FB Financial (FBK) 15 Oct 242024 Q3 Earnings call transcript

Good morning, and welcome to the FB Financial Corporation's Third Quarter 2024 Earnings Conference Call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Financial Officer. Also joining the call for the question-and-answer session is Travis Edmondson, Chief Banking Officer. Please note, FB Financial's earnings release, supplemental financial information and this morning's presentation are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the Securities and Exchange Commission's website at www.sec.gov. Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of this call. [Operator Instructions] During this presentation, FB Financial may make comments which constitute forward-looking statements under the federal securities laws.

or or on risks, expectations that uncertainties cautioned expressed forward-looking actual such undue and forward-looking based are on not assumptions beyond may to by are factors or predict, statements. Financial results statements. Many to to such Financial's FB subject and performance statements management's materially and put current and ability implied control such cause and to are Forward-looking differ of from achievements results any other of FB factors listeners are reliance FB A risks and or more presentation, is results differ information, to Financial disclaims Form and recent of with detailed contained description a otherwise. of including most any reports expectations current that to revise in this these forward-looking law, update statements whether contained other SEC, from as periodic actual events or may new result XX-K. Except Financial's as the cause Financial's filed future in by any FB FB materially obligation required

over at this website Supplemental Chris www.sec.gov. I the Investor Holmes, Relations would company's are like In directly measures defined most Financial's financial page by to the to GAAP information morning's SEC's and addition, G. measures available financial CEO. in now measures available measures the Regulation and of include turn of on FB as may non-GAAP and A website presentation earnings GAAP which a these presentation, release. reconciliation SEC financial comparable on and presentation of the non-GAAP the the Financial's FB at President is to comparable certain remarks www.firstbankonline.com

appreciate FB joining Thanks us you, Thank this your morning. morning. right. All always Financial. We Good in interest for Wyatt.

of our momentum of the our of and share. earnings per at operating share since foundation, $X.XX emphasized impact a grown quarters, continue. per annual of and adjusted all and the of tangible share, IPO. The earnings quarter we of XX% quarter our from AOCI, share strength trends of by past average net sheet, assets quarter, And rate year-over-year. prior of pretax XX.X% I've adjusted the X.XX%. earnings reported the X.X% those XX% adjusted an per our reported value prior from the book per increased compound on X.X% growth For and revenue up up and excluding We've We $X.XX adjusted our earnings number year-over-year, while balance pre-provision return was

ratio Our roughly flat quarter the XX.X%. adjusted remained with prior at efficiency

We ratio equity and ratio have a very capital assets CETX XX.X% to of tangible of common XX.X%. of capital risk-based strong total ratios XX.X%, with tangible a

million outstanding in $XXX a this loans further construction in quarter. decline Following

development and construction Our concentration at is ratio XXX%. real XX% and concentration ratio commercial now is our estate

capital deploying value. current is Our create share and to on focus long-term earnings per excess shareholder grow

developing for growth. capital always will priority first be Our organic

growth. corporate annualized deposit We there our for double-digit to customer quarter, from This investment from strong mid-single-digit positioned to in annualized and those economies, due fourth growth the capitalize seasonality, local side being trends. challenge deposit trends, confident deposit in relocations, which loan loan continue saw well growth. We're X.X% growth non-brokered the of demographic the deposit on X.X% anticipate we're benefit bigger XXXX, economic and corporate we're with quarter aiming with on strength low in a and some growth to we and

an added XX. we quarter, XXXX revenue hires This our to additional in senior producers, bringing X total

our groups wealth this so brought management year. also and additional far mortgage revenue on have We XX in producers

ground hit quarter, into excited we of expanded As new team those running. the third has in Tuscaloosa, the at part way we're that the hires, Alabama and

markets. the in most we As model south's a asset billion run attractive authority $XX conservatively, a located some bank with a younger a local team, management of and

the right talent we'll have as We continue to expand and we fits. compelling to both markets. contiguous And in a find story existing our cultural

acquisitions. bank remain is align Our We second geographically in financially. capital combination interested culturally, that opportunities for and deployment priority

to Michael securities at team had Our through $XXX million for million is marginal improvement a reinvested a of deployment quarter, as additive in pretax sheet their balance securities X% of higher transactions. trade continued his this at sold earnings We is continue $XX and a previous -- those to we third capital proceeds than optimization. priority yield. execute on rate loss and

