FB Financial (FBK)

Chris Holmes President and CEO
James Gordon CFO
Wib Evans President, FB Ventures
Nick Grant KBW Investment
Tyler Stafford Stephens
Daniel Cardenas Raymond James
Call transcript
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Good morning, and welcome to the FB Financial Corporation’s Fourth Quarter 2017 Earnings and Year-End Earnings Conference Call. Hosting the call from FB Financial is Chris Holmes, President and Chief Executive Officer. He is joined by James Gordon, Chief Financial Officer and Wib Evans, President of FB Ventures, who will be available during the question-and-answer session. Please note FB Financial’s earnings release, supplement and financial information and this morning’s presentation are available on the Investor Relations page of the Company’s website at www.firstbankonline.com. Today’s call is being recorded and will be available for replay on FB Financial’s website for the next 90 days. will for call presentation. after The Instructions] be questions open the [Operator

Financial’s and facts and are in update Many on this make and the to statements by other materially FB more revise such All risk may FB performance or by are or presentation of predict listeners put implied from the or such and this cautioned undue events which to statements or During factors ability the as a to Financial whether are differ statements. filed or comments and achievement such presentation to detailed FB actual the may SEC. any beyond not that forward-looking reliance cause control result FB these constitute risks to of in of XX-K forward-looking FB of subject any A otherwise. statements. is Financial uncertainties contained results forward-looking expressed disclaims other new future Financial forward-looking contained statements. forward-looking Financial’s obligation discussion information, any results

President FB CEO. measures GAAP may of these turn presentation Financial’s directly include of GAAP is Chris Please website comparable most to non-GAAP to I go sir. and as available Financial’s and now defined to financial www.firstbankonline.com. FBs Holmes like remarks measures by G. the on the addition, In comparable ahead would measures financial A the measures non-GAAP SEC at reconfiguration regulations the over certain presentation

Chris Holmes

of and we that call, who Financial. questions. interest the provide call additional for full our on the fourth followed turn today’s Officer, Rebecca, Gordon, and FB on fourth James comments by would then our joining review the I’ll financial will our Chief be Financial for your of this and I'll us and On call the highlights to you results over quarter quarter review morning, XXXX, results in appreciate for of good to the year your thank and XXXX

We’re FirstBank with which results outstanding this the performance. exceptional diligence, quarter of want drives of for our and continued associates of pleased daily I each service financial delivery very their customer our to thank dedicated

combination our and the return over franchise of level with come earnings results FirstBank increase EPS of demonstrate for $XX.XX the sustained in fourth common of following -- XXXX. quarter on XXXX. average equity from December with book assets and our fourth profitability apparent of our our ourselves X.XX% EPS and value pleased core tangible a per power the or $X resulted per of of common for benefits we've full first FirstBank growth was This XX.X% This Full of quarter the $X.XX of quarter share which first and on We’re year average $X.XX $X.XX measures. the performance to expect represents since tangible XX.X%. share with in return of the of core at almost entity highlight quarter year-end, are the

core ratio quarter, of delivered the a and ROAA For efficiency core of X.XX% XX.X%. a we

a term new to we ratio that efficiency to system believe the core quarter We beginning down segment will XX.X%, our of the in the target and first system December Banks cost Clayton XXXX banking at Our of was quarter core of XX%. closing convert of savings. represent our full

increase driven to from the pre-tax have prior by in segment and unseasonably, direct core pre-tax at resulted and volumes direct this in slightly team year, than contribution higher expected benefiting will of outlook the quarter to from to contribution mix direct the we to due million ratio from flat mortgage better we mortgages XXXX XXXX. expect core of in in lower volume XXXX, to margin growth X.X% Our fourth our from a time the the continue by an $XX.X was channels. our The deposit increase XXXX the produced contribution year. to the the X.X% retail XX.X% and quarter was for of to other XX.X% last year. our The expansion continued This XX.X% and organic banking compared of fourth quarter increase Similar be was balanced quarter strength last and core Annualized originations. the loan and growth count consumer channels. in reverse for efficiency and increased

