costs and managing expenses to improve our efficiency. We strive to balance the current expense levels with our long term vision and investments that will yield results in the future.”

Improving Credit Outlook

During the first quarter of 2021, the Company recognized a reversal in total provision for credit losses of $13.9 million, including a provision for unfunded commitments of $2.2 million. The Company continues to maintain a strong balance sheet with an ACL of $158.0 million, or 2.24% of loans HFI, or 2.29% when adjusted to exclude PPP loans.

The Company's net charge-offs to average loans was 0.05% for the first quarter of 2021 compared to net charge-offs to average loans of 0.58% in the fourth quarter of 2020. The Company's nonperforming assets increased to 0.77% of total assets as of March 31, 2021, compared to 0.75% at December 31, 2020. Nonperforming loans were 0.94% of loans (HFI) at March 31, 2021, compared to 0.91% at December 31, 2020. Deferrals resulting from the COVID-19 pandemic decreased to $152.2 million, or 2.16% of loans HFI as of March 31, 2021, compared to the aggregate balance deferred throughout the crisis of $1.64 billion. Of the $152.2 million in remaining deferrals, $20.7 million, or 0.29% of loans HFI, as of March 31, 2021, are receiving a full deferral of principal and interest, while $131.4 million, or 1.86% of loans HFI, as of March 31, 2021, are making interest payments and deferring principal payments.

Holmes commented, “I am optimistic that the economy and the markets we serve are poised for a strong 2021. Some uncertainty still exists with regards to how recent stimulus will be distributed and implemented, however, the economy continues to gain momentum which will likely result in future reserve releases from our ACL. At this point in the cycle given our outlook and economic indicators, we are pleased with our position.”

Strength in Capital Position

“We remain in a position of strength with regard to capital and are positioned to take opportunities to deploy capital as they arise. Total capital to risk weighted assets was 14.8% at quarter end and our current level of tangible common equity to tangible assets is 9.13%,” commented Holmes.

Summary

Holmes further commented, “The first quarter of 2021 was a good start to the year for us. We delivered adjusted ROATCE of greater than 20%, grew tangible book value per share by 14.6% annualized and saw growth trends begin to emerge. We remain comfortable and confident in our credit portfolio, and we have seen positive economic trends in our markets. With those considerations, we are optimistic about the year.”

WEBCAST AND CONFERENCE CALL INFORMATION

FB Financial Corporation will host a conference call to discuss the Company's financial results at 8:00 a.m. CT on April 27, 2021, and the conference call will be broadcast live over the Internet at https://www.webcaster4.com/Webcast/Page/1631/40699. An online replay will be available approximately an hour following the conclusion of the live broadcast.

ABOUT FB FINANCIAL CORPORATION

FB Financial Corporation (NYSE: FBK) is a financial holding company headquartered in Nashville, Tennessee. FB Financial Corporation operates through its wholly owned banking subsidiary, FirstBank, the third largest Tennessee-headquartered community bank, with 81 full-service bank branches across Tennessee, Kentucky, North Alabama and North Georgia, and mortgage offices across the Southeast. FirstBank serves five of the largest metropolitan markets in Tennessee and has approximately $11.9 billion in total assets.

SUPPLEMENTAL FINANCIAL INFORMATION AND EARNINGS PRESENTATION

Investors are encouraged to review this Earnings Release in conjunction with the Supplemental Financial Information and Earnings Presentation posted on the Company’s website, which can be found at https://investors.firstbankonline.com. This Earnings Release, the Supplemental Financial Information and the 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 April 26, 2021.

BUSINESS SEGMENT RESULTS

The Company has included its business segment financial tables as part of this Earnings Release. A detailed discussion of our historical business segments is included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020. Further discussion on the revisions to segment reporting made in the first quarter of 2021 will be included in the Company's 10-Q filed with the SEC for the three months ended March 31, 2021, and investors are encouraged to review that discussion in conjunction with this Earnings Release.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the projected impact of the COVID-19 global pandemic on our business operations, statements relating to the benefits, costs, and synergies of the merger with Franklin Financial Network, Inc. (“Franklin”) (the “merger”), and FB Financial’s future plans, results, strategies, and expectations. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management's current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond FB Financial’s control. The inclusion of these forward-looking statements should not be regarded as a representation by FB Financial or any other person that such expectations, estimates, and projections will be achieved. Accordingly, FB Financial cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which we operate and/or the US economy generally, (2) the effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and its impact on general economic and financial market conditions and on our business and our customers' business, results of operations, asset quality and financial condition, as well as the efficacy, distribution, and public adoption of vaccines, (3) changes in government interest rate policies and its impact on our business, net interest margin, and mortgage operations, (4) our ability to effectively manage problem credits, (5) the risk that the cost savings and any revenue synergies from the merger or another acquisition may not be realized or may take longer than anticipated to be realized, (6) the ability of FB Financial to effectively integrate and manage the larger and more complex operations of the combined company following the merger, (7) FB Financial’s ability to successfully execute its various business strategies, (8) the impact of the recent change in the U.S. presidential administration and Congress and any resulting impact on economic policy, capital markets, federal regulation, and the response to the COVD-19 pandemic, (9) the potential impact of the proposed phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR (10) the effectiveness of our cyber security controls and procedures to prevent and mitigate attempted intrusions, (11) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, and (12) general competitive, economic, political, and market conditions. Further information regarding FB Financial and factors which could affect the forward-looking statements contained herein can be found in FB Financial's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and in any of FB Financial's subsequent filings with the Securities and Exchange Commission (the “SEC”). Many of these factors are beyond FB Financial’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this release, and FB Financial undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for FB Financial to predict their occurrence or how they will affect the company.

FB Financial qualifies all forward-looking statements by these cautionary statements.

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, adjusted earnings, adjusted diluted earnings per share, adjusted and unadjusted pre-tax pre-provision earnings, core revenue, 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), adjusted mortgage contribution, adjusted return on average tangible common equity, adjusted pre-tax pre-provision return on average tangible common equity, adjusted return on average assets and equity, and adjusted pre-tax pre-provision return on average assets and equity. Each of these non-GAAP metrics excludes certain income and expense items that the Company’s management considers to be non-core/adjusted in nature. The Company also includes an adjusted allowance for credit losses, adjusted loans held for investment, and adjusted allowance for credit losses to loans held for investment, which all exclude the impact of PPP loans. The Company refers to these non-GAAP measures as adjusted measures. Also, the Company presents tangible assets, tangible common equity, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity and adjusted 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 demonstrate 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. Investors 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. See the “Use of non-GAAP Financial Measures” and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information as well as “Use of non-GAAP Financial Measures” and the Appendix in the Earnings Release Presentation dated April 27, 2021, for additional discussion and reconciliation of these measures to the most directly comparable GAAP financial measures.

FBK - ER

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