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FB Financial Corporation Reports Third Quarter 2021 Results

Reports Q3 diluted EPS of $0.94, ROAA of 1.51%

FB Financial Corporation (the “Company”) (NYSE: FBK), parent company of FirstBank, reported net income of $45.3 million, or $0.94 per diluted common share, compared to a net loss of $0.14 per diluted common share in the same quarter last year and net income of $0.90 in the previous quarter. Adjusted net income was $42.7 million, or $0.89 per diluted common share, compared to $1.43 per diluted common share in the same quarter last year and $0.88 in the previous quarter. The Company's return on average assets for the third quarter was 1.51% (1.42% adjusted) and return on tangible common equity was 15.9% (15.0% adjusted). The Company recorded growth in loans held for investment ("HFI") of $95.7 million in the third quarter, or 5.28% annualized. Excluding Paycheck Protection Program ("PPP") loans, the Company recorded HFI loan growth of $143.7 million, or 7.98% annualized.

For the nine months ended September 30, 2021, the Company reported net income of $141.5 million, or $2.95 per diluted common share, compared to $18.0 million, or $0.52 per diluted common share, for the same period in 2020. Adjusting for non-operating items, EPS was $2.89 and $2.51 for the nine months ended September 30, 2021 and 2020, respectively. The Company’s book value per common share at quarter-end was $29.36 and the tangible book value ("TBV") per common share was $23.90.

President and Chief Executive Officer, Christopher T. Holmes stated, “During the quarter the team delivered loan growth, increased net interest income, and realized strong mortgage results. We also added value for our shareholders by increasing our tangible book value per share at an annualized rate of 13.4% through the first three quarters of the year.”

Performance Summary

 

 

2021

 

2020

 

Annualized

 

 

(dollars in thousands, except per share data)

 

Third Quarter

 

Second Quarter

 

Third Quarter

 

3Q21 / 2Q21

% Change

 

3Q21 / 3Q20

% Change

Balance Sheet Highlights

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

1,577,337

 

 

$

1,409,175

 

 

$

1,164,910

 

 

47.3

%

 

35.4

%

Mortgage loans held for sale, at fair value

 

 

755,210

 

 

 

697,407

 

 

 

610,695

 

 

32.9

%

 

23.7

%

Commercial loans held for sale, at fair value

 

 

100,496

 

 

 

124,122

 

 

 

241,256

 

 

(75.5

)%

 

(58.3

)%

Loans held for investment (HFI)

 

 

7,294,674

 

 

 

7,198,954

 

 

 

7,213,538

 

 

5.28

%

 

1.12

%

Adjusted loans held for investment*

 

 

7,285,259

 

 

 

7,141,548

 

 

 

6,902,819

 

 

7.98

%

 

5.54

%

Allowance for credit losses

 

 

139,446

 

 

 

144,663

 

 

 

183,973

 

 

(14.3

)%

 

(24.2

)%

Total assets

 

 

11,810,290

 

 

 

11,918,367

 

 

 

11,010,438

 

 

(3.60

)%

 

7.26

%

Customer deposits

 

 

10,043,901

 

 

 

10,163,056

 

 

 

9,001,673

 

 

(4.65

)%

 

11.6

%

Brokered and internet time deposits

 

 

28,017

 

 

 

40,900

 

 

 

92,074

 

 

(125.0

)%

 

(69.6

)%

Total deposits

 

 

10,071,918

 

 

 

10,203,956

 

 

 

9,093,747

 

 

(5.13

)%

 

10.8

%

Borrowings

 

 

172,710

 

 

 

183,962

 

 

 

438,838

 

 

(24.27

)%

 

(60.6

)%

Total common shareholders' equity

 

 

1,400,913

 

 

 

1,371,721

 

 

 

1,244,998

 

 

8.44

%

 

12.5

%

Book value per share

 

$

29.36

 

 

$

28.96

 

 

$

26.38

 

 

5.48

%

 

11.3

%

Total common shareholders' equity to total assets

 

 

11.9

%

 

 

11.5

%

 

 

11.3

%

 

 

 

 

Tangible book value per common share*

 

$

23.90

 

 

$

23.43

 

 

$

20.87

 

 

7.96

%

 

14.5

%

Tangible common equity to tangible assets*

 

 

9.87

%

 

 

9.52

%

 

 

9.16

%

 

 

 

 

* Certain measures are considered non-GAAP financial measures. For a reconciliation and discussion of this non-GAAP measure, see “GAAP Reconciliation and Use of non-GAAP Financial Measures” and the corresponding non-GAAP reconciliation tables in this Earnings Release and “Use of non-GAAP Financial Measures” and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information as well as “Use of non-GAAP Financial Measures” and the Appendix in the Earnings Release Presentation dated October 19, 2021.

