FB Financial Corporation (NYSE: FBK) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; it does not provide standalone fourth-quarter results. FB Financial operates FirstBank, a regional bank headquartered in Nashville, plus a mortgage banking segment, serving markets in Tennessee, Alabama, North Georgia and Kentucky.
Financial performance and condition
| Metric | 2023 | 2022 |
|---|---|---|
| Total assets, year-end | $12.60 billion | $12.85 billion |
| Loans held for investment, year-end | $9.41 billion | $9.30 billion |
| Total deposits, year-end | $10.55 billion | $10.86 billion |
| Net interest income | $407.2 million | $412.2 million |
| Net interest margin, tax-equivalent | 3.44% | 3.57% |
| Noninterest income | $70.5 million | $114.7 million |
| Noninterest expense | $324.9 million | $348.3 million |
| Net income attributable to FB Financial | $120.2 million | $124.6 million |
| Diluted EPS | $2.57 | $2.64 |
| Return on average assets / equity | 0.95% / 8.74% | 1.01% / 9.23% |
- Interest and margins: Total interest income rose to $678.4 million from $481.4 million, but interest expense rose more sharply, to $271.2 million from $69.2 million. Deposit costs increased as customers shifted toward interest-bearing products and rates rose.
- Cash flow: Operating activities generated $211.1 million; investing activities used $55.2 million and financing activities used $372.0 million. Cash and cash equivalents declined $216.1 million to $810.9 million.
- Liquidity and debt: On-balance-sheet liquidity was $1.35 billion, with $7.08 billion in available contingent liquidity. Borrowings totaled $391.0 million, including $130.0 million under the Federal Reserve’s Bank Term Funding Program, due December 2024. Management described liquidity as more than adequate.
- Capital: Company CET1 was 12.2%, total risk-based capital 14.5%, and Tier 1 leverage 11.3%; the Bank’s respective ratios were 12.2%, 14.2%, and 11.1%. Both were reported above applicable well-capitalized thresholds.
- Credit: The allowance for credit losses on loans was $150.3 million, or 1.60% of loans, versus $134.2 million, or 1.44%, in 2022. Net charge-offs were $0.6 million (0.01% of average loans). Nonperforming loans rose to 0.65% of loans from 0.49%; nonperforming assets were 0.69% of assets.
Material changes versus 2022
- Net income fell 3.5%, while net interest income declined $5.0 million and tax-equivalent net interest margin contracted 13 basis points as funding costs rose faster than asset yields.
- Noninterest income dropped $44.1 million, mainly because mortgage banking income decreased $28.9 million to $44.7 million amid higher rates, weaker mortgage demand and lower production. Interest-rate lock volume fell 48.3%.
- A $14.0 million net securities loss followed the sale of $100.5 million of available-for-sale securities; proceeds were reinvested primarily in higher-yielding securities. The portfolio had $186.8 million of net unrealized losses at year-end, primarily attributed to interest rates.
- Noninterest expense decreased $23.4 million, including lower mortgage-related compensation and the absence of $12.5 million in 2022 mortgage restructuring expense. 2023 expenses included $8.4 million of early-retirement, severance and other costs and a $1.8 million FDIC special assessment.
- Deposits declined $307.5 million. Noninterest-bearing deposits fell $458.2 million, largely reflecting migration to interest-bearing accounts; brokered and internet time deposits increased to $150.8 million.
- Construction loans outstanding declined to $1.40 billion from $1.66 billion. Unfunded construction commitments also decreased substantially as projects moved to permanent financing and management reduced selected higher-risk commitments.
Outlook, risks and unusual items
- The filing gives no company-specific earnings or margin guidance. Management noted Federal Reserve projections in December 2023 implied potential rate decreases, but said actual rate changes were uncertain.
- Key risks include deposit competition and funding costs; interest-rate effects on margins and securities values; regional economic and real-estate weakness; commercial real estate, construction and business-credit exposures; and mortgage-market cyclicality.
- Approximately 77% of loans had real estate as a primary or secondary collateral component. Tennessee represented approximately 72% of loans and 78% of deposits, creating geographic concentration.
- Uninsured deposits were estimated at $4.90 billion, or 46% of deposits; uninsured and uncollateralized deposits were $3.13 billion. Available on-balance-sheet and contingent liquidity equaled 269% of estimated uninsured and uncollateralized deposits.
- The FDIC special assessment related to 2023 bank failures resulted in a $1.8 million accrual; future assessment adjustments remain uncertain. The Durbin Amendment fee cap contributed to lower interchange income.
- The mortgage servicing rights asset was $164.2 million and relies on assumptions about prepayments, discount rates and servicing costs. Management reported that cybersecurity threats had not materially affected the company as of the filing, while identifying vendor and cyber risks as ongoing exposures.
- Management reported no material pending legal proceedings and no goodwill impairment. The independent auditor issued unqualified opinions on the financial statements and internal controls; the allowance for credit losses was identified as a critical audit matter because of forecast and qualitative-adjustment judgments.
Most important facts for investors to verify
- Whether deposit balances and mix stabilize, and how deposit repricing affects funding costs and net interest margin.
- Trends in criticized, classified and nonperforming loans—especially commercial and industrial relationships—and whether the allowance remains adequate under changing economic forecasts.
- Commercial real estate and construction portfolio performance, including exposures by property type, borrower and market.
- The maturity and repayment plan for the $130 million BTFP borrowing due December 2024, alongside actual availability of contingent liquidity.
- Mortgage segment profitability, servicing income and MSR valuation sensitivity as rates and prepayment conditions change.
- Capital, dividend and repurchase decisions, including the effect of regulatory limits and the company’s $0.60 per-share 2023 dividend.