XX%, below. growth target of remains loan was similar delivery range growth This XXXX. anticipate line above while variances to for Our of to was in quarter, XX% XX% our with of the we our and year of for with year XX% growth per

growth growth million -- liquidation our however anticipated, deposits our we lower deposit on by third more as an a $XXX and of the was we than X.X% and Our were than impact growth growth our of related annualized to from adversely merger. proceeds was year decline deposit customer for quarter. year customer deposit from organic deposit the Net XX% XX% basis for the the that

We decline deposit maintain expect balance remaining competitive we our XXXX, importantly, environment us. customer starts loans affords are continue strategic low-cost, we experiencing right heavy a very and order are We’ll deposit about cost legacy place deposit from But creates that on growth continue focus think trend balance to that that in customer the in deposits likely advantages Bank, it’s Clayton the to going retention that, the for forward. to and noise strong deposit to which the to said, With when throughout now. base optimistic a were quarter-to-quarter. continued growth from

collections. Our was benefits for in margin the excluding net interest the X.XX% quarter, of accretion nonaccrual

X.XX%. net core Our was margin interest

charge-offs for interest base balance on or only the not margin net XXX, net in to quarter. net remain accretion benefits. margin of with of interest forward going basis the focused outlook quality the maintain Company customer relationship our strong points on our underlying the We XXX touch in bullish core of our the we for comments, depth considering employing net interest maintaining other margin. sheet his five to James while of on asset needs the the the going is more but We’re to serve our

merger of added to facilities of quarter. of loan of million is Our XX closed We quality, the repurchase were mortgage OREO service Mae optically metrics believe deterioration by increased a do asset at by approximately option million certain over XX as our credit of non-performing the this in relevantly recording officially loans from our demonstrated an were our not Ginnie affected, the and of end -- originated our $X.X HFI as year. operations points signals basis non-performing, any our in flat third which we ratio

and earnings strong with expenses us a growth for was peer interest of leading keeping our check. loan while this growth overall, the net in quarter margin, So solid

periods. that execute in and call to overview, some more the place continue our results will to turn continued and in to the I With We in solid believe on we James review financial detail. strategy foundation profitability for over the coming our remains growth

James Gordon

Thank to everyone. Chris, morning and good you,

recap to on strong results want I as quarter First, our for highlighted the operating core Slide X.

recorded represents base, supported $X.XX many production deposit tax our consistent loan from delivering slightly non-interest stable common interest outstanding return margin. like as growth reflects X.XX% and the higher XX recorded we Our $XX.X driven that earnings merger interest for benefit strong growth given fundamentals of net of $X.X X low base slightly fundamentals the strong deferred an average strong the cost, And relatively assets our average we reform. of the by the on A has customer of have and on Slide our shown to improvement margin, flat profitability. average and our our and sound nonaccrual cost million, and collection, core curve. X return loan net on limited quarter. basis net by liability increased risen profitability Loan excluding per in diluted points tangible return core net growth, credit XX.X%. to were core of deposit accretion X.XX% shows a of continue peers, partially tax equity demonstrate result of our share by quality yields XXXX, and quarter on a million tax and yield interest Slide interest yields to in efficiency. assets revaluation related as strong at This margin of income, full is a offset interest improving new of X.XX% a

provided. anticipate but improvement in limited yields, deposit to to overall our is and the that our cost competitive confident balance to and net continue expect core remain up guidance well rate in we sheet our we will rates rising due to remain interest previous take forward, continued environment positioned And XXX loan overall, current margin we the XXX cumulative interest Going rising rates. for

and quarter this next room right additional in total the above average were guidelines Noting our the have risk onto our of corner, and with this loan mentioned, development regulatory at quarter to levels sound based -- we loans total our Chris growth. some organic upper estate the loan while capital XXXX our growth risk-based generated at with concentration as Moving capital slide, capital. XX%, with loans XXX% commercial the on real construction provided

over in guidelines We are these remaining the bunch long-term. of confident the

quarter were deposits XX% last X.X customer from Our down current from year slightly billion or of fourth the and the quarter.