 

 

2021

 

2020

(dollars in thousands, except share data)

 

Third Quarter

 

Second Quarter

 

Third Quarter

Results of operations

 

 

 

 

 

 

Net interest income

 

$

88,476

 

 

$

86,563

 

 

$

68,828

 

NIM

 

 

3.20

%

 

 

3.18

%

 

 

3.28

%

Provisions for credit losses

 

$

(2,531

)

 

$

(13,839

)

 

$

55,401

 

Net charge-off ratio

 

 

0.13

%

 

 

0.02

%

 

 

(0.01

)%

Noninterest income

 

$

59,006

 

 

$

49,300

 

 

$

97,026

 

Mortgage banking income

 

$

45,384

 

 

$

35,499

 

 

$

84,686

 

Total revenue

 

$

147,482

 

 

$

135,863

 

 

$

165,854

 

Noninterest expense

 

$

95,007

 

 

$

92,960

 

 

$

118,092

 

Merger and offering expenses

 

$

 

 

$

605

 

 

$

20,730

 

Efficiency ratio

 

 

64.4

%

 

 

68.4

%

 

 

71.2

%

Core efficiency ratio*

 

 

64.7

%

 

 

68.9

%

 

 

57.4

%

Adjusted pre-tax, pre-provision earnings*

 

$

51,240

 

 

$

41,357

 

 

$

70,444

 

Total adjusted mortgage banking pre-tax net contribution*

 

$

8,853

 

 

$

542

 

 

$

39,496

 

Net income applicable to FB Financial Corporation(1)

 

$

45,290

 

 

$

43,294

 

 

$

(5,599

)

Diluted earnings per common share

 

$

0.94

 

 

$

0.90

 

 

$

(0.14

)

Effective tax rate

 

 

17.7

%

 

 

23.7

%

 

 

26.7

%

Adjusted earnings*

 

$

42,699

 

 

$

42,317

 

 

$

58,096

 

Adjusted diluted earnings per share*

 

$

0.89

 

 

$

0.88

 

 

$

1.43

 

Weighted average number of shares outstanding - fully diluted

 

 

48,007,147

 

 

 

47,993,773

 

 

 

40,637,745

 

Actual shares outstanding - period end

 

 

47,707,634

 

 

 

47,360,950

 

 

 

47,191,677

 

Returns on average:

 

 

 

 

 

 

Assets ("ROAA")

 

 

1.51

%

 

 

1.46

%

 

 

(0.24

)%

Equity ("ROAE")

 

 

12.9

%

 

 

13.0

%

 

 

(2.13

)%

Tangible common equity ("ROATCE")*

 

 

15.9

%

 

 

16.1

%

 

 

(2.72

)%

* Certain measures are considered non-GAAP financial measures. For a reconciliation and discussion of this non-GAAP measure, see “GAAP Reconciliation and Use of non-GAAP Financial Measures” and the corresponding non-GAAP reconciliation tables in this Earnings Release and “Use of non-GAAP Financial Measures” and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information as well as “Use of non-GAAP Financial Measures” and the Appendix in the Earnings Release Presentation dated October 19, 2021.

(1) Includes a dividend declared and paid by the Company's REIT subsidiary to minority interest preferred shareholders in the second quarter of 2021.

Balance Sheet and Net Interest Margin

The Company reported loan balances (HFI) of $7.29 billion, an increase of $95.7 million, or 5.28% annualized, from June 30, 2021. Excluding PPP loans, adjusted loans (HFI) increased $143.7 million, or 7.98% annualized, on a linked quarter basis. The contractual yield on loans decreased to 4.23% in the third quarter of 2021 from 4.31% in the second quarter of 2021.

The Company's net interest income on a tax-equivalent basis for the third quarter of 2021 was $89.2 million, an increase from $87.3 million in the previous quarter, or 8.67% annualized. The Company's net interest margin (“NIM”) was 3.20% for the third quarter, compared to 3.18% for the second quarter of 2021. The NIM for the third quarter of 2021 was impacted by a 4 basis point decline in the yield on interest-earning assets, offset by a 7 basis point decline in the cost of interest-bearing liabilities on a linked quarter basis. During the quarter, on balance sheet liquidity decreased to $1.75 billion, or 15.1% of tangible assets, from $2.13 billion, or 18.3% of tangible assets as of June 30, 2021. As of September 30, 2021, our PPP loan balance is down to $9.4 million from $57.4 million at June 30, 2021.

During the third quarter of 2021, total deposits decreased by $132.0 million to $10.07 billion on a linked quarter basis, primarily related to seasonal outflows of public funds. Noninterest bearing deposits increased by $124.6 million, or 19.9% annualized, during the third quarter. Excluding mortgage-escrow related deposits, noninterest bearing deposits increased by $100.1 million during the third quarter, or 17.1% annualized. The Company's total cost of deposits declined by 5 basis points to 0.26% and the cost of interest-bearing deposits decreased to 0.34% from 0.41% in the previous quarter.

Noninterest Income Outperforms Expectations

Noninterest income was $59.0 million for the third quarter of 2021, compared to $49.3 million for the second quarter of 2021 and $97.0 million for the third quarter of 2020. Mortgage banking income was $45.4 million for the third quarter of 2021, compared to $35.5 million for the second quarter of 2021 and $84.7 million for the third quarter of 2020.

Noninterest income in the Banking segment was impacted by the cancellation of a customer interest rate swap agreement as a troubled loan was resolved, resulting in a $1.5 million loss. This was offset by a $2.0 million gain on the disposition of other real estate owned and a $0.7 million gain from fair value changes on the commercial loans held for sale portfolio during the third quarter. The $0.7 million gain on the commercial loans held for sale portfolio compares to a gain of $1.4 million in the second quarter of 2021.

