FB Financial Corp Q1 FY2025 earnings call

• Tribute to Jim Ayers, former Chairman who passed away, highlighting his entrepreneurial journey and impact on FB Financial.
• Announcement of planned combination with Southern States Banc, with conviction in the deal strengthening, teams working on integration, and envisioning Q3 close.
• Financial results for the quarter: EPS of $0.84, adjusted EPS of $0.85; net interest income $107.6M, non-interest income $23M; reported net income $39.4M. Net interest margin up 5bps to 3.55%.
• Margin discussion: Net interest margin within guided range, impact of rate cuts offset by new loan production yields; cost of funds management with deposit repricing benefits.
• Expense management: Core non-interest expense increased, compensation higher due to performance-based and seasonal expenses; expectation of banking segment expense range $66M to $68M in Q2.
• Credit quality: Charge-offs higher than historical levels, allowance for credit loss balance decreased, analyzing economic uncertainty impact on customers.
• Capital position: Strong capital ratios, bought back about $10M in stock, combination with Southern States to keep capital strong.

For the first quarter, FB Financial reported net interest income of $107.6 million, non-interest income of $23 million, reported non-interest expense of $79.5 million, provision expense of $2.3 million, and all-in reported net income of $39.4 million. Net interest margin was up 5 basis points to 3.55% within the guided range. Loan balances grew by $169 million at an annualized rate of 7.14%, primarily in C&I and owner occupied CRE. Adjusted pre-tax pre provision net revenue was $52.2 million. Tangible common equity to tangible assets ratio was 10.5%, preliminary CET1 was 12.8%, and total risk based capital ratio was 15.2%.

• Margin expectation to remain between 3.55% and 3.60% on a standalone basis, solidifying with Southern States combination.
• Banking segment expense range expected to be $66 million to $68 million in Q2.
• Loan growth pipelines remain robust, anticipating high single to low double-digit growth.
• Evaluate economic uncertainty surrounding tariffs and impact on customers, analyzing specific industries and relationships.

• Economic uncertainty with volatile markets, policy changes, and rising uncertainty; monitoring tariffs, tax rules, regulatory requirements.
• Potential impact of market volatility on mortgage banking and other fee income streams.
• Risk of CRE paydowns and reprice risk, especially in hospitality sector if supply exceeds demand.

Q: Stephen Scouten asked about loan growth trends, C&I lending, expansion in Asheville and Tuscaloosa, share repurchase, and remaining share repurchase authorization.

A: Travis Edmondson said pipelines remain robust with high single to low double-digit growth expected; teams in Asheville and Tuscaloosa seeing momentum; $73M remaining in share repurchase authorization with stock repurchased when undervalued.

Q: Brett Rabatin inquired about balance sheet management, construction commitments, and hospitality sector risk.

A: Michael Mettee discussed managing balance sheet with deposit costs, paying down brokered deposits; construction commitments monitored with hospitality sector in Nashville watched for supply; one non-Nashville hospitality deal with known customer.

Q: Russell Gunther asked about margin outlook, fee income, and charge-off expectations.

A: Michael Mettee said margin outlook stable with rate cuts and deposit repricing; mortgage banking performance dependent on rates; charge-off expectations to be lower than first quarter with positive trends in MPAs and NPLs.

Q: Catherine Mealor asked about expense growth and CRE paydown risk.

A: Michael Mettee explained expense growth due to compensation and hiring lags, expecting operating leverage to pick up; CRE paydowns seen as opportunity with strong relationships and reoccurring customers.

Q: Christopher Marinac asked about reserve behavior and customer behavior in uncertain times.

A: Michael Mettee said evaluating risk with Moody's baseline, spending time with customers; Chris Holmes noted maintaining high capital and reserve levels for stability.

Q: Steve Moss asked about loan pricing and hedging.

A: Michael Mettee said new loans at around 7-7.10%, not currently hedging balance sheet as cost-benefit not favorable, but evaluating periodically.