FB Financial Corporation Reports Annual and Fourth Quarter 2021 Results

FB Financial Corporation (the “Company”) (NYSE: FBK), parent company of FirstBank, reported net income of $48.8 million, or $1.02 per diluted common share, compared to $0.95 per diluted common share in the same quarter last year and $0.94 in the previous quarter. Adjusted net income was $42.6 million, or $0.89 per diluted common share, compared to $1.14 per diluted common share in the same quarter last year and $0.89 in the previous quarter. The Company's return on average assets for the fourth quarter was 1.60% (1.40% adjusted), return on average common equity was 13.7% (12.0% adjusted) and return on tangible common equity was 16.8% (14.7% adjusted). The Company recorded growth in loans held for investment ("HFI") of $310.0 million in the fourth quarter, or 16.9% annualized. Excluding Paycheck Protection Program ("PPP") loans, the Company recorded HFI loan growth of $315.4 million, or 17.2% annualized.

For the year ended December 31, 2021, the Company reported net income of $190.3 million, or $3.97 per diluted common share, compared to $63.6 million, or $1.67 per diluted common share, for the year ended December 31, 2020. Adjusting for non-operating items, diluted EPS was $3.78 and $3.73 for the years ended December 31, 2021 and 2020, respectively. The Company’s book value per common share at quarter-end was $30.13 and the tangible book value ("TBV") per common share was $24.67.

President and Chief Executive Officer, Christopher T. Holmes stated, “We are pleased with our fourth quarter and full year results. Adjusted loan growth (HFI) of 17% for the quarter and over 10% for the year are both outstanding achievements. I am also proud of our team for their results in 2021 in deposit gathering, credit management and mortgage production, as we grew noninterest bearing deposits over 20%, we experienced net charge-offs of only 8 basis points and we delivered a mortgage contribution of $26.5 million. Our tangible book value, another core metric for us, ended the year at $24.67, which represents an annualized compounded growth rate of 15.5% since becoming a publicly traded company in September of 2016.”

Balance Sheet and Net Interest Margin

The Company reported loan balances (HFI) of $7.60 billion, an increase of $310.0 million, or 16.9% annualized, from September 30, 2021. Excluding PPP loans, adjusted loans (HFI) increased $315.4 million, or 17.2% annualized, on a linked quarter basis. The contractual yield on loans decreased to 4.17% in the fourth quarter of 2021 from 4.23% in the third quarter of 2021.

The Company's net interest income on a tax-equivalent basis for the fourth quarter of 2021 was $90.5 million, an increase from $89.2 million in the previous quarter. The Company's net interest margin (“NIM”) was 3.19% for the fourth quarter, compared to 3.20% for the third quarter of 2021. The NIM for the fourth quarter of 2021 was impacted by a 4 basis point decline in the yield on interest-earning assets, offset by a 4 basis point decline in the cost of interest-bearing liabilities on a linked quarter basis. During the quarter, on balance sheet liquidity increased to $2.22 billion, or 18.0% of tangible assets, from $1.75 billion, or 15.1% of tangible assets as of September 30, 2021. As of December 31, 2021, our PPP loan balance decreased to $4.0 million from $9.4 million at September 30, 2021.

During the fourth quarter of 2021, total deposits increased by $765.0 million to $10.84 billion on a linked quarter basis, primarily related to seasonal inflows of public funds. Noninterest bearing deposits increased by $130.6 million, or 19.9% annualized, during the fourth quarter. Excluding mortgage-escrow related deposits, noninterest bearing deposits increased by $193.7 million during the fourth quarter, or 31.8% annualized. The Company's total cost of deposits declined by 4 basis points to 0.22% and the cost of interest-bearing deposits decreased to 0.30% from 0.34% in the previous quarter.

Noninterest Income

Noninterest income was $53.2 million for the fourth quarter of 2021, compared to $59.0 million for the third quarter of 2021 and $80.6 million for the fourth quarter of 2020. Mortgage banking income decreased to $31.4 million in the fourth quarter of 2021, compared to $45.4 million for the third quarter of 2021 and $65.7 million for the fourth quarter of 2020.

Noninterest income increased from a $9.4 million realized gain from two relationships in our commercial loans held for sale portfolio that were resolved during the fourth quarter. The remaining portfolio also had $0.5 million of positive fair value changes compared to the previous quarter. The $9.9 million gain on the commercial loans held for sale portfolio compares to a gain of $0.7 million in the third quarter of 2021.

The Company's total mortgage banking pre-tax net contribution for the fourth quarter of 2021 was $0.7 million, compared to $8.9 million for the third quarter of 2021 and $22.2 million for the fourth quarter of 2020. Interest rate lock commitment volume totaled $1.48 billion in the fourth quarter of 2021 compared to $2.01 billion in the third quarter of 2021 and $2.19 billion in the fourth quarter of 2020.