The Company's total mortgage banking pre-tax direct contribution for the third quarter of 2021 was $8.9 million, compared to $0.5 million for the second quarter of 2021 and $39.2 million for the third quarter of 2020. Interest rate lock commitment volume totaled $2.01 billion in the third quarter of 2021 compared to $1.77 billion in the second quarter of 2021 and $2.42 billion in the third quarter of 2020.

Chief Financial Officer, Michael Mettee noted, “The mortgage business benefited from stability in rates and margins and also from capacity normalization within the industry during the third quarter, ultimately leading to a stronger than expected contribution.”

Expense Management

Noninterest expenses were $95.0 million for the third quarter of 2021, compared to $93.0 million for the second quarter of 2021 and $118.1 million for the third quarter of 2020. Core noninterest expense was $95.0 million for the third quarter of 2021, $93.1 million for the second quarter of 2021, and $95.1 million for the third quarter of 2020.

During the third quarter of 2021, the Company's core efficiency ratio was 64.7%, compared to 68.9% in the second quarter of 2021 and 57.4% for the third quarter of 2020. The Banking segment efficiency ratio was 57.9% versus the previous quarter of 58.6% while the Mortgage segment efficiency ratio decreased to 80.0% for the third quarter of 2021 from 97.9% in the previous quarter.

Also, during the quarter, income tax expense was reduced by two notable items. The first item resulted in a $2.1 million income tax benefit from the vesting of stock compensation granted to employees at the Company's IPO in 2016. The second item resulted in a $1.7 million tax benefit related to a change in the value of a net operating loss tax asset that was acquired with the Franklin Financial Network, Inc. transaction. These tax benefits reduced the Company's effective tax rate to 17.7% in the third quarter of 2021 from 23.7% in the previous quarter.

Mettee noted, “For the quarter the Company saw slightly elevated expenses in the Banking segment due to increased payroll taxes of $0.5 million associated with the vesting of restricted stock units, which were originally granted to full-time employees in connection with our IPO. The Company did see improvement in our efficiency ratio, mainly driven by improvement in mortgage revenue.”

Credit Quality

The Company recorded a total net reversal in provisions for credit losses of $2.5 million in the third quarter of 2021, including a provision for credit losses on unfunded commitments of $0.3 million. The Company continues to maintain a strong balance sheet with an ACL of $139.4 million as of September 30, 2021, representing 1.91% of loans HFI. This compares to an ACL percentage of 2.01% of loans HFI, or 2.03% when adjusted to exclude PPP loans as of the prior quarter-end.

The Company's net charge-offs to average loans was 0.13% for the third quarter of 2021 compared to net charge-offs to average loans of 0.02% in the second quarter of 2021. During the quarter, the Company exited a relationship recording a charge-off of $2.1 million, which was 81% of the total net charge offs for the quarter of $2.6 million. The Company's nonperforming assets decreased to 0.50% of total assets as of September 30, 2021, compared to 0.66% at June 30, 2021. Nonperforming loans were 0.59% of loans HFI at September 30, 2021, compared to 0.83% at June 30, 2021. Both of these declines were largely influenced by the same loan relationship. Deferrals resulting from the COVID-19 pandemic decreased to $18.0 million, or 0.25% of loans HFI, as of September 30, 2021, compared to the aggregate balance deferred during the crisis of $1.64 billion.

Holmes commented, “Our local economies continue to prosper. Assuming the overhang of the Delta variant continues to fade, I would expect to see future releases from our ACL in the coming quarters, if these positive economic trends continue.”

Summary

Holmes summarized, "The Company has continued to deliver strong results and capitalize on the economic strength of our markets. As we finish out 2021 and look ahead into 2022, we remain excited about the opportunities that lie ahead."

WEBCAST AND CONFERENCE CALL INFORMATION

FB Financial Corporation will host a conference call to discuss the Company's financial results at 8:00 a.m. CT on October 19, 2021, and the conference call will be broadcast live over the Internet at https://services.choruscall.com/mediaframe/webcast.html?webcastid=fdKAFzD9. An online replay will be available approximately an hour following the conclusion of the live broadcast.

ABOUT FB FINANCIAL CORPORATION

FB Financial Corporation (NYSE: FBK) is a financial holding company headquartered in Nashville, Tennessee. FB Financial Corporation operates through its wholly owned banking subsidiary, FirstBank, the third largest Tennessee-headquartered community bank, with 81 full-service bank branches across Tennessee, Kentucky, Alabama and North Georgia, and mortgage offices across the Southeast. FirstBank serves five of the largest metropolitan markets in Tennessee and has approximately $11.8 billion in total assets.

SUPPLEMENTAL FINANCIAL INFORMATION AND EARNINGS PRESENTATION

Investors are encouraged to review this Earnings Release in conjunction with the Supplemental Financial Information and Earnings Presentation posted on the Company’s website, which can be found at https://investors.firstbankonline.com. This Earnings Release, the Supplemental Financial Information and the Earnings Presentation are also included with a Current Report on Form 8-K that the Company furnished to the U.S. Securities and Exchange Commission (“SEC”) on October 18, 2021.