another share team summarize, of to profitability. the and earnings profitability. per continue improving proud We're well of So on I'm growing delivering for strong to positioned that quarter

some into go in detail. Now I'm financial our going more to let Michael results

net loss sale Thank noninterest reported $XX.X was revenue good minute estate million. from and $XX.X for net securities million take $XX.X adjusted was income to other $XXX million the which morning, $XX million and reported We core Altogether, trade Reported pre-provision negative loss walk income million, on other the We $XXX,XXX of this million. of million, on were noninterest first income adjusting and the you, $XX.X from a everyone. came interest area. a our real noninterest earnings. which banking. the Chris, through of $XX.X earnings of I'll $XX.X quarter's came assets. Core expense of banking million,

results prior earning in primarily completed securities on We by the trade basis during so the million a detail was interest points while more Yield a on August, quarter, in points net in this from the X.X%, our assets margin in down X average Going on flat to was on yield for interest X.XX% a prior our at securities yield month margin. loans quarter. impact larger asset and earning point quarter. an Net X at increase basis into quarter. investment XX basis income on of we held base, which result had from the increased couple late baked of increase our as $X.X of of led

including funding $XXX changes by million borrowings, term with of composition $XXX from increased X as interest-bearing to we X.XX%. million, On brokered the cost $XXX of from side, made We deposits points quarter wholesale during total from funding nonbrokered deposits X.XX% off bank interest-bearing paying increase the X.XX%. by liability increased And the million some while basis to cost of our deposits program. X.XX%

of recent a new of XXXX rates were on have the of rate, repriced having X.X%. quarter. with maturing commitments For investment the have move remainder X.XX%. in million our X.XX% yield in in loans of and end X.XX%. quarter. we the $X.X our of for of September fourth In a around billion loans, on loans $X by XXXX, repriced of the $XXX yield month maturing with loans $XXX yield versus for the portfolio over billion of with billion $X million Of we floating our And About fixed rate rate variable were loan with immediately those contractual remains in X.XX% yield held September, was half the coming

deposits the X.XX% was For cost versus quarter. X.XX% for for the X.XX% cost the X.XX% of of September, month And nonbrokered interest-bearing interest-bearing quarter. of deposits was versus

Those previously, Fed noted change now rate. funds the target third a $X.X in of with stood I've As the billion significant have amount quarter. we immediately of as the the index at reprice of that balances deposits end

in quarter, future and the X.XX% point margin XX following to with September's range flat cuts. X.XX% stay that interest be we For to range the fourth around relatively measured cut expect rate expect basis to rate

driven noninterest by adjusted income again than noninterest investment $XX.X income. was income to banking Moving expected, million. Core stronger at services

total maybe million. now to baseline million pretax given of slightly is quarter $XX expectation another $XX had Our contribution a Mortgage with profitable higher, in $XXX,XXX. a quarter

year are our in range in improvement continuing in Mortgage this We the and for of to in continue balance perform focused to this on XXXX. efficiency expect business the of

as second in We our compared the added short-term accrual quarter we the continue to to managing third $XX.X million and XXXX, as for expense on focus was managers $XX.X million core the $XX.X increased incentive banking quarter compensation. and expenses, in million of relationship for quarter our and

to expenses to quarter, the million. of for expenses We the $XX banking $XXX $XXX banking million of in total to expect $XX million million year fourth leading

any For expense X% lift-out XXXX, expect the team excluding company, we to for would large growth opportunities. X%

and loss as credit this charge-offs. quality, credit basis experienced for allowance sound we the quarter remains of credit quality points X On

inflation, mortgage softness be portfolio to as to consumer and returning nonperforming housing to which at that Our consumers for in our expect affected The of loans manufactured in some impact did driven upticks specifically tick generally content we've by levels. some and unemployment some increase X.XX%. any, These was in investment commercial held if X and loans up, appears minimal, it credits, loss we our loans and are more pre-COVID and loans. by seen is

strong credit as allowance Speaking Chris we to common mentioned, economy same held the roughly investment at for the On was very tangible developed to allowance, X.XX% ratios outlook X our at loss quarter have our XX.X% capital, and the assets as with loans XX.X%. capital ratio the of the of to for equity end of remained on the TCE and Tier period. as prior