from the bearing deposits mentioned million mortgage deposit primarily of temporary decline declines merger. $XX of escrow the year over customer much be to driven Chris by Non-interest approximately attributed million third in to XXX additional declined end typical the earlier, resulting outflows deposits can liquidation of seasonal related As the with our quarter from our activity. balances

and quarter expected, to Banks. As months cost we million, basis them including coming declined by this $XX in a to when point We expected a deposits X increase decline continue time total the full deposits the in three Internet brokered of of saw almost Clayton as quarters.

the the higher in included our minimal. on data only two quarter and results relatively quarter Importantly, cost was an fourth Clayton Banks of thus apples-to-apple deposits of the months deposit third

customer base remain up that low expect steady to picking As constrained. cost remain this deposits slightly our competitive we growing but will our cost funding environment, focus continue on deposit in we confident

highlighted had in -- X. excellent as Chris we an mortgage noted banking As opening from banking operations comments, Slide quarter his on our

a in XXXX, was basis. Our on a X.X% up was fourth the year-over-year XX.X was XX.X% mortgage basis quarter of and income which only down banking million on linked-quarter

As and of of quarters into decline and XXXX. we during second a to the third would first beginning quarter expect reminder, volumes the before build to revenue heading XXXX

hedged of MSR disclosed, this fully servicing our As rights XX.X assets the quarter. majority previously million balance are in hedging we the mortgage

We the the core in interest in MSR expect exclude first from from value values change rates we’ll no XXXX. quarter fair and in in less the volatility earnings our longer

to of improve leverage continued operating banking the segment. to quarter our goal Our moving this closer in XX%

this Our mortgage due secondary a the the higher velocity of margins pressure efficiency corresponding markets. continued sales channel to segment in on quarter and ratio the had higher in

channels other as reduction is pick up. ratio the of see of and move merger charges improve tax we was additional based for the deferred We in efficiency to tax and into significantly quarters excluding lower second XXXX XX.X% the factory expect benefit our the reductions. and corporate rate liability the the or Tax the quarter the XX.X% on to volumes third fourth

anticipate on projected As XX.X% in we in previously the XX.X% levels our profitability. equity benefits of tax range based disclosed, overall from rate compensation to forward income effective going being non-taxable

will income this quarter-to-quarter based However, the equity of and on pre-tax levels benefits. vary the from compensation

in It remains moving quality forward. the asset check. core strength is Our

While NPAs increase $X.X close that Mae rebook the service Ginnie increased basis minimal and NTAs or for of as basis points to Ginnie and more the increasing performing $XX loans, and million XXX our five with accounted which recorded amount the by the assets quarter to to the Mae million attributed delinquent entirety to be describe increase our of total sold nearly additional can assets in risk currently points for loans non-core, XX driven what the facilities branches approximately of $XX.X in non-performers previously of I'd assets. million this

the are the obligation recorded to increased no these by As by order to repurchase attempt and due in summer's driven in the a though Bank Bank even these norms. to hurricane. These Mae reminder, to growth Ginnie required loans channel have capacity the balances has be corresponding

by investor discussed of XX Class terms for loans great ratio remain shape the above, in in non-performing evidenced increase of ratio quality points held loan our this the as asset underlying despite in basis X quarter. NTA Our

Our future enabling capital growth through strategic level remains organically both and acquisitions. strong

needed as Our equity capital sources if flexibility needed. have structure the non-common remains simple given us to

by since capital enhance has that call the the over we’ll I further generation overview, reduction The XXXX, to closing earlier, of per rate comments end value forward. increased your Chris With to turn to noted our at back will to call and going for open want questions. XX.X% book then the end driven by strong or quarter As share the the our tangible $XX.XX performance. tax $X.XX of

Chris Holmes

Thank our Again, integrating continue evaluate to strategy profitability. by you, quarter continuing delivering recent merger opportunities. additional had James. We an M&A outstanding execute also and fully growth fourth and to we

our performance markets tendency Georgia Our forward FB investment and diversified and your look We growth was up to across updating the open for call, businesses remarks and in to expectations questions our of you and and now and completes strong highlighting Alabama. franchise like our straight interest our appreciate next and performance. and my Operator continued the call quarter on we to this that morning’s Financial


James. Thank KBW and session conducted Instructions] come Investment. Ladies And [Operator with you, the first from question will electronically. gentlemen, your question-and-answer be Nick will Grant

