FB Financial Corp Q3 FY2024 earnings call

• Reported earnings of $0.22 per share and adjusted earnings of $0.86 per share. Tangible book value per share grew at 12.9% CAGR since IPO. - Adjusted return on average asset 1.25%, adjusted EPS up 2.4% QoQ and 21% YoY. Adjusted pre-tax pre-provision net revenue up 2.7% QoQ and 20% YoY. Efficiency ratio 58.4%. - 7.2% annualized loan growth and 5.4% annualized non-brokered deposit growth. Anticipate mid-single-digit Q4 growth and low double-digit loan/deposit growth in 2025. - Hired 20 senior revenue producers and 16 in wealth management/mortgage group in 2024, expanded into Tuscaloosa. - Capital deployment priorities: organic growth, bank acquisitions, balance sheet optimization. Sold $319 million of securities at pretax loss of $40 million, reinvested at 3% higher yield.

For the quarter, net interest income was $106 million, non-interest income was a negative $16.5 million. Adjusted pre-tax pre-provision net revenue was $53.8 million. Loan growth was 7.2% annualized and non-brokered deposit growth was 5.4% annualized. The adjusted return on average asset was 1.25%, adjusted earnings per share was up 2.4% from the prior quarter and 21% year-over-year. Tangible common equity to tangible assets was 10.4%, CET1 ratio was 12.7%, and total risk-based capital ratio was 15.1%. Construction loans outstanding declined by $120 million, with construction and development concentration ratio at 69% and commercial real estate concentration ratio at 245%.

• Fourth quarter margin expected 3.50%-3.60% following September's 50 basis point rate cut, expected to stay relatively flat with future rate cuts. - Anticipate mid-single-digit growth in Q4 due to seasonality, aiming for low double-digit loan and deposit growth in 2025. - Expect banking expenses $63M-$65M in Q4, total banking expenses for 2024 $248M-$250M. - Expect 4%-5% expense growth in 2025 excluding large team lift-out opportunities.

• Interest rate changes could impact margin, need to manage deposit betas. - Credit quality risks in manufactured housing loans with past dues returning to pre-COVID levels. - Concentration risks in commercial real estate (245%) and construction (69%) if not managed properly.

Q: Could you walk us through how lower rates are an earnings growth catalyst for FBK?

A: Lower rates can help with balance sheet matching; half of loan portfolio is variable, $2.7B of deposits are indexed, 17% in CDs/fixed term. Economies have strong momentum.

Q: What are you guys assuming from a deposit beta perspective on the way down?

A: Goal is 60%-ish beta on the way down, similar to up-betas, team responded well to first 50 basis point rate cut, brokered deposits in Q3 for optionality.

Q: Where did you end the quarter for the whole bond portfolio?

A: A little north of four in the fourth quarter.

Q: Are the adversely classified loan buckets still seeing inflows than outflows?

A: Still seeing in-flows and out-flows, business as usual, working through issues, lost content not as significant as before.

Q: Have discussions picked-up on M&A?

A: Conversations are part of being in a consolidating industry, intensity of some conversations may have picked-up, but volume varies.