BUSINESS SEGMENT RESULTS

The Company has included its business segment financial tables as part of the Supplemental Financial Information, which is available in connection with this Earnings Release. A detailed discussion of our historical business segments is included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020. Further discussion on the revisions to segment reporting made in the first quarter of 2021 is included in the Company's Form 10-Q filed with the SEC for the period ended June 30, 2021, and investors are encouraged to review that discussion in conjunction with this Earnings Release.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the ongoing impact of the COVID-19 global pandemic and new virus variants on our business operations and the Company’s future plans, results, strategies, and expectations, including potential releases from the Company’s ACL. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “project,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management's current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) the ongoing effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and the emergence of new variants, and its impact on general economic and financial market conditions and on our business and our customers' business, results of operations, asset quality and financial condition, (3) ongoing public response to the vaccines that were developed against the virus as well as the decisions of governmental agencies with respect to vaccines, including recommendations related to booster shots and requirements that seek to mandate that individuals receive or employers require that their employees receive the vaccine, (4) those vaccines' efficacy against the virus, including new variants, (5) changes in government interest rate policies and its impact on our business, net interest margin, and mortgage operations, (6) our ability to effectively manage problem credits, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, (8) difficulties and delays in integrating acquired businesses or fully realizing costs savings, revenue synergies and other benefits from future and prior acquisitions, (9) the Company’s ability to successfully execute its various business strategies, (10) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (11) the potential impact of the proposed phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR, (12) the effectiveness of our cybersecurity controls and procedures to prevent and mitigate attempted intrusions, (13) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, and (14) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Earnings Release, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the company.

The Company qualifies all forward-looking statements by these cautionary statements.

GAAP RECONCILIATION AND USE OF NON-GAAP FINANCIAL MEASURES

This Earnings Release contains certain financial measures that are not measures recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered non-GAAP financial measures. These non-GAAP financial measures include, without limitation, adjusted earnings, adjusted diluted earnings per share, adjusted and unadjusted pre-tax pre-provision earnings, core revenue, core noninterest expense and core noninterest income, core efficiency ratio (tax equivalent basis), Banking segment core efficiency ratio (tax equivalent basis), Mortgage segment core efficiency ratio (tax equivalent basis), adjusted mortgage contribution, adjusted return on average tangible common equity, adjusted pre-tax pre-provision return on average tangible common equity, adjusted return on average assets and equity, and adjusted pre-tax pre-provision return on average assets and equity. Each of these non-GAAP metrics excludes certain income and expense items that the Company’s management considers to be non-core/adjusted in nature. The Company also includes an adjusted allowance for credit losses, adjusted loans held for investment, and adjusted allowance for credit losses to loans held for investment, which all exclude the impact of PPP loans. The Company refers to these non-GAAP measures as adjusted measures. Also, the Company presents tangible assets, tangible common equity, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity and adjusted return on average tangible common equity. Each of these non-GAAP metrics excludes the impact of goodwill and other intangibles.

The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance, financial condition and the efficiency of its operations as management believes such measures facilitate period-to-period comparisons and provide meaningful indications of its operating performance as they eliminate both gains and charges that management views as non-recurring or not indicative of operating performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrate the effects of significant non-core gains and charges in the current and prior periods. The Company’s management also believes that investors find these non-GAAP financial measures useful as they assist investors in understanding the Company’s underlying operating performance and in the analysis of ongoing operating trends. In addition, because intangible assets such as goodwill and other intangibles, and the other items excluded each vary extensively from company to company, the Company believes that the presentation of this information allows investors to more easily compare the Company’s results to the results of other companies. However, the non-GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which the Company calculates the non-GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. Investors should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures the Company has discussed herein when comparing such non-GAAP financial measures. See the “Use of non-GAAP Financial Measures” and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information as well as “Use of non-GAAP Financial Measures” and the Appendix in the Earnings Release Presentation dated October 19, 2021, for additional discussion and reconciliation of these measures to the most directly comparable GAAP financial measures.

Financial Summary and Key Metrics

(Unaudited)

(In Thousands, Except Share Data and %)

 

 

2021

 

2020

 

 

Third Quarter

 

Second Quarter

 

Third Quarter

Statement of Income Data

 

 

 

 

 

 

Total interest income

 

$

96,665

 

 

$

96,329

 

 

$

81,127

 

Total interest expense

 

 

8,189

 

 

 

9,766

 

 

 

12,299

 

Net interest income

 

 

88,476

 

 

 

86,563

 

 

 

68,828

 

Total noninterest income

 

 

59,006

 

 

 

49,300

 

 

 

97,026

 

Total noninterest expense

 

 

95,007

 

 

 

92,960

 

 

 

118,092

 

Earnings before income taxes and provisions for credit losses

 

 

52,475

 

 

 

42,903

 

 

 

47,762

 

Provisions for credit losses

 

 

(2,531

)

 

 

(13,839

)

 

 

55,401

 

Income tax expense (benefit)

 

 

9,716

 

 

 

13,440

 

 

 

(2,040

)

Net income applicable to noncontrolling interest

 

 

 

 

 

8

 

 

 

 

Net income (loss) applicable to FB Financial Corporation(c)

 

$

45,290

 

 

$

43,294

 

 

$

(5,599

)

Net interest income (tax-equivalent basis)

 

$

89,230

 

 

$

87,321

 

 

$

69,625

 

Adjusted net income*

 

$

42,699

 

 

$

42,317

 

 

$

58,096

 

Adjusted pre-tax, pre-provision earnings*

 

$

51,240

 

 

$

41,357

 

 

$

70,444

 

Per Common Share

 

 

 

 

 

 

Diluted net income

 

$

0.94

 

