FB Financial (US:FBK)2021-03-11 16:00Financial Performance - As of December 31, 2020, FB Financial Corporation had total assets of $11.21 billion, loans held for investment of $7.08 billion, total deposits of $9.46 billion, and total shareholders' equity of $1.29 billion[13]. - Net income decreased to $63.6 million in 2020 from $83.8 million in 2019, with diluted earnings per share dropping from $2.65 to $1.67[210]. - Total interest income increased to $314,644,000 in 2020 from $282,537,000 in 2019, representing a growth of 11.4%[186]. - Net interest income rose to $265,658,000 in 2020, up from $226,036,000 in 2019, reflecting an increase of 17.5%[186]. - Total noninterest income surged to $301,855,000 in 2020, up from $135,397,000 in 2019, marking a growth of 122.5%[186]. - Basic net income per share decreased to $1.69 in 2020 from $2.70 in 2019, a decline of 37.4%[186]. - The return on average tangible common equity for 2020 was 8.54%, compared to 15.4% in 2019[193]. - The net interest margin (tax-equivalent basis) decreased to 3.46% in 2020 from 4.34% in 2019, a decline of 20.2%[186]. - Total common shareholders' equity rose to $1,291,289,000 in 2020 from $762,329,000 in 2019, indicating an increase of 69.5%[186]. Mergers and Acquisitions - The company completed its largest merger with Franklin Financial Network, Inc. on August 15, 2020, acquiring total assets of $3.63 billion, loans of $2.79 billion, and total deposits of $3.12 billion for a transaction valued at $477.8 million[17]. - The acquisition of FNB Financial Corp. on February 14, 2020, added four branches and expanded the company's footprint into Kentucky, with total assets of $258.2 million and loans of $182.2 million[17]. - The merger with Franklin resulted in goodwill of $67.2 million being recorded based on the fair value of total assets acquired and liabilities assumed[199]. - The company incurred merger expenses totaling $34.9 million related to acquisitions during 2020[210]. Market Position and Strategy - The Nashville metropolitan area accounted for 50% of total deposits as of June 30, 2020, with deposits amounting to $4.77 billion and a market share of 5.9%[20]. - The company has a competitive advantage in metropolitan markets due to its comprehensive product suite and local decision-making authority, which appeals to small to medium-sized businesses[21]. - The company has strategically deployed capital to focus on high-growth metropolitan markets and stable community markets, enhancing its growth opportunities[13]. - The company’s community markets are characterized by stability and limited competition, allowing for an attractive profitability profile[21]. - The company has completed 13 acquisitions in the past 25 years, focusing on enhancing market penetration and minimizing tangible book value dilution[26]. Risk Management - The company maintains a comprehensive risk management framework to address various risks, including credit, interest rate, and operational risks[29]. - The company has a robust credit risk management program, with ongoing monitoring of loan portfolio performance and a Chief Credit Officer overseeing the integrity of the portfolio[38]. - The loan approval process emphasizes local authority and thorough underwriting, ensuring compliance with credit policies[31]. - The company’s credit risk approval and monitoring procedures may not fully eliminate risks associated with the loan portfolio, particularly during economic disruptions[110]. Regulatory Environment - The Dodd-Frank Act requires the Consumer Financial Protection Bureau (CFPB) to regulate banks with assets over $10 billion, leading to increased regulatory compliance costs for the company[58]. - The U.S. Basel III Capital Rules impose minimum capital requirements, including a common equity Tier 1 risk-based capital ratio of 4.5% and a total risk-based capital ratio of 8%[68]. - The company is now subject to "say on pay" and "say-on-golden-parachute" votes every three years due to the Dodd-Frank Act, affecting executive compensation governance[58]. - The company is subject to various federal and state regulatory limitations regarding dividend payments, which may affect future distributions[179]. Technology and Innovation - The company has invested significantly in technology and infrastructure to improve efficiency and support future growth[28]. - Significant technology investments in 2020 included onboarding over 61,000 customers with over 100,000 accounts and enhancing online banking platforms for over 65,000 retail customers[50]. - The company plans to continue investing in technology platforms to enhance scalability, resiliency, and customer experience, including data warehouse reporting capabilities and process automation[51]. Impact of COVID-19 - The COVID-19 pandemic has significantly impacted the demand for the Bank's products and services, potentially affecting revenue[102]. - The company participated in the Paycheck Protection Program (PPP), facilitating over 3,000 loans to protect payroll for over 37,000 employees[49]. - The pandemic has led to increased credit losses in the Bank's loan portfolios and a rise in the allowance for credit losses[102]. - The company has not experienced job eliminations due to the COVID-19 pandemic and implemented measures to maintain full pay for associates unable to work due to exposure[48]. Loan Portfolio and Credit Quality - As of December 31, 2020, approximately 77.9% of the loan portfolio consisted of real estate loans, which are sensitive to economic conditions and real estate market downturns[112]. - Commercial real estate loans accounted for 36% of the loan portfolio, with commercial and industrial loans at 19% and construction loans at 17%, indicating significant lending concentration risks[113]. - The percentage of total nonperforming loans to loans held for investment rose to 0.91% as of December 31, 2020, up from 0.60% in 2019[205]. - The company maintains an allowance for credit losses, which is sensitive to macroeconomic forecasts and may require increases based on economic conditions, potentially affecting net income and return on equity[111]. Shareholder Information - The company has approximately 1,962 stockholders of record as of March 5, 2021, with many shares held in "street name" by financial institutions[175]. - The company declared a dividend of $0.09 per share for each quarter of 2020, totaling $14,505,000 for the year[180]. - A new dividend of $0.11 per share was declared for shareholders of record as of February 8, 2021, payable on February 22, 2021[180]. - The board approved a stock repurchase plan for up to $25 million for the year ended December 31, 2020, but no shares were purchased under this plan[182].