Nick Grant

So -- margin commentary the kind real following on may up your be of quick.

bank? driven versus of contractual rates So by your core the uptick in was of much how Clayton kind

James Gordon

change key end. attributable majority X federal X the in were the think there or the to I the one were then was by that right and Clayton one two in probably at the fed drivers, at month for X more Banks for driven the of rate other quarter funds The the the Clayton, So, or change funds month. end then rate of basis and X the points

Nick Grant

about quick. might to line? of you are to what percentage following really about be making How kind bottom another taxes you of potential it of makes kind of investment sort benefit And expense Then thinking the taxes? lower the offset talking

Chris Holmes

to obviously as to employee we how and the that of anything evaluate you’ve continue we will excuse parts I’d put shareholders some investments the of in some But bottom-line, yet like make best also that and to -- of like fall We me, -- on we of out in haven’t investments some Company, that probably make thoughts fall will majority with that different are terms parts say in the officially that. would to in Nick. some continue benefit the to back probably of our seen bottom-line, the most to

as anything So -- cut. are under we consideration haven’t apply that put us out things all that tax of those the for but officially, things are apply we

Nick Grant

Clayton, And then guys reform? Kind at following pipeline how M&A do may the be the now? tax me. one conversations how of all of integration And announcement from changed last since one you about your full for feel

Chris Holmes

changed take second a the I since first. reform. tax the Yes, will so have little announcement one Actually, they of

So the something, but understandably. of may a they it were in case, thinking seller about be have may have our changed and slightly particularly if expectations we there

little bit they may start we'll privately think I some held target to calculate the So be smaller real. it different. banks has for changed and dollars a a us. been especially that It’s a of for Those, lot become to need those really

I change already bigger they've through would have an impact. it expectations banks, that, so our And probably there. don't think of and much think In it can I thought as

we there, we constant two okay. important And have things look evaluation, remain so out so what we can we a we way lot little are of friends we on of and discipline which three the dialogue, just we M&A, where be are in carry in a for, times, frustrating as very but a state a lot have or

We’re look metrics us financial for list. good going deposit for the

terms the have banks We’re to lot lot look that banks that going lot like in for to of a customer and a -- of business. loan be community deposits tend wholesale a versus us

of of continues which in us. of We we for we Atlanta, those Atlanta in and have look course conversations them old to I'd all in way in have to the really any including South all California conversions as for five have and even Geographically, don't an deposit like the Georgia side say year And or and are post actively even going us. are of been the versus around. Tennessee. for sheet. down and being we and down us western in Birmingham. the seven a and like look which in only have in Alabaman, around parts say couple to And established North markets balance that around Southern maybe in we having Kentucky we over the franchises And So it’s conversations, for they're We eastern companies Birmingham, way markets wall us. then, the continue are and

Well, you just would with actively that other there, -- Canada They're pay also folks. and I’ll assuming seeing it where options And putting a and we is, a and we and not one North true be those banking the we’ve no. out transaction talking just then off sale. the lot more of somebody a They of converse for do to of it's you a South good call things have interested and been I’ll that’s -- I’ll looking sales. in of than Eastern analogy thing. seek that having will for put so have to last up then see see we’re we where lot the to the in add fully some worth. So, of last try up market conversation. integrated for Clayton price places if circle And some of draw come when the seek. is a that house truly to really want lot couple the are really there confidence folks coming we really

We in conversion and with we acquire well are that there active having partners out board and have us great conversations. both so integration on and


hear we’ll from Tyler Stafford Next, Instructions] Stephens. [Operator with

Tyler Stafford

you the wanted about going quite to earlier Chris back very of start retention made deposits. the just I strong maybe to on margin comments out and

you the year, you into type cost have remix? for this of can some And lower and higher cost remix As you the expectations about kind to more deposits? more deposits next of talk just Clayton's look within out the just that expectation

Chris Holmes

range high deposit little think the checkpoint. look you was us our but at was mentioned we’re end the -- if actually where of couple and a high been end margin. at say. we the quarter. at our as that triangulating range, And growth, this today, things as you’ve know, quarter at that and of the we're below, -- between constantly our margins loan Sure, long-term growth as has of It about heard growth loan We for look we you

on consider we’re slightly more on the so long-term as longer And in rate. term what year and in of long-term, deposits it’s of a we actually growth above be actually loans, grow to during terms below

gone with all market. the held an customers. much And the particularly well, so has did pleased public folks part people, took as have we in again of the We which and great some those was Clayton manufactured pretty customers. it one very where about think integration they We pay-offs our to business really of housing expected the pay-off

was not things But wholesale that for -- we’re that, that held other business. our heard say, we level pretty you’ve and it we’re happen we success. of that So, everything forward, big core as us for and on our funding about had much as think customers expected those happy they than funding for Tyler, core moving the

so, And to going remix we’re that.