 

$

0.90

 

 

$

(0.14

)

Adjusted diluted net income*

 

 

0.89

 

 

 

0.88

 

 

 

1.43

 

Book value

 

 

29.36

 

 

 

28.96

 

 

 

26.38

 

Tangible book value*

 

 

23.90

 

 

 

23.43

 

 

 

20.87

 

Weighted average number of shares outstanding - fully diluted

 

 

48,007,147

 

 

 

47,993,773

 

 

 

40,637,745

 

Period-end number of shares

 

 

47,707,634

 

 

 

47,360,950

 

 

 

47,191,677

 

Selected Balance Sheet Data

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,324,564

 

 

$

1,717,097

 

 

$

1,062,391

 

Loans held for investment (HFI)

 

 

7,294,674

 

 

 

7,198,954

 

 

 

7,213,538

 

Allowance for credit losses(a)

 

 

(139,446

)

 

 

(144,663

)

 

 

(183,973

)

Mortgage loans held for sale, at fair value

 

 

755,210

 

 

 

697,407

 

 

 

610,695

 

Commercial loans held for sale, at fair value

 

 

100,496

 

 

 

124,122

 

 

 

241,256

 

Investment securities, at fair value

 

 

1,577,337

 

 

 

1,409,175

 

 

 

1,164,910

 

Other real estate owned, net

 

 

10,015

 

 

 

11,986

 

 

 

12,748

 

Total assets

 

 

11,810,290

 

 

 

11,918,367

 

 

 

11,010,438

 

Customer deposits

 

 

10,043,901

 

 

 

10,163,056

 

 

 

9,001,673

 

Brokered and internet time deposits

 

 

28,017

 

 

 

40,900

 

 

 

92,074

 

Total deposits

 

 

10,071,918

 

 

 

10,203,956

 

 

 

9,093,747

 

Borrowings

 

 

172,710

 

 

 

183,962

 

 

 

438,838

 

Total common shareholders' equity

 

 

1,400,913

 

 

 

1,371,721

 

 

 

1,244,998

 

Selected Ratios

 

 

 

 

 

 

Return on average:

 

 

 

 

 

 

Assets

 

 

1.51

%

 

 

1.46

%

 

 

(0.24

)%

Shareholders' equity

 

 

12.9

%

 

 

13.0

%

 

 

(2.13

)%

Tangible common equity*

 

 

15.9

%

 

 

16.1

%

 

 

(2.72

)%

Average shareholders' equity to average assets

 

 

11.7

%

 

 

11.3

%

 

 

11.4

%

Net interest margin (NIM) (tax-equivalent basis)

 

 

3.20

%

 

 

3.18

%

 

 

3.28

%

Efficiency ratio (GAAP)

 

 

64.4

%

 

 

68.4

%

 

 

71.2

%

Core efficiency ratio (tax-equivalent basis)*

 

 

64.7

%

 

 

68.9

%

 

 

57.4

%

Loans HFI to deposit ratio

 

 

72.4

%

 

 

70.6

%

 

 

79.3

%

Total loans to deposit ratio

 

 

80.9

%

 

 

78.6

%

 

 

88.7

%

Yield on interest-earning assets

 

 

3.49

%

 

 

3.53

%

 

 

3.86

%

Cost of interest-bearing liabilities

 

 

0.42

%

 

 

0.49

%

 

 

0.83

%

Cost of total deposits

 

 

0.26

%

 

 

0.31

%

 

 

0.56

%

Credit Quality Ratios

 

 

 

 

 

 

Allowance for credit losses as a percentage of loans HFI(a)

 

 

1.91

%

 

 

2.01

%

 

 

2.55

%

Adjusted allowance for credit losses as a percentage of loans HFI*(a)

 

 

1.91

%

 

 

2.03

%

 

 

2.66

%

Net charge-offs (recoveries) as a percentage of average loans HFI

 

 

0.13

%

 

 

0.02

%

 

 

(0.01

)%

Nonperforming loans HFI as a percentage of total loans HFI

 

 

0.59

%

 

 

0.83

%

 

 

0.61

%

Nonperforming assets as a percentage of total assets

 

 

0.50

%

 

 

0.66

%

 

 

0.64

%

Preliminary capital ratios (Consolidated)

 

 

 

 

 

 

Total common shareholders' equity to assets

 

 

11.9

%

 

 

11.5

%

 

 

11.3

%

Tangible common equity to tangible assets*

 

 

9.87

%

 

 

9.52

%

 

 

9.16

%

Tier 1 capital (to average assets)

 

 

10.4

%

 

 

10.1

%

 

 

11.8

%

Tier 1 capital (to risk-weighted assets)(b)

 

 

12.7

%

 

 

12.7

%

 

 

12.1

%

Total capital (to risk-weighted assets)(b)

 

 

14.6

%

 

 

14.9

%

 

 

15.3

%

Common equity Tier 1 (to risk-weighted assets) (CET1)(b)

 

 

12.3

%

 

 

12.4

%

 

 

11.8

%

(a) Excludes reserve for credit losses on unfunded commitments of $13.5 million, $13.2 million, and $6.5 million recorded in accrued expenses and other liabilities at September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

(b) We calculate our risk-weighted assets using the standardized method of the Basel III Framework.

(c) Includes a dividend declared and paid by the Company's REIT subsidiary to minority interest preferred shareholders in second quarter of 2021.