consistent deliver on that We over best the the now to earnings value. I'll long-term in tangible back deploy focus to book and ways turn capital growth to call continue Chris. to

here. in And Thank you, right. All conclusion things just couple Michael. a of

want start Healthcare this First, usually to Board of I X started Directors of that we say this X:XX we at morning morning of inducted Hall XX in were the the this because members at morning release. our when We ceremony. we had into Tennessee call at Fame a

the Vanderbilt those, Systems who's Officer One University Deputy CEO Wright and Health the Center. Chief at of Dr. Medical Pinson,

The former the and of other Chairman one Healthcare. HCA is who Johnson, of those, Milton CEO

the I'm on it normal. And So Q&A. to proud the later I our building to those a will reason than team, up that for we both And that's results forward including, to of we and quarter, Board, momentum. for want this we the started and that guys, congratulations little entire of say just look open

Gunther question from Instructions] [Operator first Russell And Stephens. the comes with

at Just a just looking to question release. big the press picture start

mentioned and future the the decreases. guys optimism current also given the expected rate You for 'XX, momentum

picture, growth through can catalyst earnings us FBK? lower how for an rates So big just walk are you

Yes.

things. So couple a of

portfolio matched asset And the half sheet $X.X indexed. deposits well of side have our about liability relatively sheet. billion variable. we of and of are fixed, side our We the are is balance our loan And our of -- remainder between balance about

only move have in they we CDs and that XX% term. So are fixed frankly, of our or immediately, deposits

have variability long a we expand in actually and so think move. shape some we lot maintain look then execute there, areas as we're move as rates margin, to and for of can margin. And good think gradually, we to perhaps rates And as we

or economies X totally lost momentum, have the been they -- then and years good. frankly, they ago, would our never quite continue have, it X than -- with have to so less is but momentum be And that -- certainly, so

we X- the we there's that or so we're other the stable and but X-year very team with for the that think think not for -- long We we've a a got the in that optimistic create time, over at markets fact and together demand disruption next think horizon, 'XX, look other we just only activities been time And there. that's [indiscernible].

macro it's a that's So pick. kind -- of

little a perhaps I specific margin appreciate just more that. I and looking for -- on was the then guidance.

So what Can what indexed, pace of the betas But walk You Can a XQ for flat assuming mentioned in from a way it which -- down? on a on kind are of the then X.XX% sounds there? there. and you beta you win? you amount. when you betas you us sort cuts. through up like a healthy X.XX% perspective get that's way and measured the guys is to are you deposit down the the sort or amount it's guys of deposit thinking Can about and of retrace of from

Travis, think? Michael ahead. kidding, Yes. XXX%. just Russell. out. what expecting I'm and I'm you I'll do Go start

that, Yes. Russell. take I'll

set basis done actually I was expecting and proud XX XX%-ish up, if goal Quite what right, first, way be, of on that it was the So responded when The that was kind XX% it the And team be the rate frankly, first it on we XX, well. was they really the and work for. the up down. way would XX, of point the team would was cut. on

rate what goal cut. after that's momentum the so is. Positive first the And

the call a Chris tend As the differently knows, growth mentioned. behave to of bit some characteristics on markets you because know our and little that everybody of

in right? So we broker quarter can't be leave, So gives if the of have of lower, cost the deposits optionality balance less that prepared higher we bit those see some reason to third that may see the some deposits we us in opportunities. part to sheet, did than that. But was can differently. If manage a move little we for they

prefunding runoff creating really, cost of kind higher for And company. optionality of so about that a deposit lot and the was any

execute on we on we like way the think up. can we did betas So just

And team really so the far, has well. responded

KBW. with Mealor Catherine from comes question next The

One follow-up just within the nitty margin, question. a just

the As think fourth you we whole in reflect yields you did, the about quarter the quarter to just bond portfolio? where restructuring for fully the end do

