FB Financial Corporation — Q1 2024 Form 10-Q
Business context and period. FB Financial is a Nashville-based financial holding company operating FirstBank, with Banking and Mortgage segments across Tennessee, Alabama, Kentucky and North Georgia. This unaudited filing covers the three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Dollar amounts below are in millions unless stated.
Financial performance and condition
| Metric | Q1 2024 / March 31, 2024 | Comparable period / prior year-end |
|---|---|---|
| Net interest income | $99.5; tax-equivalent NIM 3.42% | $103.7; NIM 3.51% |
| Net income / diluted EPS | $28.0 / $0.59 | $36.4 / $0.78 |
| Interest income / expense | $176.1 / $76.6 | $159.5 / $55.8 |
| Noninterest income | $8.0 | $23.3 |
| Noninterest expense | $72.4 | $80.4 |
| Total assets | $12,548.3 | $12,604.4 at Dec. 31, 2023 |
| Loans held for investment | $9,288.9 | $9,408.8 at Dec. 31, 2023 |
| Total deposits | $10,504.9 | $10,548.3 at Dec. 31, 2023 |
| Borrowings | $360.8 | $391.0 at Dec. 31, 2023 |
| Shareholders’ equity | $1,479.5; book value per share $31.55 | $1,454.8; $31.05 at Dec. 31, 2023 |
- Profitability and margins: Return on average assets was 0.89%, return on average common equity 7.70%, and return on average tangible common equity 9.29%. The GAAP efficiency ratio was 67.4%; the company-reported core efficiency ratio, a non-GAAP measure, was 58.1%.
- Credit: Loan-loss provision was $1.9 million, partly offset by a $1.1 million reversal for unfunded commitments. Net charge-offs were $0.5 million, or 0.02% of average loans. Allowance for credit losses on loans was $151.7 million, 1.63% of loans, versus $150.3 million and 1.60% at year-end. Nonperforming loans rose to $67.8 million from $60.9 million; nonperforming assets were $94.1 million, or 0.75% of assets.
- Cash flow: Net cash from operating activities was $36.3 million, investing activities provided $110.1 million, and financing activities used $86.6 million. Cash and cash equivalents ended the quarter at $870.7 million. These cash flows reflect banking balance-sheet activity and should not be read as operating cash generation in the same way as for a nonfinancial company.
- Liquidity and capital: On-balance-sheet liquidity was $1.39 billion; stated available liquidity sources totaled $7.01 billion. These sources equaled 268.1% of estimated uninsured and uncollateralized deposits. Company regulatory ratios included 15.0% total risk-based capital, 12.8% Tier 1 risk-based capital and 12.6% CET1; the filing says the Company and Bank met applicable capital requirements.
Material changes and unusual items
- Net income fell $8.4 million year over year. Higher interest income was more than offset by a $20.8 million increase in interest expense and materially lower noninterest income.
- The company sold $207.9 million of available-for-sale securities and recorded a $16.2 million pretax loss, then reinvested proceeds in securities with a reported weighted-average yield of 5.94%, versus 2.14% on securities sold. The portfolio had $183.8 million of gross unrealized losses at quarter-end, attributed by management to noncredit factors; management said it was not likely the company would need to sell before recovery of amortized cost.
- Deposit costs increased: the average cost of interest-bearing deposits was 3.49% versus 2.53% a year earlier, and total deposit cost was 2.76% versus 1.94%. Deposits were broadly stable from year-end, but noninterest-bearing deposits declined $36.3 million, with migration into interest-bearing accounts cited as a factor.
- Management cited efficiency and scalability initiatives and updated loan-fee deferral methodology in explaining lower salaries and benefits. The company also recorded a $0.5 million FDIC special assessment.
- CRE and construction credit warrant attention: management increased qualitative allowance adjustments for expected CRE deterioration, slower demand, refinancing risk, and the possibility of recession. Nonperforming loans increased particularly in commercial and construction portfolios. Construction and CRE concentration ratios were 83.2% and 255.3% at FirstBank, respectively.
Outlook, risks and contingencies
The filing provides no specific earnings, revenue, margin or credit-loss guidance. Management says liquidity is adequate and describes active monitoring of liquidity, deposits, interest-rate exposure and credit quality. Its interest-rate simulation showed an asset-sensitive position: a modeled +100 basis-point shock increased 12-month net interest income 3.93%, while a -100 basis-point shock reduced it 4.22%. These are scenario estimates, not forecasts; management cautions that assumptions and actual outcomes may differ materially.
Key disclosed risks include inflation, interest-rate and economic changes, deposit competition, CRE fundamentals and refinancing, problem-credit management, banking-industry developments, regulation, cybersecurity and reliance on third-party technology systems. The Bank Term Funding Program ceased new lending on March 11, 2024; FB Financial had $130 million outstanding at 4.85%, maturing December 26, 2024. The filing reports no material pending legal proceedings and no material changes to the risk factors in its 2023 Form 10-K. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting reported.
The board reauthorized a stock-repurchase program of up to $100 million through January 31, 2026, subject to earlier completion. No shares were repurchased in Q1; through May 3, the company repurchased 209,737 shares for $7.5 million at an average $35.54 per share. A $0.17 quarterly dividend was declared after quarter-end.
Most important facts for investors to verify
- Whether deposit pricing and mix stabilize enough to support net interest margin and earnings.
- Whether CRE/construction delinquencies, nonperforming loans and allowance assumptions worsen, especially amid refinancing risk.
- The expected earnings benefit and payback period from the securities repositioning, weighed against the realized loss and remaining unrealized losses.
- The availability and practical accessibility of stated liquidity sources, alongside uninsured deposit levels and the December 2024 BTFP maturity.
- How repurchases, dividends and subsequent results affect capital, tangible book value and per-share returns.