*These measures are considered non-GAAP financial measures. For a reconciliation and discussion of this non-GAAP measure, see "GAAP Reconciliation and Use of non-GAAP Financial Measures" and the corresponding financial tables in this Earnings Release. Investors are encouraged to refer to the discussion and reconciliation of non-GAAP measures included in the Supplemental Financial Information and Earnings Release Presentation dated October 19, 2021.

Non-GAAP Reconciliation

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

 

 

 

 

 

 

2021

 

2020

Adjusted earnings

 

Third Quarter

 

Second Quarter

 

Third Quarter

Income before income taxes

 

$

55,006

 

$

56,742

 

 

$

(7,639

)

Plus merger, conversion and offering expenses

 

 

 

 

605

 

 

 

20,730

 

Plus initial provision for credit losses on acquired loans and unfunded commitments

 

 

 

 

 

 

 

63,251

 

Less other non-operating items(1)

 

 

1,235

 

 

2,151

 

 

 

(1,952

)

Adjusted pre-tax earnings

 

 

53,771

 

 

55,196

 

 

 

78,294

 

Income tax expense, adjusted(2)

 

 

11,072

 

 

12,879

 

 

 

20,198

 

Adjusted earnings

 

$

42,699

 

$

42,317

 

 

$

58,096

 

Weighted average common shares outstanding - fully diluted

 

 

48,007,147

 

 

47,993,773

 

 

 

40,637,745

 

Adjusted diluted earnings per share

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.94

 

$

0.90

 

 

$

(0.14

)

Plus merger, conversion and offering expenses

 

 

 

 

0.01

 

 

 

0.51

 

Plus initial provision for credit losses on acquired loans and unfunded commitments

 

 

 

 

 

 

 

1.56

 

Less other non-operating items

 

 

0.02

 

 

0.04

 

 

 

(0.05

)

Less tax effect

 

 

0.03

 

 

(0.01

)

 

 

0.55

 

Adjusted diluted earnings per share

 

$

0.89

 

$

0.88

 

 

$

1.43

 

(1) 3Q21 includes a $740 gain from change in fair value of commercial loans held for sale acquired from Franklin, a $1,510 loss on swap, and a gain of $2,005 from sales other real estate owned; 2Q21 includes a $1,364 gain from change in fair value of commercial loans held for sale acquired from Franklin and a $787 gain from lease terminations; 3Q20 includes $2,305 FHLB prepayment penalty, $1,505 losses on other real estate owned, and $1,858 gain from change in fair value of commercial loans held for sale acquired from Franklin.

(2) 3Q21 includes a $1,678 tax benefit related to a change in the value of a net operating loss tax asset related to Franklin.

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

Full Year

Adjusted earnings

 

2021

 

2020

 

2020

Income before income taxes

 

$

180,210

 

$

23,514

 

 

$

82,461

 

Plus merger, conversion and offering expenses

 

 

605

 

 

25,366

 

 

 

34,879

 

Plus initial provision for credit losses on acquired loans and unfunded commitments

 

 

 

 

66,136

 

 

 

66,136

 

Less other non-operating items(1)

 

 

2,533

 

 

(1,952

)

 

 

(4,400

)

Adjusted pre-tax earnings

 

 

178,282

 

 

116,968

 

 

 

187,876

 

Income tax expense, adjusted(2)

 

 

39,762

 

 

29,490

 

 

 

45,944

 

Adjusted earnings

 

$

138,520

 

$

87,478

 

 

$

141,932

 

Weighted average common shares outstanding - fully diluted

 

 

47,983,494

 

 

34,840,292

 

 

 

38,099,744

 

Adjusted diluted earnings per share

 

 

 

 

 

 

Diluted earnings per common share

 

$

2.95

 

$

0.52

 

 

$

1.67

 

Plus merger, conversion and offering expenses

 

 

0.01

 

 

0.73

 

 

 

0.92

 

Plus initial provision for credit losses on acquired loans and unfunded commitments

 

 

 

 

1.90

 

 

 

1.74

 

Less other non-operating items

 

 

0.05

 

 

(0.05

)

 

 

(0.11

)

Less tax effect

 

 

0.02

 

 

0.69

 

 

 

0.71

 

Adjusted diluted earnings per share

 

$

2.89

 

$

2.51

 

 

$

3.73

 

(1) 3QYTD21 includes a $1,251 gain from change in fair value on commercial loans held for sale acquired from Franklin, a loss on swap cancellation of $1,510, a $2,005 gain on other real estate owned and a $787 gain from lease terminations; 3QYTD20 includes $2,305 FHLB prepayment penalty, $1,505 losses on other real estate owned, and $1,858 gain from change in fair value of commercial loans held for sale acquired from Franklin. 2020 includes $6,838 FHLB prepayment penalties, $1,505 losses on other real estate owned offset by $715 cash life insurance benefit and $3,228 gain from change in fair value on commercial loans held for sale acquired from Franklin.

(2) 3QYTD21 includes a $1,678 tax benefit related to a change in the value of a net operating loss tax asset related to Franklin.