So of not are public even there’s out of have the us funds just if core, that roll you’ll brokered if the really to are a those lot funds -- either. continue there don’t see bank have we

then we not to it those And rising up, rates, bank. roll those replace see improvement funds. them. net But out we tend the of -- cost those so any could the with could come in We'll as let the to

those anticipating other the of they stable. the But in you the those not lower They that and term, longer And relationships cost over in are give lot term really benefits. the funds of provide short-term. longer more income as are a cost improvement so, we’re over

that shareholder those But long-term think replace doing though so, won’t continue And benefit. get cost to short-term benefit we even way. we value from it probably getting we’re we’ll

James Gordon

off base, advances that, within our Federal as FirstBank bit avenues the would And the Home more sheet I say, don’t be Bank pressure to taking so we to the calls off funding to that deposit reposition shifting additional of to balance than to Chris, of options temporarily, is have a balance we that to has their pressure overall Loan That pursue. higher can We more always turn take sheet. also would little add that.

our -- markets choice kind significant and this So, it balance, where yield now of not given may lower cost not money the I rising environment, in avenue higher rate significant are of by of cost desires may particularly time and competitors our many deposits of would the customers. the environment yield higher

the lower cost So that in may not short-term. the lead to

Tyler Stafford

does James. do the we to that follow-up would that very on just And X.XX future maintained. be get any what expect X.XX increases? hike an if core this you not, you rate margin That’s to impact Chris and But James, Can year? Thanks, remind just Okay. two helpful. expectations me, a incremental rate if or assume the to

James Gordon

doesn’t up the that roughly think be necessarily loan if some would rate I our with But hike. of rate even variable and so did, rate assume we it XX% Well, at assume yields hikes, the portfolio it this in the pick would point. we

short-term, the work side overtime that’s comfortable XX then that have their interest most and borrowings, balance But back middle in that think position rate it down to of XXX In However, some to goes there. the it we environment and environment kind the either side rising lower you’ll different rate the we will the all in and the wholesale in the to feel whatever will to funding out or XXX we be deposits as we come the the side. of sheet. from said upper

Tyler Stafford

expenses, did Overall heavier little quarter. than this I was bit come they a expecting in

cost fallout savings rate You Can mentioned savings on the those How the help a are following first perspective kind the December us quarter, of much systems left cost the from towards we with just conversion, what run look here? you as expenses? out. general

James Gordon

have all heading bit into the little quarter. savings. we So of very end first a the cost There fourth -- the primarily of is amount more, but the basically quarter by a end by the of the quarter, immaterial

be of. So, the run-rate core of quarter should kind first

branches branch to were quarter Clayton then more system the -- So added branches one mix. six Banks we closed where We we added conversions seven but on one the Xst. in closed of and we consolidated so particularly that did back December into

quarter we’ll on Mortgage core bit we little or more fourth little as in and segment. first relief bit side, a see quarter the the expenses call. So, kind earlier banking the was a noted of of contributors

there some we to first the up the should bank benefit quarter fourth the see first quarter quarter. is core full from So, in in to picked and be run-rate

Tyler Stafford

just for me. last And one then

the that Can Just earlier first change fair regarding in the are mortgage from slightly you pre-tax the earnings slightly XXXX I for clarify servicing you per of sure -- make XXXX. add given contribution see equity? higher mentioned the the you just quarter. contribution value to XXXX in which thinking I’m for about expecting just starting want point to make right, their portfolio