Chief Financial Officer, Michael Mettee noted, “Our mortgage business had a good year with a pre-tax net contribution of $26.5 million. As anticipated the fourth quarter contribution was down due to seasonality in our purchase business, less refinance volume and lower margins.” Mettee continued, “We continue to liquidate the commercial loans held for sale portfolio primarily through pay downs and payoffs, with favorable results. We have been confident in our understanding and management of the portfolio since our merger and continue to have confidence in the valuation of the remaining $79.3 million.”

Expense Management

Noninterest expenses were $90.9 million for the fourth quarter of 2021, compared to $95.0 million for the third quarter of 2021 and $109.9 million for the fourth quarter of 2020. Core noninterest expense was $89.5 million for the fourth quarter of 2021, $95.0 million for the third quarter of 2021, and $95.8 million for the fourth quarter of 2020.

During the fourth quarter of 2021, the Company's core efficiency ratio was 67.0%, compared to 64.7% in the third quarter of 2021 and 58.5% for the fourth quarter of 2020. The Banking segment core efficiency ratio was 57.5% versus the previous quarter of 57.9% while the Mortgage segment core efficiency ratio increased to 97.8% for the fourth quarter of 2021 from 80.0% in the previous quarter.

Mettee noted, “The increase in our efficiency ratio was driven by expected seasonality in mortgage revenue. Core expenses in the Banking segment met expectations and total noninterest expenses were slightly elevated due to two charitable contributions totaling $1.4 million that are not run rate expenses but are important investments in the communities we serve.”

Credit Quality

The Company recorded a total net reversal in provisions for credit losses of $10.8 million in the fourth quarter of 2021, including an increase in provision for credit losses on unfunded commitments of $0.9 million. The Company continues to maintain a fortified balance sheet with an allowance for credit losses ("ACL") of $125.6 million as of December 31, 2021, representing 1.65% of loans HFI.

The Company's net charge-offs to average loans was 0.12% for the fourth quarter of 2021 compared to net charge-offs to average loans of 0.13% in the third quarter of 2021. The Company's nonperforming assets as a percentage of total assets remained constant at 0.50% as of December 31, 2021 and September 30, 2021. Nonperforming loans were 0.62% of loans HFI at December 31, 2021, compared to 0.59% at September 30, 2021. There were no deferrals resulting from the COVID-19 pandemic outstanding as of December 31, 2021, compared to $18.0 million outstanding at the end of the third quarter 2021.

Summary

Holmes summarized, “The Company has continued to deliver strong results and capitalize on the economic strength of our markets. As we close the books on a successful 2021, we look ahead into 2022, excited about the opportunities in front of us.”

WEBCAST AND CONFERENCE CALL INFORMATION

FB Financial Corporation will host a conference call to discuss the Company's financial results today, January 18, 2022, at 8:00 a.m. (Central Time). To listen to the call, participants should dial 1-888-317-6003 (confirmation code 7100213) approximately 10 minutes prior to the call. A telephonic replay will be available approximately two hours after the call on January 18, 2022, through January 25, 2022, by dialing 1-877-344-7529, confirmation code 5998304.

A live online broadcast of the Company’s quarterly conference call will be available online at https://services.choruscall.com/mediaframe/webcast.html?webcastid=0upLTSIz. The 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 82 full-service bank branches across Tennessee, Kentucky, Alabama and North Georgia, and mortgage offices across the Southeast. FirstBank serves five of the largest metropolitan markets in Tennessee and has approximately $12.6 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 January 18, 2022.

BUSINESS SEGMENT RESULTS

The Company has included its business segment financial tables as part of the Supplemental Financial Information, which is available in connection with 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 is included in the Company's Form 10-Q filed with the SEC for the period 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 Company’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,” “project,” 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 the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company 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 global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) the ongoing effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and the emergence of new variants, and its impact on general economic and financial market conditions and on the Company’s business and the Company’s customers' business, results of operations, asset quality and financial condition, (3) ongoing public response to the vaccines that were developed against the virus as well as the decisions of governmental agencies with respect to vaccines, including recommendations related to booster shots and requirements that seek to mandate that individuals receive or employers require that their employees receive the vaccine, (4) those vaccines' efficacy against the virus, including new variants, (5) changes in government interest rate policies and its impact on the Company’s business, net interest margin, and mortgage operations, (6) the Company’s ability to effectively manage problem credits, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, (8) difficulties and delays in integrating acquired businesses or fully realizing costs savings, revenue synergies and other benefits from future and prior acquisitions, (9) the Company’s ability to successfully execute its various business strategies, (10) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (11) the potential impact of the proposed phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR, (12) the effectiveness of the Company’s cybersecurity controls and procedures to prevent and mitigate attempted intrusions, (13) 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 (14) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’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 Earnings Release, and the Company 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 the Company to predict their occurrence or how they will affect the company.

The Company 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 may include, without limitation, adjusted net income, adjusted diluted earnings per common 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 mortgage pre-tax net contribution, adjusted mortgage pre-tax pre-provision net contribution, 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 (or core) 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, adjusted return on average tangible common equity, and adjusted pre-tax pre-provision 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 corresponding non-GAAP reconciliation tables below in this Earnings Release for additional discussion and reconciliation of these measures to the most directly comparable GAAP financial measures.

FBK - ER

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