Non-GAAP Reconciliation

 

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

 

 

 

 

 

 

 

 

 

2021

 

2020

Adjusted pre-tax pre-provision earnings

 

Third Quarter

 

Second Quarter

 

Third Quarter

Income before income taxes

 

$

55,006

 

 

$

56,742

 

 

$

(7,639

)

Plus provisions for credit losses

 

 

(2,531

)

 

 

(13,839

)

 

 

55,401

 

Pre-tax pre-provision earnings

 

 

52,475

 

 

 

42,903

 

 

 

47,762

 

Plus merger, conversion and offering expenses

 

 

 

 

 

605

 

 

 

20,730

 

Less other non-operating items

 

 

1,235

 

 

 

2,151

 

 

 

(1,952

)

Adjusted pre-tax pre-provision earnings

 

$

51,240

 

 

$

41,357

 

 

$

70,444

 

 

 

 

 

 

 

 

 

 

2021

 

2020

Core efficiency ratio (tax-equivalent basis)

 

Third Quarter

 

Second Quarter

 

Third Quarter

Total noninterest expense

 

$

95,007

 

 

$

92,960

 

 

$

118,092

 

Less merger, conversion and offering expenses

 

 

 

 

 

605

 

 

 

20,730

 

Less gain on lease terminations

 

 

 

 

$

(787

)

 

 

 

Less FHLB prepayment penalties

 

 

 

 

$

 

 

 

2,305

 

Core noninterest expense

 

$

95,007

 

 

$

93,142

 

 

$

95,057

 

Net interest income (tax-equivalent basis)

 

$

89,230

 

 

$

87,321

 

 

$

69,625

 

Total noninterest income

 

 

59,006

 

 

 

49,300

 

 

 

97,026

 

Less gain on change in fair value on commercial loans held for sale

 

 

740

 

 

 

1,364

 

 

 

1,858

 

Less loss on swap cancellation

 

 

(1,510

)

 

 

 

 

 

 

Less gain (loss) on sales or write-downs of other real estate owned and other

assets

 

 

2,182

 

 

 

(27

)

 

 

(1,279

)

Less gain from securities, net

 

 

51

 

 

 

144

 

 

 

583

 

Core noninterest income

 

 

57,543

 

 

 

47,819

 

 

 

95,864

 

Core revenue

 

$

146,773

 

 

$

135,140

 

 

$

165,489

 

Efficiency ratio (GAAP)(a)

 

 

64.4

%

 

 

68.4

%

 

 

71.2

%

Core efficiency ratio (tax-equivalent basis)

 

 

64.7

%

 

 

68.9

%

 

 

57.4

%

(a) Efficiency ratio (GAAP) is calculated by dividing reported noninterest expense by reported total revenue

Non-GAAP Reconciliation (continued)

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

 

 

 

 

 

 

During the first quarter of 2021, the Company re-evaluated its reportable business segments to align all retail mortgage activities with the Mortgage segment. Previously, the Company chose to assign retail mortgage activities within the Banking geographical footprint to the Banking segment. The results of mortgage retail footprint have been assigned to the Mortgage segment for all periods presented. As such, historical segment efficiency ratios have been recast for consistency with these changes.

 

 

 

 

 

 

 

 

 

2021

 

2020

Banking segment core efficiency ratio (tax equivalent)

 

Third Quarter

 

Second Quarter

 

Third Quarter

Core noninterest expense

 

$

95,007

 

 

$

93,142

 

 

$

95,057

 

Less Mortgage segment noninterest expense

 

 

36,230

 

 

 

34,766

 

 

 

45,227

 

Core Banking segment noninterest expense

 

$

58,777

 

 

$

58,376

 

 

$

49,830

 

Core revenue

 

$

146,773

 

 

$

135,140

 

 

$

165,489

 

Less Core Mortgage segment total revenue

 

 

45,284

 

 

 

35,509

 

 

 

84,723

 

Core Banking segment total revenue

 

$

101,489

 

 

$

99,631

 

 

$

80,766

 

Banking segment core efficiency ratio (tax-equivalent basis)

 

 

57.9

%

 

 

58.6

%

 

 

61.7

%

 

 

 

 

 

 

 

Mortgage segment core efficiency ratio (tax equivalent)

 

 

 

 

 

 

Mortgage segment noninterest expense

 

$

36,230

 

 

$

34,766

 

 

$

45,557

 

Mortgage segment total revenue

 

 

45,083

 

 

 

35,308

 

 

 

84,723

 

Less loss on sales or write-downs of other real estate

owned

 

 

(201

)

 

 

(201

)

 

 

 

Core Mortgage segment total revenue

 

$

45,284

 

 

$

35,509

 

 

$

84,723

 

Mortgage segment core efficiency ratio (tax-equivalent basis)

 

 

80.0

%

 

 

97.9

%

 

 

53.4

%

 

 

 

 

 

 

 

 

 

2021

 

2020

Adjusted Mortgage contribution

 

Third Quarter

 

Second Quarter

 

Third Quarter

Total Mortgage pre-tax net contribution

 

$

8,853

 

 

$

542

 

 

$

39,166

 

Pre-tax pre-provision earnings

 

 

52,475

 

 

 

42,903

 

 

 

47,762

 

% total Mortgage pre-tax pre-provision net contribution

 

 

16.87

%

 

 

1.26

%

 

 

82.0

%

Adjusted pre-tax pre-provision earnings

 

$

51,240

 

 

$

41,357

 

 

$

70,444

 

% total adjusted Mortgage pre-tax pre-provision net contribution

 

