FB Bancorp, Inc. (Fidelity Bank) 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2024. FB Bancorp, Inc. was incorporated in February 2024 to serve as the bank holding company for Fidelity Bank. As of the reporting date, the conversion from mutual to stock form had not yet been consummated; therefore, the financial statements primarily reflect the operations of Fidelity Bank. The Bank operates as a community-oriented financial institution in Louisiana, focusing on residential and commercial real estate lending, consumer loans, and mortgage banking.
Key Financial Metrics
| Metric | Q3 2024 (3 Months) | YTD 2024 (9 Months) | YTD 2023 (9 Months) |
|---|---|---|---|
| Net Interest Income | $11.42 million | $33.24 million | $33.14 million |
| Non-Interest Income | $5.37 million | $17.35 million | $20.51 million |
| Non-Interest Expense | $17.64 million | $50.86 million | $50.64 million |
| Net Income (Loss) | $(0.90) million | $(0.85) million | $2.30 million |
| Total Assets | $1.41 billion (as of Sept 30, 2024) | ||
| Total Deposits | $1.01 billion (as of Sept 30, 2024) | ||
| Total Equity | $161.47 million (as of Sept 30, 2024) | ||
| Net Interest Margin | 4.21% | 4.30% | 4.82% |
| Efficiency Ratio | 105.01% | 100.53% | 94.39% |
Material Changes vs. Prior Period
- Profitability Decline: The Bank reported a net loss of $0.90 million for Q3 2024 and $0.85 million for the nine months ended September 30, 2024, compared to net income of $2.41 million and $2.30 million, respectively, in the prior year periods. This reversal was primarily driven by a significant decrease in gains from the sale of mortgage servicing rights (MSR), which dropped from $4.74 million in Q3 2023 to $0.33 million in Q3 2024.
- Asset Growth: Total assets increased 25.1% to $1.41 billion from $1.12 billion at year-end 2023. This growth was largely fueled by a $206.4 million increase in cash and cash equivalents, attributed to holding approximately $254 million in tentative proceeds from the upcoming stock conversion.
- Deposit Expansion: Total deposits rose 30.8% to $1.01 billion. Core deposits (non-CD) increased 41.7%, heavily influenced by the tentative stock conversion proceeds held in NOW accounts.
- Interest Rate Impact: Net interest income remained relatively flat year-over-year ($33.24 million vs. $33.14 million) despite a 22.2% increase in total interest income. This was offset by a 140% increase in interest expense due to higher market rates and increased borrowing volumes.
Outlook, Risks, and Unusual Items
- Stock Conversion: A subsequent event disclosed that the Bank completed its initial public offering and conversion to stock form on October 22, 2024, raising approximately $198.4 million. As of November 8, 2024, the Bank repaid $85 million of its $120 million Federal Reserve Bank Term Funding Program borrowing.
- Asset Quality: Non-performing loans increased to $11.0 million (1.51% of total loans) from $8.5 million in the prior year. The allowance for credit losses to non-performing loans ratio decreased to 53.0% from 80.9%.
- Market Risk: The Bank faces interest rate risk. Modeling indicates that a 200 basis point increase in rates would decrease Economic Value of Equity (EVE) by 3.00%, while a 200 basis point decrease would increase Net Interest Income (NII) by 4.30%.
- Expense Pressures: Non-interest expenses are expected to increase post-conversion due to public company compliance costs and potential stock-based compensation plans.
Investor Verification Checklist
- Stock Conversion Proceeds: Verify the final allocation and utilization of the $198.4 million raised in the October 2024 IPO and the impact on future liquidity and capital ratios.
- Mortgage Servicing Rights (MSR): Assess the sustainability of non-interest income given the volatility in MSR sales, which caused the shift from profit to loss in 2024.
- Interest Rate Sensitivity: Review the Bank's hedging strategy and asset-liability management given the sensitivity of NII to falling rates (9.20% decrease in NII modeled for a 200bps drop).
- Non-Performing Assets: Monitor the trend of non-performing loans (up to 1.51%) and the adequacy of the allowance for credit losses relative to the loan portfolio growth.
- Deposit Composition: Analyze the stability of the deposit base once the $254 million in tentative conversion proceeds are deployed or reclassified post-IPO.