FB Financial Corporation (FBK) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance sheet comparisons are to December 31, 2021 unless otherwise noted. FB Financial is a Nashville-based bank holding company operating FirstBank and mortgage banking businesses, with 81 full-service branches across Tennessee, Alabama, southern Kentucky and north Georgia.
Financial performance and condition
| Metric | Q1 2022 | Comparable period / prior date |
|---|---|---|
| Net interest income | $88.2 million | $82.6 million in Q1 2021 |
| Net income | $35.2 million | $52.9 million in Q1 2021 |
| Diluted EPS | $0.74 | $1.10 in Q1 2021 |
| Net interest margin, tax-equivalent | 3.04% | 3.19% in Q1 2021 |
| Noninterest income | $41.4 million | $66.7 million in Q1 2021 |
| Noninterest expense | $89.3 million | $94.7 million in Q1 2021 |
| Efficiency ratio | 68.9% | 63.4% in Q1 2021 |
| Total assets | $12.67 billion | $12.60 billion at December 31, 2021 |
| Loans, gross | $8.00 billion | $7.60 billion at December 31, 2021 |
| Total deposits | $11.00 billion | $10.84 billion at December 31, 2021 |
| Cash and cash equivalents | $1.74 billion | $1.80 billion at December 31, 2021 |
| Shareholders’ equity | $1.38 billion | $1.43 billion at December 31, 2021 |
Net interest income increased as securities balances grew and deposit costs fell; tax-equivalent NIM nevertheless declined, reflecting lower loan yields, purchase-accounting amortization and excess liquidity. Mortgage banking income fell 46.6% to $29.5 million: mortgage sales were $1.28 billion versus $1.57 billion, and sale margin declined to 2.29% from 3.68%. Banking segment pretax income was $44.8 million, compared with $52.1 million; Mortgage recorded a $0.3 million pretax loss versus $16.3 million pretax income.
Credit-loss provision on loans was a $6.1 million reversal; provision on unfunded commitments was $1.9 million, for a net reversal of $4.2 million. Management attributed the loan reserve decline to improved economic forecasts. Allowance for credit losses was $120.0 million, or 1.50% of loans, versus $125.6 million, or 1.65%, at year-end. Nonperforming assets declined to $56.0 million from $63.0 million; nonperforming loans held for investment were 0.51% of that portfolio.
Operating cash flow was $288.1 million, compared with cash used of $172.2 million in Q1 2021. Investing activities used $477.8 million, mainly reflecting loan growth and securities purchases; financing provided $135.2 million. Cash and cash equivalents decreased $54.4 million during the quarter. The company reported estimated excess liquidity of $980.9 million. Additional disclosed funding capacity included $1.15 billion available against FHLB collateral and $325 million of unsecured, uncommitted bank lines, with no borrowings against those lines.
Borrowings were $155.7 million on the balance sheet; securities sold under repurchase agreements were $25.9 million. Regulatory capital ratios remained above stated minimums: company CET1 was 12.0% and FirstBank CET1 was 11.9%. Book value per share was $29.06 and tangible book value per share was $23.62. A $77.4 million after-tax other comprehensive loss, principally from unrealized AFS securities losses, reduced equity; AFS securities shifted from a $4.7 million unrealized gain at year-end to a $100.9 million unrealized loss at quarter-end. Management attributed the decline to rising interest rates and stated the portfolio was primarily government-backed or highly rated.
Material changes and outlook
- On May 10, 2022, the company announced it would exit its Direct-to-Consumer mortgage channel before Q4 2022, while continuing mortgage origination through its retail channel and retaining servicing rights. It expects $11–$13 million of pretax restructuring charges through the remainder of 2022. The channel represented 43.4% of Q1 2022 lock volume and 50.7% of sales volume.
- Management expected mortgage lock volumes and mortgage banking income to decline further amid higher rates, refinancing fatigue, housing-inventory shortages and industry margin pressure. No broader earnings or revenue guidance is provided in the filing.
- The Federal Reserve raised its target range by 25 basis points during Q1 to 0.25%–0.50%; management noted further increases were expected. The company described itself as asset-sensitive; its model estimated a 8.08% increase in year-one net interest income under an immediate 100-basis-point rate increase. These are modeled scenarios, not forecasts.
- Management cited continuing uncertainty from inflation, labor shortages, supply-chain disruptions, COVID-19 effects and the Russia-Ukraine conflict. Other identified risks include interest-rate and mortgage-market changes, credit quality, real-estate conditions, cybersecurity and third-party technology risks, regulation, and LIBOR transition.
- After quarter-end, the company repurchased 400,000 shares for $16.4 million at an average $40.91 per share. It declared a $0.13-per-share quarterly dividend. Management reported no material pending legal proceedings and no material changes to the prior 10-K risk factors.
Important facts for investors to verify
- Whether the mortgage-channel exit achieves planned cost savings and whether actual restructuring charges remain within the $11–$13 million estimate.
- How rising rates affect deposit pricing, loan yields, NIM, securities values and mortgage production; review actual outcomes against the filing’s interest-rate sensitivity assumptions.
- Whether loan growth, commercial real-estate and construction exposures, nonperforming assets and the allowance remain consistent with management’s credit outlook.
- The effect of the $100.9 million AFS unrealized loss on tangible equity and capital, noting that management characterized the decline as noncredit-related.
- Liquidity and deposit stability, including uninsured deposits of $4.94 billion (45% of deposits), public deposits of $2.56 billion, and access to contingent funding sources.
- Potential second-half 2022 interchange-fee pressure from the Durbin Amendment and the execution of the announced share-repurchase program.