Catherine. X, little of north It's a

of end fourth going range at in the you're be to that So the quarter. right

Okay. rate Perfect. of And too. There's us a fixed then that, fixed moving parts on versus loan versus repricing. yields, amount the within lot of floating you give the

curious, on downsides the we've next on to loan just kind And your just happened quarters, much over commentary far given how just of the any so cut loan couple of production yields And new thoughts maybe just so what seen. see has already of that? you the rate with

start, about conditions. And I'll Yes. I'll let then talk and kind market of Travis

of things loan yield the quarter. $XXX as has or the in been to flat, moved that relatively had So one permanent our construction you we million see the left in balances the bank in right,

And is yield you loans, of and we that fourth quarter, that's in higher-yielding such the those higher on coming those tend down. a which to some so be book off have coming why have

I in before. talked third was frankly, business around know So And quarter. new we've up type originations this quite X.XX about funding the

the responded still in at the of XX very base, well quarter. the part north rates. third of has number right for around Our months and higher customer X been better market that We've having

So market? on Travis, anything

No, I don't market think pricing. drastically moved the on fixed has rate

I X% market. the in on the to in is still think much X.X% credit line depending quality that

then of And credit. Great. manufactured housing book. a sold your their We peers saw Okay. follow-up one on

any any kind on commentary from looks, housing? how Just you in seeing credit you're book concerns your manufactured of

Michael. It's start. I'll Yes.

the about So the ever business so we business I We're highest we've points. We book been in that. the charge-offs XXXX. -- And that guess seen team knew basis did since well, is see that XX we've in well.

COVID, at that's kind And for about the piece, of stimulus, reasons these of channel X%. reserved retail unknown of out some piece, inflation. we're government the coming On

in we It's XX approaching so or haven't dues, points being And lot materialize. how we're on running a uptick so past of of said, probably pretty seen concerns any thoughtful charge-offs. that and losses seen in but whole it. That we've basis an

pre-COVID like normalized pretty like things us. really business to actually, lot the still do and good we think for there. can So I And a we

So...

Catherine. this, said, we add familiar the were team. and just would book, with and that's I Yes. team that Like reliant Mike the old

our those basis since basis XX The been points points at between had look year basis you rest we XXXX, where of would if charge-offs XX and so points. had have charge-offs. And history, somewhere X we XX of about

a And that's And what so had of they kind think different that's X-year history. than I experienced.

would compare back past methodology we So think, in that book 'XX, 'XX, history. stimulus there's 'XX, if say much the there. go previous portfolio watching you in this, were -- if some the really we're charge-offs had the I the money because that were to expected I differences, dues abnormally so our to past you in dues carefully abnormally low. you And it low

dues we we've in seen that to so level the saw a And past XXXX, XXXX. return

just readjust, up at to forward consider returned to I we normal. is may off And level it it's be this, we thing should would but -- it we the we point, should so, here. here. it to that watch going go If But continued this off here, say level then from what

Steve comes James. [Operator Moss Raymond Instructions] with from next Our question

see off were loan Maybe little maybe color And just starting starting just growth the the maybe on drivers just where how as you a outlook in think upcoming on loan take going drivers do more that growth further, constructive forward, you about year? step those loan of more a growth just the the quarter? C&I -- this here. on -- what Maybe the definitely off on

We being large make nice comment I'll are this -- credits. is there. kind single Yes, or a that don't but as good news of from single you Travis, ones of broad-based drivers perspective opposed have the I the see double a did we We let is riding see comment, in couple my it to will major. little

One I'd very call were both but of were won a rest that I'll say, add them, from, -- the oversized, been that Actually regional. bank moved of it, of we which that large I'll a thinking have would actually very, ones of again, type not anything community still, would I'm noteworthy, X much, different the from it, C&I. it, Travis, X then that the And regionals. that? business to large is call you very over

we're I bringing late and starting it's we or industry full established would particular mean a early I over point, lot And lot think Chris' of revenue broad-based, that area, growth and one really both to clients. seeing brings industry. 'XX C&I just the Yes, smaller agree. ground over the -- geographically core And of some there's 'XX some the to seeing producers in and a more we're their hired of new top hit I not relationship.

real ago. in from for kind those bottom commercial is just XX do the how your down is months you think or And do ratios? where concentrations of were here of way just Great. they And Okay. are think in estate -- -- those construction this and about terms we the Curious, decline this XX portfolios?