 

17.28

%

 

 

1.31

%

 

 

56.1

%

 

 

 

 

 

 

 

 

 

2021

 

2020

Tangible assets and equity

 

Third Quarter

 

Second Quarter

 

Third Quarter

Tangible assets

 

 

 

 

 

 

Total assets

 

$

11,810,290

 

 

$

11,918,367

 

 

$

11,010,438

 

Less goodwill

 

 

242,561

 

 

 

242,561

 

 

 

236,086

 

Less intangibles, net

 

 

18,248

 

 

 

19,592

 

 

 

23,924

 

Tangible assets

 

$

11,549,481

 

 

$

11,656,214

 

 

$

10,750,428

 

Tangible common equity

 

 

 

 

 

 

Total common shareholders' equity

 

$

1,400,913

 

 

$

1,371,721

 

 

$

1,244,998

 

Less goodwill

 

 

242,561

 

 

 

242,561

 

 

 

236,086

 

Less intangibles, net

 

 

18,248

 

 

 

19,592

 

 

 

23,924

 

Tangible common equity

 

$

1,140,104

 

 

$

1,109,568

 

 

$

984,988

 

Common shares outstanding

 

 

47,707,634

 

 

 

47,360,950

 

 

 

47,191,677

 

Book value per common share

 

$

29.36

 

 

$

28.96

 

 

$

26.38

 

Tangible book value per common share

 

$

23.90

 

 

$

23.43

 

 

$

20.87

 

Total common shareholders' equity to total assets

 

 

11.9

%

 

 

11.5

%

 

 

11.3

%

Tangible common equity to tangible assets

 

 

9.87

%

 

 

9.52

%

 

 

9.16

%

Non-GAAP Reconciliation (continued)

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

 

2021

 

2020

Return on average tangible common equity

Third Quarter

Second Quarter

 

Third Quarter

Total average shareholders' equity

$

1,389,201

 

 

$

1,339,938

 

 

$

1,044,913

 

Less average goodwill

 

242,561

 

 

 

242,561

 

 

 

205,473

 

Less average intangibles, net

 

18,950

 

 

 

20,253

 

 

 

20,973

 

Average tangible common equity

$

1,127,690

 

 

$

1,077,124

 

 

$

818,467

 

Net income

$

45,290

 

 

$

43,294

 

 

$

(5,599

)

Return on average equity

 

12.9

%

 

 

13.0

%

 

 

(2.13

)%

Return on average tangible common equity

 

15.9

%

 

 

16.1

%

 

 

(2.72

)%

Adjusted net income

$

42,699

 

 

$

42,317

 

 

$

58,096

 

Adjusted return on average tangible common equity

 

15.0

%

 

 

15.8

%

 

 

28.2

%

Adjusted pre-tax pre-provision earnings

$

51,240

 

 

$

41,357

 

 

$

70,444

 

Adjusted pre-tax pre-provision return on average tangible common equity

 

18.0

%

 

 

15.4

%

 

 

34.2

%

 

 

 

 

 

 

 

2021

 

2020

Adjusted return on average assets and equity

Third Quarter

 

Second Quarter

 

Third Quarter

Net income

$

45,290

 

 

$

43,294

 

 

$

(5,599

)

Average assets

 

11,915,062

 

 

 

11,900,450

 

 

 

9,179,288

 

Average equity

 

1,389,201

 

 

 

1,339,938

 

 

 

1,044,913

 

Return on average assets

 

1.51

%

 

 

1.46

%

 

 

(0.24

)%

Return on average equity

 

12.9

%

 

 

13.0

%

 

 

(2.13

)%

Adjusted net income

$

42,699

 

 

$

42,317

 

 

$

58,096

 

Adjusted return on average assets

 

1.42

%

 

 

1.43

%

 

 

2.52

%

Adjusted return on average equity

 

12.2

%

 

 

12.7

%

 

 

22.1

%

Adjusted pre-tax pre-provision earnings

$

51,240

 

 

$

41,357

 

 

$

70,444

 

Adjusted pre-tax pre-provision return on average assets

 

1.71

%

 

 

1.39

%

 

 

3.05

%

Adjusted pre-tax pre-provision return on average equity

 

14.6

%

 

 

12.4

%

 

 

26.8

%

 

 

 

 

 

 

 

 

2021

 

2020

Adjusted allowance for credit losses to loans held for investment

 

Third Quarter

 

Second Quarter

 

Third Quarter

Allowance for credit losses

 

$

139,446

 

 

$

144,663

 

 

$

183,973

 

Less allowance for credit losses attributed to PPP loans

 

 

2

 

 

 

9

 

 

 

49

 

Adjusted allowance for credit losses

 

$

139,444

 

 

$

144,654

 

 

$

183,924

 

Loans held for investment

 

$

7,294,674

 

 

$

7,198,954

 

 

$

7,213,538

 

Less PPP loans

 

 

9,415

 

 

 

57,406

 

 

 

310,719

 

Adjusted loans held for investment

 

$

7,285,259

 

 

$

7,141,548

 

 

$

6,902,819

 

Allowance for credit losses to loans held for investment

 

 

1.91

%

 

 

2.01

%

 

 

2.55

%

Adjusted allowance for credit losses to loans held for investment

 

 

1.91

%

 

 

2.03

%

 

 

2.66

%

(FBK - ER)

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