James Gordon

their so, just this and number XX a basis XX would on sure liquidity than right to $XX.X amount value as play. core you what million will are Right, again the valuations different the give in share so MSRs to the rate that other be a we set. XX, really is relate the other and in was the number expect movement make we MSR now can there market just in damage to fair to back relatively under nominal be answer did interest

million. the it’s $XX.X apples-to-apples, expense So, is


from [Operator Instructions] From Daniel Raymond James Cardenas. we’ll hear

Daniel Cardenas

couple a Just questions quick of here.

as as could to generated you then look into And as growth a a bit of loan to the where how we XXXX, us those as being give geographically, maybe quarter well ago? to going quarter that this if of pipelines bit color look compared at little a On your from? saw say growth color you that was little

Chris Holmes


footprint, actually reasonably And took that the you if balanced. it’s loan geographically, that. it it’s growth, on out would -- reflects First, pretty much see you the

got Knoxville, had a others, out continuing as they have, one merger. share out year produced those market markets, leader bit and the before we've Tennessee, terms our be strong. been half and what probably in produce that’s the there the of little we would we’ve Nashville numbers, there If So, in West team of market of of they some to above Memphis, then before the huge just there’s is well, produced. Knoxville And not second like had

year. just a checking end mentioned year one day at that’s in down area have on the us. million last in last have actually of I next the so their a line. strong of pay to $XX account end did at We And their year moved pay for of the our year, of core the to customer another business manufactured said, we where the would pay the housing day down from hey, down C&I

and you have so frankly, happy ones are that that pay we’re that you don't have have customers things The those And you’re off. happen capability. that about those loans worried

nothing standout five years I say would last the particular -- it’s contributor. last So for place And Nashville been There’s leader to stand. relatively there years about has not three, no -- been balanced big a everyone continues the four be but there. leader of we’re is has that was and worried any the there.

that to -- investment the to said the something. now, four kind or front. community looks XX% we to XX% alter goes XX% look years, on three the feels pipelines, at at say quarters, XX% as On looked that it maybe and four a of Frankly, need the might being to steady at gets for need great calls last actually probably the to good a credit think, I I I that as back We I these would thing. rate. standard we’ve to to will being say and on growth more strong, we where our is our check very what three years our XX% business pretty pipeline probably probably because a

And any did it last could it is. actually, are today that’s to year. like range, year last very, first year. quarter less. very this strong actually pretty and right first of quarter at in actually given overtime, would that back for have we could pipelines We our it and to we first pipelines it similar pipelines have pipelines quarter, our strong So be quarter be But more, keep in what if go you

Daniel Cardenas

then be major any on deposit your markets? any some And pressures, loan the pick may competitive if the in on or color side even of just you’re seeing up

Chris Holmes

that loans I quarter, on -- say some don't I very side know -- would different it have do that loan side, consider I'll continue deposits the to quarters. pressure. that than are loans seen any and see competitive certainly have this competitive is And separately. it's -- much I similar. has statements see But I do I don’t We address that last made of that We But on do because those we we’re about more We just and that maybe over on they pressure. side see the the or don't last quite we several been fit profile, that of do things the our that I done the willing don’t we wouldn’t of that happen in see seeing just little if them a have -- -- see fit but don’t credit we more particular some profile. do, side deals We our always see be things credit may anyway. not see that that we to some customer we and do a few on

few seeing in a move And deposit than somewhat the deposit. than more really you that we we quite that is you apps we’re on have see with little on We a in On a in side, them we have we some in pressure have where more "hey, rates, that higher radio, both We of give out that out and And more customers more saying, side. folks pro-activity apps have seen money reaching rate to marketplace. competition keep some a where seen may there seen to us as deposit over." that with we see lot newspaper. is particularly reaching seeing see the money that a I'll if the deposit


concluding additional to this any over Chris [Operator am remark. the Instructions] like other back seeing at I time. Holmes would for conference questions turn or no to I

Chris Holmes

Thank for are pleased just the Okay. thank with our joining and much, everybody we I thank the great the call. very for your our you thank year. we in for you a in XXXX. reiterate us you all Financial. Rebecca, We for to that on FB And quarter, with interest forward your performance performance Look pleased support.


disconnect. presentation. does participation. do that for conclude everyone and Ladies gentlemen now you And your may We today’s thank