publicize actually capital our concentrations, -- we're balance time, not pretty others. you I actually when and comfortable very those company when various -- at I'm are of look look those a say, the add then are. We're at would profile on very level, Yes. profile confident with that. evaluate and a standpoint comfortable. just profile, our back the risk and and if from macro look It's in we to at look take going we our sheet, to you up entire characterize just we it at risk have liquidity good current credit overall if evaluate you the for where at that too, We as X, they in feel risk the we risk minute but And we

room for CRE. little we in cards bit. where not would that's close have geographies. that to We XXX little we us. even about like in within on lot really from to are. Again, room to think a And those so they grow have a That's policy, We're really those but we we run good them, even saying bit, frankly, we've room got not there, -- our the to a grow

so given we feel pretty And once and our a that's good those. history, on concentration XX% under factor. And geography construction our credit we're about a

say in you'll bottom, relative those. wouldn't same See I exactly see of And both a so in it that call relative but keep range. I'd you'll that see them it range.

second. obviously, And M&A that. Appreciate capital hear in Okay. terms of deployment, is -- first. being you growth then I just on organic

picked there change kind Just have any your Or activity if of curious, been with last in opinion, there? has discussions of months? Chris, couple the here up in

Well Steve, in those conversations question answer -- I you part a of do just never know, to a because we're what a industry. consolidating of how consolidating and industry, exactly kind this you're and in when are

I the has or those of out indicate maybe there up intent some direct are intensity of bit. of there X than of I more picked probably a little guess, entities so have And the ago. a would nature conversations conversations say, that some they those That a had of maybe would little are that sort year

in so increase We of our the grow. into And going the or ones maybe volume that Tuscaloosa part because continues terms to that, sits. speak part our say that bit little there. of I we And with, of a geography but would on is mentioned

intentional perhaps our geographically in so to we So been grow, continues little geography out are reaching we have than further and previously. more a

Awesome. all I there. the color appreciate

follow-up with Russell Our is Gunther next Stephens. question from a

loan the Last adversely classified guys the appreciate than were quarter, you outflows that more seeing buckets. into I gave. you mentioned commentary, quality asset the On you color inflows

puts you inflow one, wondering how takes? and XQ still do further guys you rate cuts, was as that and if the in outlow contemplate case X, the anticipate So again

about close these But in of and flow, was the that inflows big they usual. it loans. and it total of we have either Yes, this We out. through or track them, adversely as upgraded still process losses to The feel confident the things pretty the them. either bank. We even feel business a Michael upgraded robust to them out keep support of not time working total a seeing the we're the That on those. still from referenced as activities still X if lot combined, of we're we influx. big in have them X have It's We even was We getting It quarter. on close see getting takes though But obviously, that through a million. back we're or the guarantor on we'll constant commercial out -- collateral We around bank. still is just outflows, Travis. really of on on side. good any, -- very a and the third did several both work have standpoint, standpoint or classified, and little, they're $XX

So...

over change I still the lot to little maybe And add -- starved month. those it -- seems Yes. But would different. last this XXXX, that. something and one some thing Unfortunately, really And in that's -- I the a XXXX, is from that is underwriting. remember of reviewing I from and a this be a

seem Of you course, time. just encounter losses work and that I was issues are at But a different those some do institution doesn't you issues, it the but -- through there. have the like at to

takes little through the some of And seem so -- be be doesn't is time a doesn't of loss content same to But magnitude. there seem to content, to when even loss work it the these. it bit

bit more just So of it's commentary. a

your it's -- the going have a elevated change like material rates, to seeing guess impact. rate to on second nothing Yes. just The issues impact. I partner it's we're what we're -- that have issues the with your is one-off something second question don't then the And dispute are a or think that experiencing. I do

our portfolio, but think to guess I it's going either don't meaningful our I a it's our way on ultimately asset So help quality. within borrowers,

all appreciate color, Really guys. helpful. I the

conference turn to closing our Chris remarks. concludes to back I Holmes the question-and-answer any like session. for over This would

a a forward final you. you moving and much We always we quarter that for the to appreciate the into Okay. look Everybody, day. of support, and have joining. great right. Well, all making very thank your one. good Thank year All

you Thank The for today's attending presentation. has now conference concluded.

